SMART & SMART
[2010] FMCAfam 129
•19 March 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SMART & SMART | [2010] FMCAfam 129 |
| FAMILY LAW – Property – long marriage – weight to be given to inheritance from husband’s father utilised in assts that now form one third of the matrimonial asset pool – determined 52.5:47.5 division in favour of the husband. |
| Family Law Act 1975, ss.75, 79 |
| Pierce and Pierce (1999) FLC 92-844 Hickey and Hickey and Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 |
| Applicant: | MS SMART |
| Respondent: | MR SMART |
| File Number: | MLC 5252 of 2009 |
| Judgment of: | Bender FM |
| Hearing date: | 15 February 2010 |
| Date of Last Submission: | 15 February 2010 |
| Delivered at: | Melbourne |
| Delivered on: | 19 March 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr Testart |
| Solicitors for the Applicant: | Camerons Lawyers |
| Counsel for the Respondent: | Ms Stoikovska |
| Solicitors for the Respondent: | Slater & Gordon |
ORDERS
All previous orders be discharged.
The funds currently held on trust on behalf of the parties pursuant to the orders made on 1 July 2009 in the amount of $197,000.00 (“the trust amount”) be paid to the wife.
In the event the trust amount exceeds $197,000.00, such excess shall be divided between the parties so that the husband receives 52.5 per cent of same and the wife receives 47.5 per cent of same.
The proceeds of sale of the low security water rights in the sum of $18,361.00 be paid to the wife.
Upon settlement of the sale of the jointly owned property at
Property N, the proceeds of sale being $255,450.00 be divided so that the wife receives $197,714.32 and the husband receives $57,735.68.
The parties do all things necessary to forthwith sell the following items of plant and equipment:
(a)the SAME 4WD tractor;
(b)the KUHN seven disc hay mower;
(c)the shed kit;
(d)the ride on mower; and
(e)the generator
Upon sale of the items referred to in order 6 herein, the proceeds of sale be divided as follows:
(a)in payment of any costs of sale;
(b)to pay any monies due and payable to [G] Water pursuant to the tax invoice issued to the parties dated 10 December 2009 in the sum of $2,287.75; and
(c)the balance divided so that the husband receives 52.5 per cent of same and the wife receives 47.5 per cent of same.
The monthly interest payments pursuant to the terms contract for the sale of Property N be divided equally between the parties.
Unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these or any subsequent orders:
(a)each party be solely entitled to the exclusion of the other to all superannuation and other property (including choses-in-action) owned by or in the possession of such party as at the date of these orders (the furniture, personal possessions, and like chattels in the property being deemed to be in the possession of the husband), save and except the hay cart which will be retained by the wife and the carpet which will be retained by the husband;
(b)insurance policies remain the sole property of the owner named therein.
(c)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.
(d)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
IT IS NOTED that publication of this judgment under the pseudonym Smart & Smart is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 5252 of 2009
| MS SMART |
Applicant
And
| MR SMART |
Respondent
REASONS FOR JUDGMENT
Introduction
This matter comes before the court in relation to an adjustment of property between the parties after a long marriage of some 41 years.
The wife is seeking orders that the parties’ assets be divided equally between them. Whilst conceding that the parties received the benefit of an inheritance from the husband’s father of a farming property which was sold in 1990 for $275,000.00, she argues that their lengthy marriage is such that the totality of the parties’ contributions over the 41 years of marriage outweighs the contribution constituted by that inheritance.
The husband is seeking orders that the parties’ assets be divided on the basis that he receives 55 per cent of those assets and the wife receives 45 per cent of those assets. He argues that the inheritance from his father enabled the parties to purchase the assets that now comprise over a third of their asset pool and accordingly such contribution should be reflected in the division of the matrimonial assets.
Background
The wife was born [in] 1947 and is 62 years of age. She is in receipt of a disability pension. The wife has serious health issues and is not capable of paid employment.
The husband was born [in] 1946 and is 63 years of age. He is in receipt of Centrelink payments. The husband has serious health issues and is not capable of ongoing paid employment.
