Revnik and Vasilyev

[2008] FMCAfam 118

FEDERAL MAGISTRATES COURT OF AUSTRALIA

REVNIK & MS VASILYEV [2008] FMCAfam 118

FAMILY LAW – Property – short marriage – division of liabilities.

Family Law Act 1975, ss.75(2), 79

Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143
Norbis v Norbis (1986) 161 CLR 513

Applicant: MR REVNIK

Respondent: MS VASILYEV

File Number: WOC 627 of 2007

Judgment of: Altobelli FM

Hearing dates: 10-13 December 2007

Date of Last Submission: 13 December 2007

Delivered at: Sydney

Delivered on: 4 March 2008

REPRESENTATION

Solicitor Advocate for the Applicant: Mr Webley

Solicitors for the Applicant: Robert Webley & Associates

Counsel for the Respondent: Mr Alexander

Solicitors for the Respondent: Kells the Lawyers

ORDERS

1. That parties forthwith take all necessary steps and execute all necessary documents to cause the property situated at and known as Property M being the whole of the land in Certificate of Title Folio Identifier [9] to be sold by private treaty at the earliest possible date at a price to be agreed on between the parties and failing such agreement to be determined by the President of the Real Estate Institute of New South Wales or his nominee and that the proceeds of the sale be disbursed as follows:

   (a)Payment of agent’s commission and advertising expenses and legal expenses of the sale; and

   (b)Discharge of the Mortgage to the National Australia Bank.

2. That any shortfall arising from the sale of the property referred to in Order 1 above is to be borne equally between the parties. To implement this Order, prior to settlement of the sale both parties are to do all things necessary to approach the mortgagee National Australia Bank to ensure that the said mortgagee will provide to the purchaser a discharge of mortgage on settlement, and to ensure that they have each, individually of the other, made arrangements satisfactory to the said Bank which results in their being responsible for a one-half share of any shortfall on settlement.

3. The Husband is declared to be the sole owner of:

   (a)His superannuation entitlements; and

   (b)His savings; and

   (c)His motor vehicle (subject to any liabilities relating thereto); and

   (d)The items of personal Property listed in Annexure A to these orders under the sub-heading “Mr Revnik Brought into Marriage”.

4. The wife is declared to be the sole owner of:

   (a)Her superannuation entitlements; and

   (b)Her savings and real estate; and

   (c)Her motor vehicle; and

   (d)The items of personal property listed in Annexure A to these orders under the subheading “Ms Vasilyev Brought into Marriage”

5. If the parties are unable to reach agreement in whole or in part as to the division between them of the items of personal property listed in Annexure A under the subheading “Purchased During Marriage” within one month of the making of these orders, the wife within three weeks thereafter shall cause two inventories marked A and B respectively to be produced dealing with all items in the list above, each of such inventories to contain an aggregate of items which is in her assessment of equal value. Upon completion of the inventories, both are to be delivered to the husband, who shall indicate within seven days as to whether he chooses inventory A or B. Upon the husband indicating his choice of inventory, the items in the chosen inventory shall become his property absolutely. The items in the other list shall become the wife’s absolutely. Parties are to bear their own costs of removing the property in their inventory from its current location, such removal to take place within one calendar month of the wife being given notice as to the husband’s choice of inventory.

ANNEXURE A

Mr Revnik Brought into marriage	Ms Vasilyev Brought into marriage
Electric Keyboard	Anita Colby Book
Computer – PC	Certificates
Computer Desk	Filing cabinet
CD Stand	Chinese Dresser
Bookshelf	Jewellery drawer and jewellery
Canon Printer	Quilt covers
Yamaha natural sound	Bed linen
Akai cassette deck	Shoes
Digitec vocalist	Games
Breville Coffee machine	Towels (under “linen cupboard”)
Hair products and appliances
Blow up mattress
Sewing machine
DVDs
Saeco coffee machine
Toy castle for children
Children’s pool table

