SILVERTON & MILLIGAN

[2014] FCCA 93

FEDERAL CIRCUIT COURT OF AUSTRALIA

SILVERTON & MILLIGAN [2014] FCCA 93

Catchwords:
FAMILY LAW – Property – initial cohabitation between 2001 and 2004 – informal property settlement – further on/off cohabitation between 2007 and 2010 – husband’s illiteracy – wife’s work as prostitute – contributions – subsection 75(2) factors.

Legislation:

Family Law Act 1975 (Cth), ss.75, 79, 81

Evidence Act 1995 (Cth), s.140

Briginshaw v Briginshaw (1938) 60 CLR 336
Clauson & Clauson (1995) FLC 92-595
Clives and Clives (2008) FLC 93-385
C & C (2005) FLC 93-220
Elias v Elias (1977) FLC 90-267
Ferraro & Ferraro (1993) FLC 92-335
Garrett and Garrett (1984) FLC 91-539
Hayne and Hayne (1977) FLC 90-265
Helton v Allen (1940) 63 CLR 691
Hickey & Hickey (2003) FLC 93-143
Hirst and Rosen (1982) FLC 91-230
Jordan & Jordan (1997) FLC 92-736
Kessey and Kessey (1994) FLC 92-495
Lee Steere & Lee Steere (1985) FLC 91-626
Milankov and Milankov (2002) FLC 93-095
OSF and OJK (2004) FLC 93-191
Poulos and Poulos (1984) FLC 91-515
R v Watson; Ex parte Armstrong [1976] HCA 39; (1976) 136 CLR 248
Reifek v McElroy (1965) 112 CLR 517
Russell v Russell (1999) FLC 92-877
Stanford v Stanford (2012) FLC 93-518; (2013) 293 ALR 70

Applicant: MR SILVERTON

Respondent: MS MILLIGAN

File Number: LNC 778 of 2010

Judgment of: Judge Roberts

Hearing date: 29 November 2013

Date of Last Submission: 29 November 2013

Delivered at: Launceston

Delivered on: 30 January 2014

REPRESENTATION

Counsel for the Applicant: Mr G Tucker

Solicitors for the Applicant: Grant Tucker

Counsel for the Respondent: Ms R Brown

Solicitors for the Respondent: Legal Solutions

ORDERS

1. That within 90 days of the date of this Order MR SILVERTON (“the husband”) must pay to MS MILLIGAN (“the wife”) the sum of $35,000 (thirty five thousand dollars).

2. That contemporaneously with the payment referred to in Order No. 1 hereof the wife must transfer to the husband all her right, title and interest (if any) in the following:

   (a)The property situate at and known as Property C, in Tasmania and more particularly described in Certificate of Title Volume (omitted) Folio (omitted) (“the Property C property”); and

   (b)The Honda Jazz motor vehicle, registered (omitted) (“the Honda”).

3. That the husband must indemnify the wife and keep her indemnified from payment of any liability whatsoever attaching or relating to either the Property C property or the Honda.

4. That the parties must each do all such things as are reasonably necessary to give effect to these Orders.

5. That save as to costs and/or enforcement these Orders will finally determine the financial relationships between the husband and the wife for the purposes of section 81 of the Family Law Act 1975.

IT IS NOTED that publication of this judgment under the pseudonym Silverton & Milligan is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT LAUNCESTON

LNC 778 of 2010

MR SILVERTON

Applicant

And

MS MILLIGAN

Respondent

REASONS FOR JUDGMENT

Applications

1. The applicant, MR SILVERTON (“the husband”) seeks orders that would require MS MILLIGAN (“the wife”) transfer to him all her interest in a home unit in Property C (“the Property C unit”).[1] 

   [1] Initiating Application filed 17 December 2010

2. The wife is also seeking an order that she transfer her interest in the Property C unit to the husband.  However, she seeks an order that she be paid $100,000 for that transfer,[2] which her counsel said is the equivalent of “27.5% of the assets available for distribution”.

