Victor and Victor - [2011] FMCAfam 920

FEDERAL MAGISTRATES COURT OF AUSTRALIA

VICTOR & VICTOR

[2011] FMCAfam 920

FAMILY LAW – Property dispute – lengthy marriage – equal contributions – large inheritance received by wife after separation – whether inheritance should be included in the pool of property – if inheritance excluded – what adjustment to be made in respect of future needs.

Family Law Act 1975, s.75(2)

Norbis v Norbis (1986) 161 CLR 513
Bonnici & Bonnici (1992) FLC 92-272
Mistle v Mistle [2010] FamCA 29

Applicant:

MS VICTOR

Respondent:

MR VICTOR

File Number:

MLC 11256 of 2010

Judgment of:

Burchardt FM

Hearing dates:

9 & 10 August 2011

Date of Last Submission:

10 August 2011

Delivered at:

Melbourne

Delivered on:

16 September 2011

REPRESENTATION

Counsel for the Applicant:

Ms M. Smallwood

Solicitors for the Applicant:

Pearsons Barristers & Solicitors Pty Ltd

Counsel for the Respondent:

Ms B. Tulloch

Solicitors for the Respondent:

A Agrotis & Associates

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

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLC 11256 of 2010

MS VICTOR

Applicant

And

MR VICTOR

Respondent

REASONS FOR JUDGMENT

Introductory

This is a property dispute between a couple who were married for over 20 years. The two biggest issues between them are first, whether an inheritance of about $700,000 received by the wife following separation should or should not be included in the pool. The second, which depends substantially on the answer to that first question, is how much each party should get of whatever the pool is going to be.
In the particular circumstances of this case, in my view it is appropriate to exclude the wife’s inheritance from the pool but to give it proper weight as a resource when considering the s.75(2) factors for future needs.
Thus, while the wife will receive the totality of the inheritance, I think the respondent husband should receive 67½ per cent of the matrimonial pool of assets excluding the inheritance.

The facts

Many of the facts in this case are not controversial. The applicant wife was born [in] 1963 and is therefore 48 years old whereas the husband was born [in] 1955 and is therefore 56.
The parties married [in] 1985 and separated, as was first disputed but is now agreed, in September 2007.
The parties have four children; [W] born [in] 1987, [X] born [in] 1989, [Y] born [in] 1993 and [Z] born [in] 2003. The younger two children still live at home. It appears that they still live with the father in the matrimonial home but this is a matter to which I shall return.
The husband has had a job as a [omitted] with [T] (and no doubt its predecessor corporations) for in excess of 30 years. He earned $68,929 in the 2010 to 2011 tax year and $83,335 in the 2009 to 2010 tax year. He additionally receives the statutory contribution of superannuation. (Exhibit R2).
The wife has not worked, except from what I infer must have been a very short period of part-time work referred to in one of her affidavits, for seven years. She subsists on statutory benefits together with child support.
The parties formerly lived in the matrimonial home in [U], but on a date (I think not disclosed in the materials but nothing turns on it) after separation, the wife nominally moved to a home in [G]. I say nominally because on any view of the evidence, she still spends substantial time at the matrimonial home. She still collects the two younger children every day from school and during the week cooks meals not only for them but for the husband and herself as well in the [U] home.
Although her affidavit material tended to put the matter in issue, it became clear from her cross-examination that she spends more nights than otherwise still in the [U] home where she sleeps on the lounge. I formed the clear view taking the evidence as a whole that, in fact, she was sleeping in the lounge for a substantial period of time prior to separation under the one roof in 2007.
Given these circumstances and the fact that the wife still does all the family washing, the husband’s initial challenge to the date of separation is not as sinister as counsel for the wife sought to paint it.
The elder two children live independently, and there are no children’s issues in dispute. Although nobody has said so in terms, it is my understanding that following the conclusion of these proceedings and the implementation of relevant orders, [Z] at least will be living primarily with his mother in [G]. It is not clear where [Y] will live, although it is common cause that the wife will continue the extant domestic arrangements until the end of his VCE at the end of this year.
It is common cause that throughout the relationship the husband was the primary earner and as the wife said in evidence, he has always been a good provider. The wife attended to the domestic arrangements and looked after the children throughout.
From April 2009 until August 2010, the husband made a number of payments of money to the wife set out in paragraph 10.4 of his affidavit filed by leave of the Court on 9 August 2011. In total they amounted to $13,000. In September 2010, the wife made an application for a child support assessment so the husband ceased these payments and he now pays $173.67 per fortnight in child support. There is an ongoing issue as to whether he is fully compliant with those orders but it is not presently relevant.
Subject to two issues as to add-backs, the pool of matrimonial assets is not controversial. What is controversial, however, is the wife’s inheritance to which I have referred. It is necessary at this stage to deal with the facts, which are disputed, as to how this inheritance came to be.

