Scott and Bellow
[2012] FMCAfam 338
•4 May 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SCOTT & BELLOW | [2012] FMCAfam 338 |
| FAMILY LAW – De facto – property – six and a half year relationship – applicant higher income earner – respondent re-skilled – common aim to build wealth through property development – no children. |
| Family Law Act 1975, ss.81, 90RD, 90SM(3)-(4), 90SF(3) |
| Hirst v Rosen (1982) FLC 91-230 |
| Applicant: | MS SCOTT |
| Respondent: | MR BELLOW |
| File Number: | MLC 5075 of 2011 |
| Judgment of: | Curtain FM |
| Hearing dates: | 16 & 17 February 2012 |
| Date of Last Submission: | 1 March, 2012 |
| Delivered at: | Melbourne |
| Delivered on: | 4 May 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr J. Williams |
| Solicitors for the Applicant: | Carew Counsel Pty Ltd |
| Counsel for the Respondent: | Mr R. Weil |
| Solicitors for the Respondent: | Susan Snyder Solicitor & Barrister |
THE COURT DECLARES THAT:
Pursuant to s.90RD of the Family Law Act 1975 that a de facto relationship existed between the applicant and the respondent.
THE COURT ORDERS:
That:
(a)The applicant retain the sole right, title and interest in the real property situate at Property B and more particularly described in Certificate of Title Volume [omitted] to the exclusion of the respondent; and
(b)The applicant indemnify the respondent against all payments and liability pursuant to the Commonwealth Bank (“the Property B mortgage”) and all rates, taxes and outgoings of or with respect to the real property whatsoever nature and kind.
That:
(a)The applicant retain the sole right, title and interest in the real property situate at Property W, and more particularly described in Certificate of Title Volume [omitted] to the exclusion of the respondent; and
(b)The applicant indemnify the respondent against all payments and liability pursuant to ING Bank (“the ING mortgage”) and all rates, taxes and outgoings of or with respect to the real property whatsoever nature and kind.
That:
(a)The applicant retain the sole right, title and interest in the real property situate at Property E and more particularly described in Certificate of Title Volume [omitted] to the exclusion of the respondent; and
(b)The applicant indemnify the respondent against all payments and liability pursuant to the mortgage to St George Bank (“the St George mortgage”) and all rates, taxes and outgoings of or with respect to the real property whatsoever nature and kind.
That:
(a)The respondent retain the sole right, title and interest in the real property situate at Property R (“the Property R property”) and more particularly described in Certificate of Title Volume [omitted] to the exclusion of the applicant; and
(b)The respondent indemnify the applicant against all payments and liability pursuant to the mortgage to Commonwealth Bank (“the Commonwealth mortgage”) and all rates, taxes and outgoings of or with respect to the real property whatsoever nature and kind.
That within ninety (90) days from the date of these Orders (“the date”), the respondent pay to the applicant the sum of one hundred and forty-one thousand, one hundred and thirty-two dollars ($141,132).
That in default of payment pursuant to paragraph 5 of the Orders, the respondent sign all necessary documents and do all necessary things for the Property R property be sold upon such terms as agreed between the parties, or in default of agreement as to the terms and conditions of sale, including reserve price, as determined by a nominee of the Real Estate Institute of Victoria, at the equal cost of the parties.
That the proceeds of sale of the Property R property be applied as follows:
(a)First, to meet the selling costs and commissions of sale;
(b)Second, to discharge the mortgage and other encumbrances;
(c)Third, in payment of the sum in paragraph 5 above or any balance remaining unpaid (including interest at 10% per annum from the date of default on any unpaid monies) to the applicant; and
(d)Fourth, the remaining balance to the respondent.
That in the event that the sum set out in paragraph 7(c) does not fully pay the entitlements of the applicant pursuant to these Orders, liberty to apply be reserved to the applicant upon reasonable notice to the respondent.
That:
(a)pending the payment to the applicant, or the payment of the sale proceeds to the applicant, the respondent make all payments in respect of the Property R property as and when they fall due together with all rates and insurances; and
(b)the respondent is hereby restrained from disposing of or pledging for credit or otherwise dealing with his interest in his superannuation fund or funds pending compliance with paragraph 5.
That the respondent have the sole interest in the company and business known as “[A] Pty Ltd” and indemnify the applicant in relation to any and all expenses and liabilities for same.
Unless otherwise specified in these Orders and except for the purposes of enforcing the payment of any monies under these or any subsequent Orders:
(a)Each party be solely entitled to the exclusion of the other to all other property (including choses-in-action) in the possession of such party as at the date of these Orders;
(b)Any money standing to the credit of the parties in a bank account are to be retained by the party in whose name the account appears;
(c)Each party hereby foregoes any claim they may have to any superannuation benefit that is belonging to or earned by the other;
(d)Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders; and
(e)Any joint tenancy of the applicant and respondent in any real or personal estate is hereby expressly severed.
All extant applications be otherwise dismissed.
AND THE COURT NOTES THAT:
A.Pursuant to s.81 of the Family Law Act 1975 the parties intend these Orders shall as far a practicable finally determine the financial relationship between them and avoid further proceedings between them.
IT IS NOTED that publication of this judgment under the pseudonym Scott & Bellow is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 5075 of 2011
| MS SCOTT |
Applicant
And
| MR BELLOW |
Respondent
REASONS FOR JUDGMENT
Introduction
This case was first listed before me on Thursday, 16 February, 2012. On that day I was already hearing another trial and this case could not commence and so I stood it down for the parties to negotiate. Later in the day it was called and I was told by the parties’ Counsel that the matter could not be resolved and it would proceed as a defended property dispute.
