Stewart and Stewart - [2008] FMCAfam 22

FEDERAL MAGISTRATES COURT OF AUSTRALIA

STEWART & STEWART

[2008] FMCAfam 22

FAMILY LAW – Property – matrimonial home main asset of parties – consideration of s.75(2) factors.

Family Law Act 1975, s.75(2)

Bonnici v Bonnici (1992) FLC 92-272

Applicant:

MR STEWART

Respondent:

MS STEWART

File number:

MLM 9478 of 2006

Judgment of:

Burchardt FM

Hearing date:

6 December 2007

Date of last submission:

6 December 2007

Delivered at:

Melbourne

Delivered on:

8 February 2008

REPRESENTATION

Counsel for the Applicant:

Ms R. Stoikovska

Solicitor for the Applicant:

McCluskys Lawyers

Counsel for the Respondent:

Mr P.D. Sweeney

Solicitor for the Respondent:

Kliger Partners

ORDERS

That forthwith the wife sign all documents to enable the property at B and being the land described in Certificate of Title Volume 7xxx folio 160 ("the B property") be sold by way of public auction to take place in March 2008 by real estate agents Hocking Stuart. That the reserve be nominated by the parties within fourteen days of the date of these Orders and failing agreement to be set by the agent. The proceeds of sale of the property be applied as follows:
(a)Firstly all costs, commissions and expenses of the sale with Kliger Partners in conjunction with McCluskys Lawyers;
(b)Secondly to discharge the mortgage number Rxxxxx in favour of the National Australia Bank ("the mortgage") and any other encumbrance affecting the B property with the wife being responsible for the council and water rates for the real property and the utilities on the real property;
(c)Thirdly the husbands will provide at his cost and expense including the registration fees in order to lodge withdrawal of caveat for caveat number AE208418Y registered on 27 February 2006 on behalf of the husband by Joannidis & Associates;
(d)Fourthly the balance then remaining be divided in the proportions of:
(i) 57.5% to the wife;
(ii) 42.5% to the husband.
(e)That the husband shall be totally responsible for the $4,000.00 due to W College.
That in the event that the real property not sell at the scheduled public auction then the real property remain on the market for a period of a further ten weeks and thereafter the parties will arrange to schedule a second auction on the same terms and conditions as set out in paragraph 1 herein.
That the wife retain to the exclusion of the husband the 2004 Toyota Echo motor vehicle and that the wife be responsible for and indemnify the husband in relation to all moneys owed by her to Toyota Finance in relation to the motor vehicle being retained by her.
That the wife retain her interest in WG business.
The husband retain the amount he has received for his shareholding in ASR Group.
The husband retain his 1999 Toyota Sedan motor vehicle and indemnify the wife in relation to all moneys outstanding to Toyota finance in relation to the said motor vehicle owned by him.
That unless otherwise specified in these orders and except for the purposes of enforcing the payment of any money due under these or any subsequent orders:
(a)each party be solely entitled to the exclusion of the other to all property (including choses-in-action) in the possession of such party as at this date. The furniture, personal possessions and like chattels in the B property are considered to be in the possession of the wife save and except for the art works which will be divided as set out in Schedule A attached hereto;
(b)money standing to the credit of the parties in any joint bank account is to become the property of the wife;
(c)each party hereby foregoes any claim they may have to any superannuation benefits belonging to or earned by the other;
(d)all insurance policies to become the sole property of the owner named thereon;
(e)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;
(f)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
That the Application of the husband filed 8 November 2006 and the wife's Response filed 15 March 2007 and the wife's amended Response filed 13 September 2007 be otherwise dismissed.
That pursuant to Rule 19.50 of the Family Law Rules it was reasonable to brief Counsel.
That pursuant to Rule 19.51 of the Family Law Rules it was reasonable for solicitor appearing as Counsel on this day.

THE COURT NOTES

That the parties intend these Orders shall as far as practicable finally determine the financial relationships between them and avoid further proceedings by them.

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

SCHEDULE A

Artworks to be retained by the Wife.

(i) The Louis Kahan "Mother and Child" etching 1/50
(ii)The Louis Kahan "Reflection", Watercolour, signed and initialled lower left.

