Tirkel & Loebenstein

FAMILY COURT OF AUSTRALIA

TIRKEL & LOEBENSTEIN

[2007] FamCA 1134

FAMILY LAW – PROPERTY - alteration of property interests - contributions – inheritance – global approach - just and equitable.

FAMILY LAW – PROPERTY – duty of disclosure – gaps in husband’s case – value of inheritance at time inherited.

Family Law Act 1975 (Cth) s 79(4)

J & J (1955) 2 All ER 85
Norbis & Norbis (1986) 161 CLR 513
C & C (unreported, Full Court of the Family Court of Australia, Fogarty, Nygh and Lindenmayer JJ, 13 March 1990)
In the Marriage of Bonnici (1991) 15 FamLR 138
R & R (unreported, Full Court of the Family Court of Australia, Nicholson CJ, Ellis and Fogarty JJ, 6 December 1994)
In the Marriage of ZYK (1995) 19 FamLR 797

APPLICANT:

Ms Tirkel

RESPONDENT:

Mr Loebenstein

FILE NUMBER:

NCF

2897

2002

DATE DELIVERED:

18 September 2007

PLACE DELIVERED:

Newcastle

JUDGMENT OF:

Justice Mullane

HEARING DATES:

16, 17 & 18 July 2007

REPRESENTATION:

COUNSEL FOR THE APPLICANT:

Mr Schonell

SOLICITOR FOR THE APPLICANT:

Baker Love, Solicitors

COUNSEL FOR THE RESPONDENT:

Mr Tregilgas

SOLICITOR FOR THE RESPONDENT:

MRM Lawyers

Orders

On or before 9 October 2007 the husband must do all acts and execute all documents submitted by the wife to transfer to the wife all his interest in the following properties:
1.1the property known as the K property being the land in Folio Identifier …; and,
1.2the property known as the R property, being the land in Folio Identifier ….
On or before 9 October 2007 the husband must pay to the wife a sum of $16,859.
If the said sum is not paid by the date specified the husband must pay to the wife interest at the rate prescribed by the Family Law Rules calculated from 9 October 2007 on so much as is from time to time outstanding.
In consideration of the husband’s compliance with Orders 1, 2 and 3 the wife must indemnify the husband and keep him indemnified in respect of any liability for:
4.1 outgoings on the properties described in 1.1 and 1.2;
4.2outgoings in respect of her property known as the N property being the land in folio Identifier …; and
4.3any mortgage debt or other debt secured on any of the properties referred to in this order (including interest).
Except as otherwise provided in these orders each party is declared to have no interest in the items of property in the possession of the other.
Otherwise the wife’s Amended Application filed 23 April 2007 and the husband’s Amended Response filed 11 May 2007 are dismissed.

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

FAMILY COURT OF AUSTRALIA AT NEWCASTLE

FILE NUMBER: NCF 2897 of 2002

MS TIRKEL

Applicant

And

MR LOEBENSTEIN

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

This was a hearing of competing applications for alteration of property interests under Section 79 of the Family Law Act.

CREDIT

In cross examination the husband conceded that the statement in his Financial Statement of 26 March 2007 that he was paying the mortgage repayments on the R property was untrue as was the statement he was paying maintenance for the children, as he ceased such payments in February.
The husband was aware of his obligation in these proceedings to make full and frank disclosure in relation to his inheritance from his uncle and his substantial interest in the investments held by his father in trust in a Swiss bank as executor of the uncle’s estate. But despite considerable correspondence from the wife’s solicitors, interlocutory proceedings by her and court orders, all intended to ensure timely and complete disclosure by the husband on those matters he did not comply with his obligations.
In cross examination he conceded he did not make proper disclosure in his Financial Statement of June 2005 prior to the conciliation conference. He conceded that the document “fails miserably” to make disclosure. On 1 June 2005 an order was made for him to give discovery by 12 August 2005 of any documents in his possession or control regarding his inheritance. He said he thought he had done so. He said “I provided a series of documents to my solicitors”. The documents were called for, but none were produced. When it was put to him that no documents were produced by 12 August 2005, he answered, “I though they were”. He conceded also that his then solicitors’ letter of 12 August 2005 to the wife’s solicitor listing assets of the estate makes no reference at all to the Swiss investment. Nor did their letters of 6 September 2005 and 13 September 2005 (the day before the conciliation conference).
But he conceded that on 19 April 2006 an order was made for him to produce a list of the documents in his possession, custody or control regarding the inheritance by 5 June 2006. He said he thought he discharged that obligation. But when there was a call for the document, no document was produced. Exhibit W4 establishes that his then solicitors received from his father on 12 December 2005 a copy of the 2000 report on the Swiss investment. He said that at that time the wife’s solicitors had already been provided with a copy of the 2000 report. He testified that in about March 2006 he gave his then solicitors copies of the 2000 and 2002 reports regarding the Swiss investments and the solicitors told him they then provided copies to the wife’s solicitors. Then he said he instructed them again in October 2006 to do so. Their letter of 23 October 2006 to the wife’s solicitors enclosed a copy of a 2002 report regarding the Swiss investments. He said that he complied with the April 2006 order in that he provided his solicitors all documents he had about the inheritance.
The husband’s explanation for his failure to honour his disclosure obligations regarding the inheritance and his interest in the Swiss investments were largely that his former solicitors were dilatory and his father was reluctant to provide information regarding the Swiss investments or distribute the funds to his sons, because as a Jewish father he thought it essential that his sons have substantial funds safe in an overseas location in case they or members of their family ever have to flee from religious persecution. There was documentary evidence to substantiate that his former solicitors were dilatory about some aspects.
But when the husband’s father, a retired public officer, was cross examined, he said he couldn’t recall any specific discussions with his son about the investments in Switzerland. He said if the husband had asked him the value of the investments, “I wouldn’t have known. I didn’t know myself. I had a few annual statements. Most I didn’t”. He said, “my memory is not as good as it was”. But he contradicted some of the husband’s evidence. He said (referring to his son), “if he had asked the amount in Switzerland, I’d have given him any documents I had and whatever information I had.”
The Court finds on the balance of probabilities that the husband did not pursue the issues sufficiently with his father. In addition, it emerged that the husband had failed at times to disclose in the proceedings some information he already had about inheritance and the Swiss investment.
However, the husband did not present as dishonest or as having intended to mislead the Court or intentionally withhold information. He presented as honest and generally reliable, but having failed to honour his obligation of full and frank disclosure in the areas mentioned.
The wife presented as an honest and reliable witness, although on some historical issues, such as regarding property transactions of the husband in Queensland, her recollection as stated in her affidavit, which appears to be hearsay, was wrong.

