Tyler and Tyler

[2017] FCCA 1886

FEDERAL CIRCUIT COURT OF AUSTRALIA

TYLER & TYLER [2017] FCCA 1886

Catchwords:
FAMILY LAW – Property – contributions – large gifts from husband’s parents.

Legislation:

Family Law Act 1975, ss.4AA, 75(2)

Applicant: MS TYLER

Respondent: MR TYLER

File Number: DNC 383 of 2014

Judgment of: Judge Young

Hearing dates: 2, 3 and 28 February 2017

Date of Last Submission: 28 February 2017

Delivered at: Darwin

Delivered on: 10 August 2017

REPRESENTATION

Counsel for the Applicant: Mr Looney

Solicitors for the Applicant: O'Neill Family Law

Counsel for the Respondent: Mr Norrington

Solicitors for the Respondent: DS Family Law

ORDERS

Property A

1. That the wife retain her interest in the real property situated at Property A (more particularly defined as Property A) (“Property A”).

2. That the husband transfer all of his interest in and to the Property A within twenty-eight (28) days of the date of these Orders with that interest thereafter being retained by the Wife absolutely.

3. That upon the transfer contemplated by Order 2, the wife irrevocably indemnify the husband from any liability associated with the Property A.

What the Husband will Retain

1. The husband will retain as at the date of these Orders, the following, absolutely and without any claim being able to be made by the wife:-

   (a)The real property situated at Property B

   (b)The real property situated at Property C;

   (c)The share portfolios held in his name with (Bank omitted) and (omitted);

   (d)The motorcycles held in his name;

   (e)Any cash savings held in bank accounts in his name; and

   (f)His superannuation entitlements.

What the Wife will Retain

1. The wife will retain as at the date of these Orders, the following, absolutely and without any claim being able to be made by the husband:-

   (a)the real property situated at Property D;

   (b)the share portfolio held in her name with (Bank omitted);

   (c)the motor vehicle registered in her name;

   (d)any cash savings held in bank accounts in her name; and

   (e)her superannuation entitlements.

Mortgages

1. That the husband, will as at the date of these Orders irrevocably indemnify the wife from any liability associated with the mortgage/s registered against the title of Property C and Property B.

2. That the wife, will as at the date of these Orders irrevocably indemnify the husband from any liability associated with the mortgages registered against the title of Property D.

Furniture and Contents

1. That the husband retains the items located in the downstairs living area of the real property situated at Property A (save for the mower and the washing machine) and from the upstairs living area:-

   (a)his bookshelf and books,

   (b)the 6 draw big boy above the stairwell,

   (c)his paintings;

   (d)his personal effects in the spare room; and

   (e)the items in the garden shed (subject to Order 9)

2. That the wife retains the items located in the upstairs area (including the upstairs balcony area) of the real property situated at Property A, as well as the washing machine and the mower located in the downstairs area.

Husband to Vacate the Property

1. That within twenty-eight (28) days of the date of these Orders the husband:-

   (a)have all downstairs areas of Property A professionally cleaned and provide the wife with evidence that such cleaning has taken place; and

   (b)vacate that property ensuring that each item he is to retain pursuant to these Orders is taken by him.

Cover-all Order

1. That each party be solely entitled to the exclusion of the other to all property and chattels of whatsoever nature and kind in the possession of such party as at the date of these orders and that for this purpose, bank accounts are deemed to be in the possession of the person whose name appears on the bank’s record thereof, insurance policies are deemed to be in the possession of the beneficiary thereof, superannuation entitlements are deemed to be in the possession of the person who is named as the worker whose age or working future provides the conditions for payment out of such entitlements and otherwise, each party is responsible for and indemnifies the other with respect to any liabilities which are held in their sole names or which encumber any property they would take pursuant to these Orders.