   [2] Response filed 21 September 2011

Brief background

1. Where I refer to facts in these Reasons, they should be regarded as findings of fact, unless a contrary intention is clear from the context, particularly when there is a dispute between the parties in relation to those facts.

2. The husband will be 70 years old very shortly.  The wife is aged 55 years.

3. The parties started living together in early 2001 and they married in early 2003.  The marriage certificate in the Court records show that both parties were divorced at the time of their marriage.  They separated in late 2004, and at that time they were joint owners of a home unit in Property P (“the Property P property”).

4. The Court records reveal that the husband commenced proceedings in the Family Court of Australia in May 2005 (“the earlier proceedings”).  He sought orders that the Property P unit be sold and the net proceeds be divided on the basis of 65% to him and 35% to the wife.  Those earlier proceedings were transferred to this Court on 31 August 2005.  The wife filed a Response in October 2005 in which inter alia she sought an order that she retain the Property P unit.  The matter was set down for a defended hearing in October 2006, but the wife did not appear at the time.  Her lawyer at the time provided a medical certificate stating that she was unfit to appear and had been referred to a psychiatrist in relation to anxiety and depression.  The earlier proceedings were adjourned and then subsequently removed from the defended list on 15 January 2007 “with liberty to either party to restore the matter to the list upon application to the Registry”. 

5. It is a matter of history that neither party sought to have those earlier proceedings restored to the list.  However, the parties sold the Property P unit and divided the net proceeds equally between themselves, each receiving approximately $62,000.[3]

   [3] See Transcript at page 54.

6. After the parties’ separation in 2004, the husband resumed a relationship with his former wife (“Ms C”).  In October 2006, Ms C and the husband purchased the Property C unit as joint tenants for $270,000.  I accept that most of those funds were contributed by Ms C from the proceeds of her sale of a property that she had owned in (omitted).  Certainly, it is conceded by the wife that she did not make any contribution to the purchase of the Property C unit.

7. Ms C died in December 2006 and the husband became the sole owner of the Property C unit by survivorship.

8. The husband and the wife recommenced their relationship in 2007 and in late 2009 the husband transferred the Property C unit into the joint names of himself and the wife.[4]  The husband says that he was “badgered” into transferring it into joint names contrary to advice from his solicitor.[5]  There was no real challenge to that evidence and there was no call for any evidence from his solicitor about that advice.  I accept that no funds passed between the wife and the husband in relation to that transfer.

   [4] See Annexure “A” to the husband’s affidavit

   [5] Paragraph 12 of his affidavit

9. The parties agree that the Property C unit is valued at $350,000.[6]

   [6] Transcript at page 2

10. The husband did not work during the parties’ relationship and both parties were in receipt of Centrelink benefits throughout the times that they were together.  However, the wife worked as a prostitute from time to time, and I will refer to that further below.

11. It is clear from the evidence of both parties that their relationship between 2007 and 2010 was an “on/off relationship” which included a number of significant periods of separation, including one separation when the wife went to Western Australia for more than four months.[7]  The wife accepted that their relationship involved separations of “months apart” and that they were “never together longer than three to four months”.[8] 

    [7] Transcript at page 63

    [8] Transcript at page 49

12. The parties finally separated in October 2010 and the husband commenced these proceedings by filing an Initiating Application on 17 December 2010.    

The evidence and credibility

1. The husband relied upon an affidavit filed 28 November 2012 and his Financial Statement filed 17 December 2010.  The wife relied upon an affidavit filed 22 November 2012 and her Financial Statement filed 21 September 2011.  Both parties were cross-examined.

2. The parties have very different versions of the facts, especially in relation to the wife’s employment as a prostitute and the income derived from that activity.  Further, each party makes serious allegations about the other, and where relevant, I must assess the veracity of their evidence.

3. Proceedings for alteration of property interests under the Family Law Act 1975 (“the Act”) are civil proceedings. Sub-section 140(1) of the Evidence Act 1995 states that the standard of proof in civil proceedings is that the court must be satisfied that the case has been proved on the balance of probabilities.  Sub-section (2) specifically incorporates dicta in cases such as Reifek v McElroy,[9] Helton v Allen [10] and Briginshaw v Briginshaw,[11] all of which state that the degree of satisfaction which the civil standard of proof calls for may vary, having regard to the gravity of the facts to be proved.

