Wallace and Wallace

[2013] FCCA 2224

FEDERAL CIRCUIT COURT OF AUSTRALIA

WALLACE & WALLACE [2013] FCCA 2224

Catchwords:
FAMILY LAW – Property – contributions – addbacks.

Legislation:

Family Law Act 1975, Pt.VIII, ss.4, 75, 79, 81

Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143
Stanford & Stanford [2012] HCA 52
Bevan & Bevan [2013] FamCAFC 116
NHC v RCH (2004) FLC 93-204
Beatson & Beatson [2013] FamCA 655
Pierce & Pierce (1998) FLC 92-844
Williams & Williams [2007] FamCA 313
C & C (2005) FLC 93-220

Applicant: MS WALLACE

Respondent: MR WALLACE

File Number: DNC 299 of 2012

Judgment of: Judge Harland

Hearing date: 27 September 2013

Date of Last Submission: 27 September 2013

Delivered at: Darwin

Delivered on: 19 December 2013

REPRESENTATION

Counsel for the Applicant: Mr Black

Solicitors for the Applicant: Cecil Black Family Lawyers

Counsel for the Respondent: Mr Norrington

Solicitors for the Respondent: DS Family Law

ORDERS

1. That within 30 days of the date of these orders the husband pay the wife $23,074.55.

2. That the property situated at [G] in the State of Queensland Australia, more particularly described in the Certificate of Title as Lot [omitted] (“the [G] property”) be sold and that the parties shall do all acts and things necessary and execute all deeds, documents, instruments and writings necessary to sell the [G] property on the following terms:

   (a)The [G] property be listed for sale with a real estate agent agreed between the parties within 21 days of the date of these orders;

   (b)In the event that the parties cannot agree on the nomination of such agent they shall jointly approach the President of the Real Estate Institute of Queensland and accept his or her nomination of a real estate agent to sell the [G] property;

   (c)That unless otherwise agreed, the initial listing price shall be $275,000 and in the event the parties are unable to agree on the method of sale and conditions of such sale in respect of the [G] property they shall accept the recommendations of the real estate agent appointed pursuant paragraph (2)(b) for the sale of the home in respect of each such matter.

   (d)Upon completion of the sale the proceeds of sale shall be applied as followed:

   (i)Firstly to pay all costs, commissions and expenses incurred in respect of the sale;

   (ii)Secondly to pay all outstanding Municipal rates and other levies due in respect of the [G] property;

   (iii)Thirdly, to pay the amount required to discharge the mortgage registered over the home, being the mortgage owing to the ANZ bank, loan account number [omitted];

   (iv)Fourthly, $7,000 shall be retained by the husband in an interest bearing account, to meet the expected Capital Gains Tax as assessed; and

   (v)Fifthly, the balance to be divided 55% to the wife and 45% to the husband.

   (e)That the parties are to each co-operate in every way with the agent including (without limiting the generality of the foregoing):

   (i)Making the key available to the agent;

   (ii)Allowing inspection of the [G] property at all reasonable times requested by the agent;

   (iii)Doing or saying nothing to hinder or prevent a sale being effected;

   (iv)Ensuring that the [G] property including the grounds are in a neat and clean condition at the time of inspection by the agent and prospective purchasers; and

   (v)Signing all documents requested by the agent in relation to the listing for sale of the [G] property except a contract or agreement for sale which has not been authorised by the parties' solicitors.

   (f)If the [G] property is not sold by private treaty within 3 months, then:

   (i)The parties must list the [G] property for sale by public auction with the agent appointed pursuant to paragraph (2)(b);

   (ii)That unless otherwise agreed, the reserve price shall be $250,000;

   (iii)If the bidding at the auction does not reach the reserve price the parties may negotiate with the highest bidders or any other interested person and effect a sale of the [G] property at a price which is not more than 20% below the reserve price; and

   (iv)The parties shall each pay and be responsible for payment of one half of auction expenses payable before the home is auctioned;

   (v)If the [G] property remains unsold, the parties shall do all acts and things and sign all documents necessary to immediately re-list the property for sale by public auction on a date nominated by the agent, with such auction not to have a reserve price.

   (g)In the event that the [G] property is sold by public auction pursuant to order (2)(f), the proceeds of sale shall be applied in accordance with order (2)(d).

