RJH and AH - [2004] FMCAfam 229

FEDERAL MAGISTRATES COURT OF AUSTRALIA

RJH & AH

[2004] FMCAfam 229

FAMILY LAW – Property – contributions – gifts – where wife has exclusive use of available assets post separation – post-separation wife incurs substantial credit card debts – potential capital gain tax liability.

Family Law Act 1975

Lee Steere (1985) FLC 91-626
Ferraro (1993) FLC 92-335

Clauson (1995) FLC 92-595
Rainbird (1977) FLC 90-256

Gosper (1987) FLC 91-818

Kessey (1994) FLC 92-495
Russell (1999) FLC 92-877
Rosati (1998) 23 FLC 92-804
Pellegrino (1997) FLC 92-189
Tomasetti (2002) FLC 93-032
Kowaliw (1981) FLC 91-092
Jones & Dunkel (1959) 101 CLR 298

Applicant:

R J H

Respondent:

A H

File No:

SYM494 of 2002

Delivered on:

5 April 2004

Delivered at:

Wollongong

Hearing dates:

1 & 2 April 2004

Judgment of:

Ryan FM

REPRESENTATION

Counsel for the Applicant:

Mr R. Bell

Solicitors for the Applicant:

Rita Thakur & Associates

Counsel for the Respondent:

Mr R. Maurice

Solicitors for the Respondent:

Johnson Horsley Lawyers

ORDERS

Within ten (10) weeks of the date of these orders the wife shall pay to the husband the sum of $92,345 and at the same time shall give him a release or discharge of all mortgages secured against two properties: known as the Wollongong property and the Dapto property.
Simultaneously, upon compliance by the wife with Order (1) the husband shall do all acts and things and sign all documents as are necessary to transfer to the wife his right, title and interest in the property known as the Wollongong property.
In the event that the wife fails to pay the money due pursuant to Order (1) she shall immediately take all necessary steps and execute all necessary documents to cause “the property” known as the Dapto property to be sold by private treaty at a price to be agreed on between the parties and failing such agreement to be determined by the President of the Australian Property Institute of New South Wales or his nominee and to distribute the proceeds of sale as follows:
(a)In payments of agent’s commission, advertising expenses and legal expenses of the sale;
(b)Discharge of the mortgage in favour of Citibank;
(c)Thirty five percent (35%) to the husband;
(d)Balance to the wife, from which she shall pay the husband an adjusting amount of $46,698.
In the event the property fails to be sold by private treaty within a period of three months from the date Order (3) becomes operative, then each party shall take all necessary steps and execute all necessary documents to cause the property to be sold by auction at the earliest possible date at a reserve price to be agreed upon between the parties. If they do not agree the reserve price shall be determined by the President of the Australian Property Institute of New South Wales or his nominee and that the proceeds of this sale will be distributed in accordance with Order (3).
Pending compliance with Order (1) or the sale of the property, whichever first occurs, the wife shall continue to pay as they fall due all regular instalments in respect of the mortgage/s, council rates, water rates and household insurance in respect of the property and shall indemnify and keep the husband indemnified in respect of any such amounts. If any such amounts remain unpaid as at the date of the sale of the property, the wife shall be solely liable for any such arrears.
In the event that the sale of the property pursuant to Order (3) results in the wife being assessed to pay capital gains tax, the husband shall pay thirty five percent (35%) of the liability. The husband shall pay the sum due to the wife within six (6) weeks of the wife giving him her relevant notice of assessment issued by the Australian Taxation Office.
That in default of either or both of the husband and the wife doing all such things and executing all such documents as may be needed to comply with these orders that a Registrar of the Wollongong Registry of the Federal Magistrates Court or such other person appointed by the court is authorised to do all such acts and things and execute all such documents on behalf of either or both of the husband and the wife.
That all exhibits tendered in these proceedings shall be returned at the expiration of one (1) calender month unless an appeal is lodged.
That the solicitor who issued any subpoena collects that subpoenaed material and returns it to the owner within seven (7) days.
All outstanding applications are dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
WOLLONGONG

SYM494 of 2002

R J H

Applicant

And

A H

Respondent

REASONS FOR JUDGMENT

These reasons were delivered orally.
These are proceedings for the adjustment of property pursuant to s.79 of the Family Law Act 1975.

Short History

R J H (“the husband”) was born in 1959.
A H (“the wife”) was born in 1960.
The parties commenced cohabitation in mid 1981 and were married on 17 October 1982.
There are five children of the marriage. They are D L H born in 1983, J J H born in 1985, J K H born in 1987, T R H born in 1991 and D H born in 1993.
The parties separated in about 9 December 1997.
A decree nisi was ordered on 20 January 2003 which became absolute one month later.

The evidence

At the hearing the husband relied upon the following:
·
His application filed on 29 May 2003 and his affidavit sworn

4 March 2004 together with his oral testimony.
·Affidavit of Andrew Kelkert (valuer) sworn 4 March 2004.
·Affidavit of Stephen Bourke (Superannuation specialist) sworn 8 March 2004.
·Affidavit of Bruce Higgins (Valuer) sworn 10 March 2004.
·Affidavit of J H, the applicant husband’s mother, sworn 17 March 2004.
Because the parties were able to reach agreement in relation to the valuation of real estate, superannuation and personalty Andrew Kelkert, Stephen Bourke and Bruce Higgins were not cross examined. In the husband’s case, only he gave oral testimony. The wife's counsel did not cross-examine the applicant’s mother, J H.
The wife relied upon the following:
·Her affidavit sworn 11 March 2004, her financial statement sworn 10 March 2004, her response of 17 July 2003 as well as her oral testimony.
·Affidavit of H B, the wife’s father, sworn 23 March 2004. He was not required for cross-examination.
Both parties submitted documents that became exhibits.