BACKGROUND

The parties commenced cohabitation in the wife’s home in the N region in September or October 1991. The husband owned a one quarter interest in a property in W and his brother and one of his parents had the other interests.
The parties married in November 1993.
In January 1994 the husband moved to North Queensland to take up employment there. The wife moved to North Queensland in February that year and they then rented accommodation. The N property was then tenanted and has generally been tenanted since February 1994.
From March or April 1994 until September 1994 the parties lived in Thailand and each completed a Diploma in Bangkok. After they returned to Australia, the wife purchased a Subaru motor vehicle and borrowed $26,000 from the National Australia Bank for the purchase.
In 1995 the W property was sold and the husband received $70,000 net.
When the parties returned to Australia from Thailand they resided in Sydney at first, but then in January 1995 they returned to North Queensland and resided there.
That year the parties purchased a block of land in the G region. They borrowed from the National Australia Bank to purchase the land and then also borrowed from the bank to construct a home on the property, which was completed by about March 1996.
The husband’s uncle died on 22 February 1996. He was resident in South Africa but he left the husband a one quarter interest in his Estate outside of South Africa. The husband during the cohabitation received various payments from the estate, but a substantial part of the estate to which the husband and his brother are equal beneficiaries is still held by the executor (the husband’s father) invested in a Swiss bank.
The parties also borrowed a further $10,000 in March 1996 to meet further expenses for the G property.
In May 1997 the parties left North Queensland and moved to the Newcastle area. The property at G was then tenanted for more than 5 years.
The parties purchased a home in the K region for $310,000 in 1998. They borrowed the whole of the purchase price from the National Australia Bank.
The parties’ twin sons were born in December 1998.
In 1999 the wife purchased an interest in the “P and W Trust” the purpose of which is to acquire land at the rear of the wife’s property in N and at the rear of 14 other properties on behalf of the wife and the other owners, subdivide the land acquired and transfer a lot to each owner to extend the land such owner already owns. The wife has paid a total of $24,016 for this to happen. The land has been acquired by the trust and subdivided, but it appears the transfer of the additional piece to her title is not yet completed.
The husband bought a VW motor vehicle in 1999 and borrowed $33,500 from the National Australia Bank for the purchase.
The parties separated from April 2002 to April 2003. The wife had been investing in shares during the marriage and during the separation she sold shares for $14,000 and used the proceeds to reduce the mortgage on the N property. The children resided with the wife during the separation. In January 2003 the parties sold the G property for $320,000 and received a net amount of $309,981.24. They paid out the mortgage debt on the K property.
After the parties reconciled in April 2003, in January 2004 they purchased the R property for $560,000. They borrowed $580,000 from the National Australia Bank. Since the purchase, the R property has been rented out for holiday rentals through an agent.
In September 2004 the wife borrowed $50,000 by way of a margin loan from Comsec for the purchase of more shares.
The parties finally separated on 24 September 2004. The wife remained at the K property with the children and the husband moved to other premises. The children spent time with the husband for half school holidays, each second weekend in school terms, and one evening of the school week in each fortnight. At separation the parties owed $34,938 for the wife’s margin loan from Comsec, $14,725 on the wife’s cheque account, $15,379 on the husband’s cheque account and $577 on the wife’s NAB Mastercard account.
On 30 January 2006 interim parenting orders were made in the Family Court at Newcastle providing for the children to reside with the wife and spend time with the husband for half the school holidays, every second weekend in school terms and every other week on the Monday evening from end of school until 7pm.
The wife continued trading in shares up to November 2006 but in September to November 2006 she disposed of most of her shares. She used some of the proceeds for repayment of her margin loan, and she used $40,000 of the proceeds to pay legal costs of hers in these proceedings.
In February 2007 the wife withdrew $50,000 from a joint NAB Flexi Plus line of credit account of the parties secured by mortgage over the N property.
The hearing was fixed for 6 days commencing on 16 July 2007. On 16 July the parties resolved the issues concerning the children and orders were made by consent including:
1.The children [the twin boys] born […] December 1998, (‘the children’) live with the mother.
2.The children spend time with the father defined as follows:
2.1During school terms on each alternate week from the conclusion of school FRIDAY to commencement of school TUESDAY; the father to collect the children from after school care at the commencement, and deliver the children to school at the conclusion. Such period to commence on Friday 27/7/07.
2.2For one half of all NSW gazetted school holidays being the first half in EVEN numbered years and the second half in ODD numbered years. For the purposes of calculating the school holiday period, it shall commence on the last day of the school term and conclude on the day before school recommences. If there is a pupil free day it shall be included in the school holiday period. In the event that the school holiday period in an uneven number of days then the extra day shall be exercised by the parents who have the second half. Changeover shall occur on the mid point of the holiday period at 5.30pm.
2.3On the Fathers Day weekend in the event that it is not a weekend covered by order 2.1 from after school Friday to the commencement of school Monday.

The hearing of the property proceedings continued on 17 and 18 July 2007 and Judgment was reserved.

