RNL & RHB

[2005] FMCAfam 520

FEDERAL MAGISTRATES COURT OF AUSTRALIA

RNL & RHB [2005] FMCAfam 520

FAMILY LAW ─ Property — inheritance — where husband fails to make full and frank disclosure of his financial position — where husband is a beneficiary under a will trust — where husband’s entitlement is known during cohabitation but vests after separation — whether inheritance represents a contribution by the husband — whether inheritance comprises a protected or quarantined category of property — discussion of Kay J’s “gold bar” analogy in Aleksovski (1996) FLC 92-705 — effect of parties’ contributions to loss making joint venture — whether husband can be regarded as having an earning capacity — effect of disparity in the capital position of the parties.

FAMILY LAW — Spousal maintenance — variation of existing spousal maintenance order — where wife in receipt of age pension — effect of husband’s earning capacity — lump sum spousal maintenance — capitalisation of periodic spousal maintenance — inter-relationship between property settlement orders and spousal maintenance orders.

FAMILY LAW — Costs — effect of husband’s conduct as litigant — husband wholly unsuccessful.

Family Law Act 1975
Federal Magistrates Court Rules2001

Aleksovski (1996) FLC 92-705
Anast & Anastopolous (1982) FLC 91-201
Astbury (1978) FLC 90-494
Bevan (1995) FLC 92-600
Biltoft (1995) FLC 92-614
Black & Kellner (1992) FLC 92-287
Bonnici (1992) FLC 92-272
Brandt (1997) 22 FamLR 97
Briese (1986) FLC 91-713
Caska (1998) FLC 92-826
C & C (1998) 23 FamLR 291
Chalmers & Chalmers number 2 (2003) FMCA fam 446
Chang & Su (2002) FamCA 156
Clauson (1995) FLC 92-595
Collins (1990) 14 FamLR 563
Davut & Raif (1994) FLC 92-503
Dickson (1999) 24 FamLR 460
DJM & JLM (1998) FLC 92-816
Farmer & Bramley (2000) 27 FamLR 316
Ferraro (1993) FLC 92-335
Figgins (2002) FLC 93-122
Fowler (1980) FLC 90-808
Gill (1984) 9 FamLR 969 at 981
Giunti (1986) FLC 91-759
Gleeson (2004) FAMCA 1197
Hickey (2003) FamCA 395
Hogan (1986) FLC 91 – 704
I v I(No.2) (1996) FLC 92 – 625
JEL & DDF (2001) FLC 93-075
Kannis (2002) FamCA 1150
Kelly v Kelly(No.2) (1981) FLC 91 – 108
Lee-Steere (1985) FLC 91-626
Leslie (2004) FMCAFam 357
McLay (1996) FLC 92-667
Mezzacappa (1987) FLC 91-853
Mitchell (1995) FLC 92-601.
Monte (1986) FLC 91-757
Norbis (1986) FLC 91-712
Oriolo (1985) FLC 91-653
OSF & OJK (2004) FMCAfam 63; (2003) 179 FLR 222; FLC 93-191
Pastrikos (1980) FLC 91-987
Penfold (1980) FLC 90 – 800
Phillips (2002) FLC 93-104
Prestwich (1984) 9 FamLR 1069
Prpic (1995) FLC 92-574
Schirmer & Sharpe (2005) FLC 93-213
Stein (1986) FLC 91-779
Townsend (1995) FLC 92-569
Vautin (1998) FLC 92-827
VJ & CJ (1997) 22 FamLR 166
Warnock (1979) FLC 90-726
Waters & Jurek (1995) FLC 92-635
Weir (1993) FLC 92-338
White v White (2001) Eller1
Whitely (1996) FLC 92-684

Applicant: RNL

Respondent: RHB

File Number: MLM 9786 of 2004

Judgment of: Walters FM

Hearing date: 7 September 2005

Date of Last Submission: 7 September 2005

Delivered at: Melbourne

Delivered on: 7 October 2005

REPRESENTATION

Counsel for the Applicant: Mr Puckey

Solicitors for the Applicant: Morrison & Sawers

Counsel for the Respondent: Unrepresented

Solicitors for the Respondent: Unrepresented

ORDERS

1. Counsel will be heard as to the precise orders necessary to give effect to these Reasons.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLM 9786 of 2004

RNL

Applicant Wife

And

RHB

Respondent Husband

REASONS FOR JUDGMENT

Introduction

1. Before the Court are the wife’s applications for property settlement and spousal maintenance. In a sense, the husband’s application for property settlement is also before the Court – but the husband left Australia at some time prior to 5 August 2005 and has played no further part in the proceedings since that date. The trial (which took place on 7 September 2005) proceeded on an undefended basis.

2. The husband was born in 1933. He is now 72. The wife was born in 1940 and is now 65.

3. The parties commenced cohabitation in 1976, and married in January 1977.

4. They separated in 1997.

5. There is one child of the marriage – F, who was born in 1979.

6. Each party has a child from a previous relationship.  The wife has a daughter, N, who was born in 1962.  The husband has a son, I, who was born in 1975.

7. F, N and I are well over the age of 18, and all are self-supporting.

8. It is clear from the above that the parties were married for approximately 20 years, and that they separated some 8 years ago. It appears that neither has repartnered since the breakdown of the marriage.

Orders sought

1. In her Response (filed 26 April 2005), the wife sought orders to the effect that the husband pay to her a sum equivalent to 40% of the husband’s interest in the EL Will Trust (“the EL Trust”) and that, in addition, he pay to her spousal maintenance in the sum of $450.00 per week.  I shall say more about the EL Trust later in these Reasons.

2. At trial, Mr Puckey (for the wife) particularised the wife’s claim for property settlement.  He said that the wife seeks $100,000.00 – being approximately 40% of the value of the husband’s apparent interest in the EL Trust.  Mr Puckey submitted that the wife’s entitlement to spousal maintenance (as determined by the court) should be capitalised and paid from the husband’s entitlement under the EL trust.

3. Although the husband did not take part in the proceedings after

   
   

   5 August 2005, an outline of case was prepared on his behalf and faxed to the court on 23 May 2005.  In it, the husband proposed that ­-

   a)he continue to pay spousal maintenance in accordance with orders made on 15 September 1998 (in other words, at the rate of $50 per week);

   b)by way of “…final property division, the parties be entitled to a sum equivalent to 50% of the value of the matrimonial property at the time of separation … and that such division be given effect by way of a cash adjustment”;

   c)each party be solely entitled, to the exclusion of the other, to all property of the marriage that is currently in their respective possession;

   d)each party be solely entitled; to the exclusion of the other, to “…all property respectively acquired after the date of separation”; and

   e)each party be solely liable for all “…any and all debts that were individually incurred after the date of separation”.

The Law

1. The general approach that should be adopted by the court in relation to a property settlement application has been described in many cases[1]. The court must first identify the property of the parties. It must then attribute a value to each item of property — usually as at the date of the hearing. Thereafter, it must assess the extent of each party’s contributions under the various sub-headings described in section 79(4) of the Family Law Act. Finally, the court must consider the financial resources, means and needs of the parties, and the other matters set out in section 75(2) so far as they are relevant. An adjustment of the amount due to each party by way of contribution is then made by reference to the section 75(2) factors. It is not essential, however, that such an adjustment take place. Generally speaking, an adjustment is made because one party has greater needs and the other has stronger means.

   [1] See, for example, Pastrikos (1980) FLC 91-987, Lee-Steere (1985) FLC 91-626, Ferraro (1993) FLC 92-335, Clauson (1995) FLC 92-595 and Whitely (1996) FLC 92-684.

2. In relation to the contribution of the parties under section 79(4) generally, it has been held that a “global” approach will usually be more convenient than an “asset by asset” approach — although the application of an asset by asset approach does not (of itself) amount to an error of law[2].

   [2] See Norbis (1986) FLC 91-712.

3. Section 75(2) is concerned with the process of arriving at a just and equitable result.  It follows that there may be circumstances in which the justice and equity of the case, and the specific provisions of section 75(2), support an adjustment in a party’s favour for matters which cannot comfortably be described as being of financial or economic significance.[3]

   [3] See McMahon (1995) FLC 92-606 at 82,043.

4. Under section 79(2), the court is required to be satisfied that the order to be made is just and equitable — and not simply that the underlying percentage division of the net value of the parties’ property is appropriate.  In other words, in the consideration of whether the overall result of property settlement proceedings is just and equitable, it is the justice and equity of the actual orders, and not of the percentage distribution, which must be considered[4].

   [4] See Russell (1999) FLC 92-877.

5. One of the most recent authorities dealing with the correct approach to be applied in property settlement cases is the Full Court decision in Hickey (2003) FamCA 395, where their Honours said:

   The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79.  That approach involves four inter-related steps.  Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing.  Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties.  Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case: Lee Steere (1985) FLC 91-626; Ferraro (1993) FLC 92-335; Davut & Raif (1994) FLC 92-503; Prpic (1995) FLC 92-574; Clauson (1995) FLC 92-595; Townsend (1995) FLC 92-569; Biltoft (1995) FLC 92-614; McLay (1996) FLC 92-667; JEL & DDF (2001) FLC 93-075 and Phillips (2002) FLC 93-104.

