T and T
[2003] FMCAfam 228
•25 June 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| T & T | [2003] FMCAfam 228 |
| FAMILY LAW – Property – gifts and loans by wife’s mother – split of husband’s superannuation. |
| Applicant: | M T |
| Respondent: | S T |
| File No: | CAM 3109 of 2002 |
| Delivered on: | 25 June 2003 |
| Delivered at: | Canberra |
| Hearing Dates: | 23 & 24 April 2003 |
| Judgment of: | Brewster FM |
REPRESENTATION
| Counsel for the Applicant: | Ms Tonkin |
| Solicitors for the Applicant: | McGuinness Eley |
| Counsel for the Respondent: | Self-represented |
ORDERS
That within 28 days the husband pay to the wife the sum of $108,000.
That upon payment of this amount the wife
(a)Do all things necessary to transfer to the husband her interest in the property situated at 10 I Street, P, and
(b)Indemnify the husband in relation to any liability for any debt owing to her mother L B.
That as against the husband the wife is declared the sole legal and beneficial owner of the property known as Unit 6, P Close, J.
That as against the husband the wife is declared the sole beneficial owner of the land situated at 9 D Street, K.
That pursuant to s.90MT(1)(a) of the Family Law Act 1975 whenever a splittable payment becomes payable in respect of the husband's accumulated interest in the Commonwealth Superannuation Scheme (“CSS”), the wife shall be entitled to be paid an amount calculated in accordance with the regulation using a base amount, at the date of these orders, in the sum of $106,364 and that there be a corresponding reduction to the entitlement the husband would have had in that scheme but for this order.
That pursuant to s.90MT(1)(a) of the Family Law Act 1975 whenever a splittable payment becomes payable in respect of the husband's defined interest in the CSS, the wife should be entitled to be paid an amount calculated in accordance with the regulations using a base amount, at the date of these orders, in the sum of $55,939 and that there be a corresponding reduction to the entitlement the husband would have had in that scheme but for this order.
That given that orders (5) and (6) were made without procedural fairness having been accorded to the trustee of the scheme, I direct that the solicitors for the wife forthwith serve upon the trustee of the scheme a copy of these orders. The trustee of the scheme is at liberty to have the matter relisted in order to seek to vary or set aside orders (5) and (6). The trustee shall have 28 days from the date of service of these orders to make such application.
Subject to these orders each party is entitled as against the other to all the chattels in his or her possession and all choses-in-action in his or her name.
That either party is at liberty to relist this matter for the purpose of obtaining enforcement or other machinery orders.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CANBERRA |
CAM 3109 of 2002
| M T |
Applicant
And
| S T |
Respondent
REASONS FOR JUDGMENT
Introduction
This matter concerns competing property applications.
Background
The husband is aged 43 and the wife 45. They commenced to live together in July 1980 and married on 3 November 1984. There are three children of the marriage: A who is 16, B who is 15 and C who is aged 12.
The parties separated under the one roof in about June or July 2001 and physically separated in October of that year when the wife left the matrimonial home.
In July 1979 the wife purchased a unit in Queanbeyan. This cost $26,450 and the whole of the purchase price was advanced by her parents. The property was never occupied by her and was rented out. It is apparent that the advance from the wife's parents was a loan not a gift, as the rent was utilised to repay the monies they had advanced.
The wife sold her Queanbeyan unit in 1990. The precise amount she received was not known but is likely to be in the order of $66,000. By this stage the loan from the parents had been paid out. The wife used the monies from the sale of the Queanbeyan property to purchase a property in J in March 1991. This was purchased for $104,000. An amount of $50,000 was advanced by her mother L B and the balance of the monies from the Queanbeyan unit were used to complete the acquisition of the property, pay stamp duty and legal costs and to make certain improvements to the property.
The wife says she made two payments to her mother from rent in late 1992, each of $643. Apart from this, however, she made no repayments.
The wife's parents, and, after her father's death, her mother made other advances to the parties. In August 1985 her parents paid $5,418.11 to enable the parties to discharge a personal loan. In December 1986 an amount of $10,000 was advanced for the purpose of being applied to the mortgage on the matrimonial home and in January 1988 a further $5,000 was advanced for the same purpose. In 1995 the wife's mother advanced the parties $10,929 for them to build a pergola.
The husband acknowledges that the payments in 1985 and 1995 were in the nature of loans. He does not acknowledge that the monies advanced to purchase the J property, the $10,000 paid in 1986 or the $10,000 paid in 1988 were by way of loans. I will discuss this aspect of the case later in this judgment.
