Totolos and Totolos
[2011] FMCAfam 355
•28 June 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| TOTOLOS & TOTOLOS | [2011] FMCAfam 355 |
| FAMILY LAW – Property – net asset pool of over $2,000,000.00 – 18 year marriage – husband found to have made greater initial contribution – wife found to have greater needs pursuant to section 75(2) – ordered 55:45 division of the parties’ realisable assets in favour of the wife, together with an order equalising the parties’ respective superannuation entitlements. |
| Administration and Probate Act 1958, s.51 Family Law Act 1975, ss.75, 79 |
| M & M [1998] FamCA 42 C & C [1998] FamCA 143 Hickey and Hickey and Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 Re NHC and RCH (2004) FLC 93-204 AJO v GRO (2005) FLC 93-218 M and M [2006] FamCA 913 |
| Applicant: | MS TOTOLOS |
| Respondent: | MR TOTOLOS |
| File Number: | MLC 9788 of 2009 |
| Judgment of: | Bender FM |
| Hearing dates: | 13, 14 & 15 April 2011 |
| Date of Last Submission: | 15 April 2011 |
| Delivered at: | Melbourne |
| Delivered on: | 28 June 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr Wood |
| Solicitors for the Applicant: | Robinson Gill |
| Counsel for the Respondent: | Ms Stoikovska |
| Solicitors for the Respondent: | William J Keough |
ORDERS
The wife forthwith do all such acts and things and sign all such documents as may be required to transfer to the husband, at the expense of the husband, all of her right, title and interest in the real property situate at and known as Property W being the whole of the land more particularly described in Certificate of Title Volume [omitted] (“Property W”).
The wife forthwith do all things necessary, at her expense, to provide the husband with a withdrawal of the caveat numbered [omitted] currently registered by her solicitors over Property W.
The husband indemnify the wife against all apportionable rates, taxes and outgoings of or with respect to Property W of whatsoever nature and kind.
The husband forthwith do all such acts and things and sign all such documents as may be required to transfer to the wife, at the expense of the wife, all of his right, title and interest in the real property situate at and known as Property M being the whole of the land more particularly described in Certificate of Title Volume [omitted] (“Property M”).
The wife indemnify the husband against all apportionable rates, taxes and outgoings of or with respect to Property M of whatsoever nature and kind.
Subject to order 7 herein, the husband pay to the wife the sum of $446,528.00 (“the payment”) on or before 26 August 2011 (“the date”).
On or before 25 July 2011 the husband shall notify the wife in writing whether he is able to comply with order 6 herein.
In the event that the husband notifies the wife pursuant to order 7 herein that he is able to comply with order 6 herein and the whole of the payment has not been made by the date then the husband sign all documents and do all things necessary to transfer to the wife the real property at Property C being the land more particularly described in Certificate of Title Volume [omitted] (“Property C”) to be held on trust for sale (“the sale”) and upon completion of the sale, the proceeds of the sale be applied:
(a)firstly to pay all costs, commissions and expenses of (the said trust transfer and) the sale;
(b)secondly to pay any encumbrance affecting Property C;
(c)thirdly so much of the payment as is then outstanding together with interest thereon at the rate of 10 per centum per annum adjusted monthly from the date to the wife; and
(d)fourthly the balance to the husband.
In the event that the husband notifies the wife pursuant to order 7 herein that he us unable to comply with order 6 herein then the husband shall do all things necessary to forthwith place Property C upon the market for sale (“the alternate sale”) and upon completion of the alternate sale, the proceeds of the alternate sale be applied:
(a)firstly to pay all costs, commissions and expenses of the alternate sale;
(b)secondly to pay any encumbrance affecting Property C;
(c)thirdly 55 per cent of the net proceeds of the alternate sale, plus an additional $82,510.50, to the wife; and
(d)fourthly the balance to the husband.
Both parties have liberty to apply in respect to the terms of the sale or the alternate sale.
Pending the payment, completion of the sale or completion of the alternate sale:
(a)the husband have the sole right to occupy Property C and during such right of occupation the husband pay all rates and taxes and like apportionable outgoings of Property C as they fall due;
(b)the parties hold their respective interests in Property C upon trust pursuant to these orders;
(c)neither party encumber Property C without the consent in writing of the other party; and
(d)the husband and wife be equally responsible for payment of the mortgage to the Westpac Banking Corporation (“the mortgage”) registered over Property M and over the property registered in the wife’s name at Property H being the land more particularly described in Certificate of Title Volume [omitted] (“Property H”).
Upon payment, completion of the sale or completion of the alternate sale, the wife shall indemnify the husband against all payments and liability pursuant to the mortgage and shall do all things necessary to refinance the mortgage so that the husband has no liability in respect to the mortgage.
In the event the husband or the wife refuses or neglects to comply with any provision of this order:
(a)a Registrar of the Federal Magistrates Court of Australia at Melbourne is hereby appointed to execute all deeds and documents in the name of the party in default and do all things and acts necessary to give validity and operation to these orders; and
(b)the defaulting party is ordered to pay all reasonable costs incurred by the other party for the purpose of enforcing this order and providing his/her damages; and
(c)for the purpose of this order, an affidavit setting out the defaulting party’s failure to comply with the orders shall be sufficient evidence of neglect and default.