The parties married [in] 1968. They initially separated on 20 June 2008. It is the wife’s evidence that shortly thereafter they attempted reconciliation for seven months and finally separated on 24 January 2009 when she vacated the former matrimonial home. It is the husband’s evidence that the parties separated on 20 June 2008, there was a period of seven months when they lived separated under the one roof and that the wife vacated the former matrimonial home on
24 January 2009.
The parties have three independent adult children, [X] aged 40 years, [Y] aged 38 years and [Z] aged 33 years.
At the time the parties married, neither had assets of significance. They share farmed in the Gippsland area and the wife undertook [employment in the Education Industry].
In 1975, the husband’s father transferred to the parties a farming property in Property L (“the Property L property”). Shortly thereafter this property was placed in the wife’s sole name. This enabled the parties to obtain a ‘settlement farm’ at Property S in the Western District (“the Property S property”).
After the transfer of the Property L property to the parties/wife, the husband’s father continued to farm the property and pay all outgoings in relation to the property. This continued until 1990 when the husband’s father died.
In 1983 the parties relocated to [omitted] where they purchased property at Property O. This property was later subdivided into two properties: Property M (the former matrimonial home) and Property N. It is my understanding the parties sold the Property S property to fund this purchase.
In 1989 the wife was involved in a serious motor vehicle accident. She suffered occipital nerve damage that was exacerbated by subsequent surgery. She was unable to continue [employment in the Education Industry], was only able to perform light housekeeping duties and was often bed ridden. The wife continues to suffer chronic pain which is made worse by even minor physical activity.
In 1990 the husband’s father died. In 1991 the Property L property was sold by the parties, netting sale proceeds of $271,117.00. From this amount, the parties purchased a farm and associated water rights at Property R (“the Property R property”) for $112,000.00. The balance of funds were utilised in the parties’ farming pursuits.
In 1991 the parties were sued by a sharefarmer. The matter went to the Supreme Court and ultimately the parties were ordered to pay $250,000.00 in costs.
In 1994 the wife received $150,000.00 by way of settlement of a TAC claim arising from the serious motor vehicle accidence she was involved in in 1989.
In 2005 the wife took a lump sum payment in respect to her superannuation of $250,000.00 (until them she had been receiving an ongoing ‘pension’).
In 2005 the husband cashed his lump sum superannuation entitlements of $33,000.00 and sold [B] shares worth $35,000.00.
In or around 2004/2005 the parties sold the Property R property for approximately $120,000.00. The parties retained ownership of the associated water rights.
In late 2008 the husband’s mother died and he received $10,000.00 by way of inheritance.
When the parties separated in 2008 they divided the monies held in their joint account so that they each initially received $51,849.00. As the husband’s inheritance from his mother formed part of these funds, he required the wife to repay him $10,000.00 from the monies received by her, together with an additional $2,500.00. She repaid him that amount.
From those funds the husband purchased a Chrysler motor vehicle for $50,000.00. The wife purchased a Mazda 3 motor vehicle for $28,500.00 and applied the balance of monies received by her to living expenses. Both parties retain these motor vehicles.
In 2009 the parties sold the high security water rights associated with the Property R property for $493,239.54. By agreement each of the parties received $150,000.00 from the proceeds of sale and the balance was retained in trust. Those monies in trust have a current value of $197,000.00.
In 2009 the parties sold their temporary water rights associated with the Property R property and divided the proceeds so each received $11,849.00.
In 2009 the parties entered into a terms contract for the sale of
Property N in the sum of $255,490.00. Settlement of the sale is to take place in May 2011. The purchaser makes monthly interest payments of $5,109.00. This payment is currently divided equally between the parties.
The parties have sold their low security water rights. It is anticipated they will receive a total of $18,361.00 by way of sale proceeds.
The parties have various personal chattels, and plant and equipment. During the running of the final hearing, agreement was reached as to their disposition on the basis that each party would retain the chattels in their possession (which were of approximately the same value) and that certain items of plant and equipment would be sold and the sale proceeds be divided in accordance with the court’s determination in the matter.