PROPERTY AND LIABILITIES

The property of the parties at the time of the hearing comprised:
Jointly owned K property – agreed value  $500,000
Jointly owned R property – agreed value  $520,000
Furniture and furnishings at the R property per
admission by wife  $    2,000
Wife’s property at N (including interest in P & W Trust)
– value  $590,000
Husband’s post separation savings in bank accounts
– agreed  $    3,000
Husband’s shares – agreed value  $    4,350
Husband’s VW motor vehicle – agreed value  $    8,000
Wife’s post separation savings   $      550
Wife’s Subaru motor vehicle – agreed  $    2,000
Wife’s share in the C Lodge – agreed   $ 21,000
Wife’s shares in David Jones and Commonwealth Bank
per paras 148 & 211 of her affidavit             $    7,089
The husband’s remaining interest in the Estate of his
late Uncle – agreed     $992,578
Husband’s superannuation – agreed $182,500
Wife’s superannuation – agreed                  $114,780       $297,280
Total property       $2,947,847
The liabilities of the parties at the time of the hearing comprised:
Mortgage on the R property – agreed  $528,300
Wife’s post-separation debt (loan for legal costs)
secured on the N property – agreed  $ 23,000
Wife’s post separation debt for funds drawn on joint
NAB Flexiplus account   $ 50,000
Husband’s post-separation loan from his father for
legal costs paid to wife in these proceedings        $ 19,000
Husband’s credit card debt  $    8,000
Total liabilities  $ 628,300
The difference between the property and liabilities is $2,319,547.
The estimated capital gains tax liability on shares sold by the wife is about $8,000. There has been no assessment and the extent of any liability will depend upon her income and deductions for the 2006/2007tax year. There is no present debt. However, because the wife has for most of 2006/2007 been in full time employment, and the level of her income, it appears that she will be liable for income tax on those gains as a share trader at the top marginal rate, or at least capital gains tax.

INITIAL CONTRIBUTIONS

The applicant wife brought into the relationship the N property worth about $180,000 and subject to a mortgage debt of about $54,675, so that her equity was about $125,000.
She also brought into the relationship the furniture in the N property (which the husband concedes was worth $2,000), a Honda car she sold about 2 years later for $2,000, her membership to the C Lodge which she bought in 1987 for $5,000, her superannuation entitlements worth about $5,188, and a long service leave payout of $6,000. It appears that together all the property and superannuation entitlements the wife brought into the relationship were worth at least $145,000 in 1991;
When the parties commenced cohabitation in 1991, the husband brought into the relationship savings of $12,000, a 1978 Toyota Corona motor vehicle, and some furniture. He also had a one quarter share in the W property with his father and his brother. The value of his interest in the property was not established, but 4 years later when the property was sold and mortgage payments had been made from income from the property in the meantime, he received $70,000 after expenses of the sale.

CONSERVATION AND IMPROVEMENT OF PROPERTY

The following contributions were made in relation to the conversation and improvement of the property since the parties commenced cohabitation:
a) The G Property
The parties arranged for a contractor to clear the land. They engaged a builder to carry out the construction of the home. The wife purchased the white goods, tiles and many of the fittings. She organized the telephone connection. They both took out an additional home loan from the National Australia Bank of $10,000. The wife planned the landscaping by drawing diagrams and a plan for the garden. She was responsible for the purchase of paving materials and the materials for the construction of retaining walls. She also engaged the contractors to carry out that work and other landscaping work.
The parties together attended a nursery and purchased a large quantity of plants native to the area. The wife also purchased other natives and other trees and plants from time to time at other nurseries, built up the gardens with mulch, and attended to planting a large area at the back of the house with native trees as well as planting the front yard with native plants. The husband dug holes for the plantings.
The wife maintained the gardens, including watering and weeding on a regular basis, initially every other day while the garden was being established, and then less frequently.
b) The K Property
The husband arranged to have the driveway graded and gravel placed on the drive way. The wife assisted in making these arrangements. The wife planned the garden and replanted part of the block. She also planned and planted a vegetable garden. She arranged for mulch to be delivered on 3 or 4 occasions before the final separation and a further delivery after separation. She distributed the mulch throughout the garden using a wheel-barrow. The husband provided some assistance. She also maintained the garden by watering and weeding and has also maintained the vegetable garden by replanting, watering, picking and weeding. She installed an irrigation system in the garden.
The parties had the kitchen altered at the K property in order to allow a refrigerator to be installed. The wife painted the area in which the refrigerator was to be installed.
c) The R Property
The wife did most of the painting of the interior of the house and the husband provided some assistance. The parties together located second hand furniture to furnish the R property. Since separation the wife has arranged for the painting of parts of the interior and also arranged the sanding of the dining room floor. She also purchased a bar-be-cue and indoor and outdoor furniture. At the R property the wife has also fixed a lamp, put up a new shower rose, pruned and weeded the garden, purchased and planted some native plants, and cleaned the property inside.

PAID WORK

During the parties’ cohabitation the wife had the following paid work:

Full time from October 1991 to till January 1994;
Half time from February 1995 to December 1995 and then full time May 1991;
14 hours per week from March 1995 to May 1997;
3 days per week from May 1997 to January 1998 and then full time until December 1998;
In 1997 2 days per week;
Paid maternity leave for 12 months from December 1998;
In 2000 for a while part time, then 0.6 of a full time workload until May 2002, then 0.7 of a full time workload until April 2005 and then full time until January 2006; and
Then one day per week until September 2006.

The husband had the following paid work during the cohabitation:
·    Full time from October 1991 until January 1994;
·    From January to April 1994;
·    Full time from January 1995 until May 1997;
·    From March 1995 till May 1997 part time; and,
·    Full time from May 1997 until separation in September 2004.
The income of the parties from paid work and other sources during the cohabitation was substantial. The evidence does not cover the whole of the period of cohabitation. For the tax years 1995 to 2004 the husband’s total taxable income was $1,275,872. His taxable income for 1992 -1994 was on the evidence not less than the wife’s. Adopting her figures for that period, on the balance of probabilities his taxable income for the tax years 1992- 2004 was at least $1,408,760. The wife’s total taxable income for 1992 to 2004 tax years was $1,148,059. Their combined total taxable income throughout the period from commencement of cohabitation till final separation was more than $2.6 million.
Those figures include net income from the N property but do not include income on the investments of the uncle’s estate accumulating under the administration of the executor. The tax paid is not disclosed, but their after tax incomes were obviously considerable. In the later years both parties also received additional remuneration by way of compulsory employer superannuation contributions.
The large majority of the rental income of the parties was from the N property and for the tax years 1995 -2004 the wife’s taxable income included net income from the N property of about $76,029, so the wife’s taxable income from paid work for 1992-2004 was about $1,072,030, whereas the husband’s income from paid work for the same period, reflecting that he often worked longer hours after the children’s birth, was about $1,408,760.