On that day I made Consent Orders restraining the parties from dealing with any assets and I enquired from Counsel whether the trial was ready to proceed. Neither indicated that it could not proceed, and in fact, requested that it proceed the next day or the following Monday. When the matter was called on Friday, 17 February, 2012 there was some debate between Counsel and the bench in relation to their compliance with earlier procedural Orders and directions. I was concerned that notwithstanding Counsel believed that this matter was ready to proceed, it in fact had not been fully and totally prepared for trial as it should have been. It appears that some of the assets were not valued and there was still some dispute about proper and full disclosure and whether in fact discovery had been fully undertaken. The respondent’s Case Outline did not include his business “[A]” and many smaller assets such as motor vehicles. I was provided with a document headed “Joint Schedule of Parties’ Property and Superannuation Interest” and I went through that document with Counsel for the applicant. I was initially told that the parties had an agreed value on the pool and I therefore believed that there was nothing in dispute in terms of the make-up of the pool or its value.
After the Counsel for the applicant took me through each asset and liability item by item it was then apparent to me that a number of assets and liabilities had not been properly investigated or valued. I then indicated that I had asked them yesterday if this matter was ready to proceed and yesterday they told me it was. Counsel for the Applicant told me, “it is, your Honour” and then I said:
“You haven’t got some valuations; you’ve got a dispute over the figure of the inheritance. So – what? – do we resolve that in the running, do we?
“No, your Honour”
Mr Williams then replied:
“My client’s choice, your Honour, is to, shall we say, try and get on with the principal, main assets in relation to this case and just simply take a pragmatic view that, now she knows these cars are on lease, there probably is very little equity in the costs involved in adjourning this case; and the potential risks of erosion of assets is far greater than it is in arguing about perhaps a small amount of equity in relation to three motor vehicles. That’s her pragmatic position. The pragmatic position in relation to the chattels is that she took about four things out of the home and he has got the rest. She’s not going to have all of those items valued because, as you know, from your Honour’s experience, chattels are not of a huge value when they’re sold at a garage-sale value.”
Soon after this comment, I had a further exchange with Counsel as follows:
“I was told yesterday this was ready.”
“And it is. And you can understand me saying…”
“Of a style. Of a style. The rule is set down and these orders haven’t been complied with. I get an outline of assets that’s, “You know – well, don’t know about that; don’t know about that; haven’t valued the cars; inheritance, we only saw it yesterday; and super, maybe 59.” It’s all wishy-washy. But if your client wants to run on this basis…”
“She does”
“…and the respondent wants to run on this basis, then we will have a wishy-washy trial. And she can’t complain about the system. She hasn’t complied with it.”
“No.”
Counsel for the respondent was notably silent on this topic and did not object to the matter proceeding and was clearly content for it to be dealt with.
There is a four step process that I must follow when determining de facto property matters pursuant to the Family Law Act 1975 (“the Act”). The first requirement is to identify and have a value attached to all the property of the parties whether they are assets, financial resources or liabilities that attach to property, the value of that property was at the date of hearing, which is the usual approach. As noted above, this was a problem in this case but each party wanted the case to proceed. The next step, the second step, is where I have to consider the contributions made by each of the parties pursuant to s.90SM(4) of the Act. I have to then assess all of those contributions and give them particular weight in light of the history of the case. The third step is where I have to consider the factors set out in s.90SF(3) of the Act, including the financial resources, means and needs and other matters relating to the parties.
The fourth step for consideration by the Court and the last step, is the requirement of s.90SM(3), the Court must 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.
Background
The applicant is a Ms Scott who was born [in] 1978 and is aged 34 years. She is an [omitted] by occupation and enjoys good health.
The respondent is a Mr Bellow who was born [in] 1979 and is aged 33 years. By occupation he is a [omitted] and he also enjoys good health.
It is common ground that the parties lived in a de facto relationship from around September, 2002 until April, 2009, a period of some six and a half years cohabitation, although prior to this time they had been enjoying each others company but not residing together. There are no children of the relationship.
Documents relied upon
A. Applicant
The applicant relied on the following documents:
a)Applicant’s Initiating Application filed 10 June, 2011;
b)Written Amended Application ( tendered but not dated);
c)Applicant’s affidavit filed 23 January, 2012;
d)Applicant’s affidavit filed 23 January, 2012 (number two);
e)Applicant’s affidavit filed 10 February, 2012;
f)Applicant’s Financial Statement filed 23 January, 2012;
g)Outline of Case filed 14 February, 2012, along with Applicant’s Schedule of Parties’ Property and Superannuation Interests, filed 6 December, 2011; and
h)Applicant’s Written Final Submissions (not dated).
B. Respondent
The respondent relied on the following documents:
a)Respondent’s Response to Initiating Application filed 8 September, 2011;
b)Respondent’s affidavit filed 8 September, 2011;
c)Respondent’s affidavit filed 13 February, 2012;
d)Respondent’s Statement of Financial Circumstances sworn 13 February, 2012;
e)Case Outline filed 15 February, 2012; and
f)Respondent’s Written Final Submissions dated 23 February, 2012.
Table of parties assets, resources, superannuation and liabilities
| Asset | Value |
| a) Property W | $430,000 |
| b) Property B | $350,000 |
| c) Property E | $820,000 |
| d) Property R | $1,200,000 |
| e) Assets of “[A]” | $15,000 |
| Superannuation | Value |
| a) Applicant | $149,215 |
| b) Respondent | $66,241 |
| Liabilities | Value |
| a) Property W | $351,963 |
| b) Property B | $246,172 |
| c) Property E | $514,178 |
| d) Property R | $654,656 |
| Net pool excluding superannuation | $1,048,031 |
In cross-examination the following took place:
“So you’ve handed through your counsel a document today which indicates that, in terms of [A], you value that company at $15,000. Is that right?”
“That’s just tools of the trade, yes.”