Paragraphs 15 to 18 inclusive of these orders are binding on the Trustee of the [T] Super Personal Fund (“the Fund”).
Pursuant to section 90MT(4) of the Family Law Act 1975, the amount of $238,447.50 be allocated as the base amount to the wife out of the interest of the husband (Member [number omitted]) in the Fund.
Pursuant to section 90MT(1)(a) of the Family Law Act 1975, whenever the Trustee of the Fund makes a splittable payment out of the husband’s interest in the Fund, the Trustee shall:
(a)pay to the wife the entitlement calculated in accordance with Part VI of the Family Law (Superannuation) Regulations 2001; and
(b)make a corresponding reduction in the entitlement that the husband would otherwise have had in the Fund but for these orders.
The operative time for the splitting of the Fund shall be four business days after the Trustee of the Fund has been served with a copy of this order.
The Trustee do all such acts and things and sign all necessary documents to fulfil any obligation set out in the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001 so that the wife’s entitlement can be calculated and paid to her in accordance with these orders.
Unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these or any subsequent orders:
(a)each party be solely entitled to the exclusion of the other to all superannuation and other property (including choses-in-action) owned by or in the possession of such party as at the date of these orders (the furniture, personal possessions, and like chattels in Property M and Property H being deemed to be in the possession of the wife and the furniture, personal possessions, and like chattels in Property W and Property C being deemed to be in the possession of the husband);
(b)insurance policies remain the sole property of the owner named thereon;
(c)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and
(d)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
IT IS NOTED that publication of this judgment under the pseudonym Totolos & Totolos is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 9788 of 2009
| MS TOTOLOS |
Applicant
And
| MR TOTOLOS |
Respondent
REASONS FOR JUDGMENT
Introduction
This matter relates to the division of the parties’ property after the breakdown of their 18 year marriage.
It is the wife’s proposal that the parties’ assets be divided such that she receives 60 per cent of the parties’ realisable assets and the husband receive 40 per cent of their realisable assets. The wife also seeks a superannuation splitting order that would reflect a 60:40 division of the parties’ current superannuation entitlements.
It is the wife’s argument that her proposal is just and equitable because of adjustments pursuant to section 75(2) of the Family Law Act 1975 (“the Act”) arising from her care of the parties’ two sons.
The wife is therefore seeking that the husband transfer to her his interest in the former matrimonial home at Property M (“Property M”) and Property C (“Property C”). She in turn would transfer to the husband her interest in the properties at Property W (“Property W”) and Property H (“Property H”).
The wife seeks the husband indemnify her in relation to the joint mortgage of $509,000.00 currently secured over Property M and Property H and do all things necessary to refinance such loan into his sole name.
In relation to the parties’ superannuation entitlements, the wife seeks a splitting order against the husband’s superannuation entitlements with [T] with a base amount of $300,969.00.
The husband is seeking that the parties’ realisable assets be divided equally between the parties. The husband argues that his much greater initial contribution offsets any section 75(2) adjustment in the wife’s favour.
In relation to superannuation, it is the husband’s proposal that there be a 60:40 division of the parties’ respective superannuation entitlements in his favour. It is argued this reflects his greater superannuation contribution and in particular that he had $112,000.00 of superannuation when the parties married.
The husband seeks orders be made whereby he transfers his interest in Property M to the wife, she retains Property H, that the wife transfer her interest in Property W to him and he retain Property C.
The husband proposes that the wife retain responsibility for the mortgage of $509,000.00 secured over Property M and Property H, and that he pay her $272,230.00.
In relation to superannuation, the husband proposes that there be a splitting order made against his [T] superannuation entitlements with a base amount of $175,669.00.
The parties are in agreement that they will each retain the furniture, chattels and motor vehicles currently in their possession.
In 2002, the husband’s mother made available to the parties the sum of $100,000.00. The wife argues this amount should be viewed by the court as a gift. The husband argues that the amount is a loan to be repaid upon a request to do so by his mother and should be included in the property pool as a joint liability of the parties.
Background
The wife was born [in] 1962 and is 49 years of age. She is employed as a casual [omitted] and earns approximately $25,000.00 per annum. The wife has [worked] on a part-time basis since prior to the parties commencing cohabitation. She has not re-partnered.
The husband was [in] 1953 and is 58 years of age. He is a self-employed [omitted]. He was in full-time employment with [T] in [omitted] until he retired in 2005. His current income varies depending on the [omitted] work he undertakes. He has not re-partnered.
The parties married [in] 1990 and separated under the one roof in December 2008. The husband vacated the former matrimonial home in October 2009. The parties have two sons [X] born [in] 1992 (“[X]”) and [Y] born [in] 1997 (“[Y]”). [X] and [Y] live with the wife. [X] is doing [course and university omitted]. He and the husband are currently estranged. [Y] is in Year 9 at [school omitted]. He spends time with the husband overnight each Saturday.
