SMEDLEY and HUME

[2014] FCWA 47

JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA

ACT: FAMILY LAW ACT 1975

LOCATION: BUNBURY

CITATION: SMEDLEY and HUME [2014] FCWA 47

CORAM: THACKRAY CJ

HEARD: 7 MAY 2014

DELIVERED : 25 JULY 2014

FILE NO/S: PTW 4870 of 2012

BETWEEN: MS SMEDLEY

Applicant

AND

MR HUME
Respondent

Catchwords:

PROPERTY SETTLEMENT – Contributions – 11 year relationship – Where the wife made greater financial contributions – Where the parties had no children – Assessment of contributions as being 70:30% in the wife’s favour – Adjustment of 12.5% in the husband’s favour for his future needs

Legislation:

Family Law Act 1975 (Cth), s 75(2), s 79,

Category: Reportable

Representation:

Counsel:

Applicant: Mr Kroon

Respondent: Mr Butcher

Solicitors:

Applicant: Kroon Legal

Respondent: C W Marais Legal

Case(s) referred to in judgment(s):

Bevan & Bevan (2014) FLC 93-572

Stanford v Stanford (2012) 247 CLR 108

WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT - PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED

Introduction

1I am required to determine the competing applications for property settlement of [Ms Smedley] (“the wife”) and [Mr Hume] (“the husband”).

2The wife considers she should receive 80% of the modest asset pool, whereas the husband considers she should receive only 30%.

Brief background

3The husband and wife commenced cohabitation in April 2000, were married in March 2005 and separated in April 2011. There are no children of the marriage.

4The wife is aged 47 years. She works as the manager of [a business] which she operates in partnership with her father.

5The husband is aged 55 years. He has not worked for some years and is presently in receipt of social security benefits.

6The parties acquired a house in [Coastal Town W] at the commencement of their cohabitation. They lived in the property throughout their relationship, and the husband has remained there since the wife moved out over three years ago. The wife initially lived in the parties’ caravan at [Coastal Town P], before moving into a small, old cottage she now rents from her mother.

Property settlement approach

7The proceedings fall for determination under s 79 of the Family Law Act 1975 (Cth) (“the Act”), which incorporates the factors in s 75(2) “so far as they are relevant”.

8Prior to the decision in Stanford v Stanford (2012) 247 CLR 108, property settlements were dealt with by means of a four step process. This required a trial judge to:

•identify and value the assets and liabilities of the parties;

•assess each party’s contributions to the assets;

•assess a range of factors set out in s 79(4)(d) to (g) of the Act; and then

•consider whether the proposed orders are just and equitable.

9The four step process still has utility, provided the court exercises the discretion conferred by s 79 in accordance with legal principles and does not proceed on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity: Bevan & Bevan (2014) FLC 93-572 at [19].

10Existing interests in property can be interfered with only if it is just and equitable to do so. In many cases, it will be readily established it is just and equitable to adjust existing interests for the reasons that appear in Stanford v Stanford at [42]. It is not in doubt this is such a case, since the husband and wife are no longer living in a marital relationship and there will be no future common use of property they acquired together.

Agreed schedule of assets and liabilities

11During the course of the trial I was provided with an agreed schedule of assets and liabilities, which is replicated below:

Description	Husband $	Wife $
Assets
[Matrimonial Property]	160,000	160,000
Caravan	7,500	7,500
Wife’s share of business	19,000
Superannuation	68,174
Motor vehicle – Falcon	3,000
Total Assets	170,500	254,674
Liabilities
Mortgage	100,000	100,000
Bankwest Visa	8,000
Personal loans	14,200
Business creditors	3,000
Credit card debt	4,000
Total Liabilities	125,200	104,000
Net Assets	45,300	150,674

12The agreement about this schedule resolved a number of controversies, especially relating to entitlements/liabilities concerning the storage business in which the wife has an interest. The only comments I need to make in relation to the schedule are as follows.

Wife’s superannuation

13The wife’s superannuation entitlement was included in the schedule as if it was an asset. Neither party formally proposed a superannuation splitting order.

Unpaid legal costs

14The husband has incurred about $11,000 in unpaid legal costs, while the wife had $34,000 in unpaid legal costs. I have not included these in the schedule as I consider issues concerning legal costs should be dealt with separately.

Husband’s other post separation liabilities

15The husband has accumulated $27,000 in liabilities to relatives following the separation. He claims these were incurred to meet legal fees and his living costs, as he has only been in receipt of social security and had insufficient income to meet all his costs. The husband’s paid legal fees amounted to about $12,800, and I therefore proceed on the basis that of the $27,000, about $14,200 represents funds borrowed by the husband to meet living costs. I have already indicated that I consider issues concerning costs should be dealt with separately, and I therefore have included only the $14,200 as the husband’s personal liability.