In the meantime, however in 1983 the parties purchased a property at P which became the matrimonial home. It is not necessary for me to relate the details of this purchase. Suffice to say much of the monies required to complete the purchase were borrowed by way of mortgage and that by 1990 this mortgage had been discharged.
Earlier this year, the wife contracted to purchase a property at K. This purchase has not yet been completed.
After their separation the parties reached an agreement whereby the care of the children would be shared on a week about basis.
The parties' applications
The wife seeks that the matrimonial home be sold and the proceeds divided 75/25 per cent in her favour. She proposes that each party keep their superannuation entitlements. She proposes that chattels be divided on a "pick a pile" method and during the hearing the parties agreed on this and I made orders at the conclusion of the hearing concerning chattels.
The husband seeks that the former matrimonial home be transferred to him in return for a payment by him to the wife of $115,000. He seeks that a splitting order be made in relation to his superannuation.
The approach to be taken
I propose to apply the usual four stage process to this case. The first stage involves making findings as to the parties' assets and liabilities. The second stage involves a consideration of contributions of the type referred to in paragraphs (a), (b) and (c) of s.79(4). The third stage involves a consideration of such paragraphs of s.75(2) as may be relevant in this case. The final stage involves taking an overview of the division arrived at through the second and third stages to discern if the overall result is just and equitable.
The property pool
The parties agree that the former matrimonial home at P is valued at $267,500 and that the wife's property at J is valued at $250,000.
I propose to ignore any equitable interest the wife may have in the K property she is purchasing. She has paid an amount of $20,000 towards this property but I am satisfied that all of this was borrowed from her mother. There is no evidence that her equitable interest exceeds the money she owes on this property.
The wife has NRMA shares at an agreed value of $2,426 and a motor vehicle valued at $9,300. I am satisfied that she owes her mother a sum of $8,000 with respect to this motor vehicle so its equity is $1,300.
At separation the husband also had NRMA shares which he sold. The wife claims they were valued about $2,500 and the husband accepted this. I propose to add this to the pool of notional property.
The wife also sought to include the husband's Magna motor vehicle. There was a dispute about the value of this vehicle. In the end I do not have to resolve this dispute as I do not intend to include his vehicle in the pool. The reason for this is it was in essence funded from the monies from the sale of his NRMA shares and to do so would involve an element of double counting.
At separation there were monies held in a bank account in the name of the parties' son C of $4,025. I am satisfied that in reality these monies were those of the husband. I intend to include these monies in the pool of notional property. The wife had a bank account at separation of $4,036 and this amount will also be included in the pool.
The husband sought to include other monies in the pool. The first was a sum of $24,000 held in an account in the name of the three children The second was a sum of $18,000 or so (the precise amount is a little unclear) in an account held by the wife which came from her mother. The circumstances in which these monies came into existence are complex and I do not propose to relate these circumstances. Suffice it to say that I am satisfied that $12,000 of the money held in the account in the name of the children is held on trust for the children and the remaining monies in this account are really those of the wife's mother. I am satisfied that the other monies advanced by the wife's mother were advanced on the basis they would be held by the wife in trust for her.
I do not propose to include any of these amounts in the pool.
There remains the issue of the monies advanced by the wife's parents and by her mother.
The first of these was $50,000 advanced to purchase the J property.
It is plain that the predecessor to this advance, that is the monies advanced to purchase the Queanbeyan property, were advanced as a loan. The wife's case, supported by her mother, was that the $50,000 was in the same category. She said that the parties financial position was such that her mother agreed that the loan need not be immediately repaid but should be repaid at some stage in the future when the parties were able to do so.
The husband's position was that the $50,000 should be treated as a gift.
I am inclined to think that the $50,000 was originally advanced as a loan. This would be consistent with the previous advance to purchase the Queanbeyan property. There are reasons however for drawing the conclusion that the status of the loan may have changed. There are three possible findings that could be made as to the nature of this changed status. These are
(a)That the loan was subsequently forgiven. The fact that there have been no repayments made for many years is supportive of this conclusion.
(b)That whilst the loan was not forgiven the reality is that it is unlikely to be required to be repaid although there is a possibility that if the wife’s mother’s circumstances change such a requirement may be made.
(c)That the loan will be required to be repaid but not until the wife is able to do so. The position her mother advanced at the trial is that now there is a property settlement between the parties, this is the time for the loan to be repaid.