6. Notwithstanding the Full Court’s reference to four steps in the above passage, it is my view that the testing of any proposed orders by reference to section 79(2) is not a fourth substantive step (properly so called) in the property settlement exercise.[5]

   [5] See OSF & OJK (2004) FMCAfam 63; (2003) 179 FLR 222; FLC 93-191 and Leslie (2004) FMCAFam 357.

7. In applying s.79(2), the Court has power to adjust the form, structure or balance (for want of a better description) of the orders that the court is minded to make for the purpose of giving effect to its conclusion as to the parties’ respective entitlements as a result of the application of the first three steps mentioned in Hickey. In other words, the determination of the proportional or other distribution or division of the parties’ property between them must necessarily be concluded before the court considers the justice and equity of the actual orders that are to be utilised to give effect to that distribution or division.

8. The distinction between property settlement and spousal maintenance orders was drawn in Anast & Anastopolous (1982) FLC 91-201. Relevantly, the Full Court distinguished a party’s entitlement to a property settlement based on contributions and the general factors arising under section 75(2) on the one hand, and a party’s entitlement to be maintained within the meaning of section 72 on the other. It held that an entitlement to an order under section 79 (including the section 75(2) factors) should be assessed before the question of entitlement to maintenance within the meaning of section 72 is considered. In some cases, a party’s property settlement entitlement (under section 79) will “exhaust” that party’s claim for spousal maintenance. In other cases, a maintenance entitlement under section 72 will remain, even after property entitlements under section 79 have been determined.

9. In Clauson (1995) FLC 92-959, the Full Court was at pains to clarify the distinction between a claim for spousal maintenance (properly so called) and that component of a s.79 property settlement order which attracts the terms of section 75(2).

10. After describing the general approach which should be adopted in property settlement applications, the Full Court went on to say (at page 81, 907):

    The result of the s.79 order may be such that the applicant for maintenance can no longer be described as being “unable to support himself or herself adequately” because he or she may have sufficient assets which, with or without income arising from the investment or use of those assets, will provide an adequate level of support. It also defines the other party’s capacity to meet any order.

11. The Court has broad powers in considering what may be a proper or appropriate order for spousal maintenance. Although periodic maintenance is the most common form of spousal maintenance, section 80 makes it clear that, in exercising the powers under Part VIII of the Family Law Act, an order may take a variety of different forms. It follows that the Court may make an order for periodic spousal maintenance, lump sum spousal maintenance, or a combination of both. In making such an order, it is to be borne in mind that maintenance is not confined to a subsistence level of support, but is intended to provide such assistance as is reasonable in the circumstances of the particular case[6].

    [6] See Mitchell (1995) FLC 92-601.

12. In Vautin (1998) FLC 92-827, the Full Court said:

    …in the exercise of the power to order lump sum maintenance caution is usually appropriate because of the apparent finality of lump sum orders and the difficulties in making predictions into the future. However, it is a power, the exercise of which may be appropriate in particular cases. It may be ordered, amongst other reasons, to meet non-periodic expenditure for the maintenance of that person where there is an established need and a capacity to pay. It is not confined to cases of the capitalisation of periodic maintenance and/or where periodic maintenance is unlikely to be paid because of concerns about the capacity or willingness of the liable parent to pay…

13. In Bevan (1995) FLC 92-600, the Full Court stated that an award of spousal maintenance requires:

    a)a threshold finding under section 72;

    b)a consideration of sections 74 and 75(2);

    c)no fettering principle that pre-separation standard of living must automatically be awarded where the respondent’s means permit; and

    d)discretion exercised in accordance with the provisions of s.74, with “reasonableness in the circumstances” as the guiding principle.

An order for Spousal Maintenance exists

1. In the present case, it is important to record that an order for spousal maintenance is already in existence.  On 15 September 1998, a consent order was made in the Victorian (State) Magistrates Court at Echuca in the following terms —

   a)The husband pay to the wife by way of spousal maintenance the sum of $50 per week… and such payments to be made by way of a deposit into a bank account as nominated by the wife.

   b)The husband maintain the current level of private health insurance which covers both himself and the wife.

2. As indicated above, it was not part of the husband’s proposals that the above orders for spousal maintenance (which I shall call “the 1998 Orders”) be discharged – although he certainly opposed an increase in the quantum of maintenance.

Variation of Spousal Maintenance orders

1. Modification of spousal maintenance orders is dealt with in s.83 of the Family Law Act. Section 83(1) deals with the court’s power to discharge, suspend, increase or decrease a spousal maintenance order or the amount payable thereunder. Section 83(2) is as follows:

   (2)  The court shall not make an order increasing or decreasing an amount ordered to be paid by an order unless it is satisfied:

   (a)that, since the order was made or last varied:

   (i)the circumstances of a person for whose benefit the order was made have so changed;

   (ii)the circumstances of the person liable to make payments under the order have so changed; or

   (iii)in the case of an order that operates in favour of, or is binding on, a legal personal representative — the circumstances of the estate are such;

   as to justify its so doing;

   (b)    that, since the order was made, or last varied, the cost of living has changed to such an extent as to justify its so doing;

   (ba)in a case where the order was made by consent — that the amount ordered to be paid is not proper or adequate;

   (c)…

2. Section 83(7) provides that, for the purposes of section 83, the court must have regard to the provisions of sections 72 and 75.

3. According to CCH Family Law and Practice Commentary[7], “important points to note” regarding section 83 are as follows —

   (1)On any application for variation under Section 83, Section 72 is still applicable. The applicant must establish that he or she is unable to support himself or herself adequately. The need of the applicant for maintenance must again be tested (Astbury (1978) FLC 90-494).

   (2)The conditions or matters listed in Section 83(2) are clearly in the alternative. In Caska (1998) FLC 92-826, the Full Court found…that Section 83(2)(bc) is an additional and optional ground. It may be relied on when seeking a variation of a maintenance order made by consent. It is not a prerequisite for a variation of all orders.

   (3)An order for lump sum maintenance may be made as a variation of an existing order for periodic payments …

   [7] Paragraph  25,580.

4. As I have stated, the Court should deal with the issue of property settlement before considering the spousal maintenance proceedings.  In that way, the Court can consider the spousal maintenance issue in the light of the impact of orders made in relation to property settlement.

Property and liabilities as at date of trial

1. The first step in the property settlement exercise relates to the identification and valuation of the property of the parties at trial.

1. I find that the property and liabilities of the parties are as set out in paragraph 7 of the husband’s affidavit sworn 11 May 2005.

Assets and Liabilities

Item Total

1. Investments

   1.1   Husband’s inheritance under the EL Trust          $250,000.00

   1.2   Husband’s loan to F and to N   $ 16,000.00

$ 266,000.00

2. Bank Accounts

   2.1   Husband’s savings  $    400.00

   2.2   Wife’s savings  $     350.00

$        750.00

3. Motor Vehicles

   3.1   Husband’s car  $    1,500.00

   3.2   Wife’s car  $     3,000.00

        less Wife’s car loan                  $    (4,700.00)    $   (1,700.00)

$      (200.00)

4. Furniture, Chattels & Effects

   4.1   Jewellery inherited by husband  $   24,000.00

   4.2   Husband’s chattels  $   12,500.00

   4.3   Wife’s chattels  $   11,300.00

$     47,800.00

5. Liabilities

   5.1   Husband’s credit card  $  (23,000.00)

   5.2   Wife’s credit card  $   (1,800.00)

   5.3   Wife’s debt to accountant  $   (4,600.00)

$    (29,400.00)

Total

$   284,950.00

1. It can be seen from the above that the total net value of the parties’ property is $284,950.00.

2. Some matters relating to the schedule (and the items within it) require explanation.

Husband’s figures

1. Given that the husband saw fit not to participate in the proceedings, and given his failure to make a full and frank disclosure of his financial position[8], Mr Puckey submitted that the most appropriate course of action would be to adopt the husband’s own evidence of the parties’ current financial position.  I accept Mr Puckey’s submission in that regard.  An affidavit of the wife’s solicitor (Ms Robyn Curtis) sworn

   
   

   1 July 2005 summarises the attempts made on the wife’s behalf to obtain relevant information regarding the EL Trust and the husband’s financial position generally.  The husband did not file a financial statement (although his response filed 22 February 2005 contained basic financial information).  Further, the husband’s own evidence is to the effect that he has not completed a tax return since approximately 1998 – as a result of “a conscious decision” on his part (supposedly “to allow him to enter into repayment plans with creditors”).[9]

   [8] I shall say more about this subject below, and later in these Reasons.

   [9] See paragraph 22 of the husband’s affidavit sworn 11 May 2005.

1. The duty to make full and frank disclosure of one’s financial position has been set out in a number of cases determined by the Full Court over the years. They are helpfully summarised in Chang & Su (2002) FamCA 156.

2. The Full Court in Chang & Su said that the law to be applied and the approach that may be adopted in cases where, through the lack of a full and frank disclosure, the Court is unable to fully ascertain the extent of a party’s wealth, are well settled. It then referred to Stein (1986) FLC 91-779, Mezzacappa (1987) FLC 91-853, Black & Kellner (1992) FLC 92-287 and Weir (1993) FLC 92-338. Indirect reference was also made to Giunti (1986) FLC 91-759, Briese (1986) FLC 91-713 and Oriolo (1985) FLC 91-653.

3. In Weir, the Full Court said (at page 79-593):

   It seems to us that, once it has been established that there has been a deliberate non-disclosure … then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature. 