Given this concession and that it is in the applicant’s final submissions at this figure, I have added the business to the asset pool at that figure.
Contributions
Contributions on cohabitation
The applicant, other than savings, claims to have brought a motor vehicle worth $10,000 and superannuation of $10,000 into the relationship.
The applicant also brought into the relationship two savings accounts with the Commonwealth Bank at [suburb omitted]; she said in her first affidavit they totalled of $55,000, subsequently she corrected this and said it was in fact $45,000. She said she arrived at $45,000 because she found some bank statements that refreshed her memory. The respondent appears to have had a streamline account with the same bank, with savings of around $2,000 but it was his case, that he received a $17,000 payment by way of a gift or interest from the sale of his father’s property at Property L. He said at paragraph 5 of his affidavit sworn and filed 13 February, 2012 that, “…At best I recall it this money was paid into a joint account which in turn was used to fund the deposit on the property at…Property S…”
It is common ground that in July, 2002 the parties purchased a
Property S home and paid a deposit of around $26,000 according to the applicant because she obtained a bank cheque for this sum but the contract that was subsequently produced showed that there was a deposit of 10%, some $22,050. The difference was never explained in evidence and in fact this area was somewhat grey given there was not a complete set of bank statements from both parties to enable the Court to be fully and properly informed of exactly what monies were brought in by each of them. The applicant was adamant that she paid the deposit monies on the purchase of the Property S home in July, 2002 from her own funds and that the respondent had made no contribution. There was extensive cross-examination on this topic including the following:
“I put it to you that the $45,000 was from memory, too?”
“No; I did know that I did have a great deposit, and if I didn’t I wouldn’t have been…”
“Well, have you lost some statements that you had when you made your second affidavit?”
“No, I haven’t.”
“Well, you’ve said your statements that you’ve got there do not disclose $45,000. They disclose something in the region of $40,000; that’s correct, isn’t it?”
“No, because in July it actually shows there’s a balance of $30,000 there. Then I look at this one and it says $30,800 and on the other one it says $14,200.”
“What does it say in September?”
“Of which account, sorry?”
“When you commenced to live together it was September, not July. Not June. What was – remember I asked you what the balance was in that account in September? Tell us, again?”
“Sorry – which account were you referring to? Both of them, in the September 2002?”
“Okay. Tell us what both – you don’t know what the balance was in the account – one account, because you haven’t got statements; correct?”
“In the September I do.”
“The end of September. What does it say?”
“$7,560.”
“Okay. And what does the other account say, the end of September?”
“$1563.”
“So at the end of September you had 8000, nearly – between eight and nine thousand dollars in savings; not 45; not 55?”
“The reason for that is because that money was paid as a deposit for Property S. That’s why, after it…”
“Add 9000 to 26,000: 35,000. That’s what you had when you – in your savings when cohabitation commenced. That’s a reasonable calculation, is it not? If you’re unable to answer because you have mislaid those statements that are missing, you can say that too?”
“Sorry; I’m just getting a little bit confused, because you’re talking about cohabitation. I probably had very minimal funds because I used this money to purchase the home.”
…
“Do you know how you got to 45,000 for the second affidavit? Because you’ve just given evidence the second affidavit, after looking at the figures and not relying on your memory, you said it was 45,000?”
“Yes.”
“How did you get to that?”
“From cross-referencing with this.”
“Did you add the 14 and 30 together?”
“The 14 – pretty much, but I did know that there was quite a substantial deposit…”
The respondent gave evidence in chief that he was paid $17,000 in late 2001 or early 2002. He also said that his sister was paid a similar sum from the sale of their father’s investment property at “Property L” but she was not called as a witness. The respondent attempted to explain why she was not called but I did not find that entirely convincing; it appeared he had not made every effort to locate her and have her available to the Court.
The respondent also said in chief in answer to what he did with this money that:
“I don’t know whether I specifically – whether it sat at our house or whether I gave it to her [the applicant] or whether it was deposited in to a particular bank account but, as I said, she was in control of everything and whatever – whatever we did, we talked about together, so I can’t remember exactly where it went…”
In cross-examination it was established in his first affidavit (of two affidavits) sworn 8 September, 2011 he did not mention the $17,000. It was also established that he did not know what month or year he received the monies or what bank account, if any, it was paid into. It was further established that he had no documentary proof to support his allegation that $17,000 was contributed to the purchase of the Property S property.
In my view, the burden of proof rested with the respondent that not only did he receive a $17,000 payment just prior to the purchase of the Property S property but these funds were actually contributed to this purchase. He failed to establish the latter and on balance I am satisfied that the applicant made a greater financial contribution to the parties resources just prior to or after cohabitation and particularly in relation to the purchase of the Property S property.
The financial contribution made directly or indirectly by or on behalf of a party to the de facto relationship
On cohabitation in late 2002 the respondent was employed as a [omitted] and was also working casually in the [omitted] industry. Soon thereafter he undertook an apprenticeship with the applicant’s father as a [omitted] over a period of some three and a half or so years from 2002 to 2006. After completing his apprenticeship, the respondent established his own business called “[A]” .
It is common ground that in or around 2004 the respondent established a business known as “[O]” with a friend, a Mr D.
In re-examination he clarified his role in this business and said as follows:
“And why did you start it?”
“I guess the [omitted] industry was starting to go through a bit of a boom, and obviously the [omitted] had become a much bigger issue, so it started becoming a part of your [omitted] costs that you had to have [omitted], so we thought there might have been a little bit of a niche in the market that we could attempt to …”
“What do you mean by “[omitted]”? You know, we aren’t [occupation omitted] and things here?”
“Well, it’s [omitted] …”
“So [omitted]?”
“Yes. And [omitted]…”
“Okay. And so you went into that with a mate, did you?”