3. That upon the Husband lodging his tax return application in the financial year in which the [G] property is sold, the husband shall pay the Capital Gains Tax assessed from the money retained by the husband in accordance with paragraph (2)(d)(iv) and:

   (a)In the event that the retained monies are insufficient to meet the tax assessed, the Wife shall indemnify and reimburse the Husband for 50% of any Capital Gains Tax not covered by the retained monies; and

   (b)In the event that there are surplus monies remaining from the retained monies held by the husband in accordance with paragraph (2)(d)(iv), after the entire Capital Gains Tax has been paid, any remaining money shall be distributed between the parties as to 55% to the wife and 45% to the husband. 

4. That in accordance with Order (3), the Husband shall provide the Wife with a copy of his Notice of Assessment and all other documents received from the Australian Taxation Office confirming the amount of Capital Gains Tax payable and in the event that the wife is required to make a payment to the husband pursuant to order (3)(a), the Wife shall make such payment to the Husband within 28 days of the date of the receipt of the written notice from the Husband.

5. The Wife shall retain and be solely entitled to the exclusion of the Husband to the following property and the Wife shall indemnify the Husband against all liabilities in relation to the following property as at the date of these Orders:

   (a)Mitsubishi Outlander registration number “[omitted]”;

   (b)All of the wife’s Superannuation entitlements in the [M] Superannuation and Benefits Scheme;

   (c)All Superannuation entitlements in the [A] Super fund Member Number [omitted].

6. That unless otherwise specified in these orders, each party shall be solely entitled to the exclusion of the other party to all furniture, jewellery, motor vehicles and any other chattels or possessions of whatsoever nature and kind in the possession of that 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 records thereof, insurance policies are deemed to be in the possession of the owner thereof and superannuation entitlements are deemed to be in the possession of the person whose employments or self-employment and contributions provide the conditions for a payment out of such superannuation entitlements.

7. That unless otherwise specified in these orders, each party shall be solely liable for all loans, credit cards, mortgages and any other liability, in that persons sole name as at the date of these orders.

8. That each party have liberty to relist the matter at short notice to seek consequential orders.

9. That if either party, for any reason, fails to execute and return any documents necessary to give effect to these orders as required then unless otherwise provided by these orders, a Registrar of the Federal Circuit Court of Australia at Darwin upon proof by affidavit of such failure is appointed pursuant to section 106A of the Family Law Act 1975 to execute any such unexecuted documents on behalf of the defaulting party and also to perform all acts and things necessary to give force and effect to these orders, AND FURTHER that the defaulting party pay the costs of the other party in relation to the obtaining of the Registrar’s signature to such documents and performing such acts.

10. That the base amount allocated to Ms W (formerly known as Ms Wallace (“the wife”) from the interest of Mr Wallace (“the husband”) in [A] Super (member number [omitted])(“the fund”) is $17,557.24 of the interest of the husband.

11. That pursuant to section 90MT(1)(a) of the Family Law Act 1975 (“the Act”) whenever a splittable payment within the meaning of section 90ME of the Act becomes payable to or on behalf of the husband from his interest in [A] Super, the wife shall be entitled to be paid an amount of (amount to be determined by the judge) calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (“the Superannuation Regulations”) using the base amount, and there shall be a corresponding reduction in the entitlement of the husband to whom the splittable payment would have been made but for these orders.

12. That after the service of the payment split notice pursuant to rule 7A.03 of the Superannuation Industry Regulations, the wife shall do all such things and sign all such documents as may be necessary, including but not limited to, exercising her request pursuant to rule 70A.06(1) of the Superannuation Industry Regulations for the rollover or the transfer benefits out of the husband’s interest in the Fund to a fund of the wife’s choice in accordance with rule 7A.12 of the Superannuation Industry Regulations.

13. That the operative time for the purposes of order (10) is four (4) business days after the date of the service of these final orders upon the Trustee of the Fund.

14. That until the happening of any of:

    (a)The establishment of a separate account in the name of the wife in [A] Super; or

    (b)The transfer or “rolling over” into another superannuation fund of the payment split that was created pursuant to these orders; or

    (c)The wife satisfies a condition of release and is paid the payment split that was created by these orders; or

    (d)The wife executes a waiver of rights within the meaning of section 90MZA of the Act in relation to the payment split created by these orders.

    The husband shall be restrained and an injunction shall be issues restraining him, his servants or agents from executing a death benefit nomination in favour of any person or doing any other act or thing which would render any part of his interest in [A] Super “non splittable payment” within the meaning of regulation 12 or regulation 13 of the Superannuation Regulations.

15. That the Trustee of [A] Super and any subsequent trustee of [A] Super or a successor fund, and the husband and the wife, in accordance with the obligations set out in the Superannuation Regulations shall do such acts and things to sign all such documents as may be necessary to calculate the entitlement of and make payment to the wife in accordance with these orders.