The parties’ relationship with Ms C and Mr C

It is the wife’s case that she grew up from the age of three and a half with Ms C and Mr C as her next door neighbours. It is her position that [Mr & Ms C], who had no children of their own, came to see her in effect as their child. They formed a deep and lasting relationship with her which persisted through her childhood and into her adulthood, and indeed until their deaths relatively recently. This evidence of itself was not the subject of material challenge and I entirely accept it.
It seems once again unchallenged that the husband worked with Ms C some 30 years ago. It was his case that he met the wife through an introduction from Ms C and I accept that this was so.
What is in issue is the ongoing relationship between Mr and Ms C and the husband and wife in this case following the commencement of their relationship. Given the parties put different versions of this inter-relationship, it is appropriate to say some words about credit at this stage.
The wife was a good witness. She made ready concessions when propositions were put to her with which she might otherwise have been thought likely to argue. As earlier indicated, she volunteered that the husband had always been a good provider. She made ready concessions as to amounts of money advanced by the husband to her. Although she did at one stage embark upon an excursus of complaint about the husband’s alleged gambling and made some reference to family violence, (matters which probably wisely were not included in her affidavits), she impressed me as being an entirely straightforward and truthful witness. That of course does not mean that her recollection is in every sense accurate.
The husband was a very different character. He was very quiet and softly spoken, and it is clear that it is his general personality to be somewhat unresponsive. While he was superficially unresponsive to a number of questions put to him by counsel for the wife, from the wife’s reaction to his answers I formed a clear impression that he was in the main truthfully seeking to respond, even though some of his answers might not at first glance have appeared to be so. Nonetheless, as with the wife, this does not mean that his recollection is in every case correct.
I think that to an extent both parties exaggerated (honestly and unconsciously) aspects of the history involved with Mr and Ms C. Given that the wife had an ongoing and very close relationship with both Mr and Ms C, and given that she was married to the husband from 1985 until separation in 2007, it is more probable than otherwise that Mr and Ms C saw a reasonable amount of the husband as well as the wife. I accept that they would have been invited to family gatherings and meals by the wife. There is no reason to suppose that the inter-relationship between Mr and Ms C and the husband was anything other than at least cordial during this time although, as I have said, the husband presented as a somewhat quiet and private individual. Clearly the relationship with the wife was far stronger on the part of Mr and Ms C than that with the husband.
In 2004, Ms C died. Mr C was ill and the wife asked the husband if he could stay with them. It was her case that the husband was not happy about this but effectively was cajoled into agreeing. It was her case that the husband was put out by Mr C staying with them which he did, as I find, for about nine months in 2005, and did not speak with him, in contradistinction to the other household members.
It was the husband’s case that Mr C was in fact very ill and in any event it was difficult to converse with him, but that he had not been in any way unaccommodating in having Mr C stay.
I think that both parties have probably exaggerated the position somewhat. It is clear that it is the wife who had the really close relationship with Mr C and she would undoubtedly have wanted to provide him with any assistance that was possible.
The husband obviously was not as close to Mr C and may well have found the presence of a very ill man needing a lot of support in the house somewhat unhelpful. Nonetheless, it is common cause that although Mr C paid for his own special food, an offer by him to contribute to the mortgage and bills was rejected by the husband. Furthermore, the husband provided some $4,757 to pay for

Mr C’s nursing home costs from July 2008 until August 2009. These payments, while very probably made at the insistence or at least the request of the wife, nonetheless suggest that the husband was not as antithetical to Mr C as the wife now asserts.
Equally, I think that at all times it was the wife who had the primary engagement with Mr C and who did almost all that was in fact done for him by this family.
Although the Will is not before me, it is common cause that