The facts

At the commencement of cohabitation neither party had assets of real value or any liabilities. The husband owned a motor car which he believes was worth about $6500 and a caravan which he believes was worth approximately $2000 in value. The wife owned a car which was worth about $800 and had about $3000 from the sale of a block of land that she had owned at Nowra. When the parties commenced cohabitation they were both working full time.
On their marriage on 17 October 1982 the parties moved into the wife's father's home. The wife’s father deposes that the parties lived in his home at Wollongong rent free. They lived there for about 18 months, until they moved into a home that they purchased at Warilla. Settlement of the purchase of the Warilla property took place on 4 April 1984. In her affidavit[1] the wife said that settlement of purchase of this property took place on 15 July 1988. The settlement statement[2] makes it clear that her 1988 assertion is wrong. The effect of this is that the contribution made by the wife's father on her behalf by providing rent-free accommodation was four years less than the wife claimed.
[1] Paragraph 13
[2] Exhibit E
The Warilla property was purchased for $43,000, in relation to which the parties borrowed $37,500 from IMB. Thus they needed to find $5500 and pay additional costs of $1700 in order to complete the purchase. The husband's mother advanced them about $7000, which was put towards the deposit and other costs associated with the acquisition of the property. It appears that the parties had no savings and without the money provided by the husband's mother they could not have acquired the property when they did.
Both parties agree that significant improvements were made to the Warilla property. In his affidavit[3] the husband identified the following improvements:
My father and I installed new light fittings and built a kit garage. A H's brother built a barbecue and her father and I built a covered deck in the courtyard. I paved the courtyard, retiled the complete bathroom, kitchen and laundry floors, painted throughout, did a built in wardrobe and shelving. We also carpeted, installed exterior blinds, installed curtains throughout and landscaped the garden.
[3] Paragraph 8
This evidence is consistent with paragraphs 14 and 15 of the wife's affidavit. She also identifies that her father built a sunroom and that her brother helped build the garage. Some of the material used in the improvements was acquired at cost by her father. Her father was a builder and was able to use his contacts in the industry to acquire low cost material. The wife sewed all the curtains hung at the Warilla property and worked with the husband constructing the wardrobes. Both she and the husband plastered some of the walls. With her brother H's assistance the wife landscaped the rear courtyard as well as landscaping the front and side drive. The family assistance was given without charge.
In early 1983 the wife started maternity leave from the travel agency; about two weeks before D L H’s birth. The wife returned to full time work with the agency in April 1983. While on maternity leave the wife continued selling clothes through a party plan a few evenings each week. A friend of the mother’s cared for D L H during the day when the parties were at work.
J J H was born in 1985, on this occasion the wife only took six weeks maternity leave. When she returned to work J J H went to day care with D L H. As she had been doing previously the wife dropped the children off to her friend in the morning and collected them in the afternoon.
J K H was born in 1987. This time the wife took three month's maternity leave.
In February 1987 the husband lost his job and was unemployed for two years. During this period he assumed primary responsibility for the home and children. During this period D L H started preschool and J K H and J J H were at home. The wife was working full time as the office manager of a travel agency and until the husband started work at a Club her income supported the family. During 1987 the husband obtained work at the club three nights a week as a part time cleaner. The husband worked at the bowling club until 2000.
In late 1987 the parties sold the Warilla property for $69,900. The mortgage pay out was approximately $34,000. On 26 May 1988 the parties settled the purchase of the Mount Warrigal property. The husband's mother advanced $10,000 which was put towards the deposit and other acquisition costs. In order to complete the purchase they borrowed $54,000 from St George Bank. Upon settlement they received $14,239.73[4] which money the wife received. The husband challenged her to account for the disposition of this money, claiming that about $15,000 had been spent paying out her credit cards. The wife said that she spent the money received on improvements to the home and other household expenses. I accept her evidence that she had a maximum of about $3500 outstanding on her cards being her total credit limit. She probably did pay out her credit cards and the balance of the moneys available after settlement was spent on joint matrimonial purposes.
[4] Exhibit A
In 1989 the husband started work as a survey field hand. In 1991 his position became permanent full time. Although he was based at Wollongong he actually worked at Huskisson. He worked away from home for a considerable period.
The parties separated in 1991 and reconciled prior to T R H’s birth in 1991. During this separation the wife and children lived in the home. The husband did not pay any child support. Upon their reconciliation the wife took casual work, working in a variety of occupations, including decorating. The husband continued to work at Huskisson and also at the club three nights a week. This meant that the wife was overwhelmingly responsible for the home and the children.
Once again the parties worked hard improving and maintaining their home. The wife sewed curtains, built a wall unit and revamped the kitchen. She built a pergola and erected the front fence. Her father constructed a conservatory and worked on the garage. I accept the husband’s evidence that he also worked building the garage and on the conservatory. He tiled the sunroom, built fences and pathways, erected a toolshed and fencing. Although the wife claimed that she alone painted the exterior of the home, I accept that the husband helped and that together they painted the homes interior.