“Yes, who is also a [occupation omitted].”
“Yes. And who did you get your work from?”
“Basically, well, probably 70 to 80 per cent it was – originally, it was probably 100 per cent, the [omitted] we worked for. Just we would – obviously the jobs that we were going to do, as they did a [omitted].”
“You would go in and do the [omitted] for it first. When would you go in?”
“Generally, we would go in after work on the way home or go down the [omitted] and either take it that night or the next day or on the weekend or…”
“What time do you normally – do [occupation omitted] normally finish work?”
“Most normal [occupation omitted] would probably finish at 3, but me and him would probably finish anywhere 5 till 7.”
“Well, would you then do the [omitted] after that?”
“Yes.”
“So just to make it quite clear, were you [omitted]?”
“No. Like, it’s [omitted].”
“All right. Okay. So how long did you do it for?”
“Yes, probably a period of three years, approximately.”
“Why did you and your friend stop?”
“It just wasn’t lucrative enough and the amount of stress it put on our partners and the hours involved in it and the times we were doing it, it was just – it was too much on us.”
“Can you be more specific as to “it was not lucrative enough”? What does that mean?”
“Well, for us to work all day till 6 or 7 or 5 even, or even if we finished early and then you’re out till, you know, 11, 12, midnight, 1 o’clock in the morning, it just – it wasn’t worth our time, it was just too hard on us physically. Because, I mean, he also works, you know, probably a minimum of six to seven days a week as well, and even, you know, he’s the same as me, a Sunday is six to 10 hours, it’s not two or four hours.”
The evidence is that this business was subsequently sold soon after separation in 2009 for a total of $7,000 which meant that the respondent received $3,500. He did not explain what he did with this.
The net taxable income of the respondent over the period of cohabitation was:
a)2002, $16,932;
b)2003, $11,215;
c)2004, $16,489;
d)2005, $31,312;
e)2006, $93,178;
f)2007, $108,911;
g)2008, $37,152; and
h)2009, $65,160.
It also appears that the turnover of his business “[A]” was as follows:
a)2006-2007, $184,000;
b)2007-2008, $303,000; and
c)2008-2009, $393,000.
The applicant was employed for a salary working full time in the [omitted] industry throughout cohabitation and had a net taxable income from 2002 to 2005 as follows:
a)2002, $48,925;
b)2003, $81,904;
c)2004, $73,483; and
d)2005, $81,122.
I note that the applicant says at paragraph 30 of her affidavit sworn 8 June, 2011 and filed 10 June, 2011 that, “During our 8 ½ year relationship, I earned approximately $950,000.00…” and in the same affidavit at paragraph 31 she says, “His total income [referring to the respondent] during our 8 ½ year relationship was approximately $420,000.00.” While this is interesting, the evidence was that the parties financial relationship did not start until 2002 and ceased a few months after separation with the relevant period of a ‘financial partnership’ of around 7 years.
A more useful exercise was to compare the net taxable income of the parties whilst the respondent was undertaking his apprenticeship which was as follows:
Year
Respondent’s net taxable income
Applicant’s net taxable income
2002
$16,932
$48,925
2003
$11,215
$81,904
2004
$16,489
$73,480
2005
$31,312
$81,122
The total for the respondent over this period was $75,948 whilst for the same period for the applicant it was $285,431. Over this period the applicant earned over three times more than the respondent. There is no suggestion that these monies were used for anything else other than for the support of the parties and or their purchase of or development of their interest in investments and property. On this topic the respondent in cross-examination said as follows:
“…so far you agree that she contributed, financially, more than you did; correct?”
“…Through the early – when I was doing my apprenticeship, yes, there was a significant difference. As I said, I started an apprenticeship because it was agreed upon that that would benefit us and – and get us somewhere in the long term.”
A further question that was put on this topic was:
“But in every year, but two years, from ’02 to ’09, her taxable income was in excess of yours?”
“…Yes. But there are different reasons as to why in the other years…”
In re-examination the following was put to the respondent:
“You then were asked questions about your income over various years, and it was put to you that Ms Scott earned more than you?”
“Yes.”
“And that a two year period was mentioned, and you said, “Yes, her income was greater on paper.” What did you mean by that?”
“Well, the overall total adds up to greater, but at the end of the day, when you look at the accumulated equity from the works done on the properties, it would more than exceed the difference.”
The actual role of third parties working on the properties is not clear. In my view, the respondent had an exaggerated view of the work he undertook and the work undertaken by his former employees, friends and relatives. None of his former employees, friends or relatives gave evidence and it was essential, for him to succeed with this argument, that he should have had them on affidavit and called them to corroborate his allegations, particularly given this was a significant fact in issue and the applicant did not make many concessions on this topic.
Contributions other than a financial contribution made directly, indirectly by or on behalf of a party to the de facto relationship
Property S
During their relationship the parties invested in five separate pieces of realty. As mentioned above, the first was in 2002 with the purchase of Property S (“Property S”). What is clear is that both contributed to the deposit but on any view that contribution was greater by the applicant than the respondent. At best the respondent says that he brought in $19,000 in total (but cannot prove $17,000 of this) that was used or put towards the property and the applicant says that she brought in somewhere in the region of $45,000 which was also used for their benefit.
Both say they have an interest in property development or in property investment and both say they were motivated by that interest to buy 5 separate parcels of real property. The applicant says in paragraph 39 of her affidavit sworn 8 June, 2011 that, “…Mr Bellow and I undertook numerous renovation projects, both cosmetic and major improvement works on the properties we owned. The majority of work was assigned to tradesmen, but much of the physical work was carried out by both of us in our free time...” In response to this in his affidavit sworn 2 September, 2011 the respondent says, “…[I] agree that we undertook numerous renovation projects and say that the Property S property was the only property where there were significant other tradespeople employed for whom we paid. This was the first project that we did and we needed to gain some expertise...” The applicant in her affidavit sworn 8 June, 2011 at paragraph 42(a) says that with the Property S property, “…we made significant improvements through renovation, by tradesman and our own labour from 2002-2004 which cost $180,000.00 and was funded from my income alone...” The respondent says at paragraph 23 of his affidavit, in answer to this that, “…all of the income earned by us both was to the best of my knowledge placed in a joint account and used for all expenses, including living expenses and renovating costs.”
