WALSTROM & WALSTROM
[2020] FCCA 2381
•27 August 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| WALSTROM & WALSTROM | [2020] FCCA 2381 |
| Catchwords: FAMILY LAW – Application for interim settlement of matrimonial property at early stage of proceedings and prior to final hearing – nature of interim hearing – is it just and equitable to make interim property order – matters to be considered. |
| Legislation: Family Law Act 1975 (Cth), ss.75, 79, 80 |
| Cases cited: Bevan & Bevan [2013] FamCAFC 116 Biltoft & Biltoft (1995) FLC 92-614 Clauson v Clauson (1995) FLC 92-595 Ferraro v Ferraro (1993) FLC 92-335 Harris & Harris (1993) FLC 92-378 Hicky & Hicky & Attorney-General (Intervener) (2003) FLC 93-143 Lee Steere v Lee Steere (1985) FLC 91-626 Norbis v Norbis (1986) FLC 91-712 Pierce & Pierce (1999) FLC 92-844 Russell & Russell [1999] FamCA 1875 Stanford v Stanford [2012] HCA 52 Strahan v Strahan (2010) 42 FamLR 203 Trevi & Trevi [2018] FamCAFC 173 Wardman & Hudson (1978) FLC 90-466 Wenz v Archer (2009) 40 FamLR 212 |
| Applicant: | MS WALSTROM |
| Respondent: | MR WALSTROM |
| File Number: | ADC 2633 of 2020 |
| Judgment of: | Judge Brown |
| Hearing date: | 13 August 2020 |
| Date of Last Submission: | 13 August 2020 |
| Delivered at: | Adelaide |
| Delivered on: | 27 August 2020 |
REPRESENTATION
| Counsel for the Applicant: | Ms Miller |
| Solicitors for the Applicant: | Tindall Gask Bentley |
| Counsel for the Respondent: | Ms Boyle |
| Solicitors for the Respondent: | Duncan Basheer Hannon |
ORDERS
BY WAY OF PARTIAL PROPERTY SETTLEMENT:
The wife receive by way of partial property settlement the sum of $230,000 from the net proceeds of sale of the former matrimonial home situated at B Street, Suburb C, currently held in the D Conveyancing Trust Account.
Further consideration of the matter is adjourned to 5 November 2020 at 9:30am for directions and in particular to determine whether a further conciliation conference should be appointed and what directions made regarding discovery and valuation to prepare for such conference.
IT IS NOTED that publication of this judgment under the pseudonym Walstrom & Walstrom is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADC 2633 of 2020
| MS WALSTROM |
Applicant
And
| MR WALSTROM |
Respondent
REASONS FOR JUDGMENT
Introduction
The parties to these proceedings are Ms Walstrom “the wife” and Mr Walstrom “the husband”. They are in dispute in respect of issues relating to the division of property between them, acquired during a relationship of approximately eight years in duration.
In many ways, it is a sad and perplexing case, which arises at an early stage of proceeding and so precludes the court undertaking any exhaustive examination of the relevant evidence leading to the making of definitive findings in respect of very many factual issues, which are in dispute between the parties.
It is also, in my view, a case which calls out for a negotiated outcome, which will spare each of the parties from the expense and trauma of contested proceedings. Regrettably, an early attempt at conciliation, invoked at short notice by the court, was unsuccessful.
For reasons upon which I will elaborate, in due course, the wife has got herself into a financial pickle, which has the potential to leave her financially exposed. At present, the husband is not disposed to provide her any latitude in regards to this calamity, as he asserts, if the court accedes to the wife’s position, it may result in him being subject to an injustice.
The current issue before the court is whether there should be an interim or partial settlement of property, made in the wife’s favour, from the proceeds arising from the sale of the parties’ former family home, located at B Street, Suburb C, to enable her to purchase another property in which to live.
From the wife’s perspective, the need for such a settlement is pressing because she has entered into a contract to purchase an alternative home, for herself, which ostensibly is due to settle on 14 August 2020. She does not wish to default on the contract in question and so lose the house she wishes to purchase and in which she is currently living.
The sum held in respect of the sale of the B Street, Suburb C property is $456,607.40. The new property was purchased, by the wife, for the sum of $370,000.00, of which the wife has paid a deposit of $10,000.00. The deposit was borrowed from her mother.
The wife has been previously employed as an administrative assistant. Currently, due to ill health, she is not working. Her evidence is that her income is modest - $750.00 per week, which equates to an annual salary of $39,000.00. As such, her capacity to borrow is limited.
More recently again, due to suffering an injury related to her employment, she has been characterised as a seriously injured worker, who receives worker cover payments in an amount of $650.00 per week, which equates to an annual amount of around $33,800.00 net.