When the parties married, the wife owned the property at Property H. It had a value of approximately $120,000.00 and a mortgage of $10,000.00. The wife also had savings of $10,000.00, a motor vehicle worth $2,500.00 and minimal superannuation entitlements (no figure was provided).
At the time of the parties’ marriage the husband owned the following assets:
Property S $143,000.00 Property C
Less mortgage$200,000.00
<$69,000.00>
$131,000.00Superannuation benefits with [T] $112,477.00 Motor vehicles and boat $32,000.00 [omitted] Building Society savings $53,674.00 [omitted] Building Society $2,600.00 ANZ Access Account $10,500.00 Share Portfolio $85,000.00 [F] Business (savings and stock) $32,380.00 Total: $602,631.00
In early 1990, the parties purchased Property W for $150,000.00. A deposit of $30,000.00 was paid from the husband’s savings and a joint mortgage of $120,000.00 was taken out to complete the purchase.
The parties moved into Property W when they married. In 1992 the husband sold his [Property S] property for $143,500.00. $40,000.00 was applied towards the mortgage on Property W and $88,000.00 placed in a term deposit. This money was subsequently used for the husband’s share trading.
The parties separated in or around 1995 for three months when the wife and [X] moved to Property H. The parties reconciled and resumed living together at Property H.
In 1997, the parties demolished Property W and in 1998 the husband commenced building a new family home as an owner/builder. This property remains unfinished with considerable work needed to bring it to completion. The husband has been living in the partially completed Property W property since vacating the former matrimonial home.
In 2001, Property M was purchased. It was the wife’s evidence that Property H was too small for their growing family and when it became apparent Property W was not going to be completed in a timely manner, she began looking for an alternative family home. Property M had been passed in at auction. It was the wife’s evidence that her husband initially showed little interest in the property telling her, in relation to it’s purchase, to:
“do what she wanted”
She therefore obtained the deposit to buy the property from her father. It was her evidence she intended to sell Property H to fund the purchase of Property M.
It was the wife’s evidence the husband eventually agreed to be involved in the purchase and sought to be included in the contract.
The husband’s evidence was the wife purchased Property M without his consent and that he ultimately joined the sale to ensure the parties did not suffer penalty in the event the wife was forced to rescind the contract.
The parties purchased Property M for $350,000.00. They borrowed $500,000.00 from Westpac Bank, which amount was secured by way of mortgage/s over Property H and Property M.
The parties moved into Property M and Property H was rented out. It remains tenanted to this day.
The husband has been a registered share trader since 1980. The balance of the monies borrowed for the purchase of Property M was utilised by the husband to trade shares. The loan was converted to a line of credit facility with Westpac to enable the husband to draw down funds, up to $500,000.00, to fund his share trading. Additionally, all the parties’ living expenses were paid from this account. All the parties’ income, including wages, the rental from Property H and any income from share trading and dividends was paid into this account.
The husband also utilised an e-trader account with the ANZ Bank to fund his share trading. This account utilised the parties’ own funds and was not a line of credit.
In 2005, the husband took a retrenchment package from [T] and retired. He received an amount of $167,000.00, which was deposited into the Westpac line of credit. A further amount of $63,000.00 was rolled into his [T] superannuation fund.
After his retirement, the husband was engaged primarily in share trading. He was a day trader, trading in high volumes of shares, primarily low price “spec” stocks in the mineral and resource sector of the market.
The parties again separated in 2007. It was the wife’s evidence that she agreed to a reconciliation with the husband on a number of conditions, one of which was the line of credit be paid out in full and the husband’s share trading thereafter be funded by the parties’ savings and not by borrowings.
The husband absolutely refutes that he agreed to curtail his share trading or that he would pay out the line of credit. It was his evidence he would not have agreed to reconcile on those terms.
The parties do agree that one of the conditions of their reconciliation was that Property W was to be sold in its unfinished state. A purchaser for the property was found and a contract for sale entered into in September 2008. The sale fell through when the requisite certificates of completion for the work that had been done to that time were unable to be provided by the husband.
The parties have not tried to sell Property W since this aborted sale. Further, both parties agree that little to no work has been done to complete Property W since 2005.
In 2002, the husband’s father died intestate. Shortly prior to his father’s death, the husband’s parents sold an investment property. At his mother’s request, after his father’s death, the husband initially retained the monies received by his parents from the sale of the investment property.
It is the husband’s evidence that, after payment of expenses arising from the sale of the property and his father’s testamentary expenses, his mother instructed that he and his sister retain $100,000.00 each and that his brother retain $150,000.00. Such monies were to be utilised by the husband and his siblings to reduce their mortgages. However, in the event the monies were needed by the husband’s mother to fund her care in her old age, they were to be returned to her on request.
The $100,000.00 received from the husband’s mother was placed into the Westpac line of credit and was utilised by the parties in the usual conduct of their finances for general living expenses and to fund the husband’s share trading.
Shortly prior to the hearing of this matter, the husband’s family had sought legal advice in relation to their father’s estate as he and his surviving sibling had assumed the whole of the estate was their mother’s. However the husband’s father died intestate. Under section 51 of the Administration and Probate Act 1958, the husband’s mother is entitled to the first $100,000.00 of her husband’s estate and one third of the balance remaining thereafter. The balance is to be divided between the husband and his siblings.
