SHRIMPTON & SHRIMPTON
[2017] FCCA 1614
•13 July 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SHRIMPTON & SHRIMPTON | [2017] FCCA 1614 |
| Catchwords: HELD – the Husband’s testamentary trust not be included in the pool of assets for division between the parties –the Wife receive 60% and the Husband receive 40% of the parties’ remaining assets and the Husband retain the entirety of the testamentary trust. |
| Legislation: Family Law Act 1975, ss.75(2), 79(2), 79(4) |
| Cases cited: Hickey and Hickey and Attorney General for the Commonwealth of Australia [2003] FamCA 395 |
| Applicant: | MS SHRIMPTON |
| Respondent: | MR SHRIMPTON |
| File Number: | MLC 2518 of 2016 |
| Judgment of: | Judge Bender |
| Hearing date: | 9 June 2017 |
| Date of Last Submission: | 9 June 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 13 July 2017 |
REPRESENTATION
| Counsel for the Applicant: | Ms Dellidis |
| Solicitors for the Applicant: | Chiodo Madafferi Solicitors |
| Counsel for the Respondent: | Ms Kildea |
| Solicitors for the Respondent: | Goodman Group Lawyers |
ORDERS
The matter be adjourned to 22 August 2017 at 9.30am for mention.
By 4.00pm on 20 July 2017 the Wife notify the Court and the Husband in writing the manner in which she shall pay the Husband the monies payable by her to the Husband in order to retain the former matrimonial home as set out in the judgment delivered this day and in particular whether that will be by way of a cash payment, superannuation split or a combination of a cash payment and a splitting order.
In the event the Wife chooses to make a superannuation splitting order in full or in part to meet the payment to the Husband as set out in the judgement delivered this day, she shall provide to the chambers of Judge Bender proof of procedural fairness having been afforded her superannuation fund immediately upon receipt of same.
Upon receipt of the notification by the Wife pursuant to Order (2) herein and proof of procedural fairness if necessary pursuant to Order (3) herein, final orders will be made in chambers reflecting the determination of this court pursuant to the judgment delivered this day and the adjourned date be vacated.
IT IS NOTED that publication of this judgment under the pseudonym Shrimpton & Shrimpton is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 2518 of 2016
| MS SHRIMPTON |
Applicant
And
| MR SHRIMPTON |
Respondent
REASONS FOR JUDGMENT
Introduction
This matter relates to the adjustment of property between the parties following the breakdown of their marriage.
The Wife is seeking orders that she retain the former matrimonial home, her superannuation and the (omitted) Shares and (omitted) Shares in her name and pay the Husband $51,000.
Under the Wife’s proposal the Husband would receive the payment from the Wife and otherwise retain his savings, superannuation as well as the benefit of the testamentary trust established by his late mother of $660,000.
The Wife’s proposal would mean she retain 70% of the parties’ assets excluding the Husband’s inheritance.
It is argued by the Wife that this is a just and equitable outcome given the parties’ long marriage, the contributions made by both of them over the course of the marriage and the financial resource that is the Husband’s testamentary trust.
The Husband seeks orders that he retain the former matrimonial home, his savings, superannuation and inheritance and pay the Wife $360,000. It is his proposal that in addition to the payment by him, the Wife retain her superannuation and shares.
The Husband’s proposal equates to a 66%-34% division in his favour of all the parties’ assets including the testamentary trust.
The Husband argues such a division is just and equitable given he owned the unencumbered former matrimonial home at the commencement of co-habitation which had an agreed value at that time of $195,000, the Wife made no contribution to the inheritance from his mother, that he is aged 68 and retired and the Wife is 55 and in gainful employment currently earning $73,500 per annum and the Wife has an expected inheritance from her father who is aged 97 years, suffers from dementia and is therefore unable to change his will.
Background
The Wife was born on (omitted) 1961 and is aged 55 years. She is employed four days a week as an (occupation omitted) earning $73,500 per annum. She has not repartnered.
The Husband was born on (omitted) 1948 and is aged 68 years. He is retired and currently supports himself from savings accumulated during the marriage. He has not repartnered.
The parties commenced cohabitation upon their marriage on (omitted) 1990.
At the commencement of cohabitation the Husband owned the unencumbered former matrimonial home. It is agreed its value at that time was $195,000. The Wife owned a unit at Property A. This property was encumbered by a mortgage to the (omitted) Bank. It is the Wife’s evidence the mortgage on her unit was fully serviced from the rental received for the property and that the mortgage was discharged approximately five years after the marriage. Thereafter the rental income received was used for the benefit of the family until its sale 5 years later.