In December 2009 the parties received a tax invoice from [G] Water in the amount of $2,287.75 that relates to the high security water rights sold by them. It was agreed that this would be challenged by the parties, but in the event payment was required it should be treated as a joint debt.
The Issues
Whilst there was some blurring of dates and time lines in the parties’ evidence, the detailed background set out earlier in this judgment is, I believe, an accurate reflection of the parties’ financial history over the course of their long marriage.
The issues I identified as between the parties in relation to the division of property between them are as follows:
a)What constitutes the property pool and in particular:
i)Should the $10,000.00 inheritance received by the husband at or around the time of separation be included in the pool?
ii)Should various items of plant and equipment sold by the husband post separation be included in the pool?
iii)Should the first interest payment under the terms contract for the sale of Property N of $5,109.00 be included in the pool?
b)What are the respective contributions of the parties and in particular should the husband’s contribution be deemed greater than that of the wife because of the inheritance received from his father which enabled the parties to acquire the water rights which now forms over one third of their property pool?
The legislation
Section 79 of the Family Law Act1975 (“the Act”) defines the Court’s powers in determining applications for property settlement. Sub-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 four-step approach
In Hickey and Hickey and Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 at [39], the Full Court of the Family Court described the preferred four-step approach in property matters as follows:
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), ("the other factors") including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case ….
Assets and liabilities
Save for those minor issues identified in paragraph 29(a), the parties were in agreement as to what constituted the parties’ assets and liabilities.
In these circumstances, I intend to address the specific questions as identified in paragraph 29(a) herein.
In relation to the inheritance received by the husband upon the death of his mother, I am satisfied that this amount was received at or around the time of separation, that there was no contribution by the wife to this inheritance whatsoever and accordingly have determined that it should not form part of the matrimonial pool.
It was the wife’s evidence that subsequent to separation, the husband sold a Honda Four Tracks motorbike and trailer for $2,500.00, farm equipment to Mr M for $2,200.00, hay to Mr H for $2,300.00, retained the proceeds of sale of a Toyota utility of $1,500.00 and retained the proceeds of an insurance payment from [E] Insurance for a damaged television and VCR of $1,200.00.
In response to that claim, the husband agrees that those transactions took place, but claims that the proceeds of sale of the plant and equipment and hay were utilised in the payment of outstanding farm debts, the proceeds of the insurance company payout equated to the two flat screen televisions and DVD player retained by the wife and that the proceeds of sale of the Toyota utility was of a similar amount to the family Ford Falcon motor vehicle which was retained by the wife.
The wife did not dispute the husband’s evidence in this regard and in those circumstances I am satisfied that both parties should retain the benefit of the assets that were retained by them. I am further satisfied that the funds received by the husband from the sale of the farm equipment and hay were properly utilised in satisfying the farm debts.
As set out earlier in this judgment, the parties have sold the property at Property N by way of a terms contract which is due to settle in May 2011. Pursuant to the terms of that contract, the purchaser pays the parties an interest payment of $5,109.00 each month. By agreement, this payment is being divided equally between the parties.
The first payment pursuant to the terms contract was received into the parties’ then joint farm account on 7 February 2009, shortly after the physical separation of the parties. It is common ground that there was no division of that payment upon its’ receipt and that this payment was retained by the husband. The wife is claiming that that amount should be added back into the pool.
It was the husband’s evidence that shortly prior to the receipt of that amount, the wife withdrew some $2,730.00 from the parties’ joint bank account without the knowledge or consent of the husband. These funds were utilised by her to move into rental accommodation. It was submitted on behalf of the husband that in those circumstances the wife had received her ‘half share’ of the interest payment and it was therefore appropriate that there not be a division of the payment that was received on 7 February 2009.
I am satisfied that in the circumstances that the wife received an amount approximately equal to one half of the first interest payment shortly prior to this time, it is not appropriate that the first interest payment be placed back into the property pool.