Cash Payment

1. That within 30 days of the transfer contemplated by Order 2, the husband will pay to the wife the sum of $70,902.

2. The parties may apply for any consequential orders within fourteen (14) days of the date of this Order.  

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DARWIN

DNC 383 of 2014

MS TYLER

Applicant

And

MR TYLER

Respondent

REASONS FOR JUDGMENT

1. This is a property matter. The husband is 50 years old. The wife is 48 years old. The husband is a qualified (occupation omitted) but is presently employed in his parent’s family business (omitted) in Darwin. The wife is employed as a (occupation omitted). The parties have two children aged 15 years and 13 years. The parties are living separately under the one roof and the children spend equal time with each parent.

2. The parties commenced a relationship in 1990 and married and began living together in 1998. They separated under one roof in June 2013. Although neither party made submissions on the point, the trial affidavit of each party appears to argue or assume that they began a de facto relationship in 1990. They agreed that they were in an exclusive relationship, spent most nights together and travelled together frequently on holidays. However, during this period they lived separately, the wife in nurses’ quarters and the husband with his parents. They did not share bank accounts and, although their expenditure on themselves and each other was not monitored “stringently” according to the wife, they each paid for their own expenses.

3. They each appear to have undertaken significant financial investments without reference to the other. From 1995 to 1997 the wife purchased shares in various companies worth $9,500. By the time of trial the value of this original shareholding had grown to $67,547. Her trial affidavit suggests that there were no further acquisitions after that time and that was not challenged in cross-examination.

4. From 1995 “onwards”, according to the wife, the husband purchased shares worth around $100,000 using monies held in a bank account at that time.

5. In 1997 the wife purchased vacant land at Property D along with her sister and her brother-in-law. Duplex units were then constructed on the land in “late 1997 or early 1998”. The wife says that she used cash savings of $20,000 and borrowed $104,000 secured by mortgage from a bank. She said that, while she discussed the matter (apparently before the marriage in September 1998) with the husband, he showed little interest and she made the significant decisions herself. She said that at all times rental income paid for mortgage instalments. This was not challenged.

6. Having regard to the meaning of de facto relationship in section 4AA of the Family Law Act 1975 and, in particular, the requirement that persons “have a relationship as a couple living together on a genuine domestic basis” I am not satisfied that the parties lived in a de facto relationship. The fact that, until their marriage in 1998, they lived apart and conducted separate lives, particularly in relation to financial matters, is inconsistent with a de facto relationship.

Contributions

1. The Property D property is still owned by the wife and should be seen as an initial contribution by her, along with her share portfolio.

2. It is unclear what has become of the husband’s initial share portfolio purchased for $100,000. About $20,000 worth were apparently sold after the marriage of the parties and used as a deposit for the purchase of an investment unit. As for the balance, it may be that it has been subsumed in the husband’s present share portfolio but as I am satisfied that the husband’s share investments have been subject to greater adverse vicissitudes than the wife’s share investments I am satisfied that, while it should be treated as an initial contribution and given some weight, it cannot be given any specific present value, unlike the wife’s initial contribution.

3. As mentioned, the parties married in September 1998. Initially they lived with the husband’s parents. It was agreed they did not pay rent but, according to the wife, they contributed to the grocery bill and cooking. The parties lived with the husband’s parents until they bought their own home in late 2001.

4. In 2001 the husband purchased an investment unit at Property E for $100,000 from his parents. The wife said that the husband financed the purchase by selling $20,000 worth of shares (as mentioned above) and borrowed the balance from a bank secured by mortgage. It appears that the mortgage instalments were paid from rent received. Later in 2001 the parties jointly purchased Property A for $270,000 (the wife) or $280,000 (the husband). It was agreed that the husband’s parents contributed $250,000. The wife also said that she withdrew $35,000 from the Property D mortgage account and in addition provided $15,000 in cash from her savings. Her evidence was not challenged. The contributions on the evidence were $300,000 in total. Although the discrepancy is not explained I assume some part of the difference would be made up by a stamp duty and conveyancing fees. The wife said significant repairs and renovations were undertaken on the property by the parties. These renovations included a new kitchen, extensive re-tiling, painting, construction of a carport and fences, installation of air-conditioning and solar hot water system, a new bathroom and various less significant works. The wife’s evidence was not challenged although no attempt was made to estimate the cost of the renovations.