On 2 July 1992 the parties sold the Mount Warrigal property for $150,000. At settlement the mortgage pay out was $80,724. In the intervening period the parties had borrowed extra from St George so that they could build a garage at the Mount Warrigal property. Although both thought they had borrowed $16,000 it appears that the actual amount was $17,977[5], which was borrowed on 22 March 1989. Neither party is able to explain the additional $8747 increase to the mortgage. The St George home loan statements[6] reveal that the pay out included $2985.08 interest charged by the mortgagee. It seems likely that this was a penalty charged for early discharge of the loan. Thus only $5762 is unexplained. Responsibility for explaining the shortfall did not rest solely with the wife. The amount that is unexplained is not substantial and I am not satisfied that the evidence will enable me to find that the wife wasted the shortfall. On balance I am satisfied that the $5762 was used for joint matrimonial purposes.
[5] Exhibit C
[6] Exhibit C
The parties bought their home at Wollongong from the wife’s father on 25 August 1992. Although the property had been listed for sale at $165,000, the wife’s father sold it to them for $150,000. Thus the wife contended the purchase was completed at an undervalue with the $15,000 difference comprising a contribution on her behalf. There is a distinction between listing price and selling price. Usually property is listed high in an attempt to set parameters for later negotiation. Listing price does not necessarily reflect market value. There is no evidence how long the wife’s father had the property listed for sale at $165,000 or that he had received any offers to buy it at its listed price. In these circumstances if the wife wanted to prove that the market value of the home at the time the parties bought it in 1992 was $165,000 she needed to adduce valuation evidence to that effect. I am satisfied that the parties acquired the property at market value.
In order to complete the purchase at Wollongong the parties borrowed $118,500 from the State Bank. The balance of the purchase price came from the proceeds of the sale of the Mount Warrigal property. The parties carried out significant improvements to the Wollongong property as identified in the wife's affidavit paragraphs 36 and 37 and paragraph 14 of the husband's affidavit. These included front room and loft extensions, installation of a spa bath, carpeting, built in wardrobes and outside improvements including landscaping, building retaining walls, driveways, pathways and gardening.
The wife claimed that the parties separated in August 1997 although they continued to live in the same house until December 1997. The husband agrees that there were tensions in the home but denies separating earlier than when the wife asked him to leave. Between August and December 1997 the parties were involved in significant financial transactions which suggest that they were planning to remain together. While this was the husband’s expectation, it may be that the wife thought differently. Whatever the wife’s intentions may have been the fact is that the parties cohabited until December 1997.
On 13 November 1997 the parties refinanced the mortgage on the Wollongong property to buy an investment property owned by the wife’s father. The investment property comprises two flats. Again the wife contends that the parties paid less for this property than its market value. She asserted that when purchased the property was worth $140,000 yet her father sold it for $110,000. Unfortunately the wife did not produce any cogent evidence to support this contention. Thus I am satisfied that the property was acquired at market price. The wife handled the purchase including dealing with the bank. Although she denies it, I accept the husband’s evidence that he believed the investment property was purchased in both names and only became aware that the wife was the sole registered proprietor much later. Citibank, the incoming mortgagee set up two home loan accounts, numbers 810845251 and 810847285. The former, in the sum of $140,000 was secured against the Wollongong property and the latter, $115,000 was secured on the investment property. Of a total $255,000 credit limit the parties drew down $234,983 in order to complete the purchase and re-finance. When the husband left the home in late November or early December 1997, the total amount due under both loans was $234,984. Of this $138,810.06 was secured against the Wollongong property and $96,173.89 was secured on the investment property.
Within weeks of settlement the wife asked the husband to leave, which he did. The wife and children remained in the home and she had possession and control of the investment property. This situation continued until the hearing.
The total amount now due under the Citibank mortgages is $253,790. The wife has had the exclusive benefit of the $18,806 increase in the mortgage. When the parties refinanced with Citibank in late 1997 they paid out the wife's credit card debts. This was somewhere in the vicinity of about $15,000 – $20,000. Whatever the amount, the point is that at separation all credit card liabilities were paid out. Hence any current credit card liabilities have been incurred subsequent to separation.
After separation the husband paid the wife $550 per fortnight, described as a combination of child support and a contribution to the mortgage. This continued until 25 November 1999. The husband then unilaterally reduced the moneys paid to the wife to $400 per fortnight, which payments continued until the wife made application to the Child Support Agency in early 2003. On 21 March 2003 the Child Support Agency issued a child support assessment. I do not have evidence of the liability that the applicant husband was assessed to pay prior to 5 June 2003. Effective from 5 June 2003 the husband was assessed to pay $1353 per month child support. There were a number of reassessments, the net effect of which was that from 1 September 2003 until November 2003 the husband was assessed to pay $1187.75 per month. Effective from 15 November 2003 his assessment was $1199.75 per month. Early on the husband fell into arrears totalling $3500. At the wife’s behest the Child Support Agency collected the outstanding money some time ago. The wife contends that the husband paid substantially less child support than she was entitled to if assessed by the Child Support Agency. Given that the wife had all the available assets and the husband needed to establish his own modest home, $275 per week was a reasonable level of child support. However $200 per week was clearly insufficient compared to the husband's income and the wife's need.
Since separation the wife has been able to take a number of overseas trips. These have included:
·A two-week cruise with four of the children in the South Pacific.
·A long weekend to New Zealand skiing.
·D L H was able to go to Singapore on a trip funded by the wife.
·The wife took what she described as an educational trip for five days to the United Kingdom.
·In 2002 a five day trip to the United States, also an educational trip.
·A trip to Bali for four or five days with one or more of the children.
·A trip to Phukhet in relation to which her return fare to Bangkok was provided free because of her good sales.