There is a great deal of uncertainty as to the status of this loan. I am not prepared to make a finding that it will be required to be repaid as a sequela to the parties' property settlement. On the other hand I also decline to make a finding that the loan was forgiven. I regard it as a loan which the wife will probably not be required to repay but which she might be required to repay. The uncertainty as to the status of these monies is one of the reasons for adopting an asset by asset approach, as will be seen later in this judgment.
I do find however that the other monies advanced were all by way of loans. I accept that the $10,000 and the $5,000 referred to in paragraph seven will be required to be repaid consequent on the property settlement. As I have indicated the husband accepts that the $5,418.11 paid in 1985 and the pergola money were loans. Some payments have been made off the loan advanced to build the pergola. The wife's mother maintained that $4,000 has been paid off but the husband maintains the amount was $6,200. I prefer the evidence of the husband in this regard.
The end result is that I find that the parties are indebted to the wife’s mother in the sum of $25,147 being the $5,418 advanced in 1985, the $15,000 advanced in 1986 and 1988 and $4,729 being the balance of the pergola loan. I do not propose to deduct this from the pool. Instead I will require the husband to pay one half of the debt to the wife and require the wife to indemnify him in relation to it.
The parties also have superannuation. The husband is in the CSS and has an accumulated interest of $113,208 and a defined benefit in the scheme which I am satisfied is valued in accordance with the superannuation regulations at $111,878. The wife has accumulated superannuation of $13,689.
The legislation now requires that I treat superannuation as property and I will do so. I do not include it in the pool but will deal with it in a different way.
The pool therefore comprises the following:
The P property
$267,500
The wife's J property
$250,000
The wife's NRMA shares
$2,426
The husband's NRMA shares
$2,500
The husband's bank account
$4,025
The wife's bank account
$4,036
The wife's car
$1,300
TOTAL:
$528,187
Contributions
At this stage I propose to ignore the wife's J property.
I do not propose to examine in detail the contributions of the various types made by the parties during the twenty one years they lived together. There are some things which might justify a slight adjustment in favour of the wife on the basis of contributions during the marriage. For example, in 1988 she resigned from her position in the Commonwealth public service and received a termination payment in relation to superannuation and other benefits of about $17,000. She joined in 1977 so on a mathematical basis at least, three elevenths of these monies would be referable to a period before the parties lived together. In addition, the four advances from her parents or her mother which I categorised as being loans were interest free. There was an attack made on the husband's contributions based on the fact that he apparently was a keen sportsperson and spent time away participating in his sport. Overall however, in the context of a twenty one year marriage and in the context of a pool the size of the one I am dealing with here, I do not believe any of these matters are sufficient to justify making a contribution based division with respect to the period of the marriage in favour of the wife.
Since separation the parties have shared the care of the children. Issues were ventilated at the hearing concerning the husband's financial contributions to these children but I find that there is no basis for making any distinction between the parties' post separation contributions as parents.
Since separation the husband has occupied the matrimonial home. Whilst he has paid the rates and insurance and other outgoings on this property there is no mortgage and essentially he has been occupying it "rent free". An issue arises as to whether an adjustment should be made on this count. It is debateable whether or not this issue should be considered under the rubric of contributions or as a s.75(2) factor but it is convenient to deal with it now.
At common law a co-tenant who occupies the jointly owned property to the exclusion of the other co-tenant is not liable to pay an occupation fee unless there has been an ouster of the other party: Dennis v McDonald [1982] Fam 63. In making an adjustment under s.79, I am not bound to apply the common law and could in any event extinguish any chose in action one party may have but it is a useful backdrop for a consideration of this issue. If there had been an ouster in this case then my starting point would have been a presumption that the wife’s common law rights should not be altered. However there was no ouster in this case.
The Full Court of the Family Court considered this issue in Lalor (1990) FLC 92-164. No consideration was given by the Court to common law rights of co-tenants and the issue of the relevance of those rights in a s.79 proceeding has not been the subject of any definitive guidelines. In any event the Court indicated that there is no fixed rule that a party occupying an unencumbered former matrimonial home should have that factor taken into account against him or her in any subsequent property settlement. In an appropriate case I am at liberty to do so. I usually do so where the party who leaves the matrimonial home has to pay rent. I do not believe the present case is an appropriate case to do so. The wife’s leaving the matrimonial home has had no economic consequences as she has been living rent free with her mother. This may have not have been as salubrious as the accommodation enjoyed by the husband but I do not propose to make any adjustment by reason of this wholly subjective consideration.