   It is true that in the case of Monte (1986) FLC 91-757, the Full Court said that to found jurisdiction under s. 79 in relation to property other than that which had been identified, the trial judge was obliged to make a finding as to the existence and value of other undisclosed property, even though the unsatisfactory nature of the evidence made it necessary to express that finding in the most general terms both as to identify and value. 

   We confess to some difficulty with this proposition. We should have thought that the Court's jurisdiction to make an order going beyond the identified property arises once there is sufficient evidence to support a finding that the party has not made a full disclosure of his or her assets. 

   … (We) are troubled by the proposition which seems to arise from Monte that if a party is either cunning enough or vague enough to cover his or her tracks sufficiently to prevent a Court making a finding as to the amount that has not been disclosed, then the other party fails. We do not believe this to be the law and in so far as the decision in Monte supports such a proposition, we do not believe that it should be followed.

4. In Kannis (2002) FamCA 1150 (unreported), the Full Court said (at paragraph 51):

   Whether the non-disclosure is wilful or accidental, is a result of misfeasance, or malfeasance or nonfeasance, is beside the point.  The duty to disclose is absolute.  Where the Court is satisfied the whole truth has not come out it might readily conclude that the asset pool is greater than demonstrated.  In those circumstances it may be appropriate to err on the side of generosity to the party who might be otherwise be seen to be disadvantaged by the lack of complete candour.  This is the course the trial Judge adopted.  It was a course clearly open to him and one that does not merit appellate interference.

5. In all the circumstances, I conclude that I should not be unduly cautious before accepting the husband’s own estimates of the value of the property under his control or to which he is otherwise entitled.

The Wife’s property

1. The wife did file a financial statement.  With few exceptions, the husband placed a higher value on the items of property owned by the wife than did the wife herself.  Similarly, and again with few exceptions, the husband placed a lower value upon the wife’s liabilities than did the wife herself.  According to the husband’s schedule, the net value of the wife’s property is $3,550.00.  According to the wife’s financial statement, the total value of her liabilities exceeds the total value of her assets by $2,377.00.  For the wife to accept the husband’s assessment of the value of her assets and liabilities is, therefore, a significant compromise on her part.  Nevertheless, Mr Puckey urged the court to adopt the husband’s schedule in its entirety. 

2. The failure of the husband to participate in the proceedings meant that the trial proceeded on an undefended basis.  Relevantly (and obviously) neither party was cross examined. The case was conducted “on the papers” and on the basis of Mr Puckey’s submissions. 

3. In the circumstances, and having regard to the wife’s acceptance of the husband’s schedule (the effect of which is to cause her to be regarded as being in a better net financial position that her own financial statement would indicate), I see no reason why I should decline to adopt the husband’s schedule in its entirety.

Short history of the parties’ relationship

1. Before dealing with the issue of the parties’ contributions (in all their various guises), it is necessary to outline relevant aspects of their relationship.

2. It appears that neither party had significant assets at the time that they commenced cohabitation in 1976.  Each had furniture, chattels and effects, and the husband owned two blocks of land.  The blocks were later sold to recover arrears of rates.  According to the wife, the parties did not receive any funds from the sale of either block of land.  The husband did not take issue with the wife’s assertion in this regard. 

3. When the parties commenced their relationship, the wife was working as a secretary.  After the birth of F in April 1979, the wife became – in the husband’s words – “a full time mother and home-keeper”.  She also obtained occasional work on a casual basis. 

4. The husband was employed (or self-employed) as an insurance broker throughout the period of the parties’ relationship. 

5. In 1994, the parties purchased a hotel in a country town in New South Wales. The purchase price of the hotel was approximately $200,000.00.  According to the wife, the purchase price “…was raised from the proceeds of the husband’s superannuation and vendor finance.”  According to the husband, it was purchased “…from the proceeds of the sale of my insurance brokerage business, the proceeds of my superannuation and with vendor finance…”.  The parties owned the hotel from mid 1994 to mid 1998. 

6. The wife describes the hotel venture as follows:

   This was not a good investment and by the time the hotel was sold the husband and I came out of the situation with virtually nothing.  We lost the money that we had put into the hotel.  The hotel took a huge emotional and physical toll on me.  I had to cook, clean, serve behind the bar, manage the staff and look after the existence of the hotel.  I worked fourteen hours per day.

7. The husband’s description is as follows:

   The business failed with us incurring considerable debt…

   
   

   I continued to work full time as an insurance broker even though I assisted the wife to run our hotel business.  I operated the hotel on weekends until 1998.  The wife details the emotional and physical toll that running the hotel took on her….During the time the hotel was running, I worked full time in my capacity as an insurance broker.  I was required to travel 1200 kilometres a week, travelling from Melbourne to the hotel where I worked on weekends.  It was my function to do the alcohol and grocery purchases and deliveries, manage the accounts, stock the cool rooms and maintain the grounds.  I have no doubt that running the hotel was detrimental to the health and wellbeing of both my wife and I.

8. The wife particularises her non-financial contributions during the relationship in the following paragraphs of her affidavit sworn 22 April 2005:

   28.Throughout the relationship I was responsible for maintaining the home and completing all of the domestic chores including cooking and cleaning. The husband liked a spotless home and he preferred home cooking. Throughout our relationship in the evenings I cooked gourmet meals. The husband liked to dine on a formal basis and each evening we would sit down to a properly set table, which included candles, pressed serviettes, wine glasses, beautiful crockery and cutlery. In the morning we generally ate in the kitchen area, however again the husband liked to sit at the table, which included serviettes, flowers and formal table settings.

   29.It was my responsibility to make the lunch, to attend to the husband’s dry-cleaning, to ensure that his ties and shirt were set out each morning and that all his basic needs were being attended to. I bought the husband’s clothes, did his banking and cleaned his office.

   30.Throughout our relationship it was my responsibility to care for our daughter. I met all her day to day needs including her medical and educational needs. Our daughter was heavily involved in the Pony Club. I would attend all the meetings. The husband occasionally attended but he was not as involved as most of the other fathers.

9. According to the husband, he “…took on the burden of $62,000.00 of jointly accumulated debt” at the time of separation and after the hotel business failed.  The wife makes no mention of the alleged “accumulated debt” in her affidavit material – although she acknowledges that the parties “…came out of the situation with virtually nothing.”  Mr Puckey did not admit that the husband accepted responsibility for debts totalling approximately $62,000.00 – or any other amount for that matter.  He submitted, and I accept, that the documents attached to the husband’s affidavit – which documents are described as “a true copy of records of the joint debt that (the husband) took on after separation” – are unclear, and do not demonstrate the truth of the husband’s assertion.  In this regard, I note the following:

   a)the documentary evidence relied upon the husband in relation to the alleged debts that he paid is contained in annexure HBR2 to his affidavit sworn 11 May 2005;

   b)the three pages of handwritten figures headed “Hotel related Credit Card Expenses” are incomprehensible;

   c)the typed list headed “Cheque Books – K Pty Ltd” is unexplained, and includes no figures;

   d)the receipt for the payment of $10,000.00 to AGC (or Collection House on its behalf) on 8 February 2000 is not obviously linked to any debts associated with the hotel;

   e)the Telstra bill addressed to T R Pty Ltd (in relation to which the amount of $841.85 was due on 4 August 1998) may or may not have been paid, and no receipt is attached;

   f)there is no evidence that the amount of $4,535.23 referred to as the “balance outstanding” in the letter from Glowreys, Solicitors to the husband dated May 1998 has ever been paid; and

   g)the schedule headed “GE Money – AVCO Financial Services Limited” is unexplained. 

10. Of the documents comprising annexure HBR2, the schedule headed “GE Money – AVCO Financial Services Limited” is most likely to reflect payments made by the husband after separation in respect of a debt owing at the time of separation.  But the problem (from the husband’s point of view) is that the debt is not clearly linked to the hotel or business. It might just as easily relate (for example) to a motor vehicle or other item in the husband’s possession. 

11. Overall, and on the basis of the very limited evidence before me, I am not persuaded that the husband “took on the burden of about $62,000.00 worth of jointly accumulated debt” at the time of separation.  I accept that he might have taken on some debt, but $62,000.00 would appear to be a very significant exaggeration.

12. Neither party deals in any detail with his or her post-separation contributions.  The wife records that, on 15 September 1998, the parties entered into consent orders in relation to spousal maintenance.  The 1998 Orders are to the effect that the husband is to pay spousal maintenance in the sum of $50.00 per week, and to maintain the wife’s health insurance cover.  The wife asserts that the husband made payments pursuant to the 1998 Orders, and that he also assisted her by paying her RACV membership, buying a new battery for her car and paying for some motor vehicle repairs.  By the time the trial took place, however, the husband’s payments of spousal maintenance had ceased.

13. The only post-separation contribution referred to by the husband in his affidavit sworn 11 May 2005 is the acquisition of his interest in the EL Trust.

14. According to the husband, “…there was a division of household furniture/silver and personal effects that were in the respective possession of the parties” at the time of separation.  He asserts that there was “virtually nothing else to divide.”

15. I shall deal separately with the EL Trust and the parties’ jewellery.

The EL Trust

1. In relation to the EL Trust, the husband says —

   In January 2004, due to the death of my stepmother, I became a beneficiary of the EL Trust.  My inheritance came about some

   
   

   7 years after separation.[10]

   [10] See paragraph 20 of the husband’s affidavit sworn 11 May 2005.