Bartercard debt

16The $8,428 Bartercard debt was incurred prior to separation. I was not persuaded the debt was likely to be repaid. If it ever has to be repaid, the parties can meet the liability in the same proportions as they share in the property under the terms of my judgment.

Credibility

17The wife is a well organised person, with experience in running a business. She gave her evidence in a clear and confident fashion and demonstrated a moderately good recollection of events. I was inclined to consider her evidence was largely truthful, save for the fact that she was prepared to give the husband almost no credit for anything he had done during the marriage. While there was, in my view, substance in her complaints concerning the husband’s lack of effort, I am not persuaded he was quite as indolent as she suggested.

18The husband did not make a good impression in the witness box. He appeared mainly concerned with settling old scores with the wife and arguing with her solicitor. He had a marked tendency to heap blame on the wife at every opportunity. He gave her no credit for the fact that she had met all of the liabilities following the separation, including all of the payments on the car he uses and the mortgage payments on the home which he has occupied.

19Overall, where there was a difference in the evidence, I was inclined to prefer that given by the wife. This did not, however, go a long way in assisting me, since I was left at the end of the very short trial with what I regard as an inadequate understanding of the factual background. The findings that follow are, in some instances at least, little more than impressions I gleaned or an educated guess about what actually happened.

Initial contributions

20The wife claimed she made an initial contribution of $30,000 from the sale of a unit she owned in Coastal Town W at the commencement of cohabitation. The documentary evidence to support this was far from conclusive and I was not persuaded the wife’s recollection on this particular issue was reliable. I am satisfied that she did have some savings at the time and that she had some modest equity in her unit. Overall, I gained the impression she may have had somewhere between $10,000 and $20,000, plus a car worth around $10,000.

21I accept the husband also had a vehicle, but this appears to have been acquired using a loan (guaranteed by the wife’s father) that was repaid during the first years of the relationship. Although the husband claimed to have had some other assets, notably two computers worth $9,000, I consider that the value of the assets owned by the wife at the commencement of cohabitation was somewhat greater than those owned by the husband.

Financial contributions during the relationship

22The wife worked industriously throughout the marriage as the manager of a business she operated with her father. I find her employment in this business was the only regular source of income for the husband and the wife. In 2003, the wife’s father effectively gifted a half interest in the business to the wife, which thereafter was run by a family trust controlled by the wife’s father and a family trust controlled by the wife.

23Notwithstanding the apparent legal equality, I accept the wife’s evidence that her father is by far the dominant figure in the business and that while she has the day-to-day management of the business, her father has effective control of the major decisions, including the way in which any profit from the business is distributed. The wife’s income has been set at a present day equivalent of $65,000 per annum. Although the evidence was unclear, I accept that from time to time the wife has drawn more from the business than her wage. For example, in a couple of years prior to the separation and before a major decline in the business, following the loss of the largest customer in about October 2010, the wife’s taxable income was in excess of $116,000 (although I am not necessarily satisfied that she actually received all of the additional distributions).

24I was not persuaded the husband made any contribution at all to the wife’s business or to the income she derived from it.

25The husband worked as a sales representative with a [local business] for the first few weeks of the relationship, but his employment was then terminated. The husband then decided to commence his own [business] from the garage of the home the parties acquired at the time they commenced living together. The business was subsequently moved to commercial premises in 2003, but this proved to be unviable and the business was closed down in May 2010. Thereafter the husband was largely unemployed.

26The evidence concerning the income from the husband’s business was extraordinarily vague, for which each party blamed the other. While the husband claimed it was a joint business, it was in fact operated under his sole name and he certainly had the day-to-day running. He claims that the wife assisted with the accounts and should have known about the success or otherwise of the business, but the wife said she had almost nothing to do with that aspect of the business, being far too busy operating her own business.

27As a result, no documentary evidence was ever produced during the proceedings relating to the income that the husband might have enjoyed from the business. Doing the best I can with what evidence was available, I am satisfied that the business was never a success and that, at most, it derived sufficient income to meet most of its expenses, including the rent on the commercial premises, and to pay for some of the equipment that was acquired. This was achieved, however, only as a result of injections of funds by the wife. Thus, for example, the wife drew $10,000 in March 2009 from her father’s business as personal drawings and in April 2009 she transferred $8,066 from her father’s business account to the husband’s account to cover a deficit. She also transferred $4,900 in October 2005 from the MasterCard account of her father’s business and paid other funds to the husband’s business from her personal credit card. The wife was not challenged on her evidence that the husband had agreed to repay the $8,066 and the $10,000 upon the sale of some equipment from his business when it closed down. This payment never eventuated.