At the commencement of the marriage the Husband was on WorkCover payments due to a serious workplace injury. The Husband returned to work in November 1993.
The Wife has been employed for the entirety of the parties’ relationship save for the 10 months maternity leave she took when the parties’ three children were born. The Wife’s parents cared for the children without charge when the parties’ were at work.
The parties’ three children are X born (omitted) 1990 aged 26 (“X”), Y born (omitted) 1992 aged 23 (“Y”) and Z born (omitted) 1999 aged 18 (“Z”).
Both parties agree the Wife earned more than the Husband during their relationship.
The parties maintained separate bank accounts for the entirety of their relationship into which their respective wages were paid.
It is the Wife’s evidence that whilst the Husband paid council rates and utilities, telephone and roadside assist for the parties’ vehicles, she met nearly all of the family’s expenses including food, groceries, insurances, medical expenses, private school fees for X and Z, vehicle expenses, extracurricular activities and entertainment. This enabled the Husband to amass considerable savings during the relationship.
In or around 1994/1995 the Wife purchased $350 of (omitted) shares using monies gifted to X and Y by family and friends on special occasions.
It is the Wife’s evidence that whilst the shares were placed in her name in case they needed to be sold whilst X and Y were minors, she and the Husband always understood the shares were held for X and Y.
Any dividends from the (omitted) shares were reinvested and utilised to fund offers to buy further shares. The current shareholding is 1,143 and they are valued at $91,440.
It is the Wife’s evidence that X and Y have always understood these shares belong to them and it is agreed that the shares are to be sold and the proceeds of sale paid to each of X and Y to use as a deposit when they are ready to purchase their own real estate.
At or around the same time the (omitted) shares were purchased, the Wife also purchased (omitted) shares. Whilst it is the Wife’s evidence those shares were also for X and Y, unlike the (omitted) shares they were purchased with the Wife’s money and she has retained all dividends paid by those shares.
In February 1999 the Wife received a $25,000 retrenchment package from her then employer (employer omitted). These monies were used for the benefit of the family.
In 2000 the Wife sold her Property A unit netting $90,000. It is the Wife’s evidence these funds were used in part to fund renovations to the former matrimonial home and otherwise for the benefit of the family.
In 2001 the parties undertook extensive renovations to the former matrimonial home. The renovations cost $115,000-$120,000. It is the Wife’s evidence the Husband paid the construction costs of the renovations from his “savings” and she paid $57,300 for the internal work required on the renovations from the proceeds of sale of her Property A unit.
Whilst the renovations were being undertaken, the parties and the children lived rent free with the Husband’s parents for six months.
In February 2002 the Husband’s mother established a testamentary trust for each of her three children with each of the three children appointed as executors and trustees of those trusts.
In March 2002 the Wife received a $10,000 retrenchment package from her then employer. These monies were used for the benefit of the family.
In 2007 the parties attended relationship counselling because of the deterioration in their relationship. This was unsuccessful. It is the Husband’s evidence the parties separated under the one roof at this time.
It is the Wife’s evidence that she and the Husband’s relationship was very strained from 2006 and they effectively lived separate lives. It is her evidence however that they continued to live as they always had and she considered them to be a married couple until the sudden death of her mother after she was hit by a car in (omitted) 2014.
It is the Wife’s evidence that between 2007 and (omitted) 2014 the parties continued to sleep in the same bed, she continued to perform all the domestic chores for the family including the Husband, she and the Husband continued to attend family and social functions together as husband and wife and they made no alteration to their financial arrangements.
On (omitted) 2014 the Wife’s mother suddenly died. It is the Wife’s evidence that because of the Husband’s complete lack of sympathy and empathy at the time of her mother’s death, she decided their marriage as it was, was over. She then moved out of the marital bed and slept on the couch.
In (omitted) 2012 the Husband’s mother died. The Husband became the co-trustee and sole beneficiary of the testamentary trust established for him by his mother.
In October 2012 the Husband received a redundancy payment of $12,000 together with long service leave of $13,000 from his then employer. These monies formed part of the Husband’s savings.
The Husband commenced employment in (omitted) 2013 with (employer omitted) as a (occupation omitted). He retired in (omitted) 2014 at age 65.
On 23 March 2016 the Wife filed an Initiating Application with the Federal Circuit Court seeking property orders and interim orders for sole use and occupation of the former matrimonial home. On 11 May 2016 the Husband filed a Response also seeking property orders and opposing the Wife’s application for sole use and occupation.