One of the husband’s siblings predeceased his father leaving issue. There is now a question as to the husband’s nieces’ entitlement in their grandfather’s estate.
The husband’s father’s intestacy further complicates the status of the monies received by the husband from his mother after his father’s death.
When the parties married, the husband owned and conducted from the Property C factory a business called [F], which [omitted].
In or about 2004/2005 [F]’s major customers moved their operations off-shore. As a result, [F]’s business plummeted from an income of $10,188.00 in 2005 to an income of under $1,000.00 from 2007 onwards.
After the downturn in the [F] business, the husband retained $15,000.00 of unused stock which was stored in the Property C factory from 2005 onwards. The husband refused to dispose of this stock and Property C was unable to be tenanted. In these circumstances, the property did not generate rental income for many years.
In late 2009, the husband found a tenant for Property C. The husband moved the stock and other items stored at Property C to Property W and his mother’s home. The tenant, Mr R, is a [occupation omitted]. It took several months to install the “[equipment omitted]” needed to operate Mr R’s business. Mr R was not required to pay rental until the business became fully operational in August 2010. To date he has paid only three months of rental, at $2,450.00 per month, and at the time of the final hearing was several months in arrears of his rental. He still occupies the premises.
As noted earlier, the husband has been engaged in share trading since 1980. Upon his retirement in 2005, share trading became his major occupation. As at June 2007, the market value of the parties’ share portfolio was $965,243.00. As a result of the impact of the Global Financial Crisis, the value of the share portfolio as at 30 June 2008 had dropped to $250,662.00.
In late 2008, the husband sought to increase the parties’ line of credit by an additional $38,000.00. The wife did not agree to this. The husband therefore drew from his superannuation entitlements the sum of $168,000.00. He deposited $140,000.00 into the Westpac line of credit account and thereafter transferred $40,000.00 to the ANZ
e-trader account.
Perusal of the records of the Westpac line of credit for the period between 17 October 2008 and 27 February 2009 shows that $111,814.00 was used by the husband for share trading. In the same period, the sum of $50,870.00 was deposited into the account representing shares that were sold by the husband. This represents a net loss of $60,944.00. There was no evidence before the court in relation to the husband’s share trading using the ANZ e-trader account during this period.
On 20 March 2009, the husband signed an agreement with the wife to cease share trading utilising the line of credit. He continued to trade utilising the ANZ e-trader account.
On 23 March 2010, orders were made in the Federal Magistrates Court, by consent, restraining the parties from any share trading without the written consent of both the husband and the wife.
The current value of the parties’ shareholdings is as follows:
In wife’s name $37,750.00 In husband’s name $58,360.00 In [X]’s name $35,000.00E In [Y]’s name $35,000.00E Total: $166,110.00
The parties are in agreement that the shares in their son’s names are to be retained for the benefit of both boys’ tertiary education.
After separation, the husband retained the benefit of his 2008/2009 tax return of $21,853.00. It is agreed that this amount is to be included in the property pool.
The Issues
The parties’ agreed financial history is set out in the detailed background set out in this judgment.
The issues identified by me in relation to the division of property can be summarised as follows:
a)What constitutes the property pool and in particular:
i)Is the $100,000.00 received from the husband’s mother in 2002 a joint liability of the parties or a “gift”, a loan to be repaid upon the husband’s mother’s request, an advance by the husband’s mother to the husband of his share of her or his father’s estate, or the husband’s entitlement in his father’s estate given that the husband’s father died intestate?
ii)Should the value of the chattels in the former matrimonial home retained by the wife be included in the pool?
iii)The wife retained and utilised $12,000.00 of the parties’ joint savings at separation. Should this amount be included in the pool?
b)What, if any, adjustment should be made for the husband’s greater initial financial contributions (and if the $100,000.00 received from the husband’s mother is deemed to be a gift, then the contribution constituted by that gift) and is that offset by the wife’s contributions as home-maker and primary carer of the parties’ children both during and after separation, and the husband’s share trading losses and his refusal to rent Property C between 2005 and 2010?
c)How should the parties’ superannuation be divided and in particular should the division reflect the husband’s greater superannuation entitlements at the commencement of cohabitation or is that offset by his withdrawal of $168,000.00 in 2008 and his unsuccessful use of a large proportion of those funds to share trade against the wife’s express opposition to such action?
d)What should the adjustment be for section 75(2) factors?
e)Which of the husband and wife are to retain Property C and Property H?
The legislation
Section 79 of the Act defines the Court’s powers in determining applications for property settlement. Section 79(2) of the Act provides that:
The Court shall not make an Order under this Section unless it is satisfied that, in all the circumstances, it is just and equitable to make the Order.