HOMEMAKING CONTRIBUTIONS

The husband gave very limited evidence about contributions in the homemaking area. His evidence was:
When the boys were one they usually needed their meals prepared separately to ours. On the days that I worked and [the wife] did not, she would usually prepare the boys’ meals. I would prepare most of the boys’ food in batches and put them in plastic containers in the freezer for their Nanny […] to use.
He also testified:
As the boys got older they ate the same food as [the wife] and I and I prepared the meal for the whole family.
He says that the children would play with the wife while he cooked the dinner.
He does not give evidence as to the frequency with which he prepared the meal for the whole family.
The wife gave much more extensive evidence than the husband regarding homemaking contributions.
The Court finds on the evidence that before the birth of the children the wife performed the household duties such as cooking, washing, ironing and cleaning. After the birth of the children, this arrangement generally continued. She was on maternity leave for 12 months, whilst the husband continued in full time employment, apart from about 3 weeks of leave he obtained immediately after the birth of the children. She generally continued to do the shopping, washing, most of the cooking, the cleaning and the ironing for the family.
After she returned to part time work after her maternity leave, she continued in that role and also she fed the pets, operated the garden watering system in the summer months, and picked any vegetables in season. The husband then prepared dinner on Monday evenings and sometimes one other night per week. Otherwise the wife prepared the meals unless they ate out or had a take-away meal. A cleaner cleaned the house once a week, but otherwise the wife did the cleaning and continued to do the shopping, washing and ironing.
The wife generally managed the household. She made the arrangements for employment from time to time of a nanny to care for the children when both parents were at work. Sometimes the nanny prepared meals, fed the children or attended to washing and folding of laundry.
It appears that at times the husband assisted with washing up dishes, but the wife’s evidence is that for 6 months after their reconciliation in March 2003, he did not do the washing up at all and after that he only did it occasionally (when she specifically requested him to do so).
Throughout the relationship it was the wife’s responsibility to either ensure that the husband took out the garbage each week or did so herself. There was a long steep drive at the home they occupied after the birth of the children. The husband generally then took the garbage out, but often the wife had to remind him or take it out herself if he had forgotten.
When the parties were separated in 2002/2003 the children spent fairly limited time with the husband and not overnight. In that period the wife continued to perform the cooking, shopping, washing, ironing and cleaning for herself and the children. Since the separation for the large majority of the time the children have lived with the wife. The husband has performed homemaking chores for the children when they have been with him and the wife has performed such chores for them when they have been with her.

PARENTING

When the twins were born the husband took 3 weeks of leave to assist. For the first 11 days the wife and the boys were still in hospital. When the babies were out of the neo-natal unit, they were transferred to a private hospital and the hospital and the husband stayed there with the wife for 8 days, sleeping in a fold out bed, and was present for the majority of the time, day and night. He was involved in the care of the babies at that stage.
The wife breast-fed both boys for about 6 months, although one of the boys had supplementary bottle feeding. During her 1 year maternity leave she was a full time home-maker and parent.
The husband assisted the wife when she was breast-feeding the babies, getting up to them when they were small and taking them to the wife to be fed, sterilising bottles and preparing formula, changing nappies, playing with the children, feeding them their meals, bathing them, dressing them etc.
When he resumed full time employment 3 weeks after the boys’ birth, his employment often required him to work late and also included working for both days of every eighth weekend and working for 3 or 4 hours on each Saturday and Sunday of every fourth weekend. For 12 months after the boys were born, he arranged to delay his start of work on 1 day per week till 11 am, and finished work early at 1pm on 1 day per week. That enabled him to spend additional time being involved in the care of the boys.
When the boys turned one the wife returned to work, but for only 3 days per week. The husband was working from 9am to 6.30pm 2 days per week and 9am to 5pm on 3 days per week.
When the wife returned to work the parties would return from work together on her work days and the husband would care for the children while the wife spent about half an hour working in the garden. On those occasions he would often prepare the evening meal while the wife played with the children. The parties often bathed the children together when they were young. Later the children had separate baths and were bathed by one parent. The husband often did this. After dinner the husband often took the children to their room and played with them, read to them or listened to them sing.
Once the wife returned to work, there was a nanny to assist and that continued during periods when both parents were at work until eventually the boys were either attending preschool or school. When they started attended preschool, the nanny still was available on other days when both parents were working.
When the wife did overtime on weekends from 2000 onwards, she was often able to work from home. Later when the boys were older, some Saturday mornings when she had to work, she took the boys with her with colouring books and pencils and they were sometimes entertained by other staff while the wife was working. If she had to work, usually someone in the office would supervise the boys. On some occasions if the husband was at work, she contacted him and he supervised them for short periods to allow her to work.
In 2001 when the wife was studying for a further professional qualification, the husband sometimes took the children out to play in the yard or at a park or otherwise entertained them. When the wife was studying for an exam, she sometimes relied upon the nanny to mind the children when the wife was at home studying and the husband was at work.
When the parties were separated in 2002/2003, the wife undertook most of the parenting of the boys. The husband spent limited time with them in that period, usually about 6 hours each weekend. For a few months he had weekend contact every second weekend and a few hours with the boys one evening in the other week. Otherwise, it was the wife who was responsible for the parenting of the children.
Generally, it has been the wife who has performed tasks such as bathing the children, changing their nappies, dressing them, reading to the children at night, putting them to bed, supervising their toileting and cleaning of teeth, attending to the children if they wet the bed at night, rinsing and washing dirty nappies, preparing meals, shopping for their clothing and other needs, taking them to and from preschool and school, preparing them for school in the mornings, preparing their school lunches, and attended Parent/Teacher Nights and school related activities.
By reason of the husband’s much longer work hours than the wife’s during the cohabitation, he was not available as much as she was to care for the children. The husband participated in most of these activities, but it was the wife who performed most of these tasks.
The wife’s employment history since separation is set out in her affidavit and between September 2004 and January 2007, she generally worked only 3-4 days per week, apart from a period of about 9 months in 2005/2006 when she worked 5 days per week as a result of pressure from her employer. Since 22 January 2007 she has worked 5 days per week from 9am to 5pm.
She has also set out her routine for the period from September 2006 to January 2007 and arrangements for the period since then. She has the assistance of a nanny to care for the children at times when she is not available and they are not in the husband’s care. She also relies upon before school care and after school care on some days. The arrangements she made facilitate the boys attending recreational events outside school hours.
Since the separation in 2004, the wife has undertaken most of the parenting of the children and the husband’s parenting has been limited to the times that the boys have spent with him. Until 16 July that time has generally been half school holidays and in school terms each second weekend and 1 evening per week. Since then it has generally been half school holidays and in school terms once each fortnight from Friday evening to the following Tuesday morning.
The evidence compels a conclusion that the wife has provided a much greater part of the parenting of both boys since their birth than has the husband.