   [9] Reifek v McElroy (1965) 112 CLR 517

   [10] Helton v Allen (1940) 63 CLR 691

   [11] Briginshaw v Briginshaw (1938) 60 CLR 336

4. A passage of Dixon J’s judgment in Briginshaw reads as follows: [12]

   The truth is, that when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independent of any belief in its reality.

   [12] Briginshaw at p.361

5. The wife claims that:

   ·the husband forced her into prostitution and was her pimp;

   ·she earned between $500 and $1,000 per day;[13]

   ·the husband insisted that the money be left under a box in the kitchen and he would take it and “do with it as he saw fit”;[14] and

   ·she contributed significantly to the furnishing and improvement of the Property C property.

   [13] See paragraph 20 of her affidavit filed 22 November 2012 and the Transcript at page 67

   [14] Paragraph 21 of her affidavit filed 22 November 2012

6. The husband described the wife’s claims as “almost humorous” and “laughable”, and said this:

   The Respondent throughout our relationship had alcohol/drug addictions and also gambling habits.  All her funds were expended on that.  A large proportion of my own funds was also expended on those habits, with the Respondent most of the time taking funds from me to fund her addiction.[15]

   [15] Paragraph 16 of his affidavit

7. When she was cross-examined, the wife denied having alcohol or drug addictions or gambling habits.[16]  However, it was pointed out to her that she had said the following in paragraph 11 of a handwritten affidavit filed by her on 13 October 2005 in relation to the earlier proceedings:

   My relationship with [the husband] hit an all-time low towards the middle of 2004.  I was drinking heavily, abusing prescription medication, and had developed a bad gambling habit.[17]

   [16] Transcript at pages 52 and 53

   [17] Some spelling corrected.

8. The wife also stated that she had not worked as a prostitute during those times when she was separated from the husband.  However, she admitted to advertising her services in the local paper in September 2006,[18] when she and the husband had been separated for almost two years.  I found her explanation about that to be somewhat less than convincing.

   [18] Exhibit “H1”

9. Although the wife admitted to submitting false declarations to Centrelink about her earnings, she gave very unconvincing evidence that the husband had helped her to complete those false documents and had forced her to submit them.  In this regard, I accept that the husband is illiterate and cannot even use a bank ATM to withdraw cash from his account.

10. This exchange took place during cross-examination of the husband:

    Ms Brown:    Were you aware that she was working as a prostitute?

    Husband:      Yes.

    Ms Brown:    And you say that, during the course of your relationship, you never saw any of the money that my client earned working as a prostitute?

    Husband:      That’s right. 

11. I found his evidence about that to be unconvincing as well.  

12. Overall, the state of both parties’ evidence was less than satisfactory (especially when one considers how long they had to prepare their respective cases), and referring again to Briginshaw, the “actual persuasions” that I feel are:

    ·the wife significantly overstated the income that she earned as a prostitute and the contributions that she made to the furnishing and improvement of the Property C property;

    ·the wife had significant difficulties in relation to substance abuse and gambling, which would have accounted for a significant proportion of any prostitution income that she may have earned; and

    ·although the husband did not force the wife to be a prostitute, he was complicit in her involvement and was quite willing to share in some of the financial benefits from that activity. (Whether he observed the wife in her prostitution activities from a cupboard or elsewhere is not relevant to what I have to determine, so I make no finding about that.)   

13. Having said that, however, it is impossible to quantify the “benefit” that each party received from the wife’s involvement in prostitution.  I will refer to that further below.