(iii) The Linda Dryparker :"Café" Lithograph
(iv)The Polly Courtain "Nude". Oil on paper signed and dated '86 lower right.
(v)The Steve Glassborough "Terracotta". 3d, signed and dated 1989.
(vi)The hanging wall rug by Szczurowska for Kaminski Gallery Sydney.

(vii) The painting "Julie". Watercolour signed lower left.

Artworks to be retained by Husband.

(i)Richard Ressom "Fly Away funny Bird". Oil on canvass signed lower left.
(ii)Richard Ressom "Without a Sound". Oil on canvass signed lower left.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLM 9478 of 2006

MR STEWART

Applicant

And

MS STEWART

Respondent

REASONS FOR JUDGMENT

Mr StewartStewart, the Applicant, married Ms StewartStewart, the Respondent, in May 1981. They separated in October 2001.
The biggest issue in this case is who gets how much when the former matrimonial home at BB is sold. It is agreed that the house is worth $1,800,000.00 and has an outstanding mortgage of $80,000.00.
The only other issues that now remain to be considered are:
a)whether anything should be done about the $50,000.00 withdrawn from the Ms Stewart Superannuation Fund by the wife in the years immediately following separation;
b)who should pay the final instalment of $4,000.00 to W College in respect of the children's education;
c)whether the $25,000.00 received by Mr Stewart for his shareholding in "ASR" should be included in some way;
d)what, if any, value should be allotted to the wife's interest in her business, WG; and
e)what, if anything, should be made of the husband's superannuation entitlements from 2001 until the present, which seem, at least in theory, to amount to over $50,000.00.

The Facts

Mr Stewart was born in January 1938. Ms Stewart was born in September 1948.
Both of the parties are professionally trained as pxxx but neither presently work in that capacity.
Mr Stewart married his first wife in 1971, by whom he had a son, J. They separated in 1978 and entered into a property settlement which gave Mr Stewart little except for a yacht and his accumulated superannuation with the Uxxx.
Following settlement of his affairs with his first wife, Mr Stewart cashed in his entire superannuation entitlement to pay out debts, to the extent that such funds were not invested in the purchase of the yacht.
Mr and Ms Stewart commenced cohabitation either in late 1979 or in 1980. It appears in the ultimate that it is agreed that at that time he had no assets but was debt‑free. His yacht was worth $25,000.00.
Ms Stewart was the sole registered owner of a property in N, which she bought in about August 1979 for $38,500.00. She paid a deposit of $16,000.00 and the balance of funds were borrowed by way of a mortgage. Apart from house contents, Ms Stewart had no property of any great value at that time.
The parties lived together at N until late 1983 when they moved to the B home.
In the meantime, work had been done on the N property.