As noted earlier in this judgment, after some initial argument, agreement was reached between the parties in relation to the disposition of furniture and chattels in their respective possession, and certain items of farm equipment. It was agreed that each of the parties would retain the furniture and household items currently in their respective possession and that the wife would retain the hay cart and the husband would retain some carpet. They further agreed that the SAME 4WD tractor, the Kuhn seven disc hay mower, the shed kit, the ride on mower and the generator were all to be sold and the proceeds of same divided in accordance with the percentage division determined by this court.
Otherwise, as indicated earlier, the parties had agreed as to the value to be attributed to the former matrimonial home and otherwise their substantive assets have been sold and partially distributed between them.
Accordingly, I find the matrimonial asset pool of the parties to be as follows:
The former matrimonial home, situate at Property M $405,000.00 Property N
- Sold pursuant to terms contract
- Due to settle in May 2011
$255,450.00 Proceeds of sale of high security water rights, being $493,239.54 which have a current value (including interest) of $497,000.00
- Husband: $150,00.00
- Wife: $150,000.00
- In trust: $197,000.00
$497,000.00 Proceeds of sale of low security water rights (to be received) $18,361.00 Proceeds of sale of temporary water:
- Husband: $11,849.00
- Wife: $11,849.00
$23,698.00 Joint funds divided at separation:
- Husband: $54,349.00
- Wife: $39,349.00
$93,698.00 Total $1,293,207.00
*From the matrimonial asset pool, the husband has already received $216,198.00 and the wife has already received $201,198.00
* Possible Liability: [G] Water tax invoice: $2,287.75.
Contributions
Neither party had any assets of significant value at the commencement of their relationship.
The financial history of the parties is set out in detail earlier in this judgment.
The parties’ financial circumstances ‘waxed and waned’ over the course of the marriage depending on the vagaries of the rural economy and subject to the setbacks that arose, and in particular the large costs payment that the parties incurred in relation to the unsuccessful Supreme Court proceedings in or around 2000.
The parties agree that in 1975 the husband’s father transferred to the parties the Property L property and that shortly thereafter this property was placed into the sole name of the wife for the practical purposes of that enabling the parties to qualify to purchase a settlement farm in Property S.
It is also common ground that whilst the Property L property was held in the wife’s name, it was farmed by the husband’s father and he paid all outgoings in relation to this property, including mortgage payments, rates, taxes as well as funding any necessary improvements and maintenance.
When the husband’s father died in 1990, the parties were able to sell the property and in 1991 received some $271,000.00 by way of net sale proceeds. From this amount the parties purchased a property and water rights at Property R for $112,000.00. The balance of the funds were utilised to pay out debt and to fund further farming activities.
It was submitted on behalf of the husband that there should be a weighting in his favour because of the inheritance received from his father by way of the Property L property. It was argued that this inheritance enabled the parties to purchase the Property R property, together with its’ water rights and it was the sale of the latter in 2009 which has enabled the parties to achieve a property pool considerably greater than they would otherwise have had.
It was also argued on behalf of the husband that because of the severity of the injury sustained by the wife in the 1989 motor vehicle accident and the restrictions that this placed on her capacity to perform even the lightest of household duties, that subsequent to that period not only was the husband the primary income earner, but he also performed the majority of the domestic duties to maintain the household.
On behalf of the wife, it was submitted that to adopt the reasoning of the husband would be to fall into error. It was argued that in their
41 year marriage both parties contributed to the best of their ability and that both made significant financial contributions during the course of the marriage.
It was submitted on behalf of the wife that her TAC payment enabled the parties to meet the liabilities arising from the Supreme Court case and without that, the Property R property would have had to be sold to meet this liability and therefore any subsequent windfall arising from the water rights would never have come into being.
It was also argued on the wife’s behalf that her superannuation payments, whilst accumulated during the marriage, also enabled the parties to retire debt and retain their asset base.
In response to this submission, it was argued on behalf of the husband that the wife’s superannuation was a joint asset and that the wife’s TAC payment is offset by the contribution of the husband in maintaining her health and the additional burden that was placed on him because of the impact of her injuries.