16. That in accordance with section 90MT(1)(b) of the Act, whenever a splittable payment within the meaning of Section 90ME of the Act becomes payable to or on behalf of the husband from his interest in the [M] Superannuation and Benefits Scheme (the “[M]”), the wife is entitled to be paid (by the Trustee of the [M]) 100% of the splittable payment and there shall be a corresponding reduction in the amount the husband would be entitled to receive bur for these orders.

17. That the operative time for order (16) is four business days after the service of these final orders on the Trustee.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DARWIN

DNC 299 of 2012

MS WALLACE

Applicant

And

MR WALLACE

Respondent

REASONS FOR JUDGMENT

Introduction

1. This is an application for property settlement. The parties started living together in 1995 and married [in] 1998. They separated on 18 October 2010.

2. There are two children of the relationship [X] born [in] 1999, aged 14, and [Y] born [in] 2001, aged 12. There are no parenting proceedings on foot. The parties are attending mediation with respect to the parenting issues.

3. The parties agreed on the pool for the purposes of the hearing and handed up a joint balance sheet.

4. The superannuation pool is much larger than the non-superannuation pool.

The wife’s case

1. The wife relied on her case outline, trial affidavit and financial statement. She was the only witness in her case. She was straightforward when giving her evidence.

The husband’s case

1. The husband relied on his case outline, trial affidavit and financial statement. He seeks an equal split of the parties’ assets. The husband also gave his evidence in a straightforward manner.

Issues in dispute

1. The issues in the case are:

   a)The initial contributions of the parties and the weight this should be given;

   b)Assessment of contributions during the relationship;

   c)Addbacks;

   d)Section 75(2) adjustments;

   e)The timing of the sale of the parties’ investment property.

Legal principles

1. Part VIII of the Family Law Act1975 is the part of the Act dealing with property, spousal maintenance and maintenance agreement. The major provisions relating to marital property division are contained in sections 79(1); 79(2); 79(4); & 75(2) of the Act.

2. Pursuant to section 79(1) the Court is authorised to make such order as it considers appropriate in order to alter the interest of the parties to a marriage in relevant property. 

3. The expression “property” is defined in section 4(1) in relation to the parties to a marriage or either of them as meaning “…property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.”

4. Pursuant to section 79(2) the court is actively prevented from making such an order unless it is satisfied that it is just and equitable to do so in all the circumstances prevailing.  This follows from the use of the prohibitory words “shall not” in the relevant section.

5. Section 79(4) provides the mechanics of how a court is to make an order altering marital property interests.

6. Paragraphs (a); (b); and (c); categorise contributions made by marital partners, which are relevant.  Paragraph (d) directs the court to take into effect of any order upon the earning capacity of either party to the marriage concerned. 

7. Paragraph (e) directs the court to consider a list of matters contained in section 75(2), which are germane to spousal maintenance or the prospective positions of the parties concerned by reference to their respective financial resources, means and needs. Finally, paragraphs (f) and (g) apply to child support and previously made parenting orders, as relevant. There is some overlap between these various provisions and not all will be applicable in every case.

8. Until recently, the position in respect of the process to be applied to the resolution of matrimonial property cases was said to be well settled with a preferred approach as set out by the Full Court in Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 at 78,386 [39].

9. The High Court has recently considered the operation of section 79 in the matter of Stanford & Stanford [2012] HCA 52.In the case, the majority stated at [35]-[36] that:

   “It will be recalled that s 79(2) provides that "[t]he 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) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.

   The expression "just and equitable" is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds.” [Footnotes omitted]

10. The High Court to propound that three fundamental propositions with respect to the application of section 79, which can be summarised as follows:

    1.Firstly, in order to ascertain whether it is just and equitable to make a property settlement order, it is necessary to identify the existing legal and equitable interests of the parties in the property. The Court emphasised the word existing.

    2.Secondly, although section 79 gives the court a broad power to make property settlement orders it may not be exercised in an unprincipled fashion. There must be no assumption that the parties’ interests are or should be different to their existing interests.

    3.Thirdly, when considering whether making a property settlement order is just and equitable the court must not assume that one or the other party has the right to a property adjustment order. The court must give separate consideration to section 79(2) in addition the matters referred to section 79(4).

11. In Stanford & Stanford the High Court indicated that, in the vast majority of matrimonial property cases, the requirements of section 79(2) will be readily satisfied, largely as a result of a consideration of the circumstances of the parties concerned, particularly the nature of their separation.