Relevant Law

The approach to the determination of an application under s 79 is well established by authority, In the Marriage of Lee Steere and Lee Steere (1985) FLC 91-626; In the Marriage of Ferraro (1993) FLC 92-335; and In the Marriage of Clauson (1995) FLC 92-595. The process involves a multiple part procedure, firstly identifying the property, liabilities and financial resources of the parties as at the date of the hearing. Secondly evaluating the contributions made by the parties as defined in s.79(4)(a) to (c) and the effect of any proposed order upon the earning capacity of either party. The court must then evaluate the matters contained in s.75(2) insofar as they are relevant, any other order made under the Act affecting a party or child, and any child support under the Child Support Assessment Act 1989, that a party to the marriage is to provide or might be liable to provide in the future for a child to the marriage.
In determining what order should be made under s 79 the court must be satisfied in all the circumstances that it is just and equitable to do so, (see s.79(2)). It is the justice and equity of the actual orders that the court must consider (see Russell v Russell (1999) FLC 92-877).

Assets and Liabilities at the Date of the Hearing

The parties reached agreement as to the value of most assets.
I find the assets, liabilities and financial resources as at the date of the hearing are as set out in the table below:

Non-Superannuation Assets	$
The Wollongong property - (Joint) (Agreed)	371,250
The investment property - (W) (Agreed)	281,000
Furniture in the former matrimonial home - (W) (Agreed)	6,255
1996 Ford Falcon - (W) (Agreed)	6,800
Furniture - (H) (Agreed)	2,800
Commonwealth Bank savings - (H) (Agreed)	2,500
1989 Ford - (H) (Agreed)	3,000
Total non superannuation assets	673,605
Superannuation
State Super - (H) (Agreed)	67,744
Club Plus Super - (H) (Agreed)	5,271
Superannuation - (W) (Agreed)	3,342
Total superannuation assets	76,357
TOTAL ASSETS	749,962
Liabilities
Citibank loan secured on the Wollongong property- (J) (Agreed)	139,150
Citibank loan secured on the investment property - (J) (Agreed)	114,640
TOTAL LIABILITIES	273,790
NETT ASSETS	496,172

There are two matters that require explanation. Firstly the wife asserts that her credit card debts should be treated as a joint matrimonial liability. I have already found that shortly prior to separation the parties borrowed extra money from Citibank, to acquire the investment property. At the same time they borrowed extra money sufficient to pay out all the wife's credit card debts believed to be somewhere between $15,000 and $20,000. Thus at separation the wife had no outstanding credit card liabilities. In her financial statement sworn 11 March 2004 the wife reveals that as at the date of the hearing she has the following credit card debts:

·ANZ Visa   $5,454
·Westpac Visa  $4,106
·Commonwealth Savings Bank Bankcard                 $9,886
·Commonwealth Savings Bank Visa Card                $6,207
·Coles-Myer  $2,400
·Amex  $2,844
·Citibank  $9,271
·Total credit card liability  $40,678

The wife claims that these debts have all been incurred for necessary family expenses, primarily supporting the children. She told the husband that she spent $8000 on her cosmetic surgery and he disputes her claim that her credit cards debts were incurred meeting routine and necessary household expenses. When this issue was first raised I indicated to the wife's counsel that his client would need to corroborate her claim by producing her credit card statements, which she failed to do. Ordinarily the court would not make adverse comment where a party fails to produce credit card statements as far back as six years ago. However in this case the wife produced original credit card statements for 1985-1987 inclusive[7] in order to refute the husband's assertion that she incurred debts travelling overseas or indulgently.

I do not accept that the wife was unable to locate and produce at least a representative collation of her more recent credit card accounts, which would have demonstrated the type of expenses incurred. Her failure to produce the statements satisfies me that their production would not have assisted her case. See Jones & Dunkel (1959) 101 CLR 298. The wife's counsel submitted that the wife's credit card liability approximated the shortfall in child support between the amount the husband actually paid and the amount that he would have paid if the child support formula had been applied. Thus even although the court did not have the credit card statements, the court could safely infer that the credit card debts had arisen in the way the wife claimed. During the hearing I completed some rough calculations that attempted to quantify the husbands child support liability over the years by reference to the formula. Unfortunately I did not have all necessary figures, relevantly the wife’s actual or taxable income prior to 2003. I accept the husband's counsel’s submission that the court cannot safely infer or conclude that the husband had underpaid child support by about $40,000.
[7] Exhibit F
The relevant factors that together persuade me that the credit card debt should not be treated as a joint matrimonial liability are the following:
·The wife's failure to produce documents evidencing the nature of expenditure.
·The debts have accrued entirely since separation and over a lengthy period.
·The wife had control and possession of all of the parties’ valuable and available assets.
·There is no reliable evidence that the wife used the credit cards to acquire assets, which are taken into account as matrimonial assets.
·The wife did use the credit cards for overseas travel and expenditure, whether to the extent alleged by the husband I cannot know.
If it had been the case that the wife's counsel had persuaded me that I should treat the wife's credit card debts as a joint matrimonial liability then the husband's contributions post separation would have been increased. For these reasons I am satisfied that the credit card debt are not a joint liability. Nonetheless they are relevant when considering s.75(2).
The second issue requiring explanation is the potential capital gains tax liability on the investment property. Since its acquisition the property has been an investment. The wife has never used it as her principal place of residence. Since purchase the property has increased in value from $110,000 to about $281,000. I say about, because although the property has an agreed value its actual sale price cannot be known. Presently the wife pays $29 per week income tax, which indicates that she is in the lowest tax bracket. Taken together these factors satisfy me that if the wife sells the investment property she will incur a capital gains tax liability. In her affidavit[8] the wife said “I am advised that if I sell the property at the (investment) property there will be a capital gains tax liability and goods and services tax attracted. I will obtain advice as to these liabilities from my accountant.” If the wife did obtain advice she did not provide the court with evidence of the capital gains tax and/or GST payable on sale. The absence of evidence of the value of capital gains tax makes dealing with this issue unnecessarily difficult. In Rosati (1998) FLC 92-804 the Full Court held:
“If the Court orders the sale of an asset or if satisfied that a sale of it is inevitable or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then generally allowance should be made for any capital gains tax payable on such a sale in determining the value of the asset for the purposes of the proceedings.”
[8] Paragraph 69
During his closing address the wife’s counsel indicated that the wife sought the opportunity to pay out the husband before resorting to the sale of property. This approach is inconsistent with her evidence that she had planned to sell the investment property last year because she could not manage it with her other responsibilities and that she was unable to meet her current expenses from her income. Unless she plans to increase her work hours, which she says she does not, or raise the money in a way that does not incur additional outgoings, for example a loan or gift interest free from family it is difficult to see how the wife can retain the investment property. The available evidence suggests that notwithstanding the wife’s desire to keep the property, it is probable that the investment property will be sold in the near future. If the property is sold any Capital Gains Tax will be assessed at the end of the relevant tax year, probably some time after 30 June 2005. Because there is no evidence as to the likely range of CGT payable I cannot weigh up the effect on the parties of deducting and securing the potential liability from the sale proceeds or not doing so. If the wife is able to arrange her financial affairs and buy out the husband’s interests in the matrimonial assets CGT is unlikely to be payable for many years. In order to take CGT into account, this scenario required evidence of the amount of CGT potentially payable.
Because of the absence of evidence as to the quantum of capital gains tax I cannot determine the asset pool taking this potential liability into account. The best I can do is qualify the findings made concerning the asset pool and recognise the capital gains tax liability should the property be sold when formulating the orders. It seems to me that there may have been another approach available and that would be that absent evidence of the capital gains tax liability the court would disregard it entirely. I have chosen a course, which is favourable to the wife but one, which seems to be the just course.
Other than the wife’s bald assertion that Goods and Services Tax is payable on the sale of the investment property, there is a similar paucity of evidence as to why or the quantum payable. It may be that here the wife claims that GST is payable on selling agents commission and associated costs. That seems likely. If this is what the wife contends these costs will only be incurred if the property is sold. Standard orders for the payment of expenses associated with the sale of the property will ensure that GST, if payable, is taken into account.