It is common cause that Ms Stewart paid for the mortgage, but I find that the affairs of the household were commingled and that each party contributed from their earnings to the operation of the household.
At some point, whether before or after the marriage in May 1981 or otherwise is not material, the yacht was sold for $25,000.00. The sum so realised was committed in the ultimate to joint assets of the family.
There are three children of the relationship; S, born in October 1982; G, born in August 1987; and B, born in July 1989.
After the birth of S, the parties decided to buy a larger home, which they did, as mentioned before, at B. The N property was sold for $80,000.00, realising net proceeds of $75,000.00.
By this stage Mr Stewart's business, StewartSCY Pty Ltd, was going well, and I infer it was because of this earning capacity taken in conjunction with the significant increase in the N property that the parties were able to buy the B property. It was bought, as I have said, in late 1983.
After the birth of S, Ms Stewart did not work for some years. Rather, she was at home as a full‑time mother.
Mr Stewart's business interests went well and by 1986 a company in which he had part‑ownership was bought out by MN for $2,400,000.00.
Paragraph 22 of the husband's trial affidavit filed on 16 November 2007 is, to an extent, equivocal, but it seems clear to me that he was paid $500,000.00 initially with a promise of a further $100,000.00 after 12 months. Ms Stewart says that Mr Stewart has never provided her any adequate explanation of how he applied the balance of these funds.
Neither side’s figures are entirely easy to follow, but if one accepts the evidence of the husband, who, after all, had control of the funds, he paid $50,000.00 to pay out the mortgage; a further $236,000.00, which he can provide receipts for, to extend the family home; a further $61,000.00 in shares; and further amounts in a trip to F and on carpets and the like in the home.
If one assumes that the sale price of the husband's business bought by MN was, as he says, $2.4 million, then it is reasonable to suppose that the four directors received $600,000.00 each. Even if one allots a generous price to the trip to F and the other improvements to the house, one would struggle to approach a total of $400,000.00.
Mr Stewart's description as to where the rest of the monies went both in his affidavit material and under cross‑examination was extremely unconvincing. I will never know where that money went, but it plainly was not applied to joint living expenses or the purchase of other assets jointly for the parties. The overwhelming impression I get is that that money was frittered away in one fashion or another by Mr Stewart to his own benefit.
Notwithstanding this, however, Mr Stewart continued in business and continued to earn a very substantial amount of money up until 1989. Thereafter his business affairs ran into very stormy waters, and, on any view, there was very substantial legal action arising from them. He ultimately went bankrupt in 1994.
This necessitated a borrowing, it would appear, of $200,000.00 in the wife's name on the matrimonial home, which, on advice, had been transferred into her sole name earlier.
Although Ms Stewart makes complaint of the husband's lifestyle in the period leading up to this, I find that the wife and children also benefited from the substantial income gained by Mr Stewart.
While Mr Stewart was at pains to emphasise the luxurious nature of the lifestyle enjoyed by his family, the holidays and the like do not seem to me to have been overly luxurious. A caravan holiday on the Sunshine Coast once a year is not the outer limits of extravagance.
Nonetheless, although she now complains of it, Ms Stewart was being given cash amounts each week of $800.00, or subsequently $1,000.00, which, in the context of the time they were made, was a very substantial amount of money, even allowing that she had to meet all expenses, including school fees, out of that sum.
Ms Stewart ran the business known as StewartSCO Pty Ltd from 1994 to 1997 until Mr Stewart came out of his bankruptcy. She confirmed in answer to a question from me that she was little more than a figurehead.

Mr Stewart did the work. During this time it appears that the $200,000.00 mortgage was reduced to $80,000.00 and the self‑managed Ms Stewart Superannuation Fund was set up. That fund appears to have been credited with substantial savings, although I have not been told exactly how much.
Mr Stewart took back control of the company and continued to run it thereafter.
From round about 1997 onwards Ms Stewart started work in her own private practice as a Cxxx as well as working with SFL such that her total work was full‑time.
In the late 1990s Ms Stewart's mother became ill. Ms Stewart asserts, and I accept, that she was under great strain in providing help and assistance to her mother in her illness, and running her household as well as having a full‑time job.
In 1997 the husband was offered a position as managing director of a USA software company, but it appears that either in that role or some other role he began an association with Dr W. It would appear that the husband was employed by a number of corporate entities owned or controlled by Dr W between 1999 and 2007.
In 2001 the relationship between the parties had deteriorated to a point where Mr Stewart was requested by Ms Stewart to leave the matrimonial home. From then on, Mr Stewart paid the mortgage of $1,000.00 a month together with $800.00 per week initially directly to Ms Stewart and $3,000.00 per annum towards private health insurance for the family.
While these are substantial payments on any view, it should be noted that the net effect has been to require the mother to run the entirely of her household, including discharging school fees in substantial amounts for the three children, on a net amount of $800.00 per week.
The wife inherited $45,000.00 from her mother at or about the time of separation. She invested this money as to $20,000.00 or so in stock and the remainder in other set-up costs for a business operated in B known as the WG. That company continues to trade and has stock, it would appear, of about ninety to one hundred thousand dollars. The amount of profit it made remains in dispute.
The two elder children have finished school, and S has lived away from home for most of the time since the end of 2002.
G lived with the mother from 2001 until April 2005 when she went to live with her father for a time. She now lives independently.
B is just finishing year 12 and is highly likely to go on to tertiary education.
Neither party is in perfect health. Mr Stewart is now almost 70 and is dependent solely on a pension of $317.00 per week.
He has retained his benefit in the sum of $25,000.00 which was paid out to him by ASR. He has in fact been dismissed from ASR.
During this employment by ASR and by associated predecessors under the control of Dr W, he has never received any superannuation payments that he is aware of, although he has sought to obtain information about this.
The gravamen of his evidence was that when he raised the issue of superannuation, he was threatened with dismissal and chose discretion over valour, a response I regard as reasonable.
Nonetheless, it is now notionally open to Mr Stewart to press this issue of his superannuation entitlements, albeit that in the light of his previous history as a litigant, one can understand his reluctance to do so.
Mr Stewart deposed that he had received random consultancy work which gives him a small income but that its future is uncertain. He also said he had provided some help from time to time to his children as and when he was able.
The mother's health is also in some respects poor. She had a hip operation last year, and asserted that she had to return to work after only two weeks because of the necessity to make a living. Her evidence about trying to serve customers on crutches and the pain involved in doing so was compelling. She may have to have another hip operation. She would like to retire.