On 18 May 2016 after an interim hearing, orders were made for the Husband to vacate the former matrimonial home from 8 June 2016 for a period of six months.
When the Husband vacated the former matrimonial home he had $69,865 remaining of monies that he had saved whilst in paid employment. At the time of the final hearing those savings had been reduced to $15,351. It is the Husband’s evidence these funds have been expended on legal fees and his living expenses.
In November 2016 the Wife made application for an intervention order on behalf of herself and Z. By consent an intervention order was made in January 2017 prohibiting the Husband from approaching the former matrimonial home until July 2017 pending determination of the family law proceedings.
The Issues
Having heard the parties’ evidence and the submissions made on their behalf the issues between the parties are as follows:
a)what is the date of separation?;
b)should the Husband’s testamentary trust be included in the pool of assets for division between the parties?;
c)should the (omitted) shares and/or the (omitted) shares be included in the pool of assets for division between the parties?;
d)should there be any notional “add back” for the savings used by the Husband since physical separation?;
e)what, if any, should be the adjustment in the Husband’s favour for his ownership of the unencumbered former matrimonial home at the commencement of cohabitation?;
f)in the event the Husband’s testamentary trust is included in the pool of assets for division between the parties, what should be the adjustment in the Husband’s favour for contributions given the Wife made no contribution to the trust?;
g)what, if any, should be the adjustment in the Wife’s favour for her ownership of the Property A unit at the commencement of the relationship, her role as primary homemaker and parent and her greater earnings throughout the relationship?;
h)what should be the adjustments for section 75(2) factors and in particular:
i)in the Wife’s favour if the Husband’s testamentary trust is not included in the pool of assets for division between the parties?
ii)in the Husband’s favour because of the Wife’s future inheritance from her father given he is 97, has dementia and therefore cannot alter his will in which he leaves his estate equally to his three children, including the Wife?; and
iii)in the Husband’s favour for the Wife’s greater earning capacity?; and
i)which of the parties should be given the opportunity to retain the former matrimonial home?
The Law
Section 79 of the Family Law Act 1975 (“the Act”) defines the Court’s powers in determining applications for property settlement. Section 79(2) of the Act provides that:
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.
Section 79(4) of the Act sets out the matters the Court must take into account when considering what orders should be made for the alteration of the interest of the parties in property. Those matters are:
(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 matters to be taken into account under section 75(2) of the Act are as follows:
(a)the age and state of health of each of the parties; and
(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
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and
(d)commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain; and
(e)the responsibilities of either party to support any other person; and
(f)subject to subsection (3), 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
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and
(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
(ha)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
(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
(k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l)the need to protect a party who wishes to continue that party's role as a parent; and
(m)if either party is cohabiting with another person--the financial circumstances relating to the cohabitation; and
(n)the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
(naa)the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i) a party to the marriage; or
(ii) a person who is a party to a de facto relationship with a party to the marriage; 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
(na)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; and
(o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p)the terms of any financial agreement that is binding on the parties to the marriage; and
(q)the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.
The High Court in the matter of Stanford v Stanford [2012] HCA 52 held that prior to making orders for the division of the property in which the parties have an equitable interest in accordance with the provisions of section 79 of the Act the Court must first determine that is just and equitable that the Court make such orders.
The High Court in Stanford (supra) held that in the majority of matters the decision as to whether it is just and equitable for the court to make property orders is easily resolved by the breakdown of the marital relationship and the mutual desire of both parties for orders altering their respective property interests.
This is such a matter. It is therefore apparent it is just and equitable that orders be made adjusting property matters between the parties.
Prior to the decision in Stanford (supra), a trial judge would follow the four step approach in determining how to alter property interests between the parties as articulated by the Full Court in Hickey and Hickey and Attorney General for the Commonwealth of Australia [2003] FamCA 395.
The four step process set out in Hickey is as follows. Firstly, the Court determines the nature of the property pool and attributes valuations. Secondly, the Court considers the contributions of the parties to the property pool including direct and indirect financial contributions and non-financial contributions often in the form of homemaker or parent. Thirdly, and after considering entitlements based on contributions the Court determines whether any further adjustments to either parties entitlement is proper, given the considerations under s.75(2) of the Act. Finally, the Court stands back and considers whether the proposed division of the property is just and equitable pursuant to section 79(2) of the Act.
The High Court in Stanford (supra) and subsequently the Full Court in Bevan and Bevan [2013] FLC 93-545 observed that this four step approach should not be rigidly followed.