Section 79(4) and other factors

Section 79(4) requires that the court look at the entirety of the contributions both financial and non-financial, to the welfare of the family as well as the acquisition, conservation and improvement of those assets. Contributions are not required to be tied to the acquisition, conservation and improvement of a particular asset and are to be taken into account generally as contributions in a total sense.
Both parties worked hard to establish their family's future. During the years of cohabitation both parties made a multitude of financial and non-financial contributions. The husband recognised and valued the wife's contribution more reasonably than she was willing to concede he made. Yet it is clear that both parties worked very hard to provide for their family and that their marriage was in its truest sense a joint venture.
The wife made the initial contribution to which I have already made reference. Thereafter throughout the marriage she applied all of the income earned by her in her work as a travel agent and her various other casual positions to joint matrimonial purposes. The husband makes no challenge to the wife’s evidence about her employment and I accept her account of her work history.
The husband's initial contribution was slightly greater than the wife's was. He worked full time until 1987 and then stayed at home caring for the children while also working three nights a week at the Bowling Club. He resumed full time work in 1989 and has worked with the RTA full time ever since. During his years with the RTA the husband secured promotion and his income became the financial mainstay for the family. For approximately five years he worked away from home as much as possible. This enabled him to do regular overtime and receive travelling allowances, increasing the income that he brought into the family. He routinely left home on Monday morning and returned on Friday evening. His total living away allowance was about $580 per week. It is immaterial whether his actual accommodation expenses were paid out of his travel allowance by his supervisor or paid for by the husband. After payment of his actual expenses the husband kept a small amount for personal expenses, for example cigarettes, and the balance was given to the wife. The wife said that the husband gave her between $80 and $120 from his allowances only occasionally. As the family's financial manager the wife received the husband's entire salary via their joint account weekly. She had tight control of the family’s budget and allowed the husband a modest living allowance. I do not accept the wife's claim that she was uninterested in the husband's travel allowance and merely accepted whatever amount he gave her. I am satisfied that the husband accounted to the wife for his expenses, which he minimised by staying in cheap accommodation. After each trip away he gave the wife at least $80 to $120.
During the marriage the husband's mother made a series of cash gifts which the husband’s counsel submits constitute a contribution made on his behalf. The wife disputes both the quantum of the gifts and says that these should be treated as contributions made equally. In Rainbird (1977) FLC 90-256 at 76,376 the Full Court of the Family Court makes it clear that the “contributor” of a gift is determined by the original intention of the donor. Where the intention of the donor as a gift is not clear the court can look to any special relationship between the donor and one of the spouses and regard the gift as having been contributed by that party: See Kessey (1994) FLC 92-495 at p81,149.
It is apparent from Gosper (1987) FLC 91-818 that the donor’s intention is not necessarily the determining factor. The essence of Fogarty J’s judgment is that depending on the circumstances the court is able to treat a gift as a financial contribution of the spouse’s relative. In Kessey the Full Court expanded on Gosper by saying that as a general approach a parental gift is to be treated as a financial contribution made on behalf of the child of the donor parent. In that case the court took into account the relationship between a spouse and the spouse’s parent and concluded that the gift from the parent should be regarded as the contribution of that spouse. The issue of gifts and advances is further discussed in Pellegrino (1997) FLC–92–789. In that case Chisholm J sagely acknowledged that parents do not usually have an intention as to whom they intend to benefit when they make gifts to their married children. He held that the wife’s parents intended to benefit their daughter by the gift, notwithstanding the fact that her husband derived direct and indirect benefit from it. Essentially if the motivating circumstances leading to the gift was the parent/child relationship, the gift may be regarded as the contribution of the son or daughter: and not also of his or her spouse: Pellegrino (1997) FLC–92–789 at pp 84, 726 – 84,728.
The wife denies ever discussing money matters with the husband’s mother. Because his involvement in the transactions was limited, the husband primarily relied upon his mother's evidence concerning these gifts. The wife relied on her recollection and also a reconstruction of particular sales, in effect working backward from purchase price and mortgage amount in order to calculate the size of any gifts. However her recollection proved faulty on a number of occasions. For example the selling price of the Warilla property, the year this property was sold, and the amounts paid on credit cards. This is not a criticism of the wife but persuades me that I should prefer J H's testimony. She gives a specific account of three transactions, the details of which are credible and I am persuaded essentially accurate. Thus I am satisfied that the husband’s mother made the following gifts:
·$7000 used to acquire the Warilla property in 1983.
·$10,000 used to acquire the Mount Warrigal property in 1989.
·$10,000 that she paid into the parties' loan account.
The husband agreed that his mother intended that the money would be used for the family's benefit. It is primarily on this basis that the wife claimed she made an equal contribution of the advances. However the reality is that these gifts have their nexus between the husband as a party to this marriage and his mother. His mother’s generosity was motivated by her relationship with her son. The fact that the advances were used for joint matrimonial purposes does not undermine the husband’s claim that the gifts should be treated as contributions made on his behalf. For the reasons outlined in Kessey and Pellegrino I am satisfied that the moneys paid by the husband's mother should be treated as a contribution on his behalf and not also the wife’s.
During the marriage the husband contributed to superannuation. Superannuation has long been regarded as a joint venture to which parties contribute and plan for their retirement. Thus it is a direct financial contribution by the husband and indirectly by the wife. From 1992 until separation the husband paid two per cent of his salary into superannuation. The total amount contributed was $3882.27. After separation he continued to contribute two per cent until 1998 whereupon he increased his contribution to eight per cent of his RTA salary. In terms of contribution to superannuation the parties agree that prior to separation the husband's employee contributions were 14.6 per cent, compared to his post separation contributions of 85.4 per cent. It follows that his post separation financial contributions to his superannuation substantially exceed the contributions made by either party to the acquisition of superannuation during cohabitation.
The wife contends that she alone contributed to the acquisition, conservation and improvements of the investment property. This property was previously owned by her father and for five years prior to its purchase she was his listing manager. When her father decided to sell the property the wife was keen to buy it. The wife’s claim that the husband wanted nothing to do with the purchase does not withstand scrutiny. At her behest prior to separation the husband agreed to re-finance the former matrimonial home and to jointly borrow the full purchase price of the investment property. He understood that the property was purchased in joint names and only later learned that although he was a joint mortgagor the wife was the sole registered proprietor. As settlement took place virtually simultaneously as separation I am satisfied that, as at the date of separation there was no equity in the investment property. Because the parties had no savings it is likely that stamp duty and other associated costs were paid from the increase in mortgage secured against the home. Thus the pivotal features concerning the acquisition of the investment property are the following:
·It was acquired at full value;
·All money used for its purchase was borrowed;
·The parties equity in the Wollongong property was partly used;
·The liability for the Citibank mortgage was that of each party not only the wife’s.

