Sawyer and Sawyer
[2011] FMCAfam 610
•7 June 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
SAWYER & SAWYER [2011] FMCAfam 610
FAMILY LAW – Property – setting aside of binding financial agreement, assessment of asset pool – addbacks – lottery win.
Family Law Act 1975, ss.75, 79, 90G(1)
Hackshaw v Hackshaw [2010] FamCA 1123
Hickey & Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143
In the marriage of Townsend & Townsend (1995) FLC 92-569
In the marriage of Zyk & Zyk (1995) FLC 92-644
Kouper v Kouper (No.3) [2009] FamCA 1080
Parker v Parker [2010] FamCA 664
Pierce v Pierce (1999) FLC 92-844
Applicant: MS SAWYER
Respondent: MR SAWYER
File Number: ROC 266 of 2010
Judgment of: Cassidy FM
Hearing dates: 24 & 25 March 2011
Date of Last Submission: 25 March 2011
Delivered at: Brisbane
Delivered on: 7 June 2011 REPRESENTATION
Counsel for the Applicant: Ms Alexander
Solicitors for the Applicant: Journey Family Lawyers
Counsel for the Respondent: Mr Westbrook
Solicitors for the Respondent: South & Geldard IT IS DECLARED:
(1)That the agreement entered into by the parties in 2001 is not a Binding Financial Agreement within the meaning of section 90G(1) or 90G(1A) Family Law Act 1975.
IT IS ORDERED BY THE COURT:
(2)That the net asset pool of the Applicant and Respondent be distributed on a 54% - 46% basis in the Husband’s favour.
(3)That the schedule to these Orders attached hereto and marked as “Annexure A – Net Asset Pool” forms part of the Orders.
(4)That in the event that either party seeks to apply for costs, the applicant is to file and serve written submissions by no later than 4:00pm on 21 June 2011.
(5)That the respondent file and serve written submissions in reply by no later than 4:00pm on 28 June 2011.
(6)That any costs argument will be determined on the papers.
(7)That the matter be adjourned for mention to 9:30am on 5 July 2011 at the Federal Magistrates Court of Australia at Rockhampton.
NOTATION:
(A)It is noted that should either party file submissions in relation to costs the judgment will be delivered on 5 July 2011.
(B)It is noted that if the parties forward a draft agreed order then the Order may be made in Chambers and all future dates vacated.
(C)Annexure A – Net Asset Pool
| ASSETS | VALUE |
| Husband’s property – [1] Property E | $310,000.00 |
| Jointly owned [2] Property E | $240,000.00 |
| Jointly owned [3] Property E | $200,000.00 |
| Jointly owned Property P | $215,000.00 |
| Husband’s third share in Property L | $70,000.00 |
| Joint [omitted] Account No. [1] | $7,602.00 |
| Joint [omitted] Account No. [2] | $3,500.00 |
| Husband’s third share of [omitted] Account No. [3] | $358.00 |
| Husband’s [bank omitted] Account No. [4] | $157.00 |
| Husband’s [A] Shares – 408 @ $5.31 | $2,166.00 |
| Wife’s [vehicle omitted] | $18,000.00 |
| Husband’s chattels ([business omitted]) | $96,500.00 |
| Husband’s cash on hand | $5,000.00 |
| Husband’s [A] Super | $14,069.00 |
| Wife’s [bank omitted] Account No. [5] | $6,000.00 |
| Wife’s [bank omitted] Account No. [6] | $233,500.00 |
| Addbacks | |
| Husband’s legal fees | $14,933.00 |
| Wife’s legal fees | $28,500.00 |
| Distributions to the Wife | |
| Difference between drawings and business expenses (01.09.2008 to 30.06.2009) | $27,769.46 |
| Difference between drawings and business expenses (01.07.2009 to 31.01.2010) | $56,359.52 |
| Difference (shortfall) between business income and banking (01.09.2008 to 30.06.2009) | $26,472.52 |
| Difference (shortfall) between business income and banking (01.07.2009 to 31.01.2010) | $19,782.05 |
| LIABILITIES | |
| Husband’s third share of mortgage debt on Property L | $8,333.00 |
| TOTAL NET ASSET POOL $1,587,335.55 | |
IT IS NOTED that publication of this judgment under the pseudonym Sawyer & Sawyer is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT BRISBANEROC 266 of 2010
MS SAWYER Applicant
And
MR SAWYER Respondent
REASONS FOR JUDGMENT
Introduction
1.This is an application:
a)To deal with the agreement entered into in 2001 and to determine whether or not it is a binding financial agreement within the meaning of s.90G(1) or s.90G(1)(a) of the Family Law Act 1975 (Cth) (“the Act”); and
b)An application for property settlement.