In Bevan & Bevan (No 2) (2014) FLC 93-572 the Full Court, having upheld the appeal against the decision at first instance proceeded to re-determine the property application before the Court. At paragraphs 18 and 19 of Bevan (No 2) Bryant CJ and Thackray J state the following:
18.Senior counsel for the husband structured his submissions by reference to the “four-step” approach to property settlement applications discussed in our earlier reasons. By way of explanation for doing so, senior counsel said:
16.The adoption of the above [four-step] approach is not intended to presuppose a positive answer to the question posed [by] section 79(2), nor to suggest that it is an approach appropriate in all proceedings. Rather, and provided that the fundamental propositions outlined by the High Court in Stanford (2012) 293 ALR 70 … are not obscured, such approach is intended to and does no more than provide a principled, disciplined and structured means by which all of the matters arising for consideration pursuant to section 79 can be conveniently and properly identified and assessed.
17.Further, and whilst not said critically nor in a matter which seeks to cavil with the decision in this appeal, no other approach to the determination emerges readily from either Stanford nor the decision in this appeal. It is respectfully submitted that provided that the ‘fundamental propositions’ articulated in Stanford are not obscured, and whilst not universally so as has always been recognised, the approach set out above continues to provide a proper, transparent, certain and structured approach to the presentation and determination of applications pursuant to section 79.
19. We have no issue with what senior counsel has said about the utility of the four-step process, which we accept provides a convenient way to structure both submissions and judgments, provided the caveat mentioned is not overlooked.
I am satisfied that this is a matter where the four step approach of Hickey is the appropriate approach to be taken to determine a just and equitable division of property between the parties.
When did the parties separate?
It is the Wife’s vive voce evidence that the parties separated under the one roof on 5 November 2014 after many years of a very unhappy marriage. It is the Wife’s evidence that the family travelled to (country omitted) in 2006 after which time the parties’ already unhappy relationship became even worse. It is her evidence that the parties attended marriage counselling in 2007 and that this did not assist the parties in improving their relationship in any way.
It is the Wife’s evidence that after 2007 she and the Husband effectively lived their own lives but that their marriage continued as it always had in that the parties continued to sleep in the same bed, she continued to perform all the household duties for the family including the Husband, that she and the Husband attended family and social occasions as Husband and Wife and they continued to conduct their financial affairs as they always had.
In (omitted) 2014, the Wife’s mother was hit by a car whilst crossing at a pedestrian crossing. Sadly, the Wife’s mother died a few days after this accident. It is the Wife’s evidence when she and the parties’ children returned to the former matrimonial home from the hospital where her mother had just died, the Husband demanded that she cook his dinner as she was late.
It is the Wife’s evidence that this was the final straw for her and that the Husband’s lack of empathy, sympathy and respect for her and the children was such that she made the decision that the marriage was at an end. It is her evidence that she then moved out of the matrimonial bed and thereafter slept on the couch. She concedes however that she continued to do all of the domestic chores for the family around the house.
It is the Wife’s evidence that the Husband would not accept the reality that the marriage was over and that in 2015 she asked their local priest to speak to the Husband and wrote him a letter in which she confirmed the end of their relationship.
It is the Husband’s evidence that the parties separated under the one roof in 2007 after the unsuccessful counselling.
Interestingly, in the Wife’s Initiating Application filed 23 March 2016 in Part 27 she deposes to the date of separation being 2007. In the Wife’s affidavit sworn 18 March 2016 filed in support of her Initiating Application, she deposes in paragraph 46 as follows:
“The Respondent and I have effectively separated under the same roof since 2009…”
In paragraph 45 of the Wife’s affidavit sworn 30 May 2017 she deposes as follows:
“The relationship broke down further on or about 2007, when a mutual friend informed me that the Respondent was talking negatively about me and our children at their church gathering. He denied that this happened. The relationship became even more strained thereafter. While we were both working, we lived separate lives and grew further apart. It became apparent to me that we would be unable to reconcile our relationship although we continued to live as a married couple effectively up until my mother passed away.”
When questioned about the discrepancy as to the date of separation in her Initiating Application, her affidavits and her oral evidence, it is the Wife’s evidence that the date of separation in her documentation is an error and that in her mind the marriage was over at the time of her mother’s death, albeit it had been a very unhappy marriage in the lead-up to that sad occasion.
When giving his vive voce evidence, the Husband did not dispute the Wife’s evidence as to the circumstances of their relationship between 2007 and November 2014.
In all these circumstances I am satisfied that whilst the parties’ relationship was clearly a very unhappy one, there was not a breakdown of that relationship until November 2014. I consider that to be the date of separation.