Relevant Law

1. Prior to the High Court decision in Stanford v Stanford,[19] the general approach to the determination of a property settlement application appeared to have been well established by authority as a multi-step process.[20]  The steps were said to involve:

   a)Firstly, an identification and valuation of the property, liabilities and financial resources of the parties;

   b)Secondly, an evaluation of the contributions made by the parties as defined in section 79(4) of the Act;

   c)Thirdly, a consideration of any relevant matters under subsection 75(2) of the Act; and

   d)Fourthly, before making an order adjusting property interests, being satisfied in all the circumstances that it is just and equitable to do so under subsection 79(2).[21] 

   [19] Stanford v Stanford  (2012) FLC 93-518; (2013) 293 ALR 70

   [20] See Lee Steere (1985) FLC 91-626; Ferraro  (1993) FLC 92-335; Clauson (1995) FLC 92-595, Hickey (2003) FLC 93-143 and C & C (2005) FLC 93-220

   [21] Also see Russell v Russell (1999) FLC 92-877

2. However, in Stanford, at paragraph 37, their Honours French CJ, Hayne, Kiefel and Bell JJ said:

   37. First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property.

3. In paragraph 40 of Stanford, their Honours went on to say:

   40. Third, whether making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised “in accordance with legal principles, including the principles which the Act itself lays down”.[22] To conclude that making an order is “just and equitable” only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.

   [22] R v Watson; Ex parte Armstrong [1976] HCA 39; (1976) 136 CLR 248 at 257

4. That clearly suggests that being satisfied “in all the circumstances” that it is just and equitable to make an order is not the last in a series of four steps and, with the benefit of that hindsight, it may have been wise for judicial officers over the years to have heeded the words of former Federal Magistrate Walters[23] when he said that “the testing of any proposed orders by reference to section 79(2) is not a fourth substantive step (properly so called) in the property settlement exercise, and there is no fourth step in that sense.”[24]

   [23] Now Justice Walters of the Family Court of Western Australia

   [24] OSF and OJK (2004) FLC 93-191 at paragraph 16

5. In this matter, both parties are seeking an order for the wife to transfer her interest in the property to the husband, so they appear to agree that such an order is just and equitable.  However they do not agree upon whether the husband should pay any money to the wife for such a transfer.

The asset pool

1. Again, when one considers how long they had to prepare their respective cases, it is somewhat surprising that neither party appears to have made any serious attempt to set out the composition of the relevant asset pool.

2. As mentioned at paragraph 2 above, the wife’s counsel says that her client’s entitlement to a payment of $100,000 represents “27.5% of the assets available for distribution”.  If that is correct, the total value of the asset pool must be in the vicinity of $364,000.  However, I was not provided with a table of assets by her (or by the husband’s counsel). 

3. The Property C unit has an agreed value of $350,000 and I make an assumption that the wife’s counsel included the Honda motor vehicle at the husband’s estimate of $14,000 to arrive at a total of $364,000. 

4. The parties claim in their Financial Statements to have little else in the way of assets and they each state that they have no liabilities.  Consequently, I intend to apply the principle of de minimis non curat lex to all but the Property C unit and the Honda in the husband’s possession.[25]  As a result, for the purposes of what I have to decide, the asset pool has a total value of $364,000.

   [25] For a discussion of the application of the de minimis principle see the decision in Milankov and Milankov (2002) FLC 93-095

Contributions

1. I have often referred to the fact that the assessment of contributions cannot be an exercise of mathematical precision.  In Hayne and Hayne,[26] Pawley J said: 

   In matters such as this one cannot approach the problem with an eye for meticulous detail. It should rather be dealt with broadly so that the end result can be said to be just and equitable.

   [26] Hayne and Hayne (1977) FLC 90-265 at p. 76,415

2. Similar things were said in Garrett and Garrett,[27] Clives and Clives,[28] Kessey and Kessey,[29] and Poulos and Poulos. [30]

   [27] Garrett and Garrett (1984) FLC 91-539

   [28] Clives and Clives (2008) FLC 93-385 at paragraph 44

   [29] Kessey and Kessey (1994) FLC 92-495 at page 81,150

   [30] Poulos and Poulos (1984) FLC 91-515 at p. 79,184

3. This matter is complicated by a dearth of information and detail from both parties.  The husband’s illiteracy and the wife’s problems with alcohol and drugs may partially explain that, but their preference to deal generally in cash did not help me to get an accurate picture of their respective contributions.