It may well have been that all monies were put into a joint account and then drawn down to meet the development costs of the Property S property, but the reality is that whilst it was a joint account on the face of it there were not joint contributions to that account from 2002 through to 2004 where the applicant earned net taxable income of around $205,000 in total, whilst for the same period the respondent earned a net taxable income totalling about $45,000. The applicant contributed over four times more monies than the respondent. This is a very important aspect of the case given Property S was a property that was used by the parties as a springboard to acquire other properties.
I am mindful of the comment made by the respondent at paragraph 20 of his affidavit where he said, “…the Property S property was the only property where there were significant other tradespeople employed for whom we paid.” I note in his affidavit he also claims that much work was done by his family and friends but no one was called to corroborate this. They should have been, if he wanted to establish his case.
Property W
In 2003 the property at Property W, (“Property W”) the applicant says (in paragraph 42(b) of her affidavit sworn 8 June, 2011), “…was purchased for $216,000 in 2003 in my name, the loan also in my name, using the equity in the Property S property. At the time Mr Bellow was an apprentice with no borrowing power...” In response to this at paragraph 23(b) of his affidavit sworn 2 September, 2011, the respondent says, “I agree with the matters set out therein insofar as they relate to the acquisition of the Property W property...” This property was also substantially renovated and what is interesting in the applicant’s affidavit sworn 8 June, 2011 at paragraph 42(b) she comments that work was undertaken amongst others by Mr Bellow’s apprentices including fixing, framing, window installation, deck installation, stair installation and gardening. This is consistent with some of the evidence of the respondent when he told the Court that he used many of his employees at different stages to work on different properties for the benefit of both the parties. This is the only concession made by the applicant on this issue, along with a comment in paragraph 20 of the affidavit sworn 10 February, 2012 about 2 carpenters who briefly helped the parties.
Property B
Also in 2003 the applicant purchased with the father of the respondent, a Mr B a property known as and situate at Property B (“Property B”) with a stand alone loan. She says in her affidavit sworn 8 June, 2011 at paragraph 42(c), “…Mr Bellow was not involved in this project, financially and personally...” In answer to the affidavit the respondent says at paragraph 23(c) that he found the property and worked with his father to attend Council meetings and organise the purchase. He does not take issue with the financial role undertaken by and described by the applicant. The applicant also says in her affidavit at paragraph 42(c), “…In approximately October 2009 when I was no longer in a relationship with Mr Bellow, I bought out Mr B’s share of the property at $160,000.00 and so became the sole proprietor...” The respondent takes no issue with this. It would therefore seem on the face of it that Property B was an asset that the parties acquired primarily through the effort and financial contribution of the applicant with some lesser contribution from the respondent.
Property E
Ultimately the Property S property was sold in 2006 and $145,000 from that sale was contributed to purchase of the property at Property E in the name of a company “[S]”, the Trustee of the applicant’s family trust. This trust and company are solely controlled by her. She is the sole director and shareholder of the company and appointer of the trust. The applicant retained this property after separation along with Property W and Property B. She continued to operate and use them as a business investment. She was asked:
“…you could have sold those properties at any time, if you’d wished?”
“I could have, but I – like I said, I didn’t want to.”
Property R
A further $150,000 from the sale of the Property S property was contributed to purchase of Property R (“Property R”) in the sole name of the respondent. He also borrowed the balance in his sole name. At separation the mortgage on the Property R property was around $654,000. The respondent retained sole control of this property post separation and swore an affidavit and filed same on 13 February, 2012 and did not mention the fact that since separation the mortgage on that property has blown out to a sum of $979,284 at the time of the hearing. We were told that the respondent failed to pay mortgage instalments post separation in relation to the Property R property and he had incurred interest and penalty interest debts which came to a total of $200,000 and more. It was common ground that we should look at the figure of the mortgage on this property as at the time of separation.
The respondent received an inheritance of approximately $280,000 some time in 2010. He apparently spent this legacy on “…paying wages and living…” which in any event is a resource in this matter as the applicant conceded that she made no contribution to these monies. In 2010, the respondent paid a deposit of around $90,000 to purchase a property in [suburb omitted]. However he did not proceed with that contract and simply walked away from the arrangement. It appears from his evidence in the witness box that he may be able to follow up the repayment of the deposit or some part of it, with his current solicitor some time in the future, but even this issue was unclear.
Working and their joint venture
It was put to the applicant in cross-examination that she regarded the relationship as a partnership or joint venture, she agreed with that concept but the applicant claimed that she made a greater contribution to that partnership or joint venture.
In further cross-examination the following questions were put:
“Well, you’re not suggesting that he was a slacker?”
“No. He went out and worked and we both worked.”
“He worked to the best of his ability. That’s right, isn’t it?”
“In some aspects I would agree with you, yes.”
“You see if it’s a joint venture between him and you and you started during 2002 the fact of the matter is that until you separated, until your relationship broke down, you don’t seriously criticise his contributions to that joint venture, do you?”
“I wouldn’t say I criticise it.”
“What you say is that you earned more money than him because you had greater talents and you bought those talents to the relationship. That’s what you say, isn’t it?”
“Yes.”
…
“In your affidavit you’re anxious to impress the court that you really put your shoulder to the wheel, didn’t you? You did absolutely everything you possibly could to further the joint venture between you and Mr Bellow?”