THE HUSBAND’S INHERITANCE

The husband’s inheritance was a contribution on his behalf by his uncle. It vested in the husband upon his uncle’s death in February 1996 more than 8 years before the parties’ final separation. The administration of the estate has been a very slow process. The husband’s father is the executor and still holds substantial funds in a Swiss bank investment representing the remaining undistributed part of the interests of the husband and his brother in the estate.
It appears on the evidence that the husband received his first distribution from the estate in 1999, and some others subsequently. In the more than 11 years since the husband acquired his interest in the estate the investments of the estate have accumulated substantial increases by way of interest and dividends. What he has received and his present share of the Swiss investment held by his father are together much greater than what he inherited in February 1996.
Much of the evidence concerning the husband’s interest in the estate is about the distributions he received and the present value of his share of the funds now held by his father in the Swiss bank account. Very little evidence addresses the actual value of the inheritance, when it vested in the husband. That value is needed to recognise the extent of the contribution to the property of the parties on the husband’s behalf. Much of the evidence there is on that issue involves values in foreign currencies and no direct evidence as to the Australian equivalent at the time.
The husband has an obligation to make full and frank disclosure. It is not within the wife’s power to have obtained all the necessary information to establish the value of the inheritance in February 1996. She has no onus or obligation to provide such details in respect of contributions of the husband.
In J & J (1955) 2 All ER 85, Sachs J, as he then was, said (at p 93):
In cases of this kind, where the duty of disclosure comes to lie on a husband, where a husband has, and his wife has not, detailed knowledge of his complex affairs, where a husband is fully capable of and has had opportunity to explain those affairs, and where he seeks to minimise the wife's claim, that husband can hardly complain if, when he leaves gaps in the court's knowledge, the court does not draw inferences in his favour. On the contrary, when he leaves a gap such that two alternative inferences may be drawn, the court will normally draw the less favourable inference, especially where it seems likely that his able legal advisers would have hastened to put forward affirmatively any facts, had they existed, establishing the more favourable alternative.
The principal evidence as to the value of the inheritance is Exhibit W1in the wife’s case. There is also annexure K to the wife’s main affidavit and the first paragraph 182.4 of the husband’s main affidavit. In addition there is the affidavit of the husband’s father and particularly paragraph 32 and the 1996 statement attached which provides the balance of the Swiss investments 4 days after the uncle’s death.
From annexure K to the wife’s affidavit it emerges that one of the assets was funds in Israeli Shekels invested with Bank M. In October 2002, more than 6 and a half years later, with accumulated interest those funds had grown to 103,000 Israeli Shekels. There is no direct evidence as to the value of the investment at February 1996 or the income that accumulated between then and October 2002.
There is some evidence of Australian bank interest rates on secured mortgage loans of the parties being 6.55% from 16/10/99, 6.9% from 8/11/99, 6.57% from 9/8/04 and 6.82% from 7/3/05. The evidence also establishes that the balance of the account in US dollars with the same bank was $141,312.59 at 22 February 1996 and $185, 358.95 at 21 November 2002. Using the compound interest formula of P = A x (1+ ^r/₁₀₀)ⁿ. Where P is the present balance, A is the earlier balance, r is the interest rate and n is the number of years between P and A, the interest rate over that period on that investment with Bank M averaged less than 5% per annum and slightly more than 4 % per annum.
Doing the best one can on the evidence the Court is satisfied that the investment in Israeli Shekels probably accumulated an average return of at least 4% per annum between 22 February 1996 and 22 October 2002. Accordingly, using the compound interest formula, the balance of the account at 22 September 1996 was about 73,333 Israeli Shekels. Calculating then the balance at February 1996 by allowing that the September figure includes interest at about 4 % for the 7 months between February and September, one arrives at a balance at February 1999 of about 71,661 Israeli Shekels.
In Exhibit W4 in the wife’s case there is evidence of the conversion rate of English pounds to Swiss Francs at 19 October 2000. There is evidence in Exhibit W2 in the wife’s case of relevant exchange rates to Australian dollars in January 2003( US dollars, Euros, and Swiss francs to Australian dollars) and August 2005 ( Israeli Shekels to Australian dollars). There does not appear to be any evidence of exchange rates to Australian dollars more proximate to February 1996, so doing the best one can on the evidence these rates have been used.
The Court calculates the value of the husband’s inheritance in February 1996 as follows by reference to the then assets of the estate:
Item  Value                  AUD conversion
oil painting  English pounds 20,000
National Westminster bank “        “            3,929
SUBTOTAL   “        “          23,929
Conversion  Swiss francs   61,650  $     78,157
Union Bank Switzerland Swiss francs 2, 507,176 $ 2,769,674
Bank M Israel   US$141,313  $    249,054
“       “          “                 Israeli Shekels 71,661            $      26,541
Jewellery in Safety Deposit Box at
First National Bank, Tel Aviv  $        3,000
Total value of estate  Australian      $ 3,126,426
The husband’s interest was 25% of the above estate so it was worth about $781,604 when it vested in 1996 and that was the value of the contribution on his behalf to the property of the parties.
In Norbis & Norbis (1986) 65 ALR 12 the High Court (Mason CJ, Wilson, Brennan, Deane and Dawson JJ) confirmed that both the asset-by-asset and global approaches are legitimate in approaching matters concerning the division of property and that the more appropriate methodology will depend on the circumstances of each case.
In C & C (unreported - 13 March 1990) the Full Court of the Family Court of Australia (Fogarty, Nygh and Lindenmayer JJ) dealt with an Appeal from a Judge at first instance. In property proceedings the trail Judge had dealt with contributions on an asset by asset basis. The husband had received a significant inheritance in 1986 and used that to acquire property. The parties separated in 1989 and at the time of the trial, the property purchased by the husband was worth $270,000.
In dismissing the Appeal, the Full Court held that the trial Judge’s findings were within her proper discretion.
There is a decision of In the Marriage of Bonnici (1991) 15 FamLR 138 by the Full Court (Nicholson CJ, Nygh and Tolcon JJ). The Husband inherited $20,000 in 1987 and about $500,000 in 1989 shortly prior to the parties’ separation in early 1990. The Full Court upheld the trial Judge’s rejection of the assertion that these assets were “resources” and found that they were clearly property which came into the parties’ hands during the marriage. The Full Court noted that the more difficult issue was whether the assets should be treated differently from the other types of property in which the parties had an interest.
They noted (at 143) that the answer “must depend upon the circumstances of individual cases”. They also commented there that a property does not fall into a protected category merely because it is an inheritance. They held that the other party “cannot be regarded as contributing significantly to an inheritance received very late in the relationship (and certainly not after it has terminated), except in unusual circumstances”.