4. Having said that, however, I take the view that it is reasonable to assume that both parties were satisfied that they had received a just and equitable informal property settlement when they shared equally in the proceeds from the sale of the Property P property.  I say that because:

   ·neither party sought to reinstate the earlier proceedings pursuant to the “liberty to apply” provided in the order of 15 January 2007; and

   ·they each received less than what they were seeking in their applications to the Court, so compromises had clearly been made on both sides. 

5. As a result, I do not propose to give any further consideration to their respective contributions during their earlier period of cohabitation from early 2001 until late 2004.

6. As mentioned above, the wife does not claim to have made any contribution whatsoever to the purchase of the Property C unit.  It matters little whether the husband made any contribution to that purchase, because it is clear that Ms C contributed nearly all the required funds and his acquisition of that property by survivorship is clearly the result of a contribution that Ms C made on his behalf.  In short, I can conclude that the husband contributed the entirety of the value of the Property C unit upon the resumption of the parties’ relationship in early 2007.  It is also logical to conclude that because it had only recently been purchased, the value of the Property C unit was in the vicinity of $270,000 when the husband and the wife resumed their relationship.

1. At approximately the same time they each had their half share of the net proceeds of sale of the Property P unit.  The evidence appears to suggest that they had each received approximately $62,000.[31]  In addition to that, the husband received funds from Ms C’s estate.  The wife conceded that he had received cash and superannuation benefits, [32] but somewhat surprisingly, no documentary evidence was provided to the Court.  However, Annexure “D” shows that the husband had approximately $77,500 in his account in mid-April 2007.

   [31] Transcript at page 54

   [32] Transcript at page 54

2. It is virtually impossible to determine who contributed what to the purchase of chattels or the improvement and decoration of the Property C unit.  The parties’ evidence is like chalk and cheese!  For example, in paragraphs 20 and 21 of the wife’s affidavit of 21 September 2011, she details significant expenditure in relation to improvements to the Property C unit and the purchase of furniture and effects.  In paragraphs 14 and 15 of his affidavit, the husband specifically refers to those paragraphs and states that he made all the payments.

3. Another such example is that the husband says that the parties each contributed half of the $18,000 required to complete the purchase of the Honda,[33] whereas the wife claims to have paid it all.[34]

   [33] Paragraph 18 of his affidavit

   [34] Transcript at page 64

4. I can only conclude that, apart from her Centrelink benefits, the wife’s financial contributions came from her $62,000 share of the Property P unit proceeds and from her earnings as prostitute.  However, I do not accept that those earnings were anywhere near $500 per day as claimed by her.[35]  Further, I note that the wife conceded that she told Centrelink that her earnings did not exceed the amount that would have caused any reduction in her Disability Support Pension payments.  In relation to that, I refer to Jordan & Jordan[36] in which Chisholm J referred to the “Elias principle”.[37]  He said that the principle could be stated in the following way:

   When a party has made representations of fact to third parties and has gained advantage from so doing, it is open to the court in subsequent proceedings under s 79 of the Family Law Act to decline to accept from that party evidence which contradicts those representations.

   [35] Paragraph 20 of her affidavit.

   [36] Jordan & Jordan (1997) FLC 92-736

   [37] See Elias v Elias (1977) FLC 90-267

5. On that very sound basis, I decline to accept the evidence that the wife now gives about the level of her earnings from prostitution.  In any event, I also accept that:

   ·a significant proportion of whatever she earned was spent on her alcohol and drug addictions and on gambling; and

   ·she was not at the Property C unit for substantial periods of time during the period from early 2007 and late 2010, so she was unlikely to have contributed anything to “the acquisition, conservation or improvement of any of the property” as referred to in subsection 79(4) of the Act during those extensive periods.