2. In paragraph 34 of her affidavit sworn 22 April 2005, the wife says:

   Throughout our relationship the husband was aware that he would one day receive a substantial inheritance from the EL Trust.  The husband liked to live well and although our existence was at times quite comfortable, we did not acquire property of significance other than property inherited by the husband.

3. The husband attaches documents relating to the EL Trust to his affidavit sworn 11 May 2005.  The documents comprise -

   a)extract from the will of E L;

   b)a first codicil to the will; and

   c)a Deed of Settlement dated 3 December 1957.

4. It is possible to extract the following from the documents referred to in the preceding paragraph:

   a)Ms L was the husband’s grandmother.  One of her four children was ICR – who was the husband’s father.

   b)Ms L’s will was made on 5 March 1951.

   c)Ms L died on 12 February 1956.

   d)By her will, Ms L left her residuary estate to her trustees on trust to pay the income therefrom to her husband during his life, and thereafter to divide the estate amongst her four children.

   e)The one quarter share of Ms L’s residuary estate to which the husband’s father was to become entitled upon the death of Ms L’s husband was not to be paid to the husband’s father directly.  Instead, the trustees were to apply the income of the one quarter share for the benefit of the husband’s father during his life and, upon his death, the trustees were to hold the corpus in trust for the husband and his sister.

   f)The Deed of Settlement dated 3 December 1957 was entered into between the husband and his sister (on one side) and the trustees of the trust established by Ms L’s will (on the other).

   g)The Deed of Settlement recites the establishment of the trust for the benefit of the husband and his sister.

   h)The Deed of Settlement then recites:

   (the husband’s father) has married twice and (the husband and his sister) are desirous of making the provision hereinafter contained for their step-mother PER, the present wife of  (the husband’s father).

   i)The operative part of the Deed of Settlement records that the husband and his sister have agreed to assign to the trustees the whole of their interest in the trust established by Ms L for their benefit, on the basis that the trustees are –

   to hold the same … from and after the death of (the husband’s father) upon trust to pay the income thereof if she shall survive (the husband’s father) to (the husband’s step-mother) during her life, and subject thereto to hold the capital of his or her…moieties  upon trust for (the husband and his sister) respectively and absolutely.

5. The husband’s step-mother died in January 2004[11]

   [11] See paragraph 20 of the husband’s affidavit.

6. It follows from the above that the husband had a vested interest in the EL Trust from the time of Ms L’s death in 1956, and certainly at the time the parties commenced cohabitation in 1976.  At all relevant times, the husband was entitled to a one eighth share of the corpus of the EL Trust.  The interest from that share was, of course, to be paid to the husband’s father during his lifetime, and thereafter to the husband’s step-mother during her lifetime. 

7. I therefore accept the wife’s assertion[12] that “…throughout our relationship the husband was aware that he would one day receive a substantial inheritance from the EL Trust.”

   [12] In paragraph 34 of her affidavit sworn 22 April 2005.

Inheritance

1. In Figgins (2002) FLC 93-122, the Full Court said[13]

   [13] At pp 89,295-6.

   The issue of inheritance has been considered with some frequency by this Court…

   Situations where a parent provides monies or property to a party as a gift are analogous to where a party receives an inheritance.  The issue of gifts to a party to a marriage has also been often considered by the Court…

   A useful recent discussion of inheritance is to be found in the decision of the House of Lords in White in the judgment of Lord Nicholls. [14]

   His Lordship refers to a view that inherited property, whenever acquired, should stand on a different footing from other matrimonial property.  According to this view, the spouse to whom it was given should be allowed to keep it.  Conversely, as a consequence of such a view, the other spouse has a weaker claim to it.

   Lord Nicholls entirely rejects the above proposition.  The substance of what his Lordship said after referring to that view is as follows:

   ·When present, the factor of an inheritance is one of the circumstances of the case;

   ·It represents a contribution by one of the parties;

   ·The judge should take it into account and decide how important it is in the particular case;

   ·The nature and value of the property and the time that it was acquired are among the relevant matters to be considered;

   ·However, in the ordinary course, this factor carries little weight, if any, in a case where the claimant’s financial needs cannot be met without recourse to the property.

   [14] White v White (2001) Allert.

2. The Full Court clearly endorsed Lord Nicholls’ approach.  The Full Court also regarded it as inappropriate to “quarantine” an inheritance in the manner that is implicit in the husband’s case.

3. In Bonnici (1992) FLC 92-272, the Full Court considered the effect of an inheritance received late in the relationship. After confirming that the inheritance was indeed “property” (as opposed to being a “resource”), the Full Court said[15]:

   A property does not fall into a protected category merely because it is an inheritance.  On the other hand if there are ample funds from which an appropriate settlement can be made and a just result arrived at, then the fact of a recently acquired inheritance would normally be treated as an entitlement of the party in question.

   The other party cannot be regarded as contributing significantly to an inheritance received very late in the relationship, and certainly not after it has terminated, except in very unusual circumstances…

   [15] At page 79,020.

4. The general approach endorsed by the Full Court in Bonnici and Figgins was applied by the Full Court in Schirmer & Sharpe (2005) FLC 93-213, where it was accepted that significant weight should be given to an inheritance received by a party three years after separation in circumstances where there was little or no offsetting contribution from the other party. In so concluding, the Full Court seemed to disagree with (or, alternatively, to find unhelpful) the following passage from Kay J’s decision in Aleksovski (1996) FLC 92-705 [16]

   What his Honour had to assess by way of contribution was 18 years where each party provided their labours towards the acquisition, conservation and improvement of their assets, and towards the welfare of the marriage generally.  Additionally, late in the marriage, the wife received a large capital sum arising out of a motor car accident.  In my view, whether the capital sum was acquired early in the marriage, in the midst of the marriage or late in the marriage, the same principles apply to it.   The judge must weigh up various areas of contribution.  In a short marriage, significant weight might be given to a large capital contribution.  In a long marriage, other factors often assume great significance and ought not be left almost unseen by eyes dazzled by the magnitude by recently acquired capital.  A party may enter a marriage with a gold bar which sits in a bank vault for the entirety of the marriage.  For twenty years the parties each strive for the mutual support and at the end of the twenty year marriage, they have their gold bar.  In another scenario, they enter the marriage with nothing, they strive for twenty years and on the last day the wife inherits a gold bar.  In my view it matters little when the gold bar entered the relationship.  What is important is somehow give the a reasonable value to all of the elements that go to making up the entirety to making up the marriage relationship.  Just as early capital contribution is diminished by subsequent events during the marriage, late capital contribution which leads to an accelerated improvement in the value of the assets of the parties may also be given something less than directly proportional weight because of those other elements.

   [16] At page 83, 433.

1. In some respects, the husband’s interest in the EL Trust can be likened to the Aleksovski hypothetical gold bar owned by a party at the commencement of the marriage — which gold bar sits in a bank vault for the entirety of the marriage.  I shall return to this subject later in these Reasons.

Jewellery

1. In paragraph 18 of her affidavit, the wife says:

   The husband also owns a large amount of jewellery. The jewellery was, for a time, in my possession and I am aware that some jewellery has been passed on to our daughter, F. The valuation obtained by the husband in relation to the jewellery, values the jewellery at approximately $18,875.00. This valuation includes only a part of the jewellery that I returned to the husband. There were many other items of jewellery owned by the husband which were not valued.

2. The wife then includes a list of items of jewellery.

3. In paragraph 19 of her affidavit, the wife says:

   The jewellery was brought to Australia in 1982. Prior to leaving England, it was valued at approximately 73,000 pounds for insurance purposes …

4. The husband deals with the issue of jewellery in his affidavit as follows:

   12.The only assets of the marriage which are of significance are the jewellery that I have inherited towards the end of the marriage and the shares and stocks that I inherited some seven years after separation.

   13.The wife was in possession of the jewellery in 2002 but returned it to me … because she accepted my assertion at the time that she had no claim to it. The jewellery has now been partly distributed to our daughter, partly put into safe storage in England. I am not currently in possession of the remainder of the jewellery that is in England, but believe that the total value of the jewellery is around $24,000.00 … the jewellery was brought to Australia in 1992 … the items of jewellery that my wife asserts have not been included in the valuation are of small value and of no consequence for insurance purposes.

5. In 18 of his affidavit, the husband restates:

   In 1992, some five years prior to separation, (I) inherited the jewellery referred to above.

6. The wife does not suggest that the jewellery referred to in the affidavits of the parties was acquired in a manner different from that described by the husband. Further, she conceded (through her Counsel, Mr Puckey, and in the circumstances described above) that the value of the items described in the heading “Furniture/Chattels and Effects” in the schedule appearing in paragraph 32 above are accurate (or, alternatively, that they are acceptable).

7. Given Mr Puckey’s assertion that it is appropriate to use the values attributed to the various items of property by the husband in his affidavit, it is unnecessary to consider whether any items of jewellery (or silverware) have been undervalued or omitted altogether from relevant valuations. In other words, the value of the property to be divided between the parties is not an issue in dispute in the proceedings.

8. It is also clear from the affidavit material filed on behalf of the parties, that the jewellery (and silverware) presently in the husband’s possession was received by way of inheritance during the course of the marriage. It is also likely that some of the items presently in the wife’s possession have their genesis in the husband’s inheritance.