28The wife claims that the husband was lazy, put little effort into his business and was content to spend much of his time smoking, drinking and pursuing his interest in band music. She says she met almost all of the household expenses and paid almost all of the bills and that there was very little financial contribution from the husband to these expenses. Whilst accepting that the wife’s evidence was exaggerated to some extent, I am satisfied on the evidence available that the husband made a very minor financial contribution during the marriage and that by far the greater financial contribution came from the wife.

Post-separation financial contributions

29The husband has not had employment since the separation, whereas the wife has remained employed throughout. She has contributed her income to meeting all of the outstanding expenses. Were it not for her paying the mortgage and other outgoings, the former matrimonial home would have been sold by the mortgagee. The payments she has made following separation total $85,646 (covering the home, the husband’s business and joint liabilities). The major item was $56,727 in mortgage payments. The wife has only been able to meet these expenses because she has lived very modestly, initially in the on-site caravan and then in cheap, poor quality accommodation provided by her mother.

Non-financial contributions

30I am satisfied that both parties made non-financial contributions during the relationship. Both did some work around the house and garden and there was some sharing of domestic responsibilities in the earlier years. The parties agreed that he would become responsible for the household duties when he closed down his business because the wife was so busy running her business. I find the husband cooked some more meals after he stopped working in his business, but I am not persuaded much else changed. I accept that the wife continued to employ a housecleaner and a gardener. I am not persuaded the husband has done anything other than the most basic maintenance around the home during the period since separation and I am inclined to think there is substance in the wife’s complaints that he could have done much more to present the property in a better condition for sale.

Assessment of contributions

31The husband’s counsel submitted that marriage was a partnership and that although the husband may not have made as significant a financial contribution as the wife, contributions overall should nevertheless be assessed as having been made equally. The wife’s solicitor submitted that contributions should be assessed in proportions 80:20 in favour of the wife.

32I consider that the wife made a somewhat greater contribution at the commencement of the relationship than did the husband. I am satisfied that her financial contributions during the time of cohabitation were of vastly greater value than those made by the husband. I am also satisfied that following the separation her contributions were overwhelmingly greater than those of the husband. In the exercise of the wide discretion conferred by the legislation, I assess contributions as having been made in proportions 70:30 in favour of the wife.

Section 75(2) and other factors

33The wife’s solicitor submitted there should be no adjustment for s 75(2) factors, with the outcome being that the wife would receive 80% of the assets. On the other hand, counsel for the husband submitted there should be a 20% adjustment in favour of the husband on account of s 75(2) factors. This latter submission was made on the assumption that contributions would be assessed as having been made equally as the husband had proposed.

34The husband is 55 years of age, is presently unemployed, and is in receipt of social security. He claims to be suffering from physical and psychological difficulties following two incidents. The first of these was an assault on him in Coastal Town W in June 2011, as a result of which he sustained head injuries. The assailant was found guilty and fined $1,000. The husband gave evidence in his affidavit that he had a criminal injuries claim pending, but the progress of this claim and the likely extent of the compensation to be paid were not explored at all during the course of the trial. The second incident which the husband claimed had caused him psychological distress occurred in the Coastal Town W Courthouse in 2013 when the husband found himself sitting next to another litigant who proceeded to cut himself with a knife and, according to the husband, threatened to stab him.

35There was no satisfactory medical evidence concerning the husband’s health or the impact of the two incidents mentioned above. In his submissions, counsel for the husband did not suggest that the husband was unemployable but asked me only to accept that it may take some time for the husband to return to work. I accept that the husband, at age 53, with his less than impressive physical presentation, and chequered working history will find it difficult to obtain employment. In the event he does obtain any employment I would not anticipate it would result in him earning anything other than a very modest income.

36Neither party has contributed to the income or earning capacity of the other party and contributions to their property and financial resources have already been discussed. Neither party has any responsibility to support any other person and neither has the care or control of a child. Neither is cohabitating with any other person. There was no suggestion that either party wanted to undertake a course of educational training. Neither has any commitments out of the ordinary, save that the husband claims that he needs ongoing medical treatment, but he gave no indication of the cost of this and raised it only in the context of the difficulty he would have in the event he was required to move out of the matrimonial home and live in the caravan at Coastal Town P. The proposed orders will not have any adverse impact on the ability of a creditor to recover any debt.