The wife's J property
The wife has made virtually all the contributions with respect to this property. The husband's contributions are trivial and can be disregarded. They consisted of assisting with uplifting some paving and doing some gardening. I propose to apply an asset by asset approach and deal with this property separately to the other property.
I propose to make an order under s.78 declaring the wife to be the sole legal and beneficial owner of this property.
The fact that the wife has made all the contributions to this property does not automatically mean that the husband cannot be given a contribution based share of it. During the marriage the husband made other contributions both financial and non-financial for the benefit of the family. If the J property were the only significant property in the case I would not be inclined to deprive the husband of any contribution based share of it. However, I consider it appropriate to exclude this property from the property to be divided on a contribution basis for the following reasons:
a)The J property is not the only property owned by the parties. The husband's contributions of all types, including contributions to the welfare of the family can be given recognition with respect to the other property of the parties.
b)The J property provided benefits to the family during cohabitation in the form of rent received. I consider this as offsetting such contributions to the welfare of the family as would otherwise have been regarded as justifying a contribution based share of that property in favour of the husband.
c)It provides a neater and simpler approach given the significant uncertainty as to the status of the $50,000 advanced by the wife's mother.
The balance of the property
I consider the appropriate contribution based division of other property to be an equal division.
Section 75(2) factors
When making an adjustment under this section I propose to include the wife’s J property.
As the parties share the care of the children I regard this as a neutral factor. Whilst no specific submissions were made in this respect a part of the wife's case which emerged from cross-examination appeared to relate to her responsibility to provide private school education for the children. The children are now all in secondary school and attending Catholic schools. The husband agrees that during the marriage the parties agreed that the children should attend Catholic schools. He says that following the breakdown of the marriage, and the financial implications that this involved, he advised the mother that in his view the children should attend government secondary schools. Accordingly, whilst he paid private school fees in respect of the children's primary school, in this year, now that they are all attending secondary school he has stopped making such payments. The wife has continued to send them to Catholic schools.
In my opinion, the decision of the husband that the children should attend government schools was, in the circumstances, an appropriate one. The fact that the wife chooses to continue to have the children attend Catholic schools is not a matter that I would visit on the husband by making an adjustment under s.75(2) in the wife's favour.
There is a disparity in the parties' earning capacity. There is no evidence that this is a result in any way of the marriage and so paragraph (k) of s.75(2) is not relevant. I propose to take this disparity into account however under paragraph (b) of that subsection. The husband's gross weekly income is $969 a week and the wife's $731 a week.
The disparity in income will also mean the husband will have a greater capacity to accumulate further superannuation during the balance of his working life than will the wife. She is two years older than the husband and this will also have some impact in this respect.
There is a substantial disparity in relation to the parties' superannuation but, as will become apparent, I propose to make a splitting order in this case and therefore this disparity plays no part in my consideration of s.75(2) matters insofar as the division of the parties’ property is concerned.. It will be seen that I propose to make an equal division of the parties’ superannuation. Of course a split in relation to superannuation should be made having regard to s.75(2) matters so an equal split might be seen as inappropriate. However in the circumstances of this case I propose to make the whole of the adjustment under s.75(2) to the parties' property excluding superannuation. The equal split of superannuation will be taken into account in this division.
Should there be a split of superannuation?
The wife's position, as I have indicated, is that there should be no split. She seeks a substantially greater share of the other property of the parties to compensate her for this loss of superannuation.
The husband's position however, as I have indicated, is that he does not wish to, in effect, trade existing property for the future benefits of superannuation. He seeks a substantial share of existing property now to enable him to re-establish himself.
It is apparent from a reading of the Explanatory Memorandum to the legislation that changed the law in relation to superannuation that there are two reasons for that change. These are:
a)To protect the spouse where the other spouse has significant superannuation and there is no other property or no other sufficient property from which an order could be made which would be just and equitable in the circumstances. Under the present regime the non member can be given a part of the member’s superannuation.
b)To achieve a just and equitable result where one party has substantial superannuation but there is also the substantial property. The amendments to the law allow greater flexibility. Previously, a superannuated party's interest in his or her superannuation would mean that current property would often have to be traded away in exchange for an asset that may not be able to be realised for many years. This would leave one party with realisable assets but no retirement income or less retirement income, and the other party with little or no realisable assets but, perhaps, a significant retirement income. Under the new regime this can be avoided.
In my view, it would not be just and equitable to deprive the husband of a substantial share of property to which he has made contributions over a long period of time on the basis that he will one day be able to enjoy substantial superannuation benefits.