Annexure A – Purchased During Marriage

Frozen food	Baby Bath - bathroom	Baby car seat
Bar freezer	Bath mats	Blender
Box of [B]’s toys	Brooms	Buckets
Cards	Change Table	Chinese Dresser – money
Cleaning products	Corner lounge	Crockery
Cross trainer	Crystal glasses	Cutlery
Display cabinet – large - Dining	Dryer	[B]’s clothes
[B]’s cot	Engagement ring	Enviro bags
Food processor	Foot spa	Glass TV Cabinet
Hand held massager	Hand lawn mower	Iron
Ironing board	Kitchen table and chairs	Materials and patterns
Mosquito stinger	Overlocker	Plastic bags
Plastic containers	Plastic gloves	Roasting dishes
Sandwich maker	Slow cooker	Table – white in 4th bedroom
Tallboy	Therapeutic bed	Towels (under “linen cupboard)
Trolley	Wedding ring	Wooden spoons and utensils
King bed	Bedside tables (old)	Mistral Cooler/heater
Dining room table	Expired beer	Frangipani paintings
Party equipment	Solar lights	Bedside tables x 2
Avanti toaster	Baking dishes	Barbeque
Bedside Tables (Freedom Furniture)	Bins	Bottle steriliser
Breast pump	Chest of Drawers – [B]’s room	Coffee Mugs
Coffee table	Cooking pot	Dish rack
Double bed	DSE Television	DVD/VCR
Entertainment unit	Fake trees	Refrigerator
High chair	Juice maker	Metal kettle
Magic bullet	Metal painting stool	Microwave
Outdoor tables and chairs	Paint equipment	Pasta machine
Photo album – [B]’s room	Pizza pan	Portable A/C
Pram	Projector	Projector screen
Rug	Set top box	Shiatsu massager
Shoe rack	Side table	Sound system/amplifier
Wall mounted toolbox	Vacuum cleaner	Wardrobe
Washing machine	Wedding dress	Wedding ring
Whipper snipper	Wine glasses

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

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
WOLLONGONG

WOC 627 of 2007

MR REVNIK

Applicant

And

MS VASILYEV

Respondent

REASONS FOR JUDGMENT

Introduction

1. This application for alteration of property interests, commonly known as a property settlement, is a good example of case that should have settled but did not. It represents a tragic waste of both private and public resources. There were no assets, only debts to be apportioned. During closing submissions on the fourth day on which this matter had to be heard it become glaringly obvious that only $15,000 separated the parties, notwithstanding that each party clearly had capacity to service their share of the debt, irrespective of how I might have allocated it. This figure might not overly concern the legally-aided wife, but public policy considerations must surely question the utility of this litigation from the Legal Aid Commission’s perspective. As far as the husband who, I presume, is privately funding the litigation having regard to his income, any gain to him must surely have been lost as a result of his greatly increased legal costs.

Background

1. The applicant husband is 27 years old and is an [occupation omitted]. The respondent wife is 25 years old and is a [occupation omitted]. They married in August 2005 and separated in May 2007, a period of cohabitation of under two years. They have a 21 month old child, [B]. During the course of this hearing they entered into consent orders relating to [B] that means she will be in her parents’ equal shared care. There was an appalling level of mutual suspicion and mistrust between the parties which spread to their own extended families. In their own way, each of the husband and wife are intelligent, articulate people who are obviously highly skilled and considered valuable in their respective workplaces. This is in strong contrast to the way in which they conducted this litigation. This was characterised by immature, almost childish behaviour, manifested by an inability to make sensible and obvious concessions about issues. The publicly funded court room became the province for them to play out their puerile, personal programmes of self-interest. It mattered not to them that other litigants with more demanding cases had to wait. No, for them a costly public resource was needed to decide a case that came down to apportioning debts and furniture after a short marriage. I have no doubt that as each spouse reads these reasons they will think that I am talking about the other spouse, and not them personally. The reality is that they both contributed in their own way to this appalling waste of public resources.

Issues

1. At the end of this case it became apparent that there was going to be an anticipated deficit of approximately $70,000 from the sale of the jointly-owned former matrimonial home at Property M, in the Illawarra region of New South Wales. The creditor who was owed this amount, the NAB, has security against other property owned by the wife and members of her family. Any order I make apportioning this deficit does not, however, adversely affect the NAB’s interest. The issue for me to decide, therefore, was how to apportion the deficit between the parties having regard to the circumstances of this case, and the provisions of s.79 of the Family Law Act that apply as much to liabilities as it does to assets. The other issue was how to divide the parties’ furniture and personal effects, against having regard to the facts of this case, and the applicable law.

The Applicable Law

1. The preferred approach to the determination of an application under s.79 of the Family Law Act is set out in a passage found in the Full Court’s decision in Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at 39.

2. The Full Court states that there are four inter-related steps:

   a)Identify and value the property, liabilities and financial resources of the parties; and

   b)Identify and assess the contributions of the parties and express them as a percentage of the net value of the property; and

   c)Identify and assess the other facts relevant under s.79(4)(d)-(g) including s.75(2) and determine the adjustment (if any) to be made to the contribution entitlements at step two; and

   d)Consider the effect of the above and resolve what order is just and equitable in all the circumstances.