Section 79(4) of the Act sets out the matters the Court must take into account when considering what orders should be made for the alteration of the interest of the parties in property. Those matters are:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
The matters to be taken into account under section 75(2) of the Act are as follows:
(a)the age and state of health of each of the parties; and
(b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and
(d)commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain; and
(e)the responsibilities of either party to support any other person; and
(f)subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and
(h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(ha)the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and
(j)the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
(k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l)the need to protect a party who wishes to continue that party's role as a parent; and
(m)if either party is cohabiting with another person--the financial circumstances relating to the cohabitation; and
(n)the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
(naa)the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i) a party to the marriage; or
(ii) a person who is a party to a de facto relationship with a party to the marriage; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(na)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p)the terms of any financial agreement that is binding on the parties to the marriage; and
(q)the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.
The four-step approach
In Hickey and Hickey and Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 at [39], the Full Court of the Family Court described the preferred four-step approach in property matters as follows:
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), ("the other factors") including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case ….
Assets and liabilities
Monies received from the husband’s mother
It was argued on behalf of the husband that the monies advanced by the husband’s mother to the parties was and is at all times a loan by her to the parties for their benefit on the clear understanding that it would be repayable to his mother upon request, and in particular, if and when such monies were required by her to support her care when she reached an age and/or a level of infirmity that required supported living.
The husband filed a brief affidavit from his mother sworn
12 August 2010, in which she confirmed the advance of the funds to her children, including the husband, and her expectation that these funds would be repaid to her if and when she required them to do so.
By agreement, the husband’s mother was not called to give evidence at the final hearing of this matter.
The husband’s mother is 88 years of age and continues to live independently in a home that is owned jointly by the husband’s mother and the husband’s older brother.
It was the husband’s evidence that the wife understood that when these funds were advanced by his mother it was by way of a loan and that they were repayable to his mother upon request. It was his evidence that she had only alleged that the monies received from his mother were a gift, rather than a loan, after separation.
It was the husband’s evidence that post-separation, the wife had met with his brother-in-law in an endeavour to try and resolve property matters between the parties, and that during these discussions the wife had threatened that if matters did not resolve in the manner as suggested by her, she would make it as difficult as possible for the husband and all his family, including the husband’s mother.
The wife denied this allegation and indicated that in her discussions with her husband’s brother-in-law she indicated that if the parties were not able to settle then she would be seeking to achieve from the court the best possible outcome for herself and for her sons.
Further, it was her evidence that she advised the husband’s brother-in-law that she would be seeking orders that she retain the Property C property, but that at no time did she make any threats against the husband’s family and in particular the husband’s mother.
The husband’s brother-in-law, Mr B, was called to give evidence in relation to this incident.
It was his evidence that he met with the wife in a coffee shop in what he described as a very volatile meeting. It was his evidence that he put his brother-in-law’s proposal to the wife, that she rejected that proposal and in particular refuted that the parties were in any way indebted to the husband’s mother.
It was Mr B’s evidence that the wife indicated that if the matter proceeded to court it would get nasty and would create difficulties, including difficulties for:
“the old lady”.
Mr B was a forceful, voluble witness, and it was apparent from his evidence that his meeting with the wife was very much about attempting to convince her to resolve matters in accordance with the proposals of his brother-in-law. I do not accept the wife threatened the husband’s mother but rather indicated that in the event the parties were unable to resolve matters, it would be stressful for all involved, including her mother-in-law.
Whilst there is no doubt that the husband’s mother provided the parties with $100,000.00 in 2002, the basis upon which those monies were advanced, and then were subsequently treated, has some complexity.
A complicating factor is that the husband’s father died intestate. In this circumstance, the husband was entitled to receive a proportion of his father’s estate upon his death. It is therefore open to argument that the monies, or part thereof, received by the husband after his father’s death is representative of his “inheritance” from his father.
Further, the evidence is clear that these monies have been utilised by the husband, primarily in share trading. Given the impact upon that enterprise by the Global Financial Crisis, those funds have arguably been lost to the parties and to the husband’s mother.
In these circumstances, on balance, I cannot be satisfied that these monies can be categorised as a loan and am of the view that they do not form a liability of the parties to be included in the property pool.
The Furniture
The husband estimated the value of the furniture in the former matrimonial home retained by the wife to be somewhere between $7,000.000 and $12,000.00. It was his argument that the value of the furniture should be included in the matrimonial pool of assets.
The parties’ two sons remained living with the wife in the former matrimonial home after separation. There is no doubt that many of the chattels and furniture in that property were and are utilised for their benefit.
Further, the husband has the benefit of a large tool collection used by him for the rebuilding of the Property W property, as well as in his occasional employment as a [omitted]. No value was given in relation to that collection.
Given the age of the furnishing, it’s utilisation by the parties’ children, it’s relatively small value and the husband’s retention of his tools, I am of the view that whatever the value of the parties’ chattels in the matrimonial home, they should not form part of the matrimonial pool for division between the parties, nor should the husband’s tool collection.
Savings at separation
It is common ground that at separation, the wife retained the benefit of the parties’ joint savings of approximately $12,000.00.
It is her evidence, which I accept, that post-separation these monies have been utilised by her to support herself and the parties’ two sons. This is particularly so in circumstances where, since vacating the former matrimonial home, the husband has paid only $23.00 a month by way of child support.
The authorities are quite clear that monies that are existing at separation which are used by the parties to fund their reasonable living expenses will not be notionally added back into the property pool (see M & M [1998] FamCA 42, C & C [1998] FamCA 143, Re NHC and RCH (2004) FLC 93-204 and M and M [2006] FamCA 913).