The husband joined his superannuation scheme in April 1980. Until separation his benefits were almost all accrued during the relationship.
It is now almost two years since the parties separated and a significant amount of the husband's superannuation has been accumulated since this date. It would be possible to make a contribution based split on a basis of a pro rata adjustment. The complicating factor in this respect is the wife’s superannuation which must also be taken into account. The status of the wife's superannuation is not easily determined. Her employment has been somewhat irregular and it would be inappropriate to apply a pro rata approach to her entitlements.
In the circumstances, I propose to make an equal split of superannuation. As I have indicated I will have regard to the fact that such an even split does not take into account s.75(2) factors when adjusting the balance of the parties’ property.
I do not propose to split the wife’s accumulation interest superannuation. I propose to reduce the wife’s share of his accumulation interest to take account of this. If the husband were to be given a 50% split of the wife's superannuation it would give him $6,844. I propose to deduct this amount from his accumulated interest before making a splitting order with respect to his superannuation entitlements. This means that the amount to be split is $106,364 and the wife's 50% share of this is $53,182.
As I have indicated, the value of the husband's defined benefit entitlements is $111,878. The wife's half share of this is therefore $55,939.
Division of the remaining property
What I propose to now do is return to the s.75(2) factors and determine what adjustment should be made to the P property and the other assets in the pool on the basis of these factors.
One factor in this case is, as I have indicated, the disparity in the parties' salaries. The husband earns a gross salary of $969 a week as against the wife's gross salary of $731 a week. The gross earnings amounts to a disparity of $238 a week. I have calculated however that when tax and Medicare levies are taken into account the difference is reduced to $162 a week. A corollary of the husband’s having a greater salary is that he will have the benefit of a greater employer contribution to his superannuation.
It can be seen that as a result of the contribution based division the wife has substantially more property than the husband. She will have the J property worth $250,000 (subject to a contingent debt of $50,000) and her half share of the balance of the property to a value of $139,000 (rounded off). This totals $389,000. After deducting her share of the debt to her mother ($13,000 rounded off) this leaves her with assets in the order of $376,000. This could end up at $326,000 but I do not assess this as likely. The husband will end up with his half share of the property excluding J, that is $139,000 and $126,000 approximately after he pays his share of the debt to the wife’s mother.
In my opinion, the disparity in the parties' property justifies an adjustment in favour of the husband under s.75(2). I propose to make an adjustment in his favour of 7.5% of the total property pool, that is the pool including the J property.
Conclusion
The end result is that the husband is to receive half the value of the pool after the wife's J property is deducted on the basis of contributions. This totals $139,093. He is to receive an additional 7.5% of the total pool, including the J property, on the basis of s.75(2) factors. This totals $39,614. The total of these two amounts is $178,707. He already has property to the value of $6,525. This leaves an amount to be paid of $172,182.
The P property is valued at $267,500. If $172,182 is deducted from this it leaves an amount of $95,318 that he would have to pay the wife to acquire her interest in that property. I will add to that one half of the debt to the wife’s mother. Half of this debt is $12,573. This makes the required payment $107,891 which I round off to $108,000.
I propose therefore to make an order that the husband pay this amount to the wife and that the wife transfer the P property to him.
I will order that the wife indemnify him in relation to the debt to the wife’s mother.
I am conscious of the fact that at first glance it would appear that I am being more generous to the husband than his response would indicate. However, the superannuation split that the husband envisaged provided for a base amount for the wife of $20,000 which is much less than I have in fact ordered.
Applying a broad brush the end result is that the wife will have property in the form of her J home to a value of $250,000, although there is a possibility that its value to the wife could be $200,000 if she is required to repay her mother. She will also receive net an amount of about $95,000 from the husband and she has other property in the pool of a little under $8,000. She will have to repay her mother about $13,000. This will mean that she will get property in the order of $340,000 or $290,000 if her mother requires the $50,000 to be repaid. The husband will receive in effect about $166,000, that is about $179,000 from the settlement less about $13,000 for the debt to the wife’s mother
Looking at this and also having regard to the superannuation split, I am satisfied that it represents a just and equitable division of property.
I will not make any order for the sale of the P property if this amount is not paid. The husband in his response sought an order which would involve him paying the wife $115,000 and he believes he will be able to raise such an amount. If for some reason this turns out to be not feasible the matter can be re-listed and I would vary the orders under section 79A(1)(b).
I certify that the preceding sixty-seven (67) paragraphs are a true copy of the reasons for judgment of Brewster FM
Associate:
Date:
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