2.The application and supporting affidavit were filed on 27 May 2010 by the wife.
Background
3.The husband was born [in] 1953 and he is presently 57 years old. The wife was born [in] 1957 and she is presently 53 years old. The parties commenced cohabitation in July 1982 and they have two children: [X], who was born [in] 1987, and [Y], who was born [in] 1988. Both of those girls are adults for the purposes of these proceedings.
4.[In] 1999 the parties married in [omitted]. There was a temporary separation from around mid 2000 to April 2001. On 25 October 2001 the husband’s solicitor signed an Independent Legal Advice certificate in relation to a binding financial agreement and the husband signed the binding financial agreement on 26 October 2001. The wife signed the binding financial agreement on 3 December 2001 and Mr Stockall, the solicitor for the wife, signed the Independent Legal Advice certificate on 4 December 2001.
5.
In about 2002 the wife suffered a personal injury and she received $90,000.00 which was withdrawn from her superannuation and a further $92,000.00 in relation to her injuries. On 28 May 2008 the wife and a friend of hers, [name omitted], won a Gold Lotto in the sum of one million dollars. They shared this equally between them.
On 9 January 2010 the parties separated.
The Orders Sought by the Parties
6.The applicant wife seeks a declaration that the agreement the parties entered into in 2001 is not a binding financial agreement pursuant to s.90G(1) and s.90G(1)(a) of the Act. She also seeks the transfer to her of [2] and [3] Property E and she seeks a payment of $65,000.00. The wife proposes that the husband retain [1] Property E and Property P.
7.The respondent husband seeks the exclusion from the pool of [1] Property E pursuant to the agreement that was entered into in 2001 because he argues that it is a binding financial agreement under the Act. The husband seeks to retain [3] Property E and Property P, as well as [1] Property E, and he says the wife should receive [2] Property E. The husband also seeks a payment from the wife of $54,919.00.
The Material the Parties Rely On
8.The material that the wife relies on is set out in her outline of case that was filed on 14 February 2011. Documents 1 to 8 of that outline were read in the trial.
9.The material that the husband relies on is set out in his outline of case that was filed on 9 March 2011. Documents 1, 2, 4 and 5 set out in that document were read at the trial.
10.The affidavit of Mr R, an accountant, was objected to and was not admitted into evidence pursuant to a ruling that I made at the beginning of the trial.
The Binding Financial Agreement
11.The husband submits that the property at [1] Property E does not form part of the estate in the property proceedings. The wife’s case is that it does, because the agreement that the parties signed was not a binding financial agreement under the Act. The husband’s evidence in relation to the acquisition of that property is set out in paragraph 5 of his affidavit filed 2 September 2010, where he says:
“[5] At the commencement of our cohabitation I owned:-
[5.1] [1] Property E for which I had paid $24,500.00 in 1980, two years prior to cohabitation. In 1982, I owed approximately $22,000.00 on the mortgage then registered against [1] Property E.
[5.2] An interest in the proceeds of sale of a block of land in New Zealand which was held in trust pending a settlement with my former wife, [name omitted]. Shortly after the commencement of our cohabitation, I received approximately $22,000.00 from this source which was used towards discharging the mortgage on [1] Property E and a deposit on the purchase of property at Property O.”
This evidence was not challenged.
12.