Assets and Liabilities
The Husband’s testamentary trust
There is an issue between the parties as to how the Court should deal with the Husband’s testamentary trust.
It is submitted on behalf of the Husband that the Court should take a global approach to the parties’ assets and liabilities including the Husband’s testamentary trust.
It is submitted on behalf of the Wife that the Court should take an asset by asset approach in relation to the parties’ assets and liabilities and that the Husband’s testamentary trust should be treated as his financial resource rather than an asset available for distribution between the parties given the Wife’s concession that she made no contribution whatsoever to the Husband’s trust and that it has always been treated by the parties as his sole asset.
The Court has a discretion as to whether it takes an asset by asset approach or a global approach in the manner in which it determines how to divide the parties’ assets when making orders pursuant to section 79 of the Act.
In this matter I am of the view that an asset-by-asset approach is best adopted and that the Husband’s testamentary trust should not be included in the pool of assets for division between the parties but rather as a financial resource of the Husband to be taken into account under section 75(2) of the Act.
(omitted) Shares
It is the Wife’s evidence that whilst the (omitted) and (omitted) Shares are in her name, they were purchased for and are held for the benefit of X and Y.
It is the Wife’s evidence that the (omitted) shares were purchased by her when X and Y were very young using monies that she had put aside from gifts that had been given to X and Y for birthdays, Christmas, Christenings and other special occasions. It is her evidence that someone from her work suggested that (omitted) Shares would be a good investment and she accordingly bought shares.
It is the Wife’s evidence that she discussed this purchase with the Husband at the time she made it and that he was very critical of her for “wasting X and Y’s money”. It is her evidence that she recalls having a discussion with the Husband when the value of those shares hit over $50.00 a share about what a very sensible investment it had been.
It is the Wife’s evidence that X and Y have always known of the existence of these shares and that they are held for them. It is the Wife’s evidence that there is agreement between herself, X and Y that those shares will be cashed in to be used as a deposit by them when they are in a position to purchase their own real estate.
It is the Wife’s evidence that any dividends earnt by those shares have been reinvested and utilised to fund offers to buy further shares. The current shareholding is 1,143 worth approximately $91,440.
It is the Wife’s evidence that at or around the time the (omitted) shares were purchased, she also bought some (omitted) Shares with the same intention of those being held for X and Y.
Unlike the (omitted) shares, the (omitted) shares were purchased with the Wife’s money and it is her evidence that she has retained the dividends paid in relation to those shares.
The Husband does not dispute the Wife’s evidence in relation to the purchase of the (omitted) or the (omitted) Shares but still argues that they should be considered as property of the parties.
I am satisfied that the (omitted) shares were bought with monies given and belonging to X and Y and that it was always the parties’ intention that those shares be held for X and Y’s benefit.
In those circumstances those shares will not be included in the pool of assets for division between the parties.
However, the (omitted) shares were purchased with the Wife’s money and she has retained the benefit of any dividends paid by them. I am therefore satisfied those shares belong to her and should form part of the pool for division between the parties.
Savings expended by the Husband post-separation
The Husband filed a sworn Financial Statement on 10 May 2016 in which he set out that he had $69,865 in his (omitted) Bank Savings Account. Those monies were saved by him whilst he was in employment and prior to the date of separation.
As at the date of the hearing, the Husband’s savings had reduced to $15,000.
It is the Husband’s evidence that those savings have been used by him since the physical separation of the parties to meet his living expenses, including rent, groceries, utilities, motor vehicle expenses and the like. He has also paid legal expenses of $30,000 from those savings.
Whilst the Husband deposes in his Financial Statement sworn 10 May 2016 that he has income of $542 a week from his testamentary trust and term deposit, in his vive voce evidence the Husband indicated that the earnings from the testamentary trust and the term deposit are retained in those investments rather than he receiving them and using them to meet his living expenses. The reinvestment of those monies into the testamentary trust and his term deposit are reflected in the current value of those assets.
It is submitted on behalf of the Wife that the monies expended by the Husband from his savings account on legal fees should be notionally added back to the pool of assets for division between the parties given the Wife has had to fund her legal costs from her income and/or from borrowings from family which she will have to repay at the conclusion of these proceedings.
In the matter of Bevan (supra) Finn J questioned whether the long standing practice of notionally adding back into the pool of assets for division between the parties assets that were no longer in existence was appropriate given the decision of the High Court of Stanford (supra) which required as a starting point that the Court determine the parties’ equitable and actual interests in property. The Full Court in the matter of Vass & Vass [2015] FamCAFC 51 at paragraph 138 answered that query by stating as follows:
“138. There is no error committed per se in adjusting the parties’ actual property interests by a calculation involving notionally adding back into the pool sums which have been dissipated by the parties. We reject any suggestion that the decision of Bevan v Bevan [2013] FLC 93-545 or, more particularly, the decision of the High Court in Stanford v Stanford [2012] HCA 52 is authority for any necessary contrary solution.”