The trial Judge had adopted the global approach to contributions and their Honours said (at 143-144):
In a case such as this, we think that the global approach, taken by his Honour, presents considerable difficulties. If the matter had been approached upon an asset by asset basis, we think that the task of his Honour and this court would have been a simpler one. To approach the matter globally as his Honour did, in circumstances where the wife had clearly made no contribution to a major asset, must of necessity have involved a greater weighting of her contribution than that of equality to the assets to which she did contribute. There would, nevertheless, have been nothing wrong with his Honour having approached the matter globally if he had explained how he did so.
If his Honour did so weight her contributions, he should have outlined his reasoning so that the same could be the subject of examination. Because his Honour failed to do this it seems to us that his judgment cannot stand unless it can be established that the end result which he reached was a proper one.
Subsequently in R & R (unreported, 6 December 1994) the Full Court (Nicholson CJ, Ellis and Fogarty JJ) dealt with an appeal in property proceedings where the Husband received a significant inheritance in 1986 and the parties separated in 1992. The proceeds of the inheritance were received in 1987 and invested. The trial judge adopted a global approach when evaluating the parties’ respective contributions on the basis that there had been a considerable mixing of monies between the parties and it was unproductive to consider the assets separately.
The Full Court allowed the Appeal on the basis that the trail Judge had not given adequate reasons and re-exercised the discretion. In doing so, it too dealt with the contributions of the parties on a global basis.
The Full Court decision of In the Marriage of ZYK (1995) 19 FamLR 797 was a decision about a lottery win of the Husband. The marriage was of 8 years duration and 2 years after the marriage the husband won $95,000 in Tatts Lotto. The trial Judge adopted a global approach in assessing the contributions. The Full Court (Nicholson CJ, Fogarty and Baker JJ) said at 801-802:
The global approach enables the Court to assess the contributions aspect of the s. 79 exercise in an overall way by considering the parties' contributions to their property as a whole although factoring into that exercise the circumstance, if it be so, that they may have made varying contributions to the total property at trial or which formed part of the history of their property during the marriage. It is the generally preferred and the generally adopted approach. It enables a broad approach to be taken to the varying contributions of the parties over the years of their marriage and in particular it usually has the advantage of more easily dealing with and giving proper recognition to paras. (b) and (c) contributions. However, where the contributions to the components of the total property are disparate, caution needs to be exercised in this approach and the overall conclusion tested against the requirement that the orders be ''just and equitable''. Lenehan is an example of a case where difficulties arose for that reason.
The asset by asset approach enables the Court to assess separately the parties' contributions to particular assets or groups of assets. It is the less preferred approach largely because it can at times be an artificial exercise and also because it can create difficulties in the proper evaluation of paras. (b) and (c) contributions. But there are a number of circumstances where it may be appropriate to do so, for example an inheritance received post separation, or where the financial relationship of the parties during the marriage was such that they treated some property as exclusively the property of one party to which the other party made no, at least no para. (a), contributions to it. It may be convenient in cases like that to treat that property separately rather than assess the overall contributions of the parties to the totality of their property.
However, the trial Judge has a discretion as to which course to adopt and does so having regard to what appears more suitable to the circumstances of the particular case.
…
We think it was clearly a case where the trial Judge was justified in approaching the matter in a global way. Certainly it cannot be demonstrated that he was in error in not adopting the approach now suggested by the wife.
I propose to adopt a global approach to contributions. It would be suggested for the husband that a better approach is to deal with the husband’s interest in the remaining funds of the estate, find that the wife made no contribution to them and the husband should retain them, and then, taking into account the other funds he has received from the estate (but not his remaining share of the trust funds) with all the other contributions, divide the other property in the ratio of their contributions.
The simplicity of that approach is appealing, but that approach is not just and equitable. The reason is that it would treat one particular item of property quite differently to the others. It quarantines it and more than 11 years of accumulated income from it, from the consideration of relativities of all the contributions of the parties, especially the non financial contributions. Such an approach prevents proper recognition of the non financial contributions particularly.
Another difference is that by inference it treats the income of such property during the cohabitation of the parties as a contribution of the party who owns it. That is not the approach applied to other property. For example, with the N property the wife’s contributions include the equity in the property she brought into the marriage; but not the rental from the property throughout the marriage. That would in a sense involve a double count. Similarly the net income from the R property is not treated as a contribution of the parties.
Similarly increases in value of an item of property, whether caused by improvement by the owner, inflation or a rising market are not treated as a contribution by the owner. Apart from other issues of justice and equity, an approach of treating income of particular bank accounts or investments during the marriage as contributions of the particular party who owns the account or investment is also contrary to the concept of marriage as a partnership.
Also, it is not just or equitable to treat the income generated by an asset as if it were a contribution by the party who owns the asset. Other assets owned by the other party or the parties jointly may be of similar value, but generate no income. An example would be where one party brings into the relationship a bank deposit of $10,000 and the other brings a car worth $10,000. Another example is where there is an investment in the name of one party producing income and the jointly owned matrimonial home owned by them jointly, and of the same value as the investment, producing no income.