In AJO v GRO (2005) FLC 93-218, the Full Court of Holden, Warnick and La Poer Trench JJ held in paragraph 30 the following:
“To date, three clear categories of cases have emerged where the Court has determined that it is appropriate to notionally add back to the pool of assets, that is, assets that no longer exist. They are:
(a)Where the parties have expended money on legal fees;
(b)Where there has been a premature distribution of matrimonial assets; and
(c)In the circumstances outlined by Baker J in Kowaliw & Kowaliw (1981) FLC 91-092 at 76,644:
(a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
It was clear from the evidence that the wife utilised the parties’ relatively small savings for the purposes of reasonable support of herself and the children. Accordingly, I have determined this amount is not to be added back into the property pool.
Accordingly, I find the matrimonial asset pool of the parties to be as follows:
Assets:
Property M $755,000.00 Property H $630,000.00 Property W $820,000.00 Property C $650,000.00 2002 Suziki Ignis motor vehicle (wife) $7,000.00 2002 Prado 4WD motor vehicle (husband) $15,000.00 Husband’s Shares $58,360.00 Wife’s Shares $37,750.00 2009 Tax Refund $21,850.00 Total $2,994,960.00 Liabilities:
Westpac Line of Credit (secured over Property M and Property H) $509,000.00 Total $509,000.00
NET TOTAL ASSETS: $2,485,960.00 Superannuation:
Husband’s Superannuation with [T] $552,340.00 Wife’s Superannuation with [T] $22,725.00 Wife’s Superannuation with [omitted] $52,720.00 Total $627,785.00
Contributions
As set out earlier in this judgment, at the commencement of cohabitation the husband had assets of approximately $600,000.00. The wife had assets of $120,000.00.
Additionally, the husband’s superannuation entitlements at the commencement of cohabitation were $120,000.00, whereas the wife had minimal superannuation entitlements.
Up until 2005, the husband was in full-time employment with [T], and also conducted his business [F], which generated a regular income for the benefit of the parties. Additionally, the husband applied his [omitted] skills in the improvement and maintenance of the parties’ real estate, including his contributions as the owner/builder of the
Property W redevelopment.
The wife was engaged in part-time employment as a [omitted], as well as being the primary carer for the parties’ two boys, [X] and [Y].
From 1980, the husband has been a registered day share trader, such that by 2007, the parties had shareholdings worth nearly $1,000,000.00. Unfortunately, the Global Financial Crisis decimated those shareholdings such that the parties’ current share entitlement is $160,000.00.
It was argued on behalf of the husband that whilst there has been a serious diminution in the value of the parties’ shareholdings between 2007 and now, the impact of the Global Financial Crisis cannot be something for which the husband should be held responsible, as the entire world was caught out by the impact of that Crisis.
It was submitted on behalf of the husband that 85 per cent of the initial contributions to the parties’ assets came from the husband and that when you look at the current asset pool, including the $100,000.00 received from his mother, the husband’s contributions represent
26 per cent of that current asset pool.
It was further argued on behalf of the husband that he made significant contributions during the marriage, including significant physical exertion in the maintenance of Property H, Property M and Property W, together with his income from his employment with [T], as well as [F] and his share-trading.
It was also submitted on behalf of the husband that he has made
post-separation contributions, in that he has maintained Property H, maintained Property C, maximised the parties’ superannuation entitlements by management of the interests in the [T] Superannuation Fund and enabled the wife and children to reside in the fully furnished former matrimonial home while he lives in the partially completed Property W property.
It was submitted on behalf of the husband that in these circumstances, the husband’s contributions greatly exceed those of the wife and that there should be a loading in his favour of between three to seven per cent.
It was submitted on behalf of the wife that whilst the husband did make a greater initial contribution, that contribution must be looked at in the context of the pre and post-separation contributions of both parties over what was an 18 year marriage.
Whilst acknowledging the husband’s hard work during the marriage, both as an income earner and with his physical input to their various properties, the wife argued that the decisions made by the husband, particularly post-2005, must be considered.
It was argued on behalf of the wife that in direct opposition to her wishes, the husband actively engaged in share trading, utilising the parties’ assets including his retrenchment package and part of his superannuation, instead of discharging debt and finishing the renovations and development of the Property W property. As a result, it was argued, the husband’s unilateral decisions in this regard has negatively impacted upon the parties’ financial position.
It was further argued that the wife has been the primary carer for the parties’ two children and that particularly post-separation, with the complete breakdown of the relationship between the husband and the parties’ eldest son [X], this responsibility has fallen squarely upon the wife’s shoulders.
Further, the wife argued that the husband’s management of Property C, and in particular his refusal to find a tenant for that property after 2005 when the [F] business ceased to be profitable, was such that the maximisation of the parties’ assets was compromised by the husband’s stubbornness in not accepting there was an alternate way in which to deal with that property.
It was therefore submitted on behalf of the wife that when considering all these aspects, looking at the parties’ pre-cohabitation, cohabitation and post-cohabitation contributions, the appropriate assessment of the parties’ contributions is such that they should be treated as equal.