The wife has provided evidence that a possible financier – Bank E – is prepared to lend her $170,000.00 to complete the purchase, which would be secured by way of a first mortgage on the new property.
Fees relating to the purchase amount to a further $20,427.00. The wife also wishes to repay her mother because she (Ms Walstrom’s mother) has need of funds to provide for her own medical expenses, as unfortunately she is suffering from stomach cancer.
In these circumstances, through her counsel, Ms Miller, the wife seeks to receive forthwith, the sum of $230,000.00 from the proceeds of sale currently held in the relevant conveyancer’s trust account, to enable her to complete the purchase of her proposed new home.
On my calculations, this will leave the sum of $226,607.40 remaining in the relevant trust account. In respect of the B Street, Suburb C property only, it would represent a division of around 50.4/49.6 in the wife’s favour.
Ms Walstrom entered the contract to purchase the new property on 7 January 2020. Associated with the contract, the wife entered into a licence agreement, which enabled her to occupy the property, at a weekly fee of $390.00 per week.
In Ms Walstrom’s estimation, the issues arising from the end of the parties’ marriage were not unduly complicated, as it was her view that it was incontestable that contributions directly attributable to her had enabled the parties to purchase the B Street, Suburb C property in the first place.
In these circumstances, she believed a period of six months would be ample time to sort out all the necessary details between her and Mr Walstrom. For obvious reasons, this did not prove to be the case. In these circumstances, it is the wife’s case that the husband has ulterior motives for dragging the chain, which relate to his ill-will for her.
The licence fee, enabling the wife to occupy the property in question, will lapse when the contract of sale is settled. Originally the completion date was 3 July 2020, but as previously indicated, this has been extended to 14 August 2020.
I have not been provided with any evidence as to whether the vendor concerned is prepared to grant Ms Walstrom a further period of forbearance and allow her to continue to live in the property concerned pursuant to the licence. Obviously, such forbearance is required otherwise these proceedings will be rendered nugatory.
I have not been advised as to the address of the property concerned. It is the wife’s evidence that she does not wish to disclose the address because she is fearful of the husband. As a consequence of these matters, it is axiomatic that the parties themselves have a poor and mistrustful relationship with one another.
Background
The parties began to live together in 2011 and married in 2013. There is no controversy that the date of their final separation was late April of 2019.
It is the wife’s case that the major factor, which precipitated the parties’ separation, was her displeasure at the manner in which the husband applied funds, which she brought into the marriage, which related to compensation received by her for a serious work place injury.
The wife was born in 1969; whilst the husband was born in 1971. Accordingly, each of the parties is in early middle age. Neither enjoys robust good health.
It is the wife’s evidence that she suffered a work injury in 2016. She has not provided specific evidence regarding the nature of this injury, other than it involved a tearing injury to her hamstring. This injury required surgical correction.
Apparently, the operation did not go as planned and unfortunately during it the wife suffered a cardiac arrest, which resulted in her suffering a hypoxic brain injury, as well as a dislocated shoulder.
As a consequence of her various injuries, it is the wife’s evidence that she suffers the following disabilities:
·Peripheral vision loss;
·Tendon, ligament and rotor cuff injuries;
·Post-traumatic stress disorder;
·Right leg weakness.
In addition, the wife is in remission from breast cancer. She has also recently been diagnosed with a rare form of brain disease – F Disease, which has implications for her motor skills. Regrettably, she anticipates that her motor skills will inevitably deteriorate.
For her various injuries, she is prescribed a variety of analgesia and other medications and has regular appointments with her general medical practitioner, physiotherapist and a psychologist. She has deposed that she may have to undergo surgery, at some stage in the future, to repair her shoulder and hamstring.
It is the wife’s evidence that she received two payments in respect of her work injury - $39,000.00 in 2015 and $409,000.00 in 2019. The husband has elected not to directly refute the wife’s evidence in respect of the receipt of this sum of money. However, how this significant sum was utilised, during the parties’ marriage, is surrounded by significant controversy.
The marriage produced no children, however each party has children from earlier relationships. The wife’s two children are now both adults but live with her and are financially semi-dependent upon her due to their unemployment and own health issues.
The husband is employed as a manager by Employer G. He currently earns $1,776.00 per week, which equates to an annual salary of $92,352.00.
Currently, with the sale of the B Street, Suburb C property he lives in rented accommodation at a weekly rental of $425.00. He lives with his sixteen year old daughter. His other child, who is seventeen, lives with her mother.
Mr Walstrom has had a variety of occupations, including as a scientist . It is his evidence that he was employed throughout the entirety of the parties’ relationship, receiving an income of around $90,000.00 per annum.