3. One of the legal issues that arises is whether I should adopt a global or asset-by-asset approach to contribution. The authority in this regard is the High Court’s decision in Norbis v Norbis (1986) 161 CLR 513 per Wilson and Dawson JJ at 534-5. It is clear from this statement of the law that either approach is available to me, in part or in whole.

   
   

   My discretion in this regard should be exercised having regard to the facts of this case.

The assets and liabilities of the parties

1. I am indebted to Mr Alexander, counsel for the wife, and Mr Webley, solicitor for the husband, for at least facilitating an agreement between their clients about a schedule of assets and liabilities. I reproduce this below, with the deletion of reference to furniture and effects.

Item	Ownership	Husband’s Value	Wife’s Value
Property M	Joint	$445,000	$445,000
Commonwealth Bank (as in Financial Statement 1/8/07)	Husband	$3,500	$3,500
Ford Fairmont	Husband	$8,500	$8,500
Ford Laser	Wife’s parents	$3,500	$3,500
TOTAL ASSETS	$460,500	$460,500
Mortgage to NAB – Property M	Joint	$518,350	$518,350
Ford Fairmont Loan (IMB)	Husband	$8,500	$8,500
TOTAL LIABILITIES	$526,850	$526,850
Assets less Liabilities	-$66,300	-$66,300
Item	Ownership	Husband’s Value	Wife’s Value
MLC Superannuation	Wife	$12,216
ARF Superannuation	Wife	$4,586
State Superannuation	Husband	$16,145
TOTAL	$16,145	$16,802
Property F – Agreed Equity	Wife	$50,000	$50,000

1. The parties also agreed that I should leave their respective superannuation entitlements where they are, that the Husband would retain his Ford Fairmont with its corresponding liability, and that the wife would retain her Ford Laser.

Furniture and Effects

1. It is convenient to deal with this issue first. As will be seen below, this is a case where contribution is equal, save for one specific issue, and where the s.75(2) future needs adjustment is not substantial. Accordingly, those factors do not weigh heavily on how, precisely, furniture is apportioned between the parties. I did not have the benefit of independent expert evidence about the value of the furniture and effects of the parties. Each made assertions about value that were inherently unreliable. The only piece of evidence in relation to furniture and effects in respect of which there seems to have been some consensus is in a document prepared by the husband entitled “Proposed Actions re Property”. It was a document partially adopted by the wife insofar as it listed items of furniture and effects under three categories:

   a)Items brought into the marriage by the husband;

   b)Items brought into the marriage by the wife; and

   c)Items purchased during the marriage.

2. The values ascribed to the items, and the assertions as to the source of the funds used to acquire these items, was not adopted by the wife. This document will become the annexure ‘A’ to the orders that I make. The wife invited me to make an order based on this document that, in effect, the husband retains the items he brought into the marriage, the wife does likewise, and the rest be divided using the pick-a-pile method. As I do not have evidence of the value of these items, the only other alternative would be to order the sale of these items. I do not regard that as just and equitable. These items are far more valuable to the parties than the cost of replacing them. I therefore accede to the wife’s request and divide items purchased during the marriage using the pick-a-pile method.

The Property F

1. An issue in this case that attracted considerable attention in the husband’s case was the precise nature of the wife’s interest in the property at Property F. The parties agreed that the equity in this property has a value of $50,000.00. The husband’s case was that the wife’s interest in the property was a beneficial interest. It was in her sole name, and was acquired pre-cohabitation. The wife’s case was that as a result of a pooling of monies and endeavours by her parents, brother and herself, her interest in the property was minimal, and probably no more than 25 percent. On the facts of this case 25 percent means $12,500.00. Even the husband agreed that he had made no real contribution to this property, so the context of the present issue really was establishing that she had greater property and resources to contribute to the deficit on sale of the former matrimonial home. I find that the wife’s interest in the Property F property is no greater than 25 percent notwithstanding the legal title to the property. I accept the wife’s evidence, corroborated by her mother’s evidence, and by exhibits W2 to W6, all to the effect that her actual contribution to the property was significantly less than that made by other members of her family. I do not accept the husband’s case which was to the effect that the family arrangement relating to the property was a recent invention, and that the agreement entered into between the family members was fraudulent. This was quite plainly inconsistent with the evidence.