It was apparent from the manner in which the parties gave their evidence that the husband was very much in charge of the parties’ finances, and in particular the decisions in relation to utilisation of matrimonial assets for the purposes of share trading.
What was also apparent from the parties’ evidence is that whilst the husband attempted to explain his share trading activities to the wife, she failed to grasp its’ intricacies or to show a great deal of interest in the share trading.
Whilst it is quite easy to be critical of the husband for continuing to trade shares post the impost of the Global Financial Crisis, the reality is that there were many across this world who did not anticipate that Crisis, its’ longevity and the impact it was to have on the economy across the world.
I am satisfied that the husband’s greater initial contributions are such that the parties’ current financial circumstances, albeit not as great as they may have been in 2007, are in part attributable to the considerable asset base that the husband brought to the marriage, and as such there should be a loading in his favour of five per cent.
Section 75(2) factors
It was argued on behalf of the husband that the parties’ earning capacities should be considered as equal.
The husband is 57 years of age and his only formal employment experience is with [T], where he was engaged in [occupation omitted]. It was his evidence that his only attempt to obtain employment in a related industry since his retirement in 2005 was such that he did not even obtain an interview. He has not pursued any further attempts to obtain employment in this area.
It was conceded that the husband has obtained some part-time employment since 2005 in various activities including [omitted]. Whilst the husband’s willingness to engage in full-time employment is questionable, given his evidence that he considers himself to be retired or semi-retired, based on the income he was able to generate from these activities, I am satisfied he has an earning capacity of somewhere around $55,000.00 to $60,000.00 per annum if he were to resume working on a full-time basis.
Whilst the wife only works part-time as a [omitted], she has the qualifications such that if she were to work full-time, her earning capacity would be similar to that of the husband.
Whilst conceding that the wife does have the primary responsibility for the parties’ only son under the age of 18, being [Y] who is 14, it was argued by the husband that this is countered by the possibility that if the $100,000.00 advanced by the husband’s mother is not deemed to be a loan then he will potentially have the responsibility to care for his mother in the future.
It was agreed between the parties that the husband will be retaining the Property W property. The husband argued Property W will take many years and a great deal of expense from the husband in order to maximise it’s full value, and that as such this is a factor that must be considered under section 75(2)(b) and (o).
It was therefore submitted on behalf of the husband, when considering section 75(2) factors, these should be considered at best as equal, and if not then any loading in the wife’s favour should be no more than five per cent.
It was argued on behalf of the wife that there should be a loading in her favour in relation to section 75(2) factors because of the responsibility she has for the care of the parties’ sons.
It was argued that whilst [X] is 18 years of age, he is a full-time tertiary student and she will be responsible for accommodating and caring for him until he finishes his tertiary studies.
It was further argued that [Y] is 14 years old and the wife will be primarily financially and emotionally responsible for his care until he finishes high school and, in all probability, his tertiary education. This is even more so in circumstances where the court must accept that the husband is unlikely to resume any form of full-time employment and his level of financial contribution towards the children will remain minimal. It was argued the husband pays only $23.00 per month by way of child support and is unlikely to increase that level of contribution into the future. It was apparent from the husband’s evidence that he considers himself to be retired and has little motivation to return to full-time employment. In these circumstances, the wife argued the likely level of financial support from the husband for [Y] will be minimal.
It was also argued that the husband’s argument in relation to
Property W is in fact a two-sided coin. Whilst the husband argued as to its’ unfinished condition, the wife argued that once completed, the value of the property will be measurably increased, to the benefit of the husband.
It was therefore argued on behalf of the wife that there should be a loading in her favour of 10 per cent.
When considering all the relevant factors in relation to section 75(2) of the Act, I am of the view that there should be a loading in the wife’s favour, and am satisfied that such loading should be in the amount of 10 per cent.
Who is to retain the matrimonial assets
The parties agree that the wife will retain the former matrimonial home at Property M and the husband will retain the Property W property.
However, both parties wish to retain the Property C property and neither wishes to retain Property H.
It was submitted on behalf of the wife that the Property C property will generate a greater income and will be more easily maintained by her (as Property H is in need of some repair) and that in the circumstances of her having the responsibility for the maintenance of the parties’ sons, this is the more appropriate outcome to the division of the parties’ assets.
It was further argued on behalf of the wife that on her submissions, a just and equitable division of property between the parties was such that she should retain 60 per cent of the assets, and in those circumstances the division proposed by her, whereby she retained Property M and Property C, absent of any encumbrances, achieved this outcome.
It was argued on behalf of the husband that the Property C property was owned by him prior to the commencement of cohabitation, was developed by him and managed by him, and in all those circumstances it is appropriate that this property should be retained by him.
It was the husband’s proposal that he retain Property W and Property C and pay to the wife an amount that represented the division of the parties’ realisable assets equally between them. This would leave the wife with a mortgage amount that would be met from the income from the rental paid on Property H.