It was further submitted on behalf of the wife that if the court considered both the parties’ lengthy marriage and that the inheritance occurred in 1975, that the contribution of the Property L property has been eroded over the passage of time in that the ‘ups and downs’ of the totality of the marital relationship has overtaken any initial contribution by the husband arising from that inheritance.
In response to this submission, counsel for the husband made particular reference to Pierce and Pierce (1999) FLC 92-844 at paragraph 28 where it was held:
“In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all the other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution… regard must be had to the use made by the parties of that contribution.”
The husband’s Counsel argued that the use of the inherited funds in the purchase of the Property R property and water rights increased the parties’ property pool by nearly half a million dollars and in those circumstances there should be a division of the property pool so that the husband receives 55 per cent of same and the wife receives 45 per cent of same.
By contrast, the wife’s Counsel submitted that in all the circumstances, and in particular having regard to the parties’ lengthy marriage and the reality that the parties were able to retain Property R only because of the wife’s TAC payment, that the passage of time was such that the initial contribution had been overtaken by other events. In those circumstances the wife’s counsel argued there should be an equal division of the property pool between the parties.
There is no doubt that without the inheritance from the husband’s father of the Property L property, and the use to which it was put, the parties’ property pool would be considerably less than it is.
On the other hand, there was a real risk that the Property R property would have had to be sold by the parties to meet the Supreme Court costs order were it not for the TAC lump sum payment received by the wife. Such payment however must, at least in part, be seen as a matrimonial asset.
Having balanced all the competing contributions of the parties over their long marriage, I am satisfied that there should be a loading in the husband’s favour but not to the extent as is sought by him. I am satisfied that in all the circumstances it is just and equitable that there be an adjustment so that the husband receives 52.5 per cent of the property pool and the wife receives 47.5 per cent of the property pool.
Section 75(2) factors
As set out earlier in this judgment, both parties are in their 60’s and both have significant health issues that makes them dependent upon Centrelink payments for their support.
It was agreed by both Counsel on behalf of the respective parties that there should be no adjustment in relation to section 75(2) factors as between the parties and I am in agreement with that submission.
Conclusion
The husband wishes to retain the former matrimonial home and the wife wishes to receive an adjustment of property between herself and the husband to enable her to purchase a property in [K].
Fortunately, the asset pool of the parties is such that both will be able to achieve this outcome.
Having determined that a just and equitable outcome for these parties is that there be a division of the asset pool as between them so that the husband receives 52.5 per cent of the pool and the wife receives
47.5 per cent of the pool, the division is such that based on the current asset pool as determined by me, the husband should receive assets worth $678,933.32 and the wife should receive assets worth $614,273.32.
The husband is to retain the matrimonial home and together with the funds received by him to date currently retains assets worth $621,198.00. This means that from the undistributed assets, he should receive a further $57,735.68.
The wife has received some $201,198.00 to date. As the husband is retaining the former matrimonial home, I intend to order that the wife receive all funds currently available for distribution. This will enable her to reaccommodate herself. I therefore intend to order that the monies currently held in trust on the parties’ behalf in the sum of approximately $197,000.00 be paid to the wife, together with the proceeds of sale of the low security water rights of $18,361.00.
Upon settlement of the terms contract for the sale of Property N in May 2011, the husband will receive the amount of $57,735.68 and the wife will receive the amount of $197,714.32..
In relation to the various items of plant and equipment the parties have agreed to sell, the proceeds of same are to be divided between the parties on the basis that any monies due and payable to [G] Water in relation to the tax invoice be paid and the balance be divided so that the husband receives 52.5 per cent of same and the wife receives 47.5 per cent of same.
In relation to the monthly interest payments due under the terms contract for Property N, I am satisfied that it is just and equitable that these payments continue to be divided equally between the parties until settlement of that sale in May 2011.
I certify that the preceding seventy-four (74) paragraphs are a true copy of the reasons for judgment of Bender FM
Associate: Sarah Hession
Date: 19 March 2010
0
0
1