“Absolutely.”
“You don’t suggest in your affidavit material that he did anything other than that?”
…
“Than put his shoulder to the wheel, use his best endeavours to further the joint venture between you?”
“He also did the same but I feel that I did a lot more.”
It is common ground that the applicant managed the parties’ finances, did all of the record keeping and attended to their financial affairs after they commenced cohabitation and until separation. It appears that she did the bookkeeping for the parties, kept all records and generally managed and controlled their bank accounts. It further appears that she was involved in the preparation of the tax returns, including BAS and PAYG returns and those of the company. At one stage the following question was put:
“You got it all together, gave it to the accountant. You knew exactly what was going into those tax returns?”
“Absolutely and I did inform the client who was actually signing the BAS statements. It was all shown to him.”
In the written submissions of the respondent it said at page 4, “…There can be no doubt that both parties brought their strength and talents to the relationship. There is no doubt that both parties applied themselves with enthusiasm and determination to achieving their joint ambitions...” And at page 3, “…It is submitted that the parties operated as a team throughout the 7 year relationship and both contributed their expertise and income to the acquisition, conservation and improvement of the four parcels of real estate now existing. Indeed, it is submitted that without a doubt the applicant was the “brains” and the respondent was the “brawn” of the relationship and the joint-venture.”
The difficulty with this argument is that it ignores the substantial financial contribution made by the applicant throughout the relationship, while the financial contribution of the respondent was only significant in the last few years of that relationship. It appears that throughout the relationship the applicant always earned more monies that were applied for the benefit of the parties than did the respondent, save for two years.
At this stage, I should also comment on the respondent’s lack of production of documents and non-compliance with Orders and requests for documents. The evidence was that the respondent was a poor record keeper. Often he did not retain financial records forwarded to him by financial institutions. He said that as far as he was concerned, it was only relevant up to the date of separation.
He accepted that he had not complied with all requests to produce documentation; the applicant suggested 10% compliance and the respondent replied that it was probably 60% to 70%. He blamed his lack of full compliance on his poor record keeping. In my view, the lack of documents from the respondent appears to have handicapped his own case more than progressing the case for the applicant.
Homemaker
This role falls into both s.90SM(4)(b) and (c) of the Act. The following exchange took place during the respondent’s cross-examination:
“…So, in any event, what I suggest to you, sir, is that when you live in a domestic relationship with another person, there are various domestic duties that need to be completed, such as washing, ironing, cooking, putting out the rubbish, and I suggest to you that my client did those duties almost exclusively and that you did very little?”
“If it’s in her affidavit, yes.”
“Do you accept that?”
“Yes.”
Applicant’s post separation contributions
After separation the applicant retained the Property W, Property B and Property E properties and met their outgoings after collecting the rents for same. She said that she spent more than she received over the years of separation and should get some sort of financial compensation for that loss. Her Counsel in opening put the figure, “…of something in the order of $65,000…” be further paid to her by way of property settlement.
However, in her affidavits and evidence in chief the applicant did not make proper and full disclosure of the taxation refunds she received post separation that came out in cross-examination, namely:
a)the year ending 30 June, 2009 - $11, 196.19;
b)the year ending 30 June, 2010 - $14, 977; and
c)the year ending 30 June, 2011 - $24,849.
In cross-examination she also conceded that in the year ending 2010 she claimed tax deductions for the Property W and Property B properties of $17,991 and in the year ending 2011, $19,951 on Property W and $12,402 on Property B. That is a total of some $32,353 for those two properties in 2011.
The following was also put to the applicant in cross-examination:
“…When your counsel was opening your case which you agreed was true he didn’t tell the court about your tax refunds. He didn’t tell the court that you claimed the losses on the investment properties against taxation. That’s correct, isn’t it?”
…
“That might have been an oversight that hasn’t been included but do keep in mind that your client has also not done that too… I think we’re both guilty of doing that then if that wasn’t declared.”
It was further put to the applicant that in relation to her trust which controls the Property E property that it had sustained tax losses and she agreed it was about $42,000 in tax losses that had been mounting in the trust. This is something again that the applicant forgot to disclose to the Court in her material or in her Counsel’s opening. Further it appears she received on recently resigning from her employment a long service leave payment of around $9, 500 which was only disclosed in cross-examination.
In relation to the applicant’s claim for a post separation adjustment in her favour by way of property settlement, it is my view:
a)She was not open with the Court about her over $ 51,000, total tax refund and her company’s accumulated tax losses of $42,000 which both have or will benefit her;
b)Although she initially agreed in 2009 with the respondent not to deal with any realty she retained, the three properties which were not caveated by the respondent could have been sold (or any one of them), at any stage to avoid or minimise this loss. This is particularly significant given her role during cohabitation in relation to arranging the financing, the purchase and sale of properties; and
c)The evidence in his cross-examination disclosed, amongst other things, that the respondent also claims similar losses in relation to his retention of Property R after separation but he was quite open in saying he did not seek an adjustment in relation to these losses.
In all the circumstances, I give little weight to the claim by the applicant for the post separation losses she chose to carry in relation to the realty that she chose to retain and operate under her sole control.
A further claim by the applicant related to a payment made by her in November, 2009 of $4,300 to close the parties’ credit card facility that they both previously enjoyed. Unfortunately, this was not dealt with further at the hearing and in the absence of detailed evidence about the credit card balance at separation in April, 2009 and which party incurred what debt, I could not deal with this issue.
Section 90SF(3) matters
(a) the age and state of health of each of the parties to the de facto relationship (the subject de facto relationship ); and
The applicant, Ms Scott is aged 34 years, having been born [in] 1978. She enjoys good health.