5. In March 2002 the parties’ first child, [X], was born. About (omitted) 2002 the Property E property was sold for $150,000. In April 2003 the husband purchased an investment property at Property C for $215,000 plus $7,524 in stamp duty. The husband’s trial affidavit says that the purchase was financed by borrowings of $170,000 from a bank and the balance of the purchase price and stamp duty, $52,524, was paid for from the proceeds of the Property E property. It would thus appear that almost all of the net proceeds of sale of the Property E property were the result of capital appreciation.

6. The parties’ second child, [Y], was born in 2003. It appears from the trial affidavits that the wife may have returned to work for some period prior to this but she eventually returned to work permanently in 2004.

7. In 2004 the husband purchased an investment property at Property B for $310,000. The property was financed entirely by borrowings secured by mortgage using the property at Property C as additional security. The mortgage instalments have been paid from rents.

8. In 2008 the husband’s parents gave him $1,130,000. This money was the result of the parents selling their business. The husband’s two brothers were apparently given the same or a similar amount. The entirety of the money was invested in the share market by the husband. The husband said the money was given to him and his brothers “to invest in the share market” because his parents had wanted their sons to “learn how to invest in the share market”. The husband said that:

   “My parents have always categorised the money as a loan although they have not stated in what terms, if any, they would expect it to be repaid. They have always been explicit that they expect the initial capital to be preserved”.

9. In my view, the evidence given by the husband on this issue is internally inconsistent. It is not plausible that a sum of more than $1 million could be given to a person with no significant experience of share market investment with the expectation that the capital sum would be preserved. The share market is inherently risky and I am satisfied there could not be any reasonable expectation that the fund would not be subject to loss. This in itself is inconsistent with the nature of an unsecured loan. The faint suggestion of a trust or a right to income only in the words “initial capital to be preserved” was not supported by any evidence. The husband’s parents did not give evidence on the issue. I am satisfied that the amount given to the husband was a gift for him to use as he saw fit.

10. This evidence was evidently given in an attempt to bolster the husband’s assertion that the present value of his shares, $1,075,781, should be seen as resulting from his parents’ contribution representing, he puts it, “100% of the funds currently invested”.

11. One of the difficulties with the husband’s assertion is that in 2009 he re-drew $329,074 from the mortgage accounts for the two investment properties at Property C and Property B and invested these funds in the share market as well. I am satisfied that these funds, arising from investments during the marriage, should be seen as matrimonial property. The total amount from these sources invested in the share market was $1,459,074 with matrimonial property (the re-draw on the investment properties) constituting 22.5%. My conclusion about the share fund appears to be confirmed by the husband because in a later part of his trial affidavit he altered his claim to the contribution of his parents representing “77% of the funds invested since 2008”. It is possible that the shares purchased by the husband for $100,000 before the marriage also contributed to the shares holding but in the absence of any specific evidence I am unwilling to make that finding.

12. Another difficulty with the husband’s claim is that since 30 June 2011 he has withdrawn $463,385 from the share portfolio. This may be partly accounted for by the amount of $199,374 held by the husband in a savings account. These funds, according to the husband, represent amounts paid to him for share buybacks and share sales. He does not mention dividends but it may be assumed that dividends were earned. Although the husband gave no evidence of losses the present value of his share investment, initially made in about July 2008, may represent capital losses as well.  

13. The husband ceased full-time work as a civil engineer in 2009. He said he worked for three days a week for two years, apparently from about August 2011 until separation which was in June 2013. The husband suggested in his trial affidavit that he ceased full-time work because of back pain and problems with his knees. However, in oral evidence the husband also said that he had become bored with his work as an engineer. I am satisfied that the husband has continuing earning capacity as an engineer but the primary reason for him ceasing work was that he was bored with his career as an engineer and, following the gift from his parents, felt he was able to live on income from the shares and the investment properties. In these circumstances I consider that is fair to treat the diminution of the share fund as coming from the amount contributed by the husband’ parents. If $329,074 is seen as the financial contribution of the parties, the balance of the current value of the shares, some $746,707, constitutes no more than 70% of the value of shares. I find this is the value of the husband’s parents’ contribution to the share portfolio.