Contributions

1. According to the wife, she had “a house full of quality furniture and chattels and a car” at the time the parties commenced cohabitation. She asserts that the husband had “a Queen Anne writing desk and a book case”. According to the husband, the parties “… bought chattels and household furniture and silver items to the marriage”.

2. I have already referred to the fact that the husband owned two blocks of land.

3. On the basis of the evidence before me, I find that neither party owned assets of any significant value at the date of commencement of cohabitation. I recognise, however, that the husband then had an entitlement under the EL Trust (as described earlier in these Reasons).

4. It is clear that the husband was the principal breadwinner during the period that the parties cohabited. Although the wife worked in various casual positions, there can be no doubt that the husband’s financial contribution to the acquisition, conservation and improvement of the parties’ assets was very significantly greater than that of the wife.

5. The hotel business acquired by the parties in 1994 was purchased – at least in part – with the assistance of funds obtained from the husband’s superannuation. The husband may also have contributed funds derived from the sale of his insurance brokerage business.

6. It appears that the husband’s jewellery was inherited during the marriage, and prior to the date of separation.

7. The husband’s entitlement under the EL Trust crystallised well after the date of separation.

8. Applying the dicta from Figgins, Bonnici and Schirmer &Sharpe to which I have referred in paragraphs 66 to 69 above, it is clear that significant weight must be given to the receipt by the husband of the moneys to which he was entitled under the EL Trust. The receipt of these funds represents a direct financial contribution by him to the pool of property presently available for distribution between the parties. It comprises the vast bulk of that pool.

9. I accept that the husband was aware throughout the parties’ relationship that he would one day receive his entitlement under the EL Trust. In paragraph 34 of her affidavit, the wife said:

   The husband liked to live well and although our existence was at times quite comfortable, we did not acquire property of significance other than property inherited by the husband.

10. It is clear from the passage quoted above that, although both parties were aware that the husband would ultimately receive his entitlement under the EL Trust, the wife does not assert that the parties deliberately refrained from acquiring property for that reason. Indeed, it would have been difficult for the wife to make such an assertion in the light of the fact that the parties chose to purchase the hotel business in 1994. That the business was not a success is not attributable to either party. Had it been a success, then the husband’s entitlement under the EL Trust might have been of much less significance in the context of the present case. Relevantly, the acquisition of the hotel business demonstrates that the parties actively sought to improve their financial position, and did not seek to rely wholly on the husband’s entitlement under the EL Trust for their future security.

11. Overall, and when regard is had to the whole of the period from the date of commencement of cohabitation to the date of trial, it is clear that the husband’s financial contributions to the acquisition, conservation and improvement of the property now available for distribution very heavily outweighed that of the wife. Such an imbalance is highlighted when regard is had to the fact that the husband paid spousal maintenance for the wife following the making of the 1998 Orders (although I accept that the quantum of the spousal maintenance was relatively modest).

12. Neither party dealt in any detail with alleged contributions pursuant to s.79(4)(b) of the Family Law Act – being (in summary) non-financial contributions to the asset pool. In the wife’s Outline of Case Document, the only factor referred to under this heading is the assertion that the wife “… was solely responsible for maintaining the home and completing all of the domestic chores”. Whilst such a contribution is clearly of significance, and is not to be undervalued, it is better dealt with under s.79(4)(c). I assume that the wife may have assisted the husband to some extent in his work as an insurance broker (although the wife certainly provides no details of such assistance). And I find that the wife worked long and hard in the parties’ hotel business.

    
    

    I accept her description in that regard as contained in paragraph 24 of her affidavit.

13. I also accept that the husband assisted in the hotel business in the manner described in paragraph 17 of his affidavit. I recognise, however, that the husband’s work in the hotel business was carried out on weekends. During the week, he devoted himself to his insurance broking business.

14. The fact that the hotel business ultimately failed should not lead the court to conclude that the parties’ respective contributions to it should be ignored. In Clauson (1995) 18 FamLR 693, the Full Court found that the trial judge in that case had placed “much greater emphasis than was appropriate” upon the fact that a stud business conducted by the parties operated at a significant loss. The husband had sought to attribute that loss to the wife — who had been primarily responsible for the management of the business. The Full Court said[17]:

    The important fact was that this was a chosen business of both the parties and the wife was the one who made the significant contributions of time, energy and skill. The circumstance that it continued to run at a loss was not the significant issue here; the significant issue was that it was a jointly chosen business activity to which the wife made the significant continuing contributions over a number of years.

    [17] At page 708.

15. I find that the wife’s non-financial contributions to the hotel business were of much greater significance than those of the husband. The business was, after all, “a jointly chosen business activity”. On the other hand, the husband clearly made a much greater non-financial contribution than did the wife to the conduct and management of the husband’s insurance broking business.

16. The husband continued to work as an insurance broker after the parties separated. I assume (from the fact that the husband has “not completed a tax return since the demise of the hotel business venture”[18]), that the husband has been self employed in that regard.

    [18] See paragraph 23 of the husband’s affidavit.

17. Overall, and taking into account the very limited nature of the evidence presented to the court, I find that the parties’ various contributions under s.79(4)(b) were approximately equal up to the date of separation. I am unable to make any clear finding in relation to such contributions after the date of separation, but there is certainly no evidence before me to suggest that one party’s contributions in this regard were any greater than that of the other.

18. There appears to be no doubt that the wife was principally responsible for the care and supervision of F, and for the domestic chores and homemaking duties. Indeed, the wife’s evidence – which I accept – is that she was wholly responsible for these tasks (and that she performed them to a high standard). Neither party suggests that the husband made any (or any recognisable) contribution in the role of homemaker. Indeed, the husband does not even suggest that he made any significant contribution in the role of parent.

19. In all the circumstances, I find that the wife’s contributions under s.79(4)(c) vastly outweighed those of the husband during the period of their cohabitation. No relevant evidence was led regarding the parties’ contributions in the role of homemaker and parent after the date of separation. I can only assume, therefore, that the parties’ contributions in this regard were of similar weight, or that, alternatively, they were insignificant. I do note, however, that the husband’s Outline of Case includes an assertion that “… since separation, the husband has financially assisted both the child of the marriage and the other daughter of the wife way of loans of money”.[19]

    [19] It is appropriate, of course, to recognise a party’s financial contribution to the welfare of the family — although it should be differentiated from that party’s financial contribution to the property of the parties (see Ashton (1986) FLC 91-777 at 75,559 and Ferraro (1992) 16 FamLR 1).

20. I return now to the husband’s interest in the EL Trust and whether or not it can be likened to the Aleksovski hypothetical gold bar.

21. The relevant passage from Aleksovski is quoted at paragraph 69 above. As I commented in that paragraph, the Full Court in Schirmer & Sharpe appeared to disagree with Kay J’s analysis of the effect of offsetting contributions on the hypothetical gold bar. In the present case, the following should be observed:

    ·Although the husband had an entitlement under the EL Trust at the time of commencement of cohabitation, that entitlement had not vested. It was, in essence, a financial resource of the parties, as opposed to being an item of property then available for use by them.

    ·The evidence does not reveal that either party’s contributions were affected in any way by the existence of the husband’s delayed entitlement under the EL Trust. In other words, the parties did not adjust their lifestyle to take into the account the likelihood that the husband would eventually become entitled to his share of the EL Trust.

    ·The husband’s entitlement under the EL Trust was received some seven years after the parties separated.

    ·It is clear that the wife made no direct contribution to the acquisition, conservation or improvement of the husband’s entitlement under the EL Trust. The husband would have received the entitlement when he did, irrespective of whether or not he had married the wife, and irrespective of the contributions that she may or may not have made (in any form whatsoever) during the period of their relationship.

22. In Farmer & Bramley (2000) 27 FamLR 316, the Full Court considered the effect of a lottery win received well after the date of separation. During the parties’ relationship in Farmer & Bramley, their financial circumstances had been extremely modest. The husband had “… suffered from drug-related problems in the earlier years of the marriage, and had been supported financially and emotionally by the wife during this period”.[20] The parties separated in January 1995, and in September 1996 the husband won $5m in a lottery. The wife commenced proceedings for property settlement in March 1998. Notwithstanding that the parties had no significant assets at the date of separation, and that the only real asset available for distribution between the parties at the date of trial comprised the husband’s lottery winnings, the trial judge (Purdy J) awarded the wife the sum of $750,000.00 – being 15% of the lottery winnings.

    [20] See Headnote.

23. On appeal (per Finn and Kay JJ, Guest J dissenting), the Full Court declined to interfere with the trial judge’s decision. Finn J said[21]:

    … an issue has arisen in this appeal as to whether an entitlement based on contributions made to the welfare of the family can only be satisfied out of property available to the parties at the time the contribution was made. In my view, there is nothing in s.79(4)(c) or indeed elsewhere in the Act, or in the authorities to date, which would justify such a limitation …

    … if it was to be determined that a majority of the community considered that one spouse should, as a general rule, have no entitlement to share in property either by good fortune or good management acquired after separation by the other spouse, then the Act would need to be amended to make this clear. …

    [21] At page 327.

24. Kay J said[22] that it is “beyond doubt” that:

    An assessment of contributions made under s.79(4)(a),(b) and (c) does not have to bear a direct relationship to the assets as they presently exist. The court is asked to determine what is an appropriate and just and equitable order, bearing in mind not only the contributions made directly to the existing assets, but contributions made generally during the course of the relationship between the parties both to the acquisition, conservation and improvement of assets (which may or may not still exist) and to the welfare of the family in the role of homemaker and parent.