In her affidavit[9] the wife said:
Although I received rental from the flat of $285 per week there was insufficient to meet the mortgage payments to Citibank of $1910 per month and I was contributing the balance. I also meet all of the other expenditure for the rental properties for repairs and the like.
[9] Paragraph 48
It appears that the wife was attempting to persuade the court that the investment property incurred a significant loss, which she supplemented from other income. The $1,910 paid monthly to Citibank related to both home loans. The wife conceded that the investment property portion of the $1,910 was probably about $910 per month. When $285 is multiplied by 52 the average annual rental income achieved is $14,820. Multiplying $910 by 12 totals $10,620. This means that on average rental income exceeded the relevant mortgage repayments by about $4000 annually. I accept the wife’s counsel’s submission that as well as mortgage repayments she paid rates and other taxes as well as meeting the costs of minor repairs. There were also occasions when the property was untenanted. However eventually the wife agreed that financially the investment property was cost neutral in the sense that its income covered its outgoings. To the extent that she had purported to claim that she had met a financial shortfall in relation to the investment property I do not accept her evidence.
The wife has managed this property with no assistance from the husband. This has included the completion of minor repairs, which the wife performed. This saved the parties the cost of rental agents and tradesmen. It is unlikely that the amount saved was significant.
I agree with the husband's counsel's submission that the key contributions that resulted in the investment properties current value are the following:
·The joint loan obligation established under both Citibank mortgages;
·Collateral security of the former matrimonial home taken by the mortgagee;
·The rental income earned on Dapto supported its outgoings;
·Although the property was maintained, there is no evidence of any capital improvements made to it;
As a consequence of these matters the present value of the property is primarily attributable to movements in the property market. By this I mean that is the property has achieved a windfall gain as a consequence of upward movements in the local real estate market. Overall, the effect of this is that I am satisfied that the parties made equal financial contributions to the acquisition, conservation and improvement of the investment property and the wife made a small non financial contribution.
The husband asserted that during the marriage the wife wasted large sums of money running up substantial credit card debts unnecessarily. Because money was tight these debts were repaid by increasing their mortgages. The wife agrees that she did incur credit card debts but said that these were used for ordinary family expenses. The husband's recollection was that the wife mainly spent money on her clothes and overseas travel. He said that at settlement of the sale of the Warilla property they paid outstanding credit card debts of about $15,000. At that time the wife had a Commonwealth Savings Bankcard with a credit limit of $1000 and a Visa Card with a credit limit of $2500. Thus I accept her evidence that she did not have a $15,000 credit card debt. Although the wife could not account for the disposition of the full net funds from the Warilla property, I accept that they were applied to joint matrimonial purposes and that the wife did not waste the balance remaining available after settlement. Just as the wife needed greater specificity in relation to the credit card debts incurred post separation, the husband needed to provide much more specific evidence of waste if he wanted this argument to succeed. Clearly pre separation credit card expenses resulted in increases to the mortgages. However the picture that emerges is that the parties lived somewhat beyond their means in the sense that they used the equity in their homes to raise capital in order to pay debts. While the husband disagreed with some of the wife’s pre separation expenditure it does not necessarily follow that this amounts to waste in a Kowaliw (1981) FLC 91-092 sense.
The wife's counsel emphasised her contributions as a homemaker and parent prior to and after separation. As a skilled seamstress the wife sewed clothes and soft furnishings, she grew vegetables and flowers and was intimately involved in every aspect of the children's lives. The wife enrolled the children at school and participated in their school and extra curricular activities. For the five years that the husband worked away during the week she was exclusively responsible for the children and the home Monday to Friday, this was an onerous responsibility.
For two years the husband was a full time parent and homemaker. When he was at home he was keenly involved in the children's care and took a meaningful role in family life. At other times, his employment limited his opportunity for the substantial role that the wife undertook. When he was at home he was an active parent and actively participated in the management of the home. When the wife was away or working in the evening he took care of the children. Throughout the marriage the husband did the dish washing and vacuuming as well as other types of housework.
By comparison as at separation the wife had made a greater contribution as the homemaker and parent. Ferraro makes it clear that the court must value a party's contribution as a homemaker and parent in a real and substantial way.
At separation the children's ages ranged from 14 years to 4 years. Since separation the children have lived with the wife. Hence in the six and a half years since separation the wife has been overwhelmingly responsible for their care. J K H has had a difficult adolescence and has placed the wife under great strain. The wife complains that the husband failed to have regular contact to the children, which made her post separation parenting more arduous than was necessary. I felt the wife’s criticisms were harsh and failed to recognise that the husband was living in modest rental accommodation, making regular overnight contact to five children simultaneously difficult from his perspective and probably unattractive from theirs. The husband had regular alternate weekend contact to the two younger children and the elder boys visited reasonably often. During school holidays he took the younger children for two weeks. Although the husband has had contact with the children his contribution as a homemaker and parent since separation does not equate to the wife’s. However, the husband has also made other significant post separation contributions. These include allowing the wife to have exclusive use of all of the valuable available assets, most importantly the family home and its contents. Since separation the husband has lived in rental accommodation. When he vacated the family home he removed his clothes and an old car. Everything else remained behind for the wife and children. It seems to me that this is a significant financial contribution in the sense that he provided his share of the assets to the wife and the children for years. If I am wrong to treat this as a financial contribution then this is a significant contribution to the welfare of the family. It too must be treated in a real and significant way.
As I have already found when the parties separated the total due to Citibank, was $234,983.75. It is now $253,790. There is no evidence that either party has made additional capital withdrawals. Hence the increase probably results from the wife failing to pay the mortgage instalments as when they fell due on different occasions. Although it would have been difficult because she had possession and control of the assets she was obliged to make the repayments on time. Her use of the property required that she pay the mortgage, it was in effect the price of occupation of the home. The husband does not contend that the court should notionally add back the moneys effectively drawn down by the wife on the mortgage post separation. Thus her use of those funds also involves a financial contribution by the husband. As the increased mortgage is treated as a joint matrimonial debt the husband contributed to the money used by the wife. He did not derive the benefit of any of the increase. To some extent it balances out inadequate child support.
Balancing all of these factors I am satisfied that overall the husband has made a greater financial contribution to the acquisition, conservation and improvements of the property of the parties including superannuation than the wife has done. This includes the contributions made on his behalf by his mother.
Improvements to all of the parties’ properties have been substantial and the improvements made by the wife's father and brother’s are improvements made on her behalf. Although a fine distinction I am satisfied that the wife has made a slightly greater non-financial contribution to the improvements of the various properties owned by the parties.
As between the parties the wife made a greater contribution as a homemaker and a parent. The husband made a real contribution but the wife's is significantly larger.
The orders I make will not affect the earning capacity of either party.
I have already made findings in relation to child support and do not repeat them.
Comparing the various contributions made by these parties over the many years that they lived together and since separation as well as other relevant factors I am satisfied that the outcome of the contributions phase is equal.