The long-standing case law in relation to the question of adding back property that has been expended by a party post-separation is well established. Where that property has been used for the purposes of meeting the parties’ reasonable living expenses, it is most unusual for that property to be notionally added back to the pool.
Where, however, joint property has been used by one party in the payment of their legal fees, in circumstances where the other has not been able to pay their legal fees from joint assets, the Court has often exercised its discretion to notionally add back the sum expended by that party on those legal fees to the pool of assets for division between the parties.
In circumstances where the Wife has had to meet her legal expenses from her own earnings and borrowings, I think it is only appropriate that the monies utilised by the Husband from savings accumulated during the relationship should be notionally added back to the pool.
The Pool
Other than the matters determined in paragraphs 64-88 herein, the parties are in agreement as to what constitutes the pool of assets for division between them. Accordingly I find the pool to be as follows:
| Assets | |
| Property O | $875,000 |
| (omitted) Shares (W) | $13,034 |
| (omitted) Shares (W) | $5,330 |
| (omitted) Bank Term Deposit (H) | $231,336 |
| (omitted) Bank Savings Account (H) | $15,351 |
| Notional add back of the Husband’s legal fees paid from (omitted) Bank Savings Account | $30,000 |
| The Wife’s motor vehicle | $10,000 |
| The Husband’s motor vehicle | $5,000 |
| The Wife’s superannuation | $300,260 |
| The Husband’s superannuation | $162,287 |
Total assets: | $1,647,598 |
Financial Resources | |
The Husband’s testamentary trust | $660,816 |
Contributions
It is submitted on behalf of the Husband that the Court should give considerable weight to the Husband’s initial contribution of the unencumbered former matrimonial home to the parties’ pool of assets. Its value at the commencement of cohabitation was $195,000. The former matrimonial home, it is submitted, now constitutes 37% of the total property pool (including the Husband’s testamentary trust) available for distribution between the parties.
It was further submitted on behalf of the Husband that if the Husband’s testamentary trust is included in the property pool, that trust constitutes 28% of the total pool. This is an asset to which the Wife made no contribution.
The Husband concedes that the Wife contributed her interest in her Property A unit of $90,000 ten years into the relationship but argues that the totality of his contributions greatly outweighs those of the Wife’s.
In relation to the contributions by the parties throughout the course of the relationship, the Husband concedes that the Wife was the greater income earner but argues that both contributed to the welfare of the family to the best of their abilities throughout the entirety of the relationship.
It is therefore the Husband’s submission that he made by far the greater contribution to the parties’ assets.
It is submitted on behalf of the Wife that the mathematical percentage approach of the Husband is not how this court should consider the contributions made by both of the parties.
The Wife concedes that the Husband owned the former matrimonial home at the commencement of cohabitation. It is submitted on behalf of the Wife that the proceeds of sale from the unit owned by her prior to cohabitation was utilised to undertake extensive renovations to the former matrimonial home which has greatly enhanced its value.
Further, it is submitted on behalf of the Wife that she made by far the greater contribution during the entirety of the parties’ relationship, both financially and as homemaker and parent.
It is the Wife’s evidence that not only did she earn more than the Husband but that she utilised her greater earnings in their entirety for the benefit of the family including paying private school fees for the parties’ two daughters, meeting the bulk of the cost of the parties’ and their children’s extra-curricular activities, paying for all of the children’s clothing, books and other expenses and meeting the majority of the costs of feeding the family.
It is the Wife’s evidence that a major issue between the parties was the Husband’s reluctance to contribute to the family finances. It is submitted that this is best shown by the fact that at separation the Husband had in excess of $350,000 in savings from his earnings whilst the Wife had none.
It is therefore submitted on behalf of the Wife that over the totality of the parties’ lengthy relationship their contribution should be considered as equal.
I agree with the Wife’s submission that to take a mathematical or percentage approach when trying to determine the contributions made by the parties is not the appropriate manner in which to determine the question of the respective contributions made by both of the parties.
There is no doubt that the Husband’s ownership of the unencumbered matrimonial home at the commencement of the relationship provided the parties with an advantage many young married couples do not have.
However, the Wife also had real estate and its sale during the course of the relationship enabled the parties to complete renovations on the former matrimonial home that significantly enhanced its value.