In 2001 the husband signed a financial agreement on 26 October and his solicitors signed the certificate of Independent Legal Advice on
25 October. The wife signed her document on 3 December 2001 and her solicitor signed the certificate of Independent Legal Advice on
4 December 2001. The agreement (as set out in Annexure “RS02” of the husband’s affidavit filed 2 September 2010) provided:
“IT IS AGREED ON THE FOLLOWING TERMS:
[1] This agreement is pursuant to s.90C of the Family Law Act (Cth) 1975.
[2] At the time of the making of this agreement, there is no other agreement enforced between the parties and in respect of this matter made pursuant to the Family Law Act (Cth) 1975.
[3] In the event of the breakdown of the marriage between the parties, the wife will not make any claim in relation to the property of the husband situated at [1] Property E, in the State of Queensland.
[4] The parties agree that the property situated at [1] Property E in the State of Queensland is not to be included in the matrimonial property pool when considering the division of matrimonial property.
[5] The parties agree that the said property is not to be considered to be a financial resource available to the husband or to be considered in any way in respect of the distribution of property on an interim or final basis.”
13.Mr Alexander, Counsel for the wife, submits that the agreement is not binding because the wife did not receive a copy of the binding financial agreement. Mr Alexander says this in his outline of submission filed by leave on 25 March 2011:
“[3.14] Section 90G of the Act (as in force 8 November 2001), provides:
90G When financial agreements are binding
[1] A financial agreement is binding on the parties to the agreement if, and only if:
…
[b] The agreement contains, in relation to each party to the agreement a statement to the effect that the party to whom the statement relates has been provided, before the agreement was signed by him or her, as certified in an annexure to the agreement, with independent legal advice from a legal practitioner as to the following matters.”
And the Act then provides various matters in relation to which the advice is to pertain. Subsection (e) says:
“[e] After the agreement is signed, the original agreement is given to one of the parties and a copy is given to the other.”
14.The wife’s counsel submits that Mr Stockall:
a)Did not provide the wife with advice as contemplated by the Act; and
b)A copy of the agreement was not provided to the wife.
15.I have read the decision in Parker v Parker [2010] FamCA 664 that was published on 3 August 2010, and I accept that that decision represents a summary of the law in this area.
16.Mr Westbrook submitted for the husband that Mr Stockall, the solicitor giving legal advice to the wife in relation to the binding financial agreement, gave appropriate advice and given that he signed a statement to that effect, I accept this submission. I, therefore, do not accept the wife’s evidence at paragraphs 112 to 119 of her affidavit filed 11 February 2011. The reason for that is Mr Stockall records in the signed document the advice that he provided. He is an officer of the Court and I accept that he provided that advice. I therefore do no accept the submission that the advice provided to the wife was inadequate.
17.The Act requires strict compliance. I accept that the wife signed the agreement before obtaining legal advice. This is clear on the face of the document and this was in breach of the s.90G provision. I also accept that the wife was not provided with the original agreement or a copy. Failure to comply with these two requirements has the effect of making the agreement not binding, in my view. The property at [1] Property E, therefore, forms part of the pool. It does not save the agreement to submit that the wife did not need to return the agreement to the husband if she was not satisfied with the advice. The section requires that the contract not be executed until the advice is obtained. I do not consider that this provision can be waived, because the section provides it to be binding only if it is complied with. I will, therefore, make the declaration sought by the wife in relation to that property.
The Legislation
18.Section 79 of the Act empowers the Court to make such orders as it considers appropriate altering the interests of the parties of the marriage and their property in determining applications for property settlement. Section 79(2) of the Act provides that:
“[2] The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.”
19.Section 79(4)(a) to (g) sets out the matters the Court must take into account when considering orders it should make in alteration of property interests.
“[4] In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.”
The Four-Step Approach
20.In Hickey & Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at paragraph 39, the Full Court of the Family Court decided the preferred four-step approach in property matters was as follows:
“[39] 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:…”
21.I propose to follow that course in this judgment.
The Asset Pool Add-backs
22.The husband submits that the sum of $130,383.55 should be added back to the pool. That sum was obtained from the following sources:
a)The distributions to the wife:
i)The difference between drawings and business expenses from 1 September 2008 to 30 June 2009, $27,769.46;
ii)The difference between drawings and business expenses from 1 July 2009 to 31 January 2010, $56,359.52;
iii)The difference (shortfall) between business income and banking from 1 September 2008 to 30 June 2009, $26,472.52;
iv)The difference (shortfall) between business income and banking on 1 July 2009 to 31 January 2010, $19,782.05.