The respondent, Mr Bellow who was born [in] 1979 and is therefore 33 years of age. He also enjoys good health.
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
The applicant, Ms Scott swore a Financial Statement on 8 June, 2011 and it was filed on 10 June, 2011. At page 3 it indicated she was then earning an average weekly gross salary of $3,076 being employed by [P] as an [omitted]. Page 2 discloses she was employed by that company for 10 years.
On 23 January, 2012 the applicant filed a further Financial Statement that was sworn on the same date which disclosed that she was still working with [P] and her average weekly gross salary was $2,923. She gave evidence in the witness box that she had recently resigned from [P] but was very confident of getting another job after “a break”. With her experience in the [omitted] industry I am quite satisfied that this lady has a significant capacity for earning a very good income should she chose to return her former occupation, which through her Financial Statements indicates she earned a salary somewhere between $151,996 to $159,952 gross per annum.
The position of the respondent is more problematic. Clearly he was greatly affected by the separation between the parties and emotionally found it very difficult to undertake employment as a [omitted]. However, the evidence is as a [occupation omitted], historically he also earned a significant income which in 2006 was $93,178 net taxable income, 2007 was a $108,911 net taxable income in 2008 was a $37,152 net taxable income and in 2009 was a $65,160 net taxable income. Whilst historically his income would rise and fall, he has clear capacity to earn up to nearly $100,000 a year net taxable income.
(c) whether either party has the care or control of a child of the de facto relationship who has not attained the age of 18 years; and
Not relevant.
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
This is detailed in their respective Financial Statements which I have taken into account.
(ii) a child or another person that the party has a duty to maintain; and
Not relevant.
(e) the responsibilities of either party to support any other person; and
Not relevant.
(f) subject to subsection (4), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
In terms of any benefit, pension or allowance from the Commonwealth, whist the respondent on the face of it could well qualify for same his most recent Financial Statement sworn and filed 13 February, 2012 indicates that he receives no such benefit, pension or allowance. Whilst the applicant is currently unemployed through choice she receives no benefit, pension or allowance.
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
I was told that when the parties commenced cohabitation the applicant brought $10,000 into the relationship and the respondent had no superannuation. I was told further that at around separation the applicant through “salary sacrifice” had superannuation of $103,409 and the respondent, $59,000. There was no evidence that either party directly contributed to the superannuation of the other.
The evidence was that both parties have an interest in a superannuation scheme. The superannuation of the applicant is approximately $149,215 and that of the respondent $66, 241.
and the rate of any such pension, allowance or benefit being paid to either party; and
(g) a standard of living that in all the circumstances is reasonable; and
This section will be addressed in the Orders that I make in this matter.
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
Not relevant.
(i) the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and
Not relevant.
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
Not relevant.
(k) the duration of the de facto relationship and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
Not relevant.
(l) the need to protect a party who wishes to continue that party's role as a parent; and
Not relevant.
(m) if either party is cohabiting with another person--the financial circumstances relating to the cohabitation; and
The respondent does not cohabit with any other person, whilst the applicant lives in a domestic relationship with a Ms G who according to the Financial Statements of the applicant earns an average weekly amount of $600. This relationship is not financially relevant in a material way to this case.
(n) the terms of any order made or proposed to be made under section 90SM in relation to:
(i) the property of the parties; or
This sub-section will be addressed in the final Orders.
(ii) vested bankruptcy property in relation to a bankrupt party; and
Not relevant.
(o) the terms of any order or declaration made, or proposed to be made, under this Part in relation to:
(i) a party to the subject de facto relationship (in relation to another de facto relationship); or
(ii) a person who is a party to another de facto relationship with a party to the subject de facto relationship; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
This sub-section will be addressed in the final Orders, where relevant.
(p) the terms of any order or declaration made, or proposed to be made, under Part VIII in relation to:
(i) a party to the subject de facto relationship; or
(ii) a person who is a party to a marriage with a party to the subject de facto relationship; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
Not relevant.
(q) any child support under the Child Support (Assessment) Act 1989 that a party to the subject de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the subject de facto relationship; and
Not relevant.
(r) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
In her opening the applicant told the Court through her Counsel that in December, 2009 the parties agreed that they would financially separate and there would be a payment made to the applicant by the respondent of $145,000. When cross-examined on this topic, the applicant said:
“…But we did speak in December 2009... we also did agree – and I actually have the text messages from it – in regards to the payout figure of $145,000 for settlement, financial separation… It was just a matter of moving on…he did agree with that as well.
It was put to her:
“…There was never an agreement – that’s clearly his position – that he would pay $145,000, isn’t it?”
“There was an agreement.”
When cross-examined on this topic the following was put to the respondent:
“…at paragraph 19 she says, “By November 2009, we agreed between ourselves that each party would retain the properties and associated mortgages in their separate names, and that
Mr Bellow would pay me out the balance of the equity, which we shared in the property, in the sum of $145,000 by December 2009. We agreed the figure that he owned me, at that time, through agreed approximate valuations of the properties. Mr Bellow failed to make this agreed payment.”In answer to this the respondent said:
“…she is saying – she is saying it, not me…”
And subsequently said the following:
“…We generally agreed on the figures; I just wanted proof, just to verify it, which I think I am entitled to.”
And also:
“…We hadn’t agreed on the specific details of the agreement, otherwise it would have been done. I don’t want to go through all this. She doesn’t want the cost of it. I don’t want the cost of it. It would have been arranged. We hadn’t agreed on the details of it …”
It appeared from the affidavit material and the evidence given by both parties in the witness box that they were very close to a settlement or had agreed to a figure in principle subject to proof. Whether it was just and equitable or a proper and reasonable settlement is a different issue altogether and one has to be careful not to put too much weight on these discussions between the parties given we were not informed in detail about the make up of the asset pool, the value of the assets and the nature and extent of the liabilities in December, 2009. Neither party gave detailed evidence how the figure of $145,000 was arrived at.