2. I therefore find that the wife’s interest in the property at Property F to be 25 percent and thus having a value of $12,500.00.

Contribution

1. This is a short marriage where, in general terms (and excluding the Property F property), the contribution made by each spouse to the acquisition of assets was equal. That does not mean the contribution was identical, but equality of contribution as an outcome is the only just and equitable way of balancing diverse and different contributions on the facts of this case. Whilst a finding of equality of contribution towards acquisition of assets is clearly indicated, is the same finding appropriate in the present context of allocating the share in which the parties should contribute to a deficit?

2. The evidence about how the deficit was acquired was not controversial, even though there were some minor differences as between the parties. The husband’s evidence is set out at paragraphs 93-100 of his affidavit filed 26 November 2006. The wife’s evidence is at paragraphs 77-78 of her affidavit sworn 20 November 2007. I accept that as part of the financing of the former matrimonial home the wife’s personal loan used to acquire her Ford Laser motor vehicle was paid out in the sum of about $7,700.00. Her pre-marriage personal liability was thus incorporated into the joint liabilities of the parties, and this was a benefit to her. As for the surplus of the loan actually drawn down after settlement of the purchase, whatever the actual figure was at the time, I am satisfied from the evidence of both parties that this surplus was used for their joint benefit which included wedding costs, acquisition of furniture and appliances, works around the home, and interest payments.

3. On behalf of the husband it was argued that the wife should be ordered to make a greater contribution to the deficit because she received the benefit of the repayment of a pre-existing debt at cohabitation i.e. the $7,700.00. Moreover, the husband should receive credit for his contribution in making a $1,650.00 principal repayment off the mortgage, from his funds. I accept an adjustment is necessary as regards the former, but not he latter, which I treat as part of the husband’s overall equal financial contribution to the marriage. In relation to the payment of the wife’s personal loan, her counsel urged that I should simply ignore it because it had been subsumed to the much greater liabilities of the parties and, in any event, she too had contributed to its repayment after marriage.

4. The refinancing of the personal loan made sense at the time it was done. At that time it represented $7,700.00 out of a loan of $520,000.00 or about 1.4 percent of the loan. It is a significant issue in this case because it represents about 10 percent of the deficit. The husband says, in effect, it is unfair that the wife should receive the benefit of her car (agreed value $3,500) but that he should be left bearing up to 50 percent of the debt ($3,850) used to acquire it. I agree with him. It would not be just and equitable to him for this to happen. Under the circumstances it is appropriate to order the wife (and subject to other matters discussed below) to carry a 10 percent greater burden of the deficit in the loan to reflect the benefit she received in paying out that personal loan.

Section 75(2) factors?

1. The evidence indicates that the husband’s earning capacity is greater than that of the wife. He currently earns $65,000.00 and she earns $41,000.00. He is an [occupation omitted] and I am satisfied that he will be able to continue to earn a good income into the future, even with equal shared care of their child. The wife has some health issues, but these are not clear. She has a one quarter interest in the property at Property F which has a value of $12,500.00 but which could not be realised without a sale agreed to be the other members of her family. She too will have the equal shared care of their child. I am satisfied that in the long term her financial position will not be as strong as that of the husband and accordingly an adjustment of 10 percent in her favour under s.75(2) is appropriate.

Just and Equitable?

1. The 10 percent adjustment against the wife for contribution to the deficit is offset by the 10 percent adjustment in favour of the wife for s.75(2) considerations. The net result is that each spouse is to pay

   
   

   50 percent of the deficit on the sale of the former matrimonial home.

   
   

   Is that just and equitable under the circumstances? I am satisfied that it is. The husband’s earning capacity and savings will enable him to refinance one half of the deficit as a personal loan, if need be.

   
   

   The wife’s earning capacity, her existing interest in the Property F property, and the clearly available support of her own family, will enable her to refinance her one half share of this liability. Both spouses will retain their respective superannuation interests.

Conclusion

1. The marriage was a personal and financial disaster for the husband and the wife. The manner in which they chose to conduct these proceedings only exacerbated a clearly disastrous situation. The former matrimonial home, which is already on the market for sale, will need to be sold. The shortfall to the mortgagee, the NAB, will need to be met by each spouse equally as at the time of settlement. Each spouse will return their own motor vehicles and any liabilities attached thereto. Furniture and effects will be dealt with as previously indicated in these reasons. The husband will retain his savings, and each will retain their superannuation.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Altobelli FM

Associate:  Lisa Molloy

Date:  4 March 2008