14. The husband also owns shares in a managed fund called “(omitted)”. These shares were given to the husband by his parents. Their present value is $50,879. The wife has made no contribution to this fund.

15. The parties also made submissions about post-separation contributions. Criticisms were made of the husband’s lack of interest in mowing lawns and some other matters but, overall, the parties appeared to be making some efforts to contribute in an equitable manner to the care and support of the children. I am not able to discern any significant difference between the post-separation contributions of the parties.

16. The agreed asset pool of the parties at trial is as follows:

Assets	Wife	Husband	Total
Property A	$310,000	$310,000	$620,000
Property C	$420,000	$420,000
Property B	$400,000	$400,000
Property D	$380,000	$380,000
Shares  - husband	$1,075,781	$1,075,781
Shares – (omitted)	$50,879	$50,879
Shares - wife	$67,547	$67,547
Car - wife	$16,300	$16,300
Motorcycles	$27,500	$27,500
Furniture, contents, jewellery and firearms	$10,000	$10,000
Furniture, contents and jewellery	$10,000	$10,000
Savings account	$199,374	$199,374
Savings account	$623	$623
Total	784,470	2,493,534	$3,278,004
Liabilities
Mortgage Property C and Property B	$783,999	$783,999
Mortgage Property D	$78,312	$78,312
Net assets	$706,158	$1,709,535	$2,415,693
Superannuation
Australian Super and (omitted superannuation fund)	$222,000	$222,000
(omitted superannuation funds)	$242,000	$242,000
Total	$948,158	$1,931,535	$2,879,693

1. The wife identified her own legal fees as an “add back” but the husband did not identify the amount of his legal fees. In the absence of that information I am not prepared to “add back” the wife’s legal fees alone. The husband’s balance sheet in his case outline indicated that the sum of $16,500 spent by the wife on a forensic accountant to trace the husband’s share dealings should also be an “add back”. I assume the husband was proposing to submit that the amount was unreasonably or unnecessarily incurred. That submission was not ultimately made and I do not need to consider it. 

2. The husband’s parents made some important gifts during the marriage for the purpose of acquiring particular assets. It was not suggested that these were gifts to both parties and I will treat these gifts as contributions by the husband. Because of this it is appropriate to adopt a partial asset by asset approach in assessing financial contributions. A global approach is justified in relation to overall contributions.

3. The purchase price and stamp duty of the former matrimonial home at Property A was made up of a contribution of $50,000 from the wife and a contribution of $250,000 from the husband’s parents. However, more than half of the present value of the property is made up of capital appreciation. I find that the financial contribution to this asset was 1/3 from the wife and 2/3 from the husband.

4. The investment properties at Property C and Property B, while purchased in the husband’s name, were acquired during the marriage and, as observed above, with equity accruing from capital appreciation on an earlier investment property acquired during the marriage and borrowings. In my view these assets should be treated as part of the joint enterprise of the parties reflecting approximately equal contributions in the different spheres of the husband and the wife.

5. The husband’s present share holdings, with the exception of the (omitted) shares, are a result of contributions from mixed sources including his parents and a re-draw on the mortgage on Property C and Property B. I am satisfied that the financial contribution of the husband’s parents to the shares is approximately 70%. By extension this also applies to the cash amount held in the husband savings account which is derived from the share fund.  

6. The (omitted) shares are entirely derived from husband’s parents and should be seen as his contribution.

7. The parties lived with the husband’s parents for about three years before the arrival of their first child. The husband submitted that this was a financial contribution because the parties did not pay rent. While this may be true there are many factors involved in such an arrangement and it is difficult to quantify the contribution.

1. The wife’s Property D property was owned by her prior to marriage and has been funded by rents. Her share fund was acquired before the marriage and its present value is a result of capital appreciation. In my view the husband has not contributed to these assets.