Section 75(2) factors

The husband is 45 years old and the wife is 44 years old. Both have basically good health. On 16 May 2003 the wife was diagnosed with Graves' Disease which is a toxic multi nodular goitre. Graves disease causes fluctuating hormone levels and makes the wife tired and at times teary. The condition will resolve with time and the evidence does not indicate that the wife will suffer long-term ill health. I make no adjustment pursuant to the subsection (a).
Both parties have the income identified in their financial statements. From a combination of child support, rental income, salary and government benefits the wife receives $1295 per week gross. The wife said she wanted to retain the investment property an outcome I consider speculative. It is more likely that the property will be sold and the wife's income reduced by about $285 per week. Of course her expenses will reduce as well. Presently the wife has assets greater in value than the husband has, but only the investment property is income producing. For the year 30 June 2003 the husband earned $57,306 gross. Presently he earns approximately $990 per week which amount increases if he works overtime. In the years since separation he has had an annual salary as high as $68,000. I am satisfied that he has the capacity to earn more than he currently does and that his income over the years will increase. I must consider under s.75(2)(b) the parties' capacity for future employment. The wife has the physical and mental capacity for work as a travel agent. She has many years’ experience in the industry and early in the marriage managed a travel agency. She overstated the training she would need to complete in order to address industry changes and technological advances that she said she needed in order to run an agency. Her almost continual employment in the travel industry combined with her obvious intelligence and energy means that with comparatively little effort she could have the requisite skills and experience to manage a travel agency. This would result in an increase in her earning capacity. By comparison the husband currently has secure employment and an earning capacity reflected at least in his current salary with the potential for regular overtime and additional allowances. I am satisfied that overall subsection (b) warrants an adjustment in the wife's favour.
In Clauson the Full Court said “.. it should not be forgotten that the payment of child support in no way compensates the custodial parent for the loss of career opportunity, lack of employment opportunity and the restriction upon an independent lifestyle with the obligation to care for children usually entailed.” These principles are applicable to the circumstances of this case. Presently the wife has the care of three children under the age of 18. J K H at 17 is the eldest, T R H is 12 and D H at 10 is the youngest. As a consequence of her care of the children that there should be an adjustment under subsection (c) in the wife’s favour.
Subsection (d) focuses on the financial needs of the parties including their financial commitments supporting the children. After payment of tax and child support the husband has about $465 per week. From this he pays rent of about $160 per week, health insurance of $15 and $76 superannuation. This leaves him $213 per week to live on. This is a modest sum and persuades me that the husband spends all of his income on necessary and reasonable expenses. From her income the wife has fixed expenses of $612 per week, school expenses of $67 weekly and credit card payments of $230 per week. Because she owes $40,000 on her credit cards it is likely that she will be paying them off for years. This leaves her $386 each week for food, clothing, utilities and other household expenses for herself and the children. I am satisfied that the wife exhausts all of her income on necessary expenses supporting herself and the children. On balance the application of this subsection warrants a small adjustment in the wife's favour.
Other than the children neither party has responsibility to support any other person. I make no adjustment under subsection (e).
The wife is in receipt of a government benefit, which I have already taken into account in subsection (b). I make no adjustment under subsection (f).
Since separation both parties have suffered a reduction in their standard of living. The husband has lost the benefits and comfort from living in his own home and has lived in modest rented accommodation. The wife has supported the family without the full benefit of her partner's income. I accept her evidence that day in and day out she has struggled to provide a reasonable standard of living for herself and the children. As both parties have struggled and lived in reduced circumstances I make no adjustment pursuant to subsection (g).
Subsections (h) to (k) do not arise.
The wife works part time and says that she wishes to continue to do so that she can maintain her role as a parent. She is home by 2.30 in the afternoon and does not work school holidays. In her affidavit she emphasised the difficulties that J K H has experienced following the breakdown of his parents' marriage which means that her decision to be as available to the children as she possibly can is reasonable and appropriate. J K H is nearly 18. Once D H is in high school it is probable that she would be able to extend her hours of employment so that she works more than the 10 - 15 hours a week without having to intrude into school holidays or during non-school hours. I have already taken into account under subsections (b) and (c) the financial consequences to the wife of her care of the children and I make no further adjustment pursuant to subsection (l).