CONTRIBUTIONS TO PROPERTY AND TO THE WELFARE OF THE FAMILY (paras (a), (b), & (c) of Subsection 79(4) of the Family Law Act)

The parties made joint and equal contributions as follows:

As owners of the R property for about 4 years, as borrowers and mortgagors in respect of the loan of $580,000 for its purchase and as lessors of the property for holiday lettings;
As owners for 8 years of the G property, as joint borrowers and mortgagors of the initial loan of $48,275 for the land and the subsequent loan of $171,126 for construction of the home and a further bank loan of $10,000, and as lessors for about 5 years;
As joint owners for 9 years of the K property and as borrowers and mortgagors for the bank loan of $310,000 for its purchase; and
As joint owners since January 2004 of the R property, as borrowers and mortgagors in respect of a bank loan of $580,000 for its purchase, and as lessors for limited holiday lettings over more than 3 years.

The applicant wife made the following further contributions:

Her initial contributions;
Her contribution as borrower of $26,000 in 1994 for the purchase of the Subaru car;
Her contributions to the conservation and improvement of properties;
Her after tax remuneration from paid work during the cohabitation;
Contributions by her and on her behalf by her employers to her superannuation entitlements over 16 years
Her contribution over 16 years as owner of the R property, as mortgagor in respect of loans secured on it, for more than 13 years as lessor and as participant for 8 years in the P and W Trust;
Her contribution by way of share trading activity and her contribution as borrower of the $50,000 margin loan to fund some of that activity;
About $74,000 paid in $1,000 fortnightly repayments on the R property mortgage since separation;
Financial support of the children for nearly 3 years since separation. The wife did not include in her affidavits or financial statement direct evidence of the expenses she has incurred. According to the husband’s financial statement his itemised expenses for the time the children spend with him are about $381 per week. Those expenses do not include expense for transport, medical, dental, optical, other health expenses, their part time nanny or housing costs such as the boys’ share of mortgage interest or rental. On the balance of probabilities the wife’s total costs for the boys apart from transport, medical, dental, optical, other health expenses or housing costs are more than $381 per week and her total costs of keeping the boys, including those other expenses are at least $550 per week. The wife has been receiving child support of about $350 per week from the husband. Accordingly, doing the best one can with the evidence the wife has provided about $200 per week for nearly 3 years;
Her parenting contributions; and
Her homemaking contributions.

The respondent husband made the following further contributions:

His initial contributions discussed earlier;
His contributions to the conservation and improvement of their properties as discussed earlier;
As owner of the interest in the W property for about 4 years;
His after tax remuneration from paid work during the cohabitation;
Contributions by him and on his behalf by his employers to his superannuation entitlements over more than 16 years;
The contribution on his behalf by way of the inheritance of $781,604 in 1996;
His contribution as borrower of $33,500 in 1999 for purchase of his VW motor vehicle;
His homemaking contributions;
His parenting contributions;
Financial support of the children for nearly 3 years since separation of about $731 per week including child support of $350 per week;
About $63,000 paid in $1,000 fortnightly repayments on the R property mortgage from separation till February 2007; and
An indirect contribution to the welfare of the wife and the children in that they have had the rent free occupation of the jointly owned K property for 3 years since separation.

The joint and equal contributions of the parties have been significant. The parties also made approximately equal contributions in terms of borrowing for the purchase of motor vehicles.
The husband made greater contributions than the wife in terms of his after tax income from paid work and contributions by or on his behalf to superannuation. He also made a major contribution by way of his inheritance. He has also made a greater contribution than the wife to the financial support of the boys since separation and his indirect contribution to the wife and the children through their occupation of the K property. Those matters all weigh in his favour.
The initial contributions were substantial, and the wife’s were on the balance of probabilities at least double those of the husband. The wife’s homemaking contributions have been substantial over more than 11 years, whereas over that period the husband’s have been quite limited. Since December 1998, for approaching 9 years, the wife has provided the large majority of the parenting for the 2 children. In the period since separation the wife’s repayments on the R property mortgage have been significantly greater than the husband’s. The wife’s contribution to the conservation and improvement of the parties’ properties has also been significantly greater than the husband’s. Her contribution as owner, mortgagor, and lessor of the N property has also been more significant than the husband’s contribution as owner of the interest in the W property. The wife also made a significant contribution to the property of the parties through her share trading.
Over all the finding is that a just and equitable result based upon the contributions of the parties would be a division of their present property and liabilities based upon entitlements being calculated by applying a ratio of 60:40 in the husbands favour to a notional pool arrived at by the following adjustments to the present pool of property and liabilities:
Present Property and liabilities  $2,319,547
Add Back
Wife’s post separation debts used for legal
costs and living expenses       $     73,000
Husband’s post separation loan and
present credit card debts  $     27,000
Proceeds of sale of shares used by wife for
Legal costs ( balance used to pay Comsec debt)  $    40,000
Subtotal$2,459,547
Less
Wife’s post separation savings  $   550
Husband’s post separation savings  $ 3,000
Husband’s cheque account debt at separation
(since paid from income)  $15,379
Wife’s cheque account and credit card debts
(since paid from income)   $15,302
$34,231
Adjusted Pool  $2,425,316
The findings as to contributions would see the division of property based upon applying the ratio of 6:4 (in favour of the husband) to the adjusted pool of property and superannuation. (No superannuation splitting order is sought.)