(s) the terms of any Part VIIIAB financial agreement that is binding on either or both of the parties to the subject de facto relationship; and
Not relevant.
(t) the terms of any financial agreement that is binding on a party to the subject de facto relationship.
Not relevant.
The law
Whilst these proceeding relate to a short de facto relationship, given the provisions in s.90SM and s.90SF(3) of the Act are so similar to s.79 of the same Act, I am guided by such cases as Hirst v Rosen (1982) FLC 91-230 at page 77, 251 where the Honourable Justice Nygh says as follows:
“in marriages of short duration, such as this one, the court should primarily look at the actual financial contributions made indirectly or directly to the acquisition or preservation of the assets...”
And he went on further to say:
“…where a marriage has lasted for some time or where there have been substantial contributions made to the care and control of the children of the marriage, the indirect contribution especially that usually made by the spouse who assumes the primary role of homemaker and parent, must be taken into account, but where a marriage of short duration and no question arises of the care and control of children, the question of assessment of the indirect contributions made by the parties becomes less important...”
Conclusion (just and equitable requirement)
Superannuation
Mr Weil in his opening told me that the respondent’s case was one of seeking a 50/50 settlement and “…in effect, that means that he keeps what he has got and she keeps what she has got…”
The applicant said she had over $10,000 in her superannuation fund on cohabitation (which was not challenged at the hearing) and she said through her Counsel that she had $103,000 at the time of separation, (which again was not challenged) which is significant given that at paragraph 47 of her affidavit sworn 8 June, 2011 she says the following, “…I also made additional contributions to my superannuation by way of salary sacrificing during the course of the relationship of approximately $60,000.00...”
During the trial, the applicant’s Counsel during his opening said as follows:
“In the event that there is a shortfall, then liberty to apply, and the reason for that, your Honour, is that, even though my client did not seek initially in her application nor does she seek now a splitting order in relation to superannuation, the only asset left, if that is the only asset left and my client is not paid, then obviously, pursuant to liberty to apply, if there’s a shortfall, we will be seeking an order in respect of superannuation.”
Subsequently, I asked the applicant’s Counsel the following:
“…if there is a split, we should stop at a hundred and three as being the figure for the split?”
“That’s right, yes. But we say there’s no split, and if you were going to make any order in this case you wouldn’t go that way. If there is a difference that you were considering making in superannuation, you would deal with it on a cash basis.”
In his written submissions, the applicant seeks to retain her superannuation and for the respondent to retain his superannuation without any splitting Order at all.
The respondent in his Counsel’s written submissions seeks a 50/50 splitting Order with a splitting “payment” to the respondent, by the applicant of $41,487.
In my judgment I do not believe a superannuation splitting Order is appropriate nor just and equitable in this case given:
a)It was a short period of cohabitation. There is no evidence that either party made a direct contribution to the superannuation of the other;
b)The applicant started with $10,000 and had a sum of $103,000 at separation of which $60,000 was a direct contribution by her by way of salary sacrifice; and
c)If there was a 50/50 superannuation splitting Order to get to a just and equitable outcome, it would have meant in my view that the respondent would have to pay the applicant more. This in turn would put at risk his retaining the Property R property, which is something to be avoided where possible, given that his evidence was that he wanted to retain that property.
Other assets and liabilities
On cohabitation the applicant was aged 24 years and the respondent 23 years. These parties are decent, hardworking people that brought to the relationship many skills, some of which were established and others that subsequently evolved and developed during their cohabitation. The applicant, when the parties commenced living together was working at [P] in [omitted] where she continued to work throughout cohabitation. She generated a steady and significant income that supported, to some degree, the respondent through his change of career from a [omitted] to a [omitted] for a period of around 3 and a half years, (about 50% of the period of cohabitation) whilst he did his [omitted] apprenticeship.
The applicant not only worked full time generating a greater income for the benefit of the parties for all but two years of cohabitation but she also was:
a)Their bookkeeper;
b)The homemaker; and
c)The banker and financial controller amongst other tasks.
There is no doubt that she was good at this, the respondent in his evidence in chief made the following frank comment, “I probably never even looked at a bank account or a bank account statement for nearly nine years.”
I have no doubt that the respondent worked hard developing and applying his skills as a [omitted] but his business did not flourish. In 2004 he established “[O]” which apparently did not generate a great deal of income and cost the parties around $10,000 to establish whilst the respondent sold it after separation and only received $3,500. The [omitted] company “[A]” had a couple of good years and then appears to have failed. In the written final submissions on behalf of the respondent at page 6 the frank and accurate comment is made as follows, “…the respondent does not hold himself out to have been a good businessman. No doubt he is an excellent [omitted]...” In the very same document it is submitted at page 3 that, “…without a doubt the applicant was the “brains” and the respondent was the “brawn” of the relationship and joint-venture.”
I do not believe it was as simple as that, as the applicant in my view brought to the relationship a reliable, steady and growing income stream that continued throughout cohabitation and was a major factor in the parties starting their cohabitation with one real property and then separating seven years later with four.
In the circumstances of this case, having read the parties’ material and exhibits and heard and observed them in the witness box, it is my finding that a just and equitable outcome for them is a division of the agreed net equity of $1,048,031 (excluding superannuation) of 60% to the applicant and 40% to the respondent. Given that the applicant will retain her interest in Property W, Property B and Property E which have a total equity of $487,687 means that the respondent will have to pay her the sum of $141,132 and each party shall retain their current interest in their own superannuation fund.
I certify that the preceding ninety-eight (98) paragraphs are a true copy of the reasons for judgment of Curtain FM
Date: 3 May 2012
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