Mr C made a Will in January 2008 by which he appointed the wife as his sole executor and beneficiary. In the event of the wife predeceasing him, the estate was to be divided equally between [Y] and [Z]. The husband and the two elder children were excluded.
Following the period he lived in the matrimonial home, Mr C was removed first for a short time to one nursing home and then thereafter to the [omitted] nursing home where he resided until his death on 8 November 2009.
It was the wife’s case that the husband never, not even once, visited

Mr C in the nursing home and that he had refused to attend his funeral.
The husband said he did visit from time to time but that he never signed himself in. He said that he did not attend the funeral because he was looking after one of the children on that day. This was one area of the evidence where I found the husband’s demeanour unconvincing. His answers made little sense. Nonetheless, it is only one relatively small indicia.
What really shows the nature of the attendance at the [omitted] nursing home is exhibit R1, which is an extract from the [omitted] nursing home visitor register. It was put that an entry on 5 May 2007 shows the husband attending but I accept that this was a reference to [W]. What it also shows is that the wife is incorrect to say that she went every day, as she asserted. Entries are not daily but they are fairly frequent. The first page of exhibit R1 shows the wife visiting on

30 April, 1, 3, 5, 13 and 15 May 2007. The second page shows her visiting on 20, 22, 25, 26 and 27 April 2007.
These visits were not, on any occasion, short. They vary from about an hour to as long as four hours.
The picture that emerges quite clearly is that while the wife exaggerated when she said she went there every day, and while I think that the husband more probably than not did go on a very small number of occasions with her, the overwhelming picture one gets is that this was a very regular process of visitation by a very devoted woman. It should be borne in mind that in 2007 [Z] was only 4 years old and [Y] 14. She had plenty of other duties to attend to. She obviously gave much of her spare time to visiting this elderly gentleman to whom she clearly was a surrogate daughter.
Small wonder then that the Will made in January 2008 reflected this affection. The husband swore on his affidavit material that the Will was intended to benefit the entire family. When cross-examined he was not able to say what it was that led him to express that opinion.
I think the Will said what it meant and meant what it said. It is clear that Mr C regarded the wife as something akin to his own daughter and he very understandably intended to and did leave the entirety of his estate to her.