37The marriage was of relatively short duration and the period of cohabitation overall spanned about 11 years. The marriage has had no impact on the earning capacity of either party. The parties have enjoyed a modest standard of living and it would be reasonable to hope this would continue; however, in the case of the husband, this will be difficult as the asset pool is so small and his income earning capacity is also small.

38The husband asserts that the wife will ultimately be one of the beneficiaries of what is said to be the substantial assets of her parents (who I note are divorced). The husband’s evidence about the extent of property owned by the wife’s family was not challenged and I accept they have fairly valuable assets, probably worth in excess of $4,000,000. The wife would appear, at present, to enjoy a good relationship with her father; however, the husband’s own evidence asserts a past rift in the relationship between the wife and her mother and sister. The wife’s father is 70 years of age, and he holds most of the assets to which I have referred. There is no indication that he is in poor health, having now recovered from a serious motor vehicle accident, and there can be no guarantee the wife will ultimately receive an interest in her father’s estate. The husband’s mother is 85 years old and owns her home in Coastal Town W worth about $380,000 which is free of encumbrance. The husband expects to receive a half share in her estate. I do not propose to take into account the possibility that both parties will one day benefit from the estate of their parents.

39In the exercise of the very wide discretion conferred by the legislation, and taking particular note of the fact that the wife’s age, state of health and personal drive are such that she is more likely to be able to earn a good income to support herself in the future than the husband, I propose to make an adjustment on account of s 75(2) factors in favour of the husband to the extent of 12.5%, bringing about a disparity of 25%. I recognise that in dollar terms this is a modest amount.

The outcome

40As a result of my assessment of contributions and the adjustment made for s 75(2) factors, the assets of the husband and wife will be divided in proportions 57.5% to the wife and 42.5% to the husband. In arriving at this result, I observe that a not insignificant proportion of the wife’s share of the property will be held in the form of superannuation which she will not be able to access for some time.

41The wife indicated at the end of the trial that she was keen to retain the home and anticipated being in a position to buy out the husband’s interest regardless of the way in which the assets were divided. In my view, this provides a neat and quick way in which to resolve what has been unfortunate and protracted litigation, the resolution of which has proved difficult because of disputation concerning the presentation and marketing of the matrimonial home.

42I propose to require the husband to vacate the property upon payment of a first instalment of $70,489, with the balance of $20,000 being paid 28 days thereafter. The staggered payment has been made with a view to ensuring the property is delivered up to the wife in no worse condition than it was at the time of the last inspection by the real estate agent who has been attempting to sell the property.

Orders

43For these brief reasons, I propose to make the following orders:

1.The wife shall pay the husband $90,489 with the first instalment of $70,489 to be paid in 90 days and the balance of $20,000 to be paid 28 days thereafter.

2.The husband shall transfer to the wife his interest in the [Matrimonial Property] (Certificate of Title Volume XX Folio ZZ) simultaneously with payment of the sum of $70,389 and shall vacate the said property forthwith upon that payment.

3.The husband shall be at liberty to lodge a caveat against the title to the said property to secure payment of the second instalment of $20,000, provided that the husband shall meet all costs associated with the lodgement and withdrawal of the said caveat.

4.The wife shall indemnify the husband against all liability in relation to the mortgage secured against the title to the Matrimonial Property and shall use her best endeavours to secure his release from liability under the mortgage.

5.In the event the wife fails to comply with paragraph 1 of these orders, the husband and wife each have liberty to apply for an order for sale of Matrimonial Property

6.The wife shall transfer and assign to the husband all her interest, if any, in:

a.the on-site caravan at Coastal Town P;

b.the husband’s Falcon vehicle; and

c.furniture and household effects in his possession.

7.The husband shall transfer and assign to the wife all his interest, if any, in:

a.the [Country Town M] business and the [Smedley Family Trust];

b.the wife’s superannuation; and

c.furniture and household effects in his possession.

8.The husband shall indemnify the wife and keep the wife indemnified against all liability in relation to his:

a.Bankwest visa debt;

b.personal loans from his family; and

c.business creditors.

9.The wife shall indemnify the husband and keep the husband indemnified against all liability in relation to her:

a.credit card debts; and

b.any liability the husband may have in relation to the Country Town M business and the Smedley Family Trust.

10.The husband shall remain responsible for 42.5% of the Bartercard liability and the wife shall remain responsible for 57.5% of the said liability.

11.The application and response otherwise be dismissed.

12.In the event either party wishes to apply for an order for costs, they are to seek the listing of the application for oral argument within 28 days of delivery of these reasons.

I certify that the preceding [43] paragraphs are a true copy of the reasons for
judgment delivered by this Honourable Court

Associate