23.That total is $130,383.55.
24.The wife was cross-examined at some length in relation to these figures and admitted that these differences existed. Mr Alexander for the wife submits that the husband has not come up to proof with respect to the add-backs. I do not accept this submission. Mr Westbrook argues in his submissions filed by leave on 25 March 2011 that, with respect to the wife:
“[4.][.6] …Perhaps by her own course of conduct she came to believe, wrongly, that the business was not profitable. That the Wife pursued this course may not be a matter for justified criticism, but to the extent that she has had the use or benefit, the enjoyment, of the funds employed, and to the extent that the estate of the parties is reduced as a consequence, this should lead to a finding that there has been a ‘premature distribution’ to the Wife’s advantage.”…
Mr Westbrook cites In the marriage of Townsend & Townsend (1995) FLC 92-569 with respect to that proposition. Footnote 13 states:
“To extend the example, if the Wife had chosen to expend a significant sum on her own enjoyment in overseas travel, whilst this would not be a matter for criticism, she would no doubt be required to bring her expenditure to account as funds of which she had the separate benefit.”
25.Mr Westbrook’s submissions go on to say:
“[4.][.6] …The extent of the receipts of the business, and its profitability, cannot be judged as a consequence of her failure to provide disclosure.
[4.][.10] The wife should be treated for the purposes of the proceedings as having had the benefit of the further funds expended by her for which there is no or no satisfactory explanation. Whether the funds are treated as a “premature distribution”, or otherwise, should ultimately make no difference to the outcome of the proceedings.”
Mr Westbrook refers to Townsend & Townsend again in footnote 14 and says:
“…see in particular AJO v GRO (2005) FLC 93-218 (per Holden, Warnick and Le Poer Trench JJ) at para 30 where the court summarises the instances in which “add-backs” are said to be appropriate.”
26.Mr Westbrook also referred me to the discussion by Murphy J in Kouper v Kouper (No.3) [2009] FamCA 1080 and Hackshaw v Hackshaw [2010] FamCA 1123.
27.I accept his submissions with respect to this issue. The evidence of the wife in cross-examination demonstrated that these funds were unaccounted for. They should be added back into the pool. I understand they came from the wife’s Lotto win in 2008 and that will, no doubt, be the subject of a contribution argument. However, it is appropriate to add them back into the pool.
28.The pool is otherwise agreed by the parties and is as follows:
a)The husband’s property, [1] Property E, $310,000.00;
b)Jointly owned, [2] Property E, $240,000.00;
c)Jointly owned, [3] Property E, $200,000.00;
d)Jointly owned, Property P, $215,000.00;
e)The husband’s one third share in Property L, $70,000.00;
f)The husband’s one third share of mortgage debt in Property L, negative $8,333.00;
g)Joint [omitted] Account number [1], $7,602.00;
h)Joint [omitted] Account number [2], $3,500.00;
i)The husband’s one third share of [omitted] Account number [3], $358.00;
j)The husband’s [bank omitted] account number [4], $157.00;
k)The husband’s [A] shares, being 408 at $5.31, $2,166.00;
l)The wife’s [vehicle omitted], $18,000;
m)The husband’s chattels ([business omitted]), $96,500.00;
n)The husband’s cash on hand, $5,000.00;
o)The husband’s [A] Super, $14,069.00;
p)The wife’s [bank omitted] account number [5], $6,000.00;
q)The wife’s [bank omitted] Account number [6], $233,500.00.
r)Add-back:
i) The husband’s legal fees, $14,933.00;
ii) The wife’s legal fees, $28,500.00;
iii) The distribution to the wife as per the drawings and the shortfalls, $130,383.55.
s)Total pool $ 1,587,335.55.