The approach to be adopted to the inheritance

Counsel for the wife submitted that Norbis v Norbis (1986) 161 CLR 513 established a proposition that the Court has a discretion, at large but to be fashioned according to the requirements of each case to produce a result that is just and equitable, to adopt either a global approach or an asset by asset approach. She urged an asset by asset approach and exclusion of the inheritance from the pool.
The husband’s counsel by way of contradistinction urged a global approach. She submitted that the inheritance should be included in the pool, although it should be noted that the wife’s counsel readily conceded that even if excluded from the pool, the inheritance was property of the parties at the time of decision and could not be excised from the case altogether but rather was required to be considered as an asset in the assessment of future needs.
Norbis v Norbis was a case in which the head note asserts:
“When a court assesses the entitlement to property of the parties to a marriage pursuant to s.79, it is not obliged to adopt either a global approach or an asset by asset approach to the exclusion of the other. Failure to pursue a global approach does not amount to an error in law.”
It should be noted that the issue in the case is whether failure to follow the global approach would necessarily involve an error in law.
In my opinion, the overarching matter which ultimately guides the approach is that each case must be considered on its own facts and the Court should adopt the methodology that will produce a result that is just and equitable. In Bonnici & Bonnici (1992) FLC 92-272, the Full Court was concerned with a case where “very substantial assets … came into the husband’s hands shortly prior to the end of the marriage”. The Court said:
“We have no doubt that his Honour was correct in rejecting the submission that these assets were a “resource” and not property. They clearly were property and came into the parties’ hands during the subsistence of the relationship. Indeed, if they had come into their hands subsequently, they would still have retained their character as property. The expression “resource” is and should be confined to those interests which do not fall into the definition of property as such to which the parties have a present entitlement.
The more difficult issue in this case is as to whether the same should be treated differently from other types of property in which the parties clearly have an interest.
The answer we consider, must depend upon the circumstances of individual cases. If, for example, in the present case there had been no other assets than the husband’s inheritance, but the wife had, as his Honour found, clearly carried the main financial burden in support of a family and also performed a more substantial role as a home maker and parent than the husband, then it would clearly be open and indeed incumbent upon a court to make a property settlement in her favour from such an inheritance.
A property does not fall into a protected category merely because it is an inheritance. On the other hand, if there are ample funds from which an appropriate property settlement can be made and a just result derived at, then the fact of a recently acquired inheritance would normally be treated as an entitlement of the party in question.
The other party cannot be regarded as contributing significantly to an inheritance received very late in the relationship and certainly not after it is terminated except in very unusual circumstances. Such circumstances might include the care of the testator prior to death by the husband or wife as the case may be or other particular services to protect a property.”
It should be noted that the Full Court did, however, go on to make it clear that while “if the matter had been approached on an asset by asset basis, we think the task of his Honour in this Court would have been a simpler one”. The Full Court nonetheless observed “there would, nevertheless, have been nothing wrong with his Honour having approached the matter globally if he had explained how he did so”.
As Le Poer Trench J said in Mistle v Mistle [2010] FamCA 29 at [78]:
“[78] I accept that should the case so require the court could order that part of the property received by the husband by way of inheritance be paid to the wife. I do not need to include all of the husband’s property in one pool of assets to be able to determine if such an order were necessary.
[79] The Act requires that I make an order which is just and equitable. I consider the best way to ensure that will happen having regard to the particular facts of this case, is to have the husband’s inherited property in a separate pool.
[80] Each case must be approached having regard to the requirements of the Act and its particular facts …”
In this case, as I find, the husband did not make any contribution whatsoever to the inheritance but it was on any view a negligible one. There is no evidence that during the years that Mr and Ms C knew the parties as a couple, the husband did more than permit them to attend for various family functions. During the time that Mr C lived with them the burden of Mr C plainly fell mainly on the wife as the husband was predominantly out at work. It is quite clear that the relationship between the wife and Mr and Ms C was far more developed and intense than that of the husband and indeed the devoted visitation that exhibit R1 and the wife’s evidence reveal shows that the decision by the testator to leave his entire estate to her is entirely consistent with the proportions of input that the wife and husband made to Mr C’s benefit.
The inheritance was an asset (more accurately a series of assets) that came into the wife’s possession after separation and to which the husband had made no effective contribution. In these circumstances, prima facie, these assets should be excluded from the pool.
Having said this, however, and accepting as the wife submits that the provision of a result that is just and equitable is not some simple evening-up process, nonetheless, the Court still has to consider at an appropriate point in the four-stage methodology whether there is a sufficiently significant asset pool excluding the inheritance to enable a just and equitable outcome to be attained. This was very much the effect of the remarks of Le Poer Trench J which I have quoted above.

The pool

The pool is effectively agreed subject to two add-back disputes. The husband’s revised asset pool dated 10 August 2011 sets out the agreed assets as follows:
·Property U  $475,000
·Mortgage against Property U as of 15 July 2011,       ($49,937)
·Husband’s car,  $3,000
·Wife’s car,  $1,000
·Husband’s [A] shares,  $1,509
·Funds paid to the wife pursuant to orders made 10 February 2011 (by consent)  $50,000
·Funds paid to the husband pursuant to orders made 10 February 2011 (by consent)  $30,000
·Husband’s [P] superannuation fund,  $222,673
·Husband’s [T] superannuation fund,  $18,193
·Wife’s [H] superannuation fund,  $4,984
TOTAL: $756,422

In addition of course there is the net assets from the estate of Mr C which as I understand it are not controversially assessed at $707,042.
The first add-back that is sought by the wife is $24,943. The husband drew down $34,943 on the mortgage on 13 July 2011 and repaid $10,000 of that on15 July 2011. That doubtless explains the figure in the revised asset pool schedule.
Although cross-examination of the husband on this point seemed to me to be somewhat critical, I found the husband’s explanation straight forward. He went to the bank to try to get some more money and the bank suggested he simply draw it down and save himself the fees. As he said, “it was my money”.
Counsel for the husband sought to say that this sum ought not be added back in because in effect he had received $20,000 less out of the orders made in February 2011. That argument in my view rather misses the point. It is clear that both parties used the moneys drawn down in February 2011 at least in large part as something akin to Barro order funds. It is not open to me to say whether the husband should or should not have received any of that $30,000 save to say that since