The Size of the Pool

There is no dispute that the matrimonial home in B is worth a net $1,720,000.00. It is by far and away the biggest asset that the parties possess.

The $50,000 Drawn Down by Ms Stewart from the Superannuation Fund

Ms Stewart's evidence was that when her husband departed in 2001, she received the sum of $800.00 per week out of which she had to pay school fees, in the first year or two at least, in very substantial amounts. I accept that this was so. It was not substantially challenged.
Ms Stewart's evidence was that her husband had taken most of the business records, and that in any event she desperately needed money to live on. I accept that she drew down moneys from the superannuation fund of approximately $50,000.00 in the years immediately following separation. While the fact that she did not tell her husband about this does not do her any credit, it is plain that the relationship between the parties was strained at the time, and in any event I find that her conduct in this regard was necessitated by financial need. While $800.00 a week is a lot of money if you have free accommodation and free health insurance thrown in, it is by no means a large amount when three or even two sets of private school fees are being paid.
It is in my view wholly inappropriate in these circumstances to recredit the $50,000.00 back into the pool.

The $4,000.00 School Fees Owing to W College

It has always been understood between the parties that Mr Stewart would pay school fees. To the extent, an extent far from clear, that

Ms Stewart has dipped into the moneys advanced to her from time to time by Mr Stewart for living expenses, I think that this was justified.
It is readily apparent that Ms Stewart has been hard-pressed financially. She has sought, admirably in my view, to foster the children's best interests, as seen by both parents, by keeping them in private school, and in my view it is entirely appropriate that the $4,000.00 remaining payable to W College should be paid for by Mr Stewart.
The evidence given by Ms Stewart of her unduly early return to work following her hip replacement was, as I have said, compelling. I also accept that it has been necessary for her to borrow sums of money from her family to achieve whatever travel she has achieved (predominantly for business purposes) in the interim.

The $45,000.00 Inheritance and the WG Business

It is well established that an inheritance received at the end of, or after, a marriage devolves, in the absence of other intent or compelling circumstances, solely to the benefit of the party that receives it (Bonnici v Bonnici (1992) FLC 92-272). Indeed, Mr Stewart did not claim otherwise in respect of the $45,000.00 left by Ms Stewart's mother to her.
It was put nonetheless that the business represented an asset to

Ms Stewart and one that should be brought into account in this proceeding.
The tax returns of the business show that it has made but little in the way of money. While I accept the criticism, advanced by Mr Stewart through his counsel, of Ms Stewart's description of her income, which was patently understated, equally I accept that it is not possible to put a value of any significance upon it.
The reality is that in my view the business represents the inheritance. It owes nothing to Mr Stewart, being in any event a wholly post-separation asset. In my view it is inappropriate to take it into consideration in the pool in any way. Not only has it, as I say, no definable value, albeit that such value would be extremely low, but it owes nothing to Mr Stewart.

The Husband’s Superannuation

In my opinion the same holds true for such superannuation as

Mr Stewart might be held to have notionally accrued since separation.

Mr Stewart's explanation as to why he had not chased superannuation with his post-separation employers was in my view highly credible. It reflects the weakness in his bargaining position in the intervening years. While I found some of his answers as to why he had not pursued the matter more energetically since his dismissal thoroughly unconvincing, it must be said that any endeavours to recoup any amounts that might be notionally said to stand to his credit is fraught with legal uncertainty, and further, in any event it is entirely a post-separation created asset. Like the wife's $45,000.00 inheritance and subsequent resulting business, I do not think it is appropriate to take it into consideration in the pool.