Further, the Wife’s contributions during the course of the relationship were considerably greater than those of the Husband, not only financially but also as, using the term adopted by the parties when giving their evidence, the CEO of domestic and parenting matters.
Accordingly, I am satisfied that the contributions of the parties to the assets available for division between them in circumstances where I have determined that the Husband’s testamentary trust is not to be included in the assets for division should be considered equal.
Section 75(2) factors
It is submitted on behalf of the Husband that he is 68 years of age, is retired and will not be returning to paid employment.
In contrast the Wife is 55, in good health, is good at her job and has the capacity to continue to earn an income for at least the next ten years.
Whilst conceding that the Husband has the benefit of the testamentary trust arising from his inheritance from his mother, it is submitted on behalf of the Husband that the Wife too has the expectation of an inheritance from her father.
The Wife’s father is aged 97 years and is suffering from dementia. Whilst he still had testamentary capacity he executed a will in which his three children, including the Wife, are the named beneficiaries. The Wife’s father is the owner of a four bedroom home in (omitted) which is currently being rented by the parties’ eldest daughter and her partner. The value of this property is unknown.
The Wife’s father currently lives in a nursing home where he was placed after the unfortunate death of the Wife’s mother. It is the Wife’s evidence that in order to be accommodated in the nursing home there was a requirement he pay a bond of $550,000. The Wife and her siblings were able to negotiate that her father only made a payment of $330,000. The value of this bond has reduced to a current value of $270,000 because her father is required to pay interest on the initial shortfall of his payment of the bond. This interest is deducted from the bond held by the nursing home.
It is argued on behalf of the Husband that the benefit that he has arising from his interest in the testamentary trust established by his mother is off-set by the Wife’s expectation of an inheritance from her father which, given his age, must be considered by this court to be a reality in the foreseeable future.
For these reasons, the Husband argues that there should be an adjustment in his favour for section 75(2) factors.
The submission of the Husband is that he should retain 70% and the Wife should retain 30% of all assets including the testamentary trust on the basis that a global approach be taken.
The Husband’s proposal of a payment of $360,000 to the Wife and she otherwise retain her car, shares and superannuation would result in a division to the Wife of 41.8% of the asset pool excluding the Husband’s testamentary trust.
It is submitted on behalf of the Wife that the submissions made on behalf of the Husband in relation to the differences in the parties’ earning capacity are misguided.
Whilst conceding that the Wife currently has a greater earning capacity than the Husband, it is the Wife’s evidence that her current employer is going through a restructure which makes her position somewhat tenuous and that if she were to be retrenched at the age of 55, her future employability is not certain.
Further, it is submitted on behalf of the Wife that the Court must not only consider he parties income earning capacity but also the reasonable standard of living of both parties. It is submitted that the Husband is a frugal man who has always been parsimonious in his expenditure, something perhaps shown by the Husband’s own evidence that he currently eats regularly at Salvation Army services where there is no charge for his meals.
It is submitted on behalf of the Wife that in those circumstances, the Husband’s current income is more than sufficient to provide him with a reasonable standard of living.
In contrast to the Husband, the Wife submits she continues to support her three children even though they are now adults. Z and Y live with the Wife. Z has only just embarked on tertiary education and will be dependent on the Wife’s support whilst she completes her education.
In relation to the Wife’s expectation of an inheritance, it is submitted on her behalf that whilst the Wife’s father is 97 and suffering from dementia, he is in excellent physical health and could live for many years. The impact this may have on his assets and particularly the bond at his current nursing home is unknown.
In contrast, it is submitted on behalf of the Wife that the Husband has the benefit of his late mother’s testamentary trust of $660,000 from which he can generate an income. The Husband can also access the capital in that trust at any time.
It is submitted on behalf of the Wife that in all the circumstances there should be a division of the parties’ assets excluding the testamentary trust such that she retain 70% of same and the Husband retain 30% of same.
In relation to the Wife’s expectation of an inheritance from her father, the Full Court in the matter of De Angelis & De Angelis (2003) FLC 93-133 held at paragraph 95 as follows:
“The discussion by the Full Court in White and Tulloch v. White (1995) 19 Fam LR 696 of this question of the treatment of anticipated inheritances in property settlement proceedings indicates that there is no absolute rule and that each case will depend on its own facts. However, we think it important to remember that the Court is required in exercising the jurisdiction under s.79 of the Family Law Act 1975 to accord justice and equity to both parties. The question therefore has to be asked whether, in the present case, it would be just and equitable to the husband for the Court to have ignored the probability that, in what could well be very short period of time (given the ages of her aunt and mother), the wife could well be the owner of two properties having a combined value of almost the same amount as the value of the parties' property currently available for distribution, and particularly in circumstances where the husband had been found to have done substantial improvement and maintenance work on both properties?”