2. I consider the other assets to be the result of equal contributions by the parties.

3. The parties also made non-financial contributions during the marriage as, for example, homemakers and parents. I see no reason to consider these contributions other than as equal.

4. I find the financial and non-financial contributions of the parties to the non-superannuation assets are 42% by the wife and 58% by the husband.

5. There was no evidence that the superannuation interests of the parties are anything other than employers’ contributions during their working careers. The fact that the husband’s interest is slightly less than the wife’s is probably a reflection of his decision to stop working notwithstanding his capacity to work had he wished. I am satisfied that the respective interests reflect the respective contributions. Neither party sought any splitting or other order in relation to superannuation.

Section 75(2) factors

1. The husband submitted that because both parents will share the care of the children equally, along with associated costs, and each is able to engage in gainful employment that no adjustment was required for section 75(2) factors. The husband asserted that, notwithstanding his “lower income than the wife for the last few financial years” and “some health problems” no adjustment was required. There was no medical evidence about any health problems suffered by the husband although he mentioned some back and knee problems. There was no evidence that this affected his capacity for gainful employment. The husband is presently employed in the family business (omitted) in the Darwin CBD. His evidence was that he was employed as a (omitted) earning about $30,000 a year. In material published by the family business he is identified as a main contact for the business along with his brother. I am satisfied that the husband is an important part of the family business, perhaps using his (omitted) skills, and his earning capacity is more than $30,000 a year. There was little or no evidence about the nature of the husband’s interest in the family business although he was said to be a beneficiary, presumably discretionary, of the family trust. Notwithstanding the paucity of evidence on this subject I am satisfied that the husband has or is likely to obtain a significant interest in the family business, directly or indirectly, and that he is likely to be the object of his parents’ continuing largesse in the future. Another factor to be taken into account is that the alteration of property interests proposed by both parties will see the husband retain the investment properties and the share portfolio, both of which are capable of producing a significant income.

2. The wife is employed part-time. She is in good health and is a (occupation omitted). She is likely to continue to receive a good income into the future. Her counsel submitted that the fact that the husband will retain income earning assets merited an adjustment of between 2.5% and 5% in favour of the wife. I am satisfied that the factors mentioned merit an adjustment of 3% in favour of the wife so that the overall division of non-superannuation assets is 45% to the wife and 55% to the husband.  If superannuation is included the overall division is 46% to the wife and 54% to the husband.

3. On the basis of the agreed values a 45%/55% division of non-superannuation assets would result in a transfer to the wife of $380,902 or equivalent value. The wife wishes to retain the former matrimonial home and if the husband transfers his interest worth $310,000 to the wife with a cash payment of $70,902 this is achieved. The asset pool will be as follows:

Assets	Wife	Husband	Total
Property A	$620,000	$620,000
Property C	$420,000	$420,000
Property B	$400,000	$400,000
Property D	$380,000	$380,000
Shares  - husband	$1,075,781	$1,075,781
Shares – (omitted)	$50,879	$50,879
Shares - wife	$67,547	$67,547
Car - wife	$16,300	$16,300
Motorcycles	$27,500	$27,500
Furniture, contents, jewellery and firearms	$10,000	$10,000
Furniture, contents and jewellery	$10,000	$10,000
Savings account	$199,374	$199,374
Savings account	$623	$623
Cash payment to wife	$70,902
Total	$1,165,372	2,493,534	$3,278,004
Liabilities
Mortgage Property C and Property B	$783,999	$783,999
Mortgage Property D	$78,312	$78,312
Cash payment to wife	$70,902
Net assets	$1,087,060 (45%)	$1,328,633 (55%)	$2,415,693
Superannuation
Australian Super and (omitted superannuation fund)	$222,000	$222,000
(omitted superannuation funds)	$242,000	$242,000
Total	$1,329,060 (46%)	$1,550,633 (54%)	$2,879,693

1. There will be orders accordingly.

2. The case outlines of the husband and wife also dealt with some minor items of property. As the proposed division of these appears to be the same in each case I will include these items in the orders as well.

I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Judge Young

Date: 10 August 2017