12. The High Court also pointed out that what is just and equitable is different in every case.

13. Stanford & Stanford casts doubt on the correctness of adding back notional amounts to the pool for the purposes of property settlement. The Full Court confirmed this in Bevan & Bevan [2013] FamCAFC 116 and noted that section 75(2)(o) provides ample scope to ensure there is a just and equitable outcome between parties taking into account any disposal of assets.

14. The Full Court confirmed this in Bevan & Bevan. The Full Court said at paragraph [79]:

    “We observe that “notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them”, and thus is not amenable to alteration under s 79.  It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage – and potentially an important part.  As the question does not arise here, we need say nothing more on this topic, save to note that s 79(4) and in particular s 75(2)(o) gives ample scope to ensure a just and equitable outcome when dealing with the unilateral disposal of property.”

15. In my view in light of Stanford & Stanford and Bevan & Bevan it is not appropriate to addback notional property which no longer exists. The proper course is to make an adjustment pursuant to section 75(2)(o). In my view this is appropriate because it reflects the reality of the situation and achieves the same outcome. Having said this, I think paid legal fees are different. The Full Court in NHC v RCH (2004) FLC 93-204 discussed the issue of paid legal fees. It is a matter of discretion for the trial judge. The source of funds to pay for the legal fees is important. Where the legal fees were paid from joint fund it is appropriate to add those fees backs. Fowler J took this approach in Beatson & Beatson [2013] FamCA 655 which was decided after Stanford & Stanford and Bevan & Bevan.

16. In Pierce & Pierce (1998) FLC 92-844 and Williams & Williams [2007] FamCA 313 the Full Court considered initial contributions.

17. The Court should adopt a two pool approach referred to in C & C (2005) FLC 93-220 with superannuation assets separately due to the superannuation constituting a significant percentage of the total pool and the husband’s superannuation entitlements in particular being a defined benefit interest.

The Pool

1. The main asset in the non-superannuation pool is the Queensland investment property. The property has been on the market for some time. It went to auction on 1 September 2013 with a reserve price $275,000. The mortgage on the property is $192,000. The property is rented and the rent covers the mortgage. The parties have not made an allowance for sale costs in the balance sheet. They also have not included the capital gains tax the husband will incur on the sale. The husband attached a CGT valuation prepared by Deloittes to his affidavit. He was not challenged about this.  This should be paid from the proceeds of sale.

2. The husband has $49,681 in a bank account. This is what is left from the proceeds of sale of another property the parties owned.

Assets and Liabilities

1. The non-superannuation pool for the purpose of the hearing are as follows:

Assets	Owner	Value
Property G, QLD	Husband	$275,000
Mitsubishi Outlander	Wife	$16,700
ANZ Bank Account	Husband	$49,681
Furniture	Wife	$4,000
Furniture	Husband	$4,000
Interim costs order	wife	$5,000
Paid legal fees	Husband	$9,300
SUBTOTAL	$363,681
Liabilities
Mortgage	Husband	$192,000
Estimated capital gains tax	Husband	$7,000
SUBTOTAL	$199,000
NET NON-SUPERANNUATION TOTAL	$164,681

1. The superannuation pool is as follows:

Assets	Owner	Value
[M]	Wife	$74,300.24
[A] Super	Wife	$9,441
[A] Super	Husband	$41,282
[P]	Husband	$130,267
[M] Super	Husband	$86,847
SUBTOTAL	$342,137.24

Contributions

1. In 1999 the wife received $20,000 from her superannuation. The wife says this was from superannuation acquired before the relationship. The parties purchased a house at [J], ACT for $185,000. They used the $20,000 towards the purchase and borrowed the rest.

2. In early 2000 the husband received a payout from his superannuation which he used to purchase a car.

3. The husband had some superannuation at the beginning of the relationship as did the wife. They were both [occupation omitted].

4. It is not in dispute that the husband provided the wife with financial support post separation in the sum of $400 a month for 14 months. The wife was not working and wanted to build up her [omitted] business. It seems that this was maintenance for the wife as the husband is not seeking recognition of this. The husband did complain that the payment was supposed to be for the business. The wife said it was to help her with the rent. It my view it makes no difference. The wife needed to pay the rent to be able to work on the business. That much is clear. I do not accept the husband’s complaints about the amount the wife paid in rent. Rentals in Darwin are notoriously high.

5. The husband argues that there should be no adjustment for the early contributions as they were 14 years ago. Although they have been referred to as initial contributions that were made 4 years into the relationship.

6. Although there is a dispute in the parties’ affidavit about the extent of the husband’s study commitments, his working hours and time at home and whether or not the wife should have returned to work fulltime, nothing turns on these issues. I am satisfied that both parties made contributions to benefit their family as best they could.