The Husband's ASR Shareholding

Consistent with the above reasoning, I hold that the husband's shareholding in ASR, valued at $25,000.00 when he was paid out, should not be taken into consideration in the pool. It is a wholly post-separation created asset.
Thus the pool is effectively the matrimonial home with a net value of $1,720,000.00, out of which the husband should pay the outstanding $4,000.00 fees owing to W College for B.

The Contributions of the Parties

The parties, through their counsel, sought to make much of the competing contributions made by the parties. In a marriage the length of this one, in which both parties plainly have made very significant contributions, it is difficult to do other than conclude that their contributions were of roughly equal worth. Ms Stewart was at all material times the primary home-maker. Mr Stewart was at all material times the primary income-earner.
I do not think that the wife's initial contribution in the form of the deposit at N, although plainly it provided a springboard of a sort to the purchase of the B home, is as decisive as her counsel suggested.
The value of an initial contribution may be eroded over time and that is what I think happened here. With the success of Mr Stewart's business interests in earlier years, I have little doubt that the parties could have bought such a home as B in any event. Indeed, had they been in greater debt when MN bought Mr Stewart out, more of the funds would have been put into discharging the mortgage and less would have been frittered away.
The dissipation by Mr Stewart of what, on any view, was a six-figure sum in the period of the late 1980s through to the early 1990s is a matter that has caused me considerable concern. Had this not occurred, it is reasonable to suppose that the parties' financial position might have been better.
Nonetheless, the fact is that the primary negative outcome for the parties was that they ended up $200,000.00 in debt in or about 1994. One can always speculate as to what the outcome of events might have been had Mr Stewart been less profligate.
He might have made perfectly proper investments in the share market for example which produced a similar disastrous negative outcome, although that is of course speculative.
The fact, further, is that Mr Stewart continued to earn money even in the period when he was bankrupt and did the primary work during the period that Ms Stewart nominally controlled his company. He continued to be the primary earner right through until the relatively recent stage when his employment ceased and he stopped paying the mortgage.
The mortgage has been reduced in the ultimate to $80,000.00. This has been substantially through the husband's efforts.
In all the circumstances, it seems inappropriate to me now to penalise the husband for his earlier profligacy when quantifying the contribution so the parties. I will return, however, to this aspect of the matter later.
In my view, looking at the parties' efforts as a whole through what was a very long relationship and bearing in mind their post-separation contributions, it seems appropriate to me to find that the parties contributed in equal amounts to the matrimonial home.

Section 75(2) Factors

Neither party is in particularly good health. Both are at an age when retirement might be said to be a reasonable prospect.
The criticisms advanced by Mr Stewart through his counsel of Ms Stewart's capacity to continue to work show a pitiless lack of sympathy that does him no credit. Ms Stewart has had a hip replacement and may well have to have another. She is almost 60.
The inference in Mr Stewart's case, to the effect that Ms Stewart should simply go on working until she drops, is as unattractive as it is unpleasant.
On the other hand, however, Mr Stewart is not a young man. He is almost 70 years of age, and although he may continue to earn some money in consulting, it is not likely to be in any way substantial.
I accept that Ms Stewart continues to provide emotional and financial support to all three children. Mr Stewart's evidence of the financial assistance he has given was vague and unsatisfactory even though I accept he has not, at least in recent times, been in any way flush with funds.
Furthermore, B will be living at home with her mother in all probability for some years to come, and this is not a matter which in my opinion can properly be the subject of criticism.
In my opinion it is appropriate that there be a 5 per cent adjustment in favour of the wife under s.75(2) of the Family Law Act 1975.

Just and Equitable

In my opinion, a result that gives to the wife a total of 55 per cent of the value of the matrimonial home would not be a just and equitable outcome. That is because she, unlike the husband, has not been profligate at any stage with monies. He has been so with his earlier dealings, he has been so with his $25,000.00 from ASR, he has some measure of future earning prospects which is, albeit unquantifiable and not great, likely to continue, and there remains the uncertain prospect that he may yet receive quite a substantial amount of money in respect of his superannuation post-separation to the present. All of these, on one view, are matters that could have been dealt with in the various subheadings above, but when one puts them all together, in my view it is appropriate that there be a property division between the parties of 57 and a half per cent to the wife and 42 and a half per cent to the husband.
The parties are directed to prepare minutes of orders to give effect to these reasons for judgment.

I certify that the preceding seventy eight (78) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Associate: Brooke Evans

Date: 8 February 2008