Contributions – Initial Contributions
29.The husband contributed [1] Property E to the property of the parties. This was an initial contribution and it must be recognised in assessing contributions in the trial. Pierce v Pierce (1999) FLC 92-844 records at paragraph 28:
“[28] In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home…”
30.In the present case the totality of the house was provided by the husband and the property at [1] Property E was the property the subject of the agreement to exclude it from the pool. While I have not done that, I accept that the contribution by the husband in relation to this property is significant, and I consider 5% reflects the sum that should be put in place to reflect that contribution. A sum of 5% of the pool is a sum of $79,366 and a differential of 10% which amounts to a sum of $158,732. I consider that represents an appropriate assessment of that initial contribution by the husband.
The Workers Compensation
31.The wife received compensation in 2003 for a [omitted] injury. She received $92,000.00 from her superannuation fund and she received $90,000.00 for the injury. The husband questioned the quantum but accepts that she received those two funds. The $90,000.00 injury claim is a significant sum contributed by the wife to the assets of the parties and I consider that contribution to be at 1%. The superannuation part of the payment cannot be treated as a contribution by the wife because both parties contributed to the superannuation that the wife accrued during the relationship, and I do not understand the superannuation to have accrued prior to the relationship in this matter.
32.With respect to the Lotto win, the law is settled in this area and the case that assists me is In the marriage of Zyk & Zyk (1995) FLC 92-644 at 82515 where the Court said:
“In some cases a distinction has been sought to be drawn because the ticket is purchased by one party to the marriage in a syndicate with third persons. Whilst there may be some superficial attractions in this, we do not think that it is correct. The only relevant point of distinction is that the party to the marriage purchases not the whole ticket but a share in a ticket (or group of tickets) with other persons. That share would ordinarily be treated as coming from joint funds with his or her married partner, and any resultant prize would be a joint contribution by them to the property of their marriage. Similarly, a distinction is sometimes sought to be drawn in cases where the purchase is the continuance of a pre-marriage practice by one party. However, in ordinary circumstances the above approach would apply, because from marriage the purchase would usually be treated as coming from their joint incomes.”
33.The Lotto win, in this case, I will treat as a joint contribution. The husband was very concerned, on his own evidence, about the wife’s gambling and he says this caused the separation. However, I do not consider that this takes the case outside the reasoning contained in Zyk. I therefore conclude on contributions that the contributions favour the husband by 4% because all of the other contributions during the marriage, it was conceded by counsel, were equal.
The s.75(2) factors
34.The wife argues that she has less income and earning capacity than the husband. I do not accept this argument. The husband is 57, the wife is 53; neither of them are currently working. The husband has not worked for the past six years. I do not consider that either party has the income or earning capacity that would make a difference to the percentage they should receive.
35.
The wife argues the husband is in receipt of rental income. Upon the finalisation of this matter, she, too, could purchase an investment property if she wishes and that would remove that distinction.
I, therefore, do not intend to make any adjustment with respect to s.75(2) factors.
Just and Equitable
36.The effect of the decision in this matter is that the husband would receive 54% of the pool and the wife would receive 46% of the pool. This would result in the husband receiving 54% of the $1,587,335.00 which is the sum of $857,160.00. I note just by the consent of the parties in the way they have drawn their draft orders would include the properties at [1] Property E and Property P. The wife will receive 46% of the pool which in dollar terms is $730,175.00 and included in her settlement will be [2] Property E. The parties both asked to retain [3] Property E.
37.If the parties are unable to agree on which of them can take that property, I will need to make an order that it be sold. I am not able, on the evidence I have before me, to be satisfied that there is a just and equitable basis for awarding it to one or other party. The way to overcome a claim where both parties are seeking the property is to sell it. I do not, however, intend to publish final orders today but give the parties an opportunity to settle on a draft order that reflects the distribution of 54% to the husband and 46% to the wife, to enable them to have some discussions about whether they really want that property sold or whether they can come to an agreement that one of them might take it and the other one be compensated in cash.
38.If the parties can forward a draft order that is by agreement to the Court in the meantime, I am prepared to make those orders in chambers. So I will issue the order today that sets out the declaration, prescribes the percentages and annexes the property pool as I found it, and make those directions with respect to the further management of the matter.
I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of Cassidy FM
Date: 11 July 2011
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