Given the findings made by me in relation to this matter, there is some difficulty in either party being able to retain two properties, given their current level of income. Whilst the wife argues Property C will generate a greater level of income and is more manageable, the evidence of the husband does not support this argument in that the current tenant is in considerable arrears of rent. The husband also gave evidence of structural problems with the factory. Property H has a long-standing tenant and is a property well known to the wife.
In all the circumstances, I am of the view that an equitable division of the parties’ real estate would have each party retaining the property they brought into the marriage. Accordingly, the husband shall retain the Property C property and the wife shall retain the Property H property.
Superannuation
It was submitted on behalf of the husband that, given his greater superannuation entitlements at the commencement of cohabitation, an equitable division of superannuation between the parties was such that he retain 60 per cent of the parties’ respective superannuation entitlements and the wife retain 40 per cent of those superannuation entitlements.
It was argued on behalf of the wife that the husband’s unilateral decision to reduce his superannuation entitlements by $168,000.00 and to then invest a large proportion of same in share trading in the midst of the Global Financial Crisis was such that any greater initial entitlement by him to superannuation was offset by this decision.
It was therefore argued on behalf of the wife that there should be a superannuation splitting order made in her favour in the same terms as the division of the parties’ realisable assets, being a superannuation splitting order whereby she retains 60 per cent of the parties’ respective superannuation entitlements.
Whilst I have expressed in this judgment some empathy to the impact of the Global Financial Crisis on the husband’s share trading activities, his decision in relation to the cashing in of some of his superannuation in late 2008, in circumstances where the impact of the Global Financial Crisis was well known to him is such that his initial contribution is offset by his decision to draw down on his superannuation in 2008.
The wife is 49 years of age and the husband 57 years of age. When considering section 75(2) factors in respect of superannuation, the husband’s evidence in relation to resuming full-time employment is such that it is unlikely he will make any further large contributions to his superannuation. In contrast, the wife, especially if she were to resume full-time [omitted], will have the capacity to increase her superannuation before retirement. She will however continue to have the primary responsibility for the parties’ sons.
In these circumstances, I am satisfied that it is just and equitable that a superannuation splitting order be made such that the parties’ current superannuation entitlements are equalised.
Just and equitable
It was argued on behalf of the husband that the parties’ assets should be divided equally between them, and that to achieve this outcome, he retain Property W, Property C, his motor vehicle and his shares, and pay the wife $272,230.00.
The husband submitted that the wife should retain Property M, Property H, that she be responsible for the $500,000.00 mortgage on those properties, noting that the mortgage would be reduced by the amount that he paid to her by way of property settlement.
The wife submitted that there should be a 60:40 division of the parties’ assets between them, and that this was achieved by she retaining Property M, Property C, her motor vehicle and shares, and by the husband retaining Property W, Property H and assuming responsibility for the $500,000.00 mortgage.
It was the husband’s argument that his proposal reflected his greater initial contribution, enabled both parties to retain the properties that they brought into the marriage and left them both with a similar level of indebtedness in circumstances where they had comparable income earning capacities.
The wife argued that given her greater section 75(2) factors and the equalisation of contributions over a very lengthy relationship, her proposal left her with the capacity to continue to be the primary carer of the parties’ two sons and to retain the property that would best generate a rental income which would assist her in the support of those children absent any real commitment from the husband to contribute to their ongoing care.
Conclusion
I have determined that the husband’s initial greater contribution should attract a five percent adjustment in his favour. I have also concluded that the wife’s responsibilities for the ongoing care of the parties’ children, absent any real financial support from the husband, are such that pursuant to section 75(2), there should be a 10 per cent adjustment in the wife’s favour.
Accordingly, I have determined that the parties’ realisable assets should be adjusted such that the wife receive 55 per cent of same and the husband receive 45 per cent of same.
I have also determined that in respect to the parties’ real estate the husband should retain Property W and Property C, and the wife should retain Property M and Property H.
The parties will each retain their motor vehicles and their current shareholdings.
As noted earlier in this judgment, the shares that are currently in [X] and [Y]’s names will be retained for their benefit by agreement between the parties.
What this determination means in practical terms is that in order for the husband to retain Property W and Property C, he will need to pay the wife the sum of $446,528.00 and she shall assume all responsibility in relation to the mortgage to the Westpac Bank.
The practical reality of my determination is that this is an amount that may exceed the husband’s borrowing capacity. Given his desire to retain both properties, he will be given the opportunity to explore the extent of that borrowing capacity
The orders I intend to make will make provision for the husband to ascertain his borrowing capacity within 30 days of the delivery of this judgment. In the event he is unable to borrow the amount set out in paragraph 143 herein, the orders will provide for Property C to be placed on the market for sale and for the net sale proceeds of the sale to be divided between the parties such that there is a division of their realisable assets on the basis the wife retains 55 per cent of same and the husband retains 45 per cent of same.
The orders will also make provision that pending the payment or settlement of the sale of Property C, both parties shall continue to be equally responsible for payment of the Westpac mortgage.
In relation to superannuation, a superannuation splitting order shall be made such that the parties’ respective superannuation entitlements are equalised.
I certify that the preceding one hundred and forty-seven (147) paragraphs are a true copy of the reasons for judgment of Bender FM
Date: 28 June 2011
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