Subsection (m) does not apply.
Subsection (n). I have already made findings in relation to the contributions phase as a result of which the parties will each have 50 per cent of the assets. This means that the wife will have assets the net value of which is $248,000. While the husband will have assets of the same value, approximately $72,000 is superannuation. It will be many years before the husband will receive his superannuation a factor that warrants a small adjustment in his favour.
I have already made findings concerning child support. The husband pays substantial child support pursuant to the child support assessment and it is likely that he will continue to do so for a number of years. The amount paid however does not warrant further adjustment in the husband's favour as I have already taken this expense into account under subsection (b).
Subsection (o). There are no other factors that the court should take into account.
Subsection (p) does not arise.
Having regard to all of the findings I have made pursuant to s 75(2) I am satisfied that there should be an adjustment in the wife's favour of 15 per cent. This will mean that the wife will have 65 per cent of the net assets and the husband will have the remaining 35 per cent. This is the cumulative effect of the findings I have made (see Tomasetti (2002) FLC 93-032). Any lesser adjustment, given the size of the asset pool, would be notional.

Section 79(2) is this outcome just and equitable?

Because the court must consider the actual orders, not just the percentage distribution under s.79(2) justice and equity in cases like this requires that the court stands back and looks carefully at the outcome of the s.79(4) and s.75(2) process. It is at this stage that the court considers the actual structure of the orders.
I will not repeat the findings made thus far. There are key findings that lead to my comfortable satisfaction that an outcome favourable to the wife, 65% compared to the husband’s entitlement at 35% is just and equitable. Simply put this has been a reasonably long marriage during which both parties put in maximum effort in order to support their family. They made wide-ranging contributions of a financial and non-financial nature and both contributed as a homemaker and parent. With five children it is quite clear that neither parent had many an idle moments. For a considerable period of time the husband worked two jobs. The wife also took a substantial financial role in the family through her regular full time, part time and casual work. On both sides family members made contributions on the spouse relatives behalf. Post separation both parties have made substantial contributions. In a financial sense the husband contributed to superannuation and allowed the wife and children to use all of the available assets. The wife made a particularly significant contribution as a homemaker and parent. The contributions of a parent and in the role of a homemaker must be treated in a real and significant way. I must take into account in a proper way the financial consequences to the wife of her continued care of the three younger children of the marriage. Although I have not treated it as a joint matrimonial liability I must not lose sight of the fact that the wife will also carry a $40,000 personal credit card debt.
The effect of the orders will mean that the husband will have his furniture worth $2800, $2500 savings, car worth $3000, giving him total non-superannuation assets of $8300. His superannuation is $73,015, which gives him total assets of $81,315. He will not take any of the liabilities secured against the parties' properties. The net asset pool is $496,172 thirty five per cent of which is $173,660. Therefore the wife must pay the husband $92,345. She will need time to rearrange her finances in order to do so. The husband has waited a long time to take his share of the matrimonial assets and should have to wait an unduly long time. Ten weeks should be sufficient time for the wife to make necessary inquiries and complete any refinance. At settlement the wife must give the husband a release from the Citibank or a discharge of any mortgage in which he is a joint borrower or guarantor. It would be inconsistent with s.81 of the Family Law Act 1975 and the clean break principle to leave the parties unnecessarily financially connected.
If the wife cannot raise these funds then she must sell the investment property. Its actual sale price cannot be known nor do I have details of the capital gains tax liability. Excluding the investment property from my calculations, the net assets are $354,322, 35 per cent of which is $124,013. This means that from the sale proceeds the wife must pay the husband an adjustment of $46,698. This is the difference between the husband's assets and 35 per cent of the assets excluding the investment property.

So that it is clear that I did not lose sight about the wife's potential capital gains tax liability, had there been evidence of its value I would have ordered that that amount be held in trust from the sale proceeds of the investment property pending the ATO issuing an assessment notice. There was insufficient evidence to calculate the sum potentially payable.
For these reasons I am satisfied that the outcome is just and equitable.
For these reasons I make the orders identified at the start of this judgment.

I certify that the preceding ninety-five (95) paragraphs are a true copy of the reasons for judgment of Ryan FM

Associate: S. Mashman

Date: 18 May 2004