    That is not to say that the court should be blind to the circumstances in which any assets were acquired post separation …

    [22] At page 328.

25. In my opinion, the effect of the Full Court’s decisions in Farmer & Bramley, Bonnici, Figgins and Schirmer & Sharpe is – in the context of the present case – that the husband’s entitlement under the EL Trust cannot be regarded as any form of protected or quarantined property. The totality of the parties’ contributions (in all their various guises), must be considered, and it must be considered for the whole of period from the commencement of cohabitation to the date of trial. Clearly, however, significant weight must be given to the fact that the husband’s interest in the EL Trust represents a substantial (and contextually late) contribution on his part.

Conclusions regarding contribution

1. Having regard to the parties’ contributions (in all their various guises) over the whole of the period from the date of commencement of cohabitation to the date of trial, and recognising the fact that the husband’s interest in the EL Trust vested and was received by him some seven years after the parties separated, I conclude that an appropriate division of the parties’ property available for distribution between them as described in the schedule contained in paragraph 32 above – and on the basis of contribution alone – is something between 20% and 25% to the wife, and the balance to the husband. As it would be intellectually dishonest of me to choose either of those figures, I conclude that the appropriate split on the basis of contribution should be 22.5% to the wife and 77.5% to the husband.

Discretion — observation

1. In Gleeson (2004) FamCA 1197, Warnick J (with whom Kay and O’Ryan JJ agreed) said in relation to an exercise of discretion such as that carried out in the preceding paragraph:

   …words will often (perhaps always) fall frustratingly short of an incontestable explanation for any particular exercise of discretion – or, for that matter, for a finding by an appellate court that a particular exercise was wrong. All the relevant factors can be described, with modifiers in abundance, but still the analysis will beg the question, “Yes, but why that figure and not another?” or “Why was that the range rather than some other parameters?”

   The deficiency is unavoidable. When there are a number of “right” results available, the explanation for the choice of one over others can never be incontestable. Nor can the reasons for saying that a result is outside a range be beyond challenge. The very nature of a discretionary exercise that ascribes mathematical consequences to a batch of actions and events amenable only to descriptive evaluation, means that it is impossible to place beyond argument the explanation for all the steps to the ultimate selection of result.[23]

   [23] See paragraphs 73 and 74.

2. His Honour continued[24]:

   …In respect of virtually every exercise of discretion, by definition, it will not be possible to deliver a judgment which excludes reasoned argument that another result was available.

   [24] At paragraph 81.

3. This is an unusual case, and I have done the best that I can to reflect the very limited evidence that is before me in relation to contribution issues. The most significant of those factors are clearly the late receipt of the husband’s entitlement under the EL Trust and the very significant contributions made by the wife under s.79(4)(c) in the role of homemaker and parent. That is not to say that the other contribution factors should be ignored. I have not ignored them, and have dealt with them in these Reasons.

Section 75(2) factors

1. So far, in considering the question of property settlement, I have dealt with the identification of the parties’ property and the question of contribution. The Court has power to make an adjustment to a party’s property settlement entitlement on the basis, amongst other things, of both parties’ respective means and needs. The Family Court has been critical of shorthand terms being used to describe this step in the property settlement exercise, preferring to refer to it simply as “the section 75(2) factors”[25] In essence, s.75(2) is concerned with the process of arriving at a just and equitable result.[26]

   [25] See Clauson (1995) FLC 92-595.

   [26] See, in that regard, Waters & Jurek (1995) FLC 92-635.

1. I have already recorded the parties’ ages. Neither appears to be in good health. The wife suffers from a variety of medical problems, which are described in paragraphs 9 and 10 of her affidavit. In my opinion, it is clear beyond argument that the wife (who is presently aged 65) is incapable of obtaining or maintaining paid employment.

2. The husband also suffers from a variety of medical problems. In paragraph 23 of his affidavit, he says:

   There will soon come a time when I will not be able to continue in full time occupation or at all. In addition to the limitations on my working capacity caused by my age, I have serious concerns for my health. I suffer from atrial fribulation, hypertension and arthritis. In 2000 I was diagnosed with prostate cancer and I have since received radiotherapy. Although my condition had stabilised, my condition is far from certain and recently I received disturbing advice from my physician that my condition is incurable.

3. Attached to the husband’s affidavit is a report dated 4 April 2005 from the husband’s radiation oncologist. The report states that there are indications that the husband’s prostate cancer has spread elsewhere in his body – although it has not been possible to detect which parts of the husband’s body have been affected. The report continues:

   From our point of view, this would usually mean that the disease is incurable. We will, at some stage in the near future, need to reintroduce treatment in the form of androgen deprivation (blocking the effects of testosterone on prostate cancer growth). Although it is very difficult to predict in an individual person, the average duration of response to this treatment is around 18 months.

4. Mr Puckey did not suggest that the court should ignore the medical report attached to the husband’s affidavit. Given the husband’s conduct as a litigant, however, and his failure to participate in the trial, I am of the view that little weight should be given to the report. Relevantly, the court was provided with no current evidence regarding the husband’s state of health.

5. In paragraph 24 of his affidavit, the husband said:

   In view of my medical condition and deteriorating health,

   
   

   I anticipate that I will encounter significant medical costs in the near future.

6. It appears from paragraphs 22 to 24 of the husband’s affidavit that he continues to have the capacity to work on a full time (or close to full time basis) as an insurance broker. The fact of the matter is, however, that his health problems — combined with his age — are likely to have an increasingly significant impact on his ability to work. Although Mr Puckey argued that the husband has the ability to continue to work on a full time basis, and emphasised that his court documents indicate that he was earning approximately $66,000.00 per annum, I remain conscious of the husband’s advancing years, his health problems and the fact that he has now relocated to the United Kingdom.

7. The concept of “earning capacity” was discussed at length in DJM & JLM (1998) FLC 92-816, where the Full Court said (at page 85,272):

   Child support and child maintenance orders are governed by legislation which emphasises and prioritises the obligation of parents to support their children and seeks to ensure that the level of financial support is to be measured according to the parents’ “capacity to provide financial support”.

   Property adjustment orders have far less focus and are arrived at on the basis of what is “appropriate” after weighing up many competing factors. Spousal maintenance is governed by a test of what is proper and having regard to the reasonable ability of the liable spouse to meet the needs of the other.

   In our view, there can be different answers to the same question about earning capacity — depending upon which head of power is sought to be exercised.

   A judge might reasonably say that a parent should be working longer hours or in more lucrative employment to meet child support obligations. A spouse is only required to support the other spouse to the extent that he or she is reasonably able to do so. This requirement does not impute the same degree of compulsion about it that the child support and child maintenance tests express …

8. The Full Court (at para 17.37 of DJM v JLM) indicated that it was “most attracted” by the following tests of earning capacity, as “at least the minimum tests to be applied”. The tests derive from decisions of the Californian Court of Appeal in decisions referred to on page 85,271 of DJM v JLM:

   Earning capacity is composed of (1) the ability to work, including such factors as age, occupation, skills, education, health, background, work experience and qualifications; (2) the willingness to work exemplified through good faith efforts, due diligence and meaningful attempts to secure employment; and (3) an opportunity to work which means an employer who is willing to hire…

   When the ability to work or the opportunity to work is lacking, earning capacity is absent … When the payor is unwilling to pay and the other two factors are present, the court may apply the earnings capacity standard to deter the shirking of one’s family obligations… A parent’s motivation for reducing available income is irrelevant when the ability and opportunity to adequately and reasonably provide for the child are present.

   Once persons become parents, their desires for self-realisation, self-fulfilment, personal job satisfaction and other commendable goals must be considered in the context of their responsibilities to provide for their children’s reasonable needs. If they decide they wish to lead a simpler life, change professions or start a business, they may do so, but only when they satisfy their primary responsibly: providing for the adequate and reasonable needs of their children.

9. On the basis of the very limited evidence before me, I am of the view that:

   ·The husband has the ability to work in the short term, but his health problems are such that it is not reasonable to expect him to continue to work for a period beyond two or three years (at the most),

   ·The husband has demonstrated a willingness to work in the past, and his court documents do not suggest that he no longer has that willingness,

   ·The fact that the husband has worked on a self-employed basis in the past indicates that he continues to have an opportunity to work for as long as he is willing and able to do so.

10. Doing the best that I can with the limited material available to me, I conclude that the husband has an earning capacity of something in the order of $66,000.00 per annum, and that he will continue to have that capacity for a further two to three years (which I shall average and regard as being equivalent to 2.5 years).

11. I recognise, of course, that the husband has the benefit of his entitlement under the EL Trust, and that he is able to utilise those moneys in such manner as he considers appropriate. For example, he might be minded to invest the funds to which he is entitled and receive and utilise the interest; alternatively he might invest the funds and draw down on them (both capital and interest) to cover his living expenses for some time into the future. It is also possible that the husband will choose to acquire an asset (such as a home) with his entitlement under the EL Trust.

12. On the other hand, I do not ignore the likely impact upon the husband’s capital position of any order that the court might be minded to make in relation to property settlement.