7. The wife also claims that she made significant contributions to their home after he went away. Both parties made contributions to the renovations as the husband did work on the property before he left. I find this contribution is neutral.

8. In my view contribution the wife made early in the marriage is counterbalanced by the contributions the husband made post-separation including payments he made to the wife’s car repairs and the care of the children since the wife moved to Queensland. There is also the overpayment in child support which he made of $4,000. The husband was repaid from the joint account.

9. Considering all of these issues there should be an equal distribution of the assets based on contributions.

Addbacks

1. There are several addbacks which the parties argued about. The most significant one is the legal fees the husband paid for from the proceedings of sale of the parties’ home. This is clearly joint property of the parties and the wife has an interest in it.

2. I will addback the paid legal fees the husband paid as they came from joint funds. This sum is $9,300.  I will also addback the sum of $5,000 as this was agreed by the parties. The wife received this sum by way of interim property settlement in order with orders made on 30 July 2013.

3. I decline to addback the other amounts sought. It was appropriate for the superannuation valuation to be from the joint funds. I have taken into account the other amounts under contributions.

Section 75(2) factors

1. The wife relocated to Queensland for a few months in 2012 then returned to Darwin. The children stayed with the husband when she went to Queensland. When the wife returned they had a shared care arrangement for the children. She relocated to Queensland again in mid 2013. The children are living with the father full-time. The parties are attending mediation about the parenting issues. The wife wants the children to live with her in Queensland. The husband wants the children to remain living with him in Darwin. Both say the children have told them they want to live with them. This is not unusual.

2. The mother’s lawyer urged me not to make any allowance for section 75(2)(c) being a party having care and control of children under the age of 18. The Court has to deal with the facts that are before it at the time of the hearing. There are too many uncertainties surrounding parenting issues. The mother could have chosen to have parenting issues joined to these proceedings but has not done so. There are no parenting proceedings on foot and I would be merely guessing to say the children will live with their mother in Queensland. The boys are aged 14 and 12. On the evidence before me the husband will continue to have the majority care of the children for a few years. This factor favours the husband.

3. The husband does not receive child support. He has not required the wife to pay child support. Nevertheless this is a relevant factor under section 75(2)(na). This factor favours the husband.

4. Earning capacity is another relevant factor. The husband earns significantly more than the wife and this is likely to remain the case. The husband’s lawyer referred to the uncertainty about the future for public servants but again I have to deal with the facts that are presented to me at the hearing not speculation about uncertainties in the future.

5. The husband argues that the wife could earn more than she does. At the time of the hearing she was working 24 hours a week as a [omitted]. She expected her hours to increase once the season was underway. She also earns some money from her business. Even taking these things into account the husband still earns at least twice as much as the wife. This requires an adjustment in favour of the wife.

6. Taking all of these factors into account the wife should receive 55% of both pools.

Conclusion

1. The realisable asset pool is modest. It primarily consists of the investment home which the parties agree must be sold and what is left of the proceeds of sale of the former matrimonial home which is in the husband’s bank account.

2. The wife’s lawyer argued that the wife needs to receive more of the cash so that has the opportunity to buy a home especially if the children live with her.  The wife says she needs to receive $70,000 so that she will have a sufficient deposit to buy a home.

3. Currently the children live with the husband. The husband is living in a rental property. Although he earns more than the wife he also needs to receive some cash so that he also has the opportunity to rehouse himself.

4. The net asset pool is $164,681. This does not allow for sale costs with respect to the sale of home. The wife has her car, furniture and the interim costs she received totalling $25,700. The husband has his bank account, furniture and paid legal fees totalling $62,981.

5. The superannuation pool is significantly larger totalling $342,137.24.

6. The wife has $83,741.24 in superannuation. The husband proposes that the wife receive the whole of his interest in his [M] Super which gives her another $86,847 in superannuation. The wife will need a further payment of $17,587.24 from the husband’s [A] Super.

7. The wife wants to delay the sale of the property in order to get the best price. The husband wants finality. The property has already been on the market. There is no evidence that delaying the sale will increase the sale price. Section 81 requires finality. I will make the orders for sale in accordance with the husband’s minute of order, adjusted to allow for the wife to receive 55% of the net proceeds of sale of the [G] property.

8. I will order the husband to pay $23,074.55 to the wife, which will have the effect of giving the wife 55% of the assets the husband and wife have excluding superannuation and the investment property. This avoids the need to use a formula to work out the proper division of the [G] proceeds of sale.

I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of Judge Harland

Associate: 

Date:  19 December 2013