6. I also note that the clear evidence is that the wife did not contribute anything to the “acquisition” of the Property C unit, so her contributions between early 2007 and late 2010 can only have related to any “conservation or improvement of … the property”.[38]  The Property C unit was worth $270,000 at the start of that period and it is now agreed to be worth $350,000, so the improvement in value is $80,000.  

   [38] See section 79(4) of the Act

7. In relation to the Honda, I am of the view that the parties should appropriately share in its reduced value.  I will comment about that below.

8. Apart from his Centrelink benefits, the husband’s financial contributions after he and the wife resumed cohabitation in early 2007 appear to have been the sum of approximately $77,500 in his bank account in mid-April 2007.  However, he also brought the Property C unit worth $270,000 into the relationship and his financial contributions also relate to the improvement in value of that property of $80,000.

9. In my view, the husband must receive “full credit” for the contribution of the Property C unit at $270,000 and a proportion of the improvement in the value of that unit.  The wife should receive credit for a proportion of the improvement in the value of the Property C unit. 

10. On the basis of the ascertainable financial contributions of $77,500 by the husband and $62,000 by the wife, and if the parties had remained in cohabitation throughout the period from early 2007 until final separation, I would have considered it appropriate to assess their contributions to the improvement in value of the Property C unit to be 45% by the wife and 55% by the husband.  However, it is very clear that the parties had substantial separations between early 2007 and late 2010, which included separations of “months apart” and that they were “never together longer than three to four months”.[39]  It is logical to assume that the wife was not contributing to any “conservation or improvement of … the property” during those substantial periods of separation.  It is likely that during those periods the wife was spending her funds on her own general living costs, including funding her substance abuse and gambling. 

    [39] Transcript at page 49

11. Consequently, I consider that it is appropriate to assess her contributions to the improved value of the Property C unit at 30%.  

12. That would mean that, on the basis of contributions, the husband should pay to the wife 30% of the $80,000 improvement in the value of the Property C unit (being $24,000) plus 30% of the current value of the Honda of $14,000 (being $4,200), making a total of $28,200.

13. However, these matters are not decided on contributions alone. 

Subsection 75(2) factors

1. As mentioned above, the husband is nearly 70 years old and the wife is 55 years old.

2. The husband’s age and his illiteracy suggest that he will continue receiving a Centrelink pension.  Similarly, the wife’s age and her health and substance abuse difficulties suggest that she will also continue receiving a Centrelink pension.  Neither has any real capacity for gainful employment, so in that respect, their situations are very similar.  Indeed, the wife’s counsel stated that I could “assume that their future needs will be comparable”.[40] 

   [40] Transcript at page 77

3. The wife will continue to pay rent, whereas the husband is able to continue living in the unencumbered Property C unit. In my opinion that is the only factor that could provide for any adjustment in favour the wife under subsection 75(2).

4. However, this has been a short “on/off” relationship and the Court is not entitled to “compensate” a person simply because of financial disparity.  In this regard, I am also mindful of what Nygh J said in Hirst and Rosen.[41]  He said: 

   I also reject any argument based solely upon the disparity in financial resources between the parties. Section 79, as I have indicated in argument, does not entitle the Court to adopt “a soup kitchen” approach. … It is, therefore, not an open sesame for the Court to administer such justice as it thinks fit. That, indeed, would be a grievous error.[42]

   [41] Hirst and Rosen (1982) FLC 91-230

   [42] At page 77,251

5. In my view, any adjustment in favour of the wife under subsection 75(2) must be relatively small and I consider an additional $6,800 is appropriate.

Conclusions

1. On the basis of what I have said above, I conclude that it is just and equitable for the wife to receive a total of $35,000 in return for transfers to the husband of her interest in the Property C unit, and the Honda (if any).  That $35,000 is the total of $28,200 and $6,800 referred to at paragraphs 54 and 60 above.

2. The husband does not have a large income, but he will have an unencumbered property worth $350,000, so he should be able to raise the sum of $35,000 within 90 days. 

3. I will make orders to provide for what is set out above.

I certify that the preceding sixty-three (63) paragraphs are a true copy of the reasons for judgment of Judge Roberts

Date:  30 January 2014