In this matter the Court has no evidence before it as to what the value of the Wife’s father’s (omitted) property is. There is no evidence before the Court as to the Wife’s father’s state of health or when it may be he would be expected to pass.
There is clear evidence before the Court that the Wife’s father lacks the capacity to alter his will and that therefore the Wife will inherit a one third interest in his (omitted) property. Whilst the Wife’s father may be in robust physical health, he is 97 years of age.
As noted, the Husband has the benefit of a $660,000 testamentary trust which he can cash in and access at any time he chooses.
The Husband has on his own evidence lived comfortably on approximately $450 per week, including being able to pay his rent. He is clearly a man of simple needs who prefers to live frugally.
Whilst the parties’ three children are now adult and the two elder children close to being self-sufficient, the financial responsibility for the care of the parties’ youngest daughter Z whilst she completes her tertiary education will fall solely on the shoulders of the Wife.
The Wife has the capacity to earn an income for some time into the future, albeit there is some uncertainty about her current employment whilst her employer restructures.
At some time in the future the Wife will inherit from her father. When this will occur and how much she may receive is not known. I accept however that the Wife should inherit a one third interest in her Father’s four bedroom home in (omitted) when her father does pass away unless that property has had to be sold to fund his ongoing care.
Having considered the benefit the Husband has of the financial resource which is the testamentary trust, the disparity in the parties’ earning capacity, what constitutes a reasonable standard of living for each of the parties, the Wife’s responsibility for the parties’ adult children and particularly Z whilst she completes her tertiary education and the potential of the Wife’s inheritance at some stage in the reasonably foreseeable future, I am of the view there should be an adjustment in the wife’s favour for section 75(2) factors of 10%.
Who is to retain the former matrimonial home
Both parties are seeking to retain the former matrimonial home.
It is submitted on behalf of the Husband that as he owned the property prior to the parties’ marriage, he should be the party to retain that home.
It is submitted on behalf of the Wife that she has lived in the home for 27 years and she had an integral part in renovating the property. She, Y and Z are all living in the property and wish to continue to do so. It is submitted that to disrupt not only the Wife but two of the three children of the marriage cannot be seen to be an appropriate way forward and accordingly the Wife should retain the property.
I am more persuaded by the Wife’s arguments as to who should have the opportunity to retain the former matrimonial home. Orders will be made that allow her the opportunity to do so.
Just and equitable
As can be seen, I have determined that the appropriate division of the parties’ assets are such that the Wife retains 60% of the parties’ realisable assets, the Husband retain 40% of the parties’ realisable assets together with his entitlement to the testamentary trust set up by his late mother.
Such an order requires the Wife to make a payment to the Husband of $215,000 in order for her to retain the former matrimonial home, her (omitted) Shares and (omitted) Shares, her motor vehicle and her superannuation.
The Husband will retain his term deposit, the savings in his bank account, his superannuation, the payment from the Wife together with his interest in his mother’s testamentary estate. This totals $1,319,8790.
The amount received by the Husband well and truly enables him to reaccommodate himself and have sufficient remaining funds to generate an income from which he will be able to more than adequately support himself.
The Wife will retain assets to the value of $988,568.80. Whilst the Court has no evidence of the value of the Wife’s expected inheritance, it is not unreasonable to suggest that in the long term she will be in a similar financial position to that of the Husband.
In the submissions made on behalf of the Wife, it was indicated that she would consider making payment to the Husband by accessing her superannuation. Given the Husband is over 65 and retired, any splitting order from the Wife’s superannuation fund to the Husband’s superannuation fund would immediately be accessible by the Husband and would enable the Wife to retain the former matrimonial home without the necessity of a mortgage. The Wife however may not wish to reduce her superannuation by that amount.
In those circumstances, on the handing down of this judgment the Wife will be given a period of seven days to nominate in writing to the Husband how she intends to make the payment to the Husband, whether that be by way of a cash payment to the Husband, by way of a superannuation splitting order or a combination of the two.
Upon the Wife nominating the method of payment to the Husband, orders will be made requiring either payment and/or a splitting order being effected no later than 60 days from the date of the judgment.
I certify that the preceding one hundred and forty three (143) paragraphs are a true copy of the reasons for judgment of Judge Bender
Date: 13 July 2017
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Fiduciary Duty
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Procedural Fairness
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Remedies
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