MATTERS UNDER SUBSEC 75(2) OF THE FAMILY LAW ACT

Under this heading the Court has made findings on the relevant maters listed in subsection 75(2).
Both parties are 46 and enjoy good health.
The husband’s average weekly salary is $3,923 and his employer also pays compulsory superannuation contributions for him equal to 9% of that. The wife’s average weekly salary is $1,774 per week and her employer also pays the compulsory 9% superannuation contributions. She also receives income by way of $350 per week child support from the husband and net rental from the N property of $155 per week, giving total income of $2,275 per week plus employer superannuation contributions.
Each party has the physical and mental capacity to continue his or her present gainful employment and continue to receive income from it.
The findings as to contribution would see the applicant wife’s entitlement calculated as follows:
40 % of adjusted pool is $970,126
This would comprise:
The K property  $   500,000
The R property  $   520,000
The N property  $   590,000
Wife’s superannuation  $   114,780
Wife’s car$      2,000
Share in the C Lodge  $     21,000
Other shares  $      7,089
The R property furniture  $      2,000
Funds from sale of shares used for legal costs     $     40,000
Subtotal$ 1,796,869
Less
The R property mortgage           $ 528,300
Paid cheque account and credit card debts $ 15,302
Amount payable to husband  $ 283,141
$ 826,743
Entitlement  $ 970,126
This would leave the wife with the following present property and liabilities:
The K property  $ 500,000
The R property  $ 520,000
The R property furnishings  $    2,000
The N property  $ 590,000
Savings $      550
Car$    2,000
Share in the C Lodge  $ 21,000
Shares $    7,089
Superannuation   $ 114,780
Subtotal$ 1,757,419
Less
Mortgage$ 528,300
Payable to Husband              $ 283,141
Loan for legal costs             $ 23,000
NAB Flexiplus debt              $ 50,000        $ 884,441
Net Total$ 872,978
The findings as to contributions would see the husband’s entitlement calculated as follows:
60% of the adjusted pool is $ 1,455,190
This would comprise:
Payable by wife  $ 283,141
Shares  $    4,350
Car  $    8,000
Interest in Uncle’s Estate  $ 992,578
Superannuation   $ 182,500
Subtotal  $ 1,470,569
Less cheque account debt at separation             $     15,379
Entitlement  $ 1,455,190
This would leave the husband with the following present property and liabilities:
Savings  $    3,000
Shares   $    4,350
Car  $    8,000
Payable by wife  $283,141
Interest in estate   $992,578
Superannuation   $182,500
Total property               $1,473,569
less
Loan from father   $ 19,000
Credit card debt  $    8,000       $ 27,000
Net   $1,446,569
The effect of orders based upon contributions would be a division of the parties’ present property and liabilities in the ratio of $1,446,569: $872,978 in favour of the husband.
The wife has the future care of the parties’ 2 sons under 18. That responsibility can be expected to continue more than 9 years.
The parties have the responsibility for the financial support of the twin boys. The husband’s current costs are about $731 per week including child support. The wife’s are at least $200 per week.
The parties each have commitments for the support of herself or himself of $914 per week. There is no direct evidence of the wife’s commitments, but they are probably comparable.
The parties have no responsibility to support any other person.
Each of the parties has contributed to the income and earning capacity of the other. By the roles the wife has undertaken in the areas of homemaking and parenting she has assisted the husband to remain in full time employment for the whole of the period since December 1998. Often he was free to undertake further study because the wife assumed responsibility for the children.
The husband has contributed to the wife’s income and earning capacity by on weekends and on weekdays after work supervising the children when the wife studying in the 3 or 4 months leading up to her exams that occurred in early March 2001. Also in the 8 or 9 weeks leading up to exams in August 2001, the husband minded the children for a few hours each Saturday while the wife studied. Although the wife failed that examination, she has subsequently passed it since separation.
The marriage and the parenting role the wife has adopted with the children have had adverse consequences for her income and earning capacity. Her commitment to the boys outside normal work hours was not compatible with the hours she would have had to work in her profession. As a result she chose a change of direction in her profession resulting in less after hours work.
The wife’s further training in her profession would have taken 3 years full time, but she has not been able to undertake it full time throughout because of her parenting role. Her income is significantly less than her income would be if she was able to develop further qualifications, like the husband.
Also in 1998, when both the parties enrolled in a degree course at the University of Newcastle, the wife was unable to complete the course because she was working part time, was pregnant with the boys, and their birth occurred in December that year. After she completed the maternity leave she then resumed those studies but because of her responsibilities for the care of the children, she was unable to complete the work required for the degree and therefore deferred. She has not completed the degree.
There is a need to protect the wife, who seeks to complete her qualification, in order to have more time in which to be available for the children. She proposes that when she has her qualification she will work part time so that she can be available to the boys on some afternoons after school to personally supervise and care for them.
The husband will continue to pay Child Support of at least $350 per week towards the financial support of the children.
The wife is likely to have to meet a tax liability of at least $8,000 in respect of shares she purchased during the marriage and sold after separation in 2006/2007.

SUBSECTION 79(2) OF THE FAMILY LAW ACT.

Subsection 79(2) provides:
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.
The husband’s greater ongoing role in the financial support of the children weighs in his favour.
The factors under subsec 75(2) that weigh in the wife’s favour are:
·She will have the responsibility for most of the future care and control of the boys for more than 9 years;
·She has made a much greater contribution to the husband’s income and earning capacity than he has to hers;
·The marriage and her homemaking and parenting roles have had adverse consequences on her income and earning capacity;
·There is a need to provide some protection to the wife to respect her wish to continue the parenting role she has adopted in the past and wishes to continue in the future;
·The husband is in a significantly stronger position that the wife as to income and earning capacity;
·The wife will have to pay about $8,000 tax in respect of sale of shares: and
·Orders based upon contributions alone would see the husband in a much stronger position that the wife as to property and liabilities.
Overall the matters under the subsection support a substantial adjustment in favour of the wife and the just and equitable result is an adjustment of $300,000 in favour of the wife, producing a division of their present property and liabilities in the ratio of $1,172,978: $1,146,569 in favour of the wife.

I certify that the preceding one hundred and thirty seven (137) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Mullane

Associate

Date: 18 September 2007

[2007] FamCA 1134

18 September 2007

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Equity & Trusts

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