13. I have already dealt with the income, property and financial resources of the parties elsewhere in these Reasons.

14. Neither party has the care or control of a child of the marriage who has not attained the age of 18.

15. The commitments of each of the parties that are likely to enable them to support themselves are, in my view, likely to be similar. Although reference was made in the wife’s material to the fact that she presently resides with her father, and that she considers that she is obliged to care for him, Mr Puckey did not suggest that the wife has a duty to maintain her father. Similarly, it was not suggested that either party had a responsibility to support any other person apart from himself/herself.

16. The wife is eligible for, and receives, the Age Pension. Her entitlement to the Age Pension is unlikely to be affected by the orders that the court will make in these proceedings.

17. I am not aware of the husband’s eligibility for an Age Pension, or other pension, allowance or benefit under Australian law, or under the law of the United Kingdom. I have no reason to believe, however, that the husband will not have a similar eligibility to that of the wife when he is no longer able to exercise his earning capacity.

18. Both parties are entitled to a standard of living that is reasonable in the circumstances of the case. The fact of the matter is that the asset pool is a modest one, and that neither party is likely to enjoy a high standard of living in the future. Both are likely to be heavily reliant upon such government pensions, allowances or benefits to which they are or might become entitled.

19. Mr Puckey did not submit that any of the other factors under s.75(2) have relevance in the context of the present case – save for s.75(2)(o), which requires the court to take into account “… any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account”.

20. In my opinion, the disparity in the capital position of the parties reached as a result of the preliminary “split” of the property pool on the basis of contribution alone, is such a factor. Alternatively, it is relevant when regard is had to s.75(2)(b) or s.75(2)(g).

21. There have been many cases over the years in which the Family Court has seen fit to make an adjustment to a party’s entitlement on the basis of contribution alone in order to take account of a relevant capital disparity. See, for example, Gill (1984) 9 FamLR 969 at 981, Prestwich (1984) 9 FamLR 1069 at 1072, Aleksovski (1996) 20 FamLR 894 at 904 and 909, Brandt (1997) 22 FamLR 97 at 110, VJ & CJ (1997) 22 FamLR 166 at 201, C & C (1998) 23 FamLR 291 at 518, Dickson (1999) 24 FamLR 460 at 473-4, and Collins (1990) 14 FamLR 563 at 565-70.[27]

    [27] See also the judgment of Kay J in Farmer & Bramley (2000) 27 FamLR 316 at 330 ff & 341.

Conclusion in relation to s.75(2) factors

1. Having regard to all the evidence before me, I am persuaded that it is appropriate to make an adjustment on the basis of the s.75(2) factors. This is so because the purpose of the s.75(2) factors adjustment is to assist the Court in the process of arriving at a just and equitable result. To refuse to make an adjustment in the present proceedings would be to run the risk of making orders which are neither just nor equitable.

2. In my opinion, the most significant of the s.75(2) factors are:

   (a)the fact that the husband continues to have a significantly greater earning capacity than the wife (although I recognise that he is only likely to have such an earning capacity for a period of approximately 2.5 years); and

   (b)the disparity in the capital position of the parties reached as a result of the distribution on the basis of contributions alone.

3. I am very conscious of concepts such as those that were described by Nygh J, in early cases, as “palm tree justice” or “a soup kitchen approach” (in relation to subjects such as the s.75(2) adjustment. Nevertheless, the cases referred to in paragraph 126 above make it clear that the court is entitled to give appropriate weight to capital disparity where it is relevant.

4. When I have regard to the above matters, together with all the other matters discussed under the general heading of the s.75(2) factors, I conclude that an appropriate adjustment of the wife’s entitlement on the basis of contribution alone is to increase that entitlement by 12.5%.

5. As I observed in relation to my assessment of an appropriate split on the basis of contribution alone, this is an unusual case, and I have done the best that I can to explain the reasons why I have exercised my discretion in the manner that I have.

6. It follows that the overall distribution of the property between the parties should be on the basis of 35% to the wife and 65% to the husband.

Just and equitable?

1. Although I am of the view that the testing of any proposed orders by reference to s.79(2) is not a fourth substantive step (properly so called) in the property settlement exercise, and although I have considered the justice and equity of the overall “split” under the general heading of “conclusion as to s.75(2) factors”, I propose to (metaphorically) step back and consider whether the outcome achieved by my consideration of the parties’ contributions and the s.75(2) factors has brought about a just and equitable result.

2. I am very conscious that justice and equity must be done to both parties, and I am satisfied that the split that I have proposed (as described below) achieves that result.

Overall conclusion – property settlement

1. I have already recorded that the total net value of the property presently available for distribution between the parties is $284,950.00. 35% of $284,950.00 is $99,732.50.

2. It is apparent from the schedule contained in paragraph 32 above that the items to be retained by the wife comprise her savings, her car and her chattels. The car is subject to a debt of $4,700.00, and the wife also has the two debts recorded under the heading “liabilities”. It follows that the net value of the property to be retained by her is $3,550.00.

3. If the wife’s overall entitlement is to amount to $99,732.50, then she must receive from the property under the control of the husband a total amount of $96,182.50.

4. One of the most difficult aspects of the present case is the relatively modest size of the asset pool. The Full Court has cautioned against assessing s.75(2) factors in percentage terms without considering the real impact of any proposed adjustment. In other words, the real impact in money terms is “the critical issue”.[28] In the present case, the s.75(2) adjustment equates to approximately $35,600.00 (being 12.5% of $284,950.00). I am satisfied that the adjustment is proper. Indeed, I am satisfied that the adjustment is proper even when regard is had to the differential between the wife’s overall entitlement and the husband’s overall entitlement, which differential equates to 30% of the asset pool (or approximately $85,500.00).

   [28] See Clauson (1995) FLC 92-595.

Spousal maintenance

1. I have dealt with the law regarding spousal maintenance elsewhere in these Reasons.[29] There can be no doubt that as a result of the orders that I propose to make in relation to property settlement, the circumstances of the parties will have altered since the 1998 order was made. In any event, the vesting of the husband’s entitlement under the EL Trust was itself a significant change in circumstances (for the husband, if not for the wife).

   [29] See paragraphs 19 – 24 and 27 – 30 above.

2. Having regard to the change or changes of circumstances referred to in the previous paragraph, it is clear that the requirements for variation of the spousal maintenance order made in October 1998 – as set out in s.83 of the Family Law Act – have been met.

3. I turn now to consider the provisions of s.72 of the Family Law Act.

Section 72 – “Threshold Finding”

1. The husband is only liable to maintain the wife to the extent that he is reasonably able to do so. Further, he is only obliged to maintain her if she is unable to support herself adequately for one of the reasons set out in s.72 (and having regard to the matters referred to in s.75(2)).

2. It is clear that the wife is unable to support herself adequately. She lacks the capacity for appropriate gainful employment.

3. For so long as the husband continues to earn something in the order of $66,000.00 per annum, he is reasonably able – on the basis of the evidence now before me – to continue to contribute to the wife’s support. He is already obliged to pay spousal maintenance at the rate of $50.00 per week pursuant to the 1998 Orders.

4. I have already considered the factors referred to in s.75(2) earlier in these Reasons. Insofar as s.74 is concerned, I note that the court has power to make such order as it considers proper for the provision of maintenance for the wife.

5. I remind myself of the additional (or alternatively phrased) considerations referred to in paragraph 24(c) and (d) above.

6. Mr Puckey argued that the wife seeks spousal maintenance in the sum of $450.00 per week, and that she needs that amount in order to support herself. He argued that the husband has an earning capacity of approximately $1,270.00 per week and that his expenses (including spousal maintenance of $50.00 per week) total $1,250.00. He suggested that the husband could trim many of his expenses in such a way as to permit him to pay the additional $400.00 per week sought by the wife.

7. I note that the husband claims (in his Response filed 22 February 2005) to be paying an amount of $300.00 per week in respect of income tax and $200.00 in respect of his motor vehicle expenses. As well, he has claimed $225.00 per week for rent.

8. Given the husband’s statements[30] that he has “… not completed a tax return since the demise of the hotel business venture.” and that this was a “conscious decision”, I am not inclined to regard the husband’s allocation of $300.00 for income tax as a “real” expense. Nevertheless, I recognise that the husband has a legal obligation to pay income tax in relation to his taxable income.

   [30] In paragraph 22 of his affidavit.

9. The husband has now relocated to the United Kingdom and I have no evidence as to his present commitments or expenses. Nor, of course, do I have any evidence regarding his present income.

10. The fact of the matter is that the wife is in receipt of an Age Pension. An Age Pension is income tested. Section 75(3) provides that, in exercising its jurisdiction (in relation to spousal maintenance), a court must “… disregard any entitlement of the party whose maintenance is under consideration to an income tested pension, allowance or benefit”. That being the case, it appears that the wife’s income is limited to any moneys that she might receive from investing the amount that she is to receive by way of property settlement and spousal maintenance (if, indeed, she does not use the moneys for other reasonable purposes — such as securing accommodation for herself).

11. Doing the best that I can with the available material, I conclude that the wife is unable to support herself adequately (for reasons already discussed) and that the husband is reasonably able to support her for so long as he is able to exercise his earning capacity. I have already found that he is likely to continue to be able to exercise his earning capacity for a further 2.5 years (approximately).

12. I am not satisfied, however, that the husband has the capacity to pay spousal maintenance at the rate of $450.00 per week. Doing the best that I can with the evidence of the husband’s financial position which is available to me, I find that the husband is reasonably able to pay spousal maintenance at the rate of $150.00 per week during that period. I also find that his relocation to the United Kingdom is likely to cause his expenses (and, in particular, his motor vehicle expenses) to reduce.