I have excluded the inheritance prima facie from the pool altogether, that was in itself a windfall gain to him. Moreover, the $50,000 plainly came out of the inheritance and as I have said, I have prima facie excluded that from the pool.
In the circumstances, given the date upon which the funds were drawn down, there plainly should be an add-back of $24,943. They were funds totally abstracted by the husband for his own use.
The other figure sought to be included is the $26,307 life insurance benefit paid to the husband on 20 November 2008. Counsel for the wife again submitted that these were simply funds extracted by the husband solely for his own use and that they should be added in. Counsel for the husband resisted on the footing that these funds had been disbursed, at least in part, upon the payments to the wife of some $13,000 and the payments to the benefit of Mr C of some $4,300 already referred to.
Counsel for the wife said that given the husband’s income stream and the fact that he was otherwise paying his bills prior to separation, the only inference that could be drawn is that these funds had simply been used by him solely for himself.
I think that the position is more opaque than either set of submissions indicate. While the evidence as a whole suggests a reasonably prudent financial approach by the husband (the wife did after all say that he has always been a good provider), I think it is more probable than otherwise that at least a certain proportion of the $26,000 figure was disbursed in a fashion that benefited the wife one way or another. The $13,000 payments (albeit that these are close to the child support obligation since imposed) were undoubtedly received by her and in the circumstances I have described, the payments towards Mr C’s benefit were also payments effectively to assist the wife.
The evidence is simply not sufficiently clear to enable any exact calculations, especially bearing in mind that the husband continued to pay the mortgage on the matrimonial home throughout. The schedules appear to suggest that about $18,000 was disbursed directly or indirectly to the wife’s benefit (leaving aside any other benefit she may have received in terms of food whilst she was in the matrimonial home). In the circumstances, I think that of the $26,307, $20,000 should be subtracted (the additional $2,000 reflecting, as best able, the husband’s contribution to the mortgage and food). Accordingly, I will add back $8,307 under this heading.

Contribution

Given the amount of time this occupied during the trial and the emphasis given to it, curiously enough this heading can be dealt with shortly given the earlier findings. Both sides agreed that leaving aside the inheritance issues, the contribution of the parties towards the matrimonial assets was properly assessed as being even. The husband worked and earned the money that supported the parties in their relationship and attended to all financial matters. The mother looked after the home. I think the parties are correct to assume that their contributions should be assessed as equal.

Section 75(2) matters

Counsel for the husband submitted that in the event that the inheritance was excluded, her client should receive 80 to 85 per cent of the pool. Given the concessions about contribution, this would require a 30 to 35 per cent adjustment in the husband’s favour. The wife by way of contradistinction submitted that the maximum that he could be awarded would be in the range of 60 to 65 per cent.
Both parties tended to concentrate their submissions by reference to the physical assets of the property of the parties, such as the matrimonial home, cars, superannuation and so on.
While regard must obviously be had to the practicality of any outcome, in my view it is appropriate to approach this aspect of the case in percentage terms. The net effect of the outcome could be considered in the fourth step.
The husband is 56 years old. Although his job appears to be extremely secure, one may wonder whether anybody can say that in these uncertain uneconomic times. Even assuming he has secure employment, which I do subject to the slight tweak of reservation just expressed, he is unlikely to work for more than about another ten years. He has reasonably substantial superannuation but it will never make him a millionaire. So far as I am aware, he is in good health. It is not clear to what extent he will be required to and/or decide to contribute to [Z]’s future needs.
The wife is 48 years old and it would seem is not likely to work for a considerable period of time. She will as I find devote herself to looking after [Z] (and possibly [Y] to an extent) and the chances of her obtaining anything more than some relatively poorly paid part-time work must be very low indeed. She will have the primary responsibilities for looking after [Z] until he turns 18 in 10 years time.
On the other hand, absent intervention by the Court, she will start off her new life with an unencumbered house worth $500,000, another property worth $48,000 at [omitted] and net funds of almost $160,000. Assets of this order cannot be ignored and indeed the wife’s counsel did not suggest that they should be. They are a very significant resource in her favour. In all the circumstances, it is appropriate there be a 17 ½ per cent loading in the husband’s favour as to future needs.

Just and equitable

The application of the above methodology will give the husband a clear majority of the matrimonial pool of property. He obtains this in circumstances where his income is far greater than that of the wife, albeit he is older. The wife’s inheritance, to which the husband made no material contribution, will be retained by her. In all the circumstances, I think this is a just and equitable outcome. I will hear the parties as to the form of orders that should be made.

I certify that the preceding sixty-two (62) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Date: 16 September 2011