13. In other words, I propose to require the husband to pay spousal maintenance at the rate of $150.00 per week for 2.5 years. Thereafter, the husband’s obligation to pay spousal maintenance should cease, as his earning capacity ceases.

Lump sum spousal maintenance

1. Bearing in mind the dicta from Vautin (1998) FLC 92-827 referred to in paragraph 23 above, I am of the view that it is appropriate to capitalise the wife’s spousal maintenance entitlement.

2. I recognise that the longer a lump sum order operates, the greater is the chance of a change in the parties’ circumstances – which might otherwise necessitate a variation of the order (thereby making the order unjust). Nevertheless, I have already commented upon the husband’s behaviour as a litigant and the fact that he has not made full and frank disclosure of all relevant aspects of his financial position. The husband has had significant funds available to him since his receipt of the EL Trust. Notwithstanding that fact, the husband has ceased to meet his obligations to pay spousal maintenance pursuant to the 1998 Orders and has (in a financial sense) effectively “disappeared”.

1. I find that the husband’s attitude to the litigation is such that it is fair to conclude that he is likely to manipulate his financial affairs – to the extent that he is able to do so – to ensure that it is difficult for the wife to enforce the payment of periodic spousal maintenance. This is particularly so when regard is had to fact that the husband presently resides in the United Kingdom.

2. In all the circumstances of the present case, and as indicated above, I am of the view that it is appropriate to order that spousal maintenance be capitalised with effect from the date of the trial, and paid in a lump sum.

Capitalisation

1. I have indicated that the husband should pay spousal maintenance at the rate of $150.00 per week for 2.5 years.

2. In my opinion, the 3% discount scale should be employed to calculate the present value of a relevant weekly sum for the 2.5 year period.[31]

   [31] See Barrell Insurance Pty Ltd v Pennant Hills Restaurant Limited (1981) 34 ALR 162, Todorovic  v Waller (1981) 37 ALR 481 and Racine v Hemmett (1982) 7 FamLR 716

3. According to the “Table of Multipliers” contained in paragraph [7840] of Butterworths Australian Family Law (CD-ROM version), the 3% “multiplier” relevant to a period of 2 years is 101.3. The 3% “multiplier” relevant to a 3 year period is 149.8. The mid point between the two multipliers (representing 2.5 years) is 125.55.

4. I intend to use 125.55 as the appropriate “multiplier” for a period of 2.5 years. If, as is my view, an appropriate quantum of spousal maintenance payable by the husband (as at the date of the trial) is $150.00 per week, then the present value of that periodic sum for 2.5 years is $18,832.50.

5. It follows that I propose to order that the husband pay lump sum spousal maintenance in the sum of $18,832.50, and that the order for spousal maintenance contained in the 1998 Orders be discharged with effect from the date of the trial.

6. I am aware that the 1998 Orders include a provision to the effect that the husband is to “… maintain the current level of private health insurance which covers both himself and the wife”. Having regard to the fact that the husband has now relocated to the United Kingdom (and to the other orders that I propose to make), however, I am of the view that this order should also be discharged.

Summary – property settlement and spousal maintenance

1. It follows from the above, that the husband will be obliged to pay to the wife the sum of $96,182.50 in respect of property settlement and $18,832.50 in respect of lump sum Spousal Maintenance. The total of these two amounts is $115,015.00.

Costs

1. The question of costs in family law proceedings is dealt with in section 117 of the Family Law Act.  A judicial officer has a broad discretion in costs matters, and the Full Court has indicated that it will not ordinarily intervene unless the order is plainly unreasonable.  Indeed, it has been held that the court has an almost unlimited jurisdiction in relation to costs, although any costs order must be just.[32]

   [32] See Kelly v Kelly (No.2) (1981) FLC 91-108, Hogan (1986) FLC 91-704 and  I v I (No.2) (1996) FLC 92-625.

2. It is not the law that a costs order can only be made in “a clear case”.  Thus, although a finding of justifying circumstances is an essential preliminary to the making of a costs order, there is no additional or special onus on an applicant for an order for costs.  Although the general rule is that each party shall bear his or her own costs, that general rule is expressed to be subject to section 117(2) and must yield whenever the judicial officer finds that there are circumstances justifying the making of the costs order.[33]

   [33] See Penfold (1980) FLC 90-800.

Section 117(2A)(a) – The parties’ financial circumstances

1. I have already dealt with the parties’ financial circumstances in these Reasons. I have found that the husband is in a stronger financial position than the wife, and that he has an earning capacity of approximately $66,000.00 for the next 2.5 years or thereabouts.

Section 117(2A)(b) – Legal aid

1. The husband is not in receipt of legal aid.

2. The wife is in receipt of legal aid but, according, to Mr Puckey, it is likely that she will have to contribute to her costs from any award she receives by way of property settlement.

Section 117(2A)(c) – Conduct

1. This provision requires the court to have regard to the parties’ conduct in relation to the proceedings. In other words, their conduct as litigants must be considered.

2. I have already commented on the husband’s conduct as a litigant in these proceedings. That conduct culminated in his failure to attend at trial (and included his failure to make full and frank disclosure of his financial position).

3. I note, as well, that this matter was originally listed for trial in the May 2005 sittings of the Federal Magistrates Court in Shepparton. The trial did not proceed in those sittings and it was adjourned, by consent, for final hearing in the August 2005 sittings of the court. It was given priority in those sittings.

4. When the matter was called on during the August 2005 sittings, Mr Scriva (who appeared for the husband) sought and obtained leave to withdraw on the basis that his instructors no longer held instructions from the husband. The husband was called, but did not appear. Mr Puckey advised the court that the husband had left the country.

5. As a result of the husband’s actions, various injunctions were granted on 5 August 2005. The principal order made on that day is as follows:

   Until further order save and except for the purpose of meeting his reasonable needs for day to day living and support:

   (a)the husband be and is hereby restrained by injunction from disposing of, selling or otherwise dealing with his interest in the EL Trust, such trust consisting of the capital of the EL Will Trust and the one quarter residuary estate of EL;

   (b)the husband be and is hereby restrained by injunction from selling, disposing of or otherwise dealing with all real or personal property whatsoever and wheresoever situate and/or any superannuation entitlement in his name.

6. The matter was listed for a further hearing (in Melbourne) on

   
   

   11 August 2005. Once again, the husband did not appear at that hearing and directions were made adjourning the matter to 7 September 2005.

7. The trial took place — on an undefended basis – on 7 September 2005.

Section 117(2A)(d) — Whether the proceedings were necessitated by the failure of a party to comply with previous orders.

1. It is not suggested that this provision is of relevance.

Section 117(2A)(e) – One party wholly unsuccessful

1. In my opinion, it is clear beyond argument that the husband has been unsuccessful in the proceedings. In his Response filed 22 February 2005, he sought that the wife’s application for an increase in spousal maintenance be dismissed. In his application on 16 March 2005, he sought property settlement orders which would have had the effect, in essence, of each party retaining the property that was then in his/her possession. In paragraph 1 of those orders, the husband sought that the parties “… be entitled to a sum equivalent to fifty percent of the value of the property held by the parties as of the date of separation and such entitlement be given effect by way of a cash adjustment”.

Section 117(2A)(f) – Offers

1. This does not appear to be a relevant consideration.

Section 117(2A)(g) – Other matters

1. There are no other matters that I consider are relevant to the issue of costs.

Conclusion — Costs

1. In my opinion, the most significant of the factors referred to above are the husband’s conduct as a litigant and his lack of success in the proceedings. I am more than satisfied that there are circumstances that justify the court in ordering that the husband pay the wife’s costs.

Quantum of costs

1. Mr Puckey sought an order that the husband pay the wife’s costs, comprising:

   a)daily hearing fee (half day) with advocacy loading in respect of the hearing in May 2005 — $1,072.50;

   b)daily hearing fee (full day) in respect of the hearing that was due to take place in August 2005 (and was listed with priority), including advocacy loading — $2,047.50;

   c)preparation for final hearing (one day matter), together with daily hearing fee (full day), including advocacy loading in respect of the hearing on 7 September 2005 — $4,947.50.

2. I am satisfied that the above figures are in accordance with the Costs Schedule in the Federal Magistrates Court Rules2001, and that the total of $8,067.50 is reasonable.

3. I therefore propose to order that the husband pay the wife’s costs of and incidental to the within proceedings, fixed in the sum of $8,067.50.

Orders

1. I propose to make orders to the following effect:

   a)the husband is to pay to the wife the sum of $96,182.50 in respect of property settlement;

   b)the husband is to pay the wife the sum of $18,832.50 in respect of lump sum maintenance;

   c)the husband is to pay to the wife the sum of $8,067.50 in respect of costs.

   d)the 1998 Orders are to be discharged with effect from the date of trial;

   e)the injunctions granted on 5 August 2005 are to be discharged upon the husband paying to the wife all moneys due pursuant to orders made as a consequence of these Reasons.

   f)each party is to retain responsibility for his/her various liabilities; and

   g)each party is to otherwise retain the property is his/her possession.

2. I shall now hear Counsel as to the precise orders that will be necessary to give effect to these Reasons.

I, Barbara Mendleson, certify that the preceding one hundred and ninety (190) paragraphs are a true copy of the reasons for judgment of Walters FM.

Deputy Associate: 

Date: 6 October 2005