It is his position, as I understand it, that his income supported the family, whilst the wife was mainly either unemployed or in receipt of worker’s compensation, during the parties’ relationship. The wife asserts that Mr Walstrom suffers Type2 diabetes, but this does not prevent him from being fully employed.
The major areas of either factual controversy or uncertainty relate to the respective financial positions of the parties, at the commencement of their relationship and the weight to be given to the wife’s compensation payments. It is the wife’s position that the vast majority of her payments can be traced to the acquisition and/or conservation of marital property.
Essentially, it is the wife’s position that, when the B Street, Suburb C property was purchased, in joint names, in 2011, she contributed the greater proportion of the purchase price, with the remainder being secured by mortgage, which was discharged when she received her personal injury payment, in 2019.
It is further her case that she and Mr Walstrom mutually agreed to sell the B Street, Suburb C property, with the tacit recognition that each would need to make alternative accommodation arrangements. She also points to the fact that Mr Walstrom has conceded that when the property was originally purchased, he recognised that ownership should be viewed as being 65/35% in Ms Walstrom’s favour.[1]
[1] See husband’s affidavit filed 17 July 2020 at [10]
In these circumstances, it is the wife’s position that she considered that she would be able to resolve the various property issues, with Mr Walstrom, in around six months from the date of separation, given from her perspective, they could not be regarded as being unduly complicated.
In these circumstances, she contends that she cannot be regarded as being irresponsible or cavalier in entering into the contract to purchase new accommodation for herself and her children, of which she has a pressing need.
In her affidavit material, she is critical of Mr Walstrom for not engaging with her in respect of settling these issues with any degree of urgency. Rather, she contends that he is intent on making the process as difficult as possible, in order to satisfy his own emotional needs. In this context, she points to a text message, which the husband sent to her, which she contends is indicative of this attitude.[2]
[2] See exhibit 4 to the wife’s affidavit filed 10 August 2020
In response to the wife’s interim application, the husband has deposed as follows:
“I do not agree to the wife receiving $300,000.00 by way of partial property settlement. Her assertion that she will receive more than $300,000.00 at the end of the case is based on her application of 75% of an asset pool in which she excludes monies he (sic) has already received, double counts assets (the disputed add back of $27,000.00, which was used to purchase the Suburb H property and includes assets that are not assets (potential income bonuses, leave entitlements and frequent flyer points).”[3]
[3] See husband’s affidavit filed 17 July 2020 at [18]
Legal considerations applicable
Ms Walstrom seeks that there be an order relating to the disposition of marital property prior to the final determination of the proceedings. Her application arises at what she would characterise as a point of crisis, which necessitates the court’s expeditious involvement to direct the proper apportionment of the proceeds of sale of the B Street, Suburb C property so that justice is done.
The urgency of the situation, from her perspective, dictates that the resultant hearing has occurred in a truncated form, without extensive oral evidence and cross examination. As a consequence, the court is not in a position to make concluded findings of fact regarding evidentiary issues in dispute.
However, this lack of evidence does not automatically preclude the court from making orders in respect of the disposition of property at an interim stage, if it is persuaded that it is just and equitable to do so. However, such an exercise must still be referrable to the applicable provisions of the Act.
Part VIII of the Family Law Act deals with financial matters relating to marriages. 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.
Pursuant to section 79(2) the court is actively prevented from making an order altering proprietorial interests, 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 prohibitive words “must not” in the relevant section.
This was an issue analysed by the High Court in Stanford v Stanford.[4] In the case, the majority stated that:
“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.”[5]
[4] Stanford v Stanford [2012] HCA 52
[5] Ibid at [35]–[36]
Accordingly, whether it is just and equitable to make any individual property order, under the provisions of section 79(2), must depend upon the court’s analysis of the idiosyncratic circumstances of each particular case which comes before it. It is not an issue to be approached in a formulaic manner or on the basis of any assumptions regarding contribution issues.
The process to be followed for the division of the parties’ property is well-established by law.[6] The relevant legal principles are primarily contained in sections 79(4) and 75(2) of the Family Law Act. I am required to follow a number of specific steps.
[6] See Lee Steere v Lee Steere (1985) FLC 91-626; Ferraro v Ferraro (1993) FLC 92-335;
In the first step, I must ascertain what are the parties’ assets and liabilities available to be divided between them. The normal rule is that those assets are to be determined as at the date of trial.[7] However, as indicated above, the court is not obliged to include an uncertain or imprecise liability.
[7] See Wardman & Hudson (1978) FLC 90-466; and Biltoft & Biltoft (1995) FLC 92-614
In respect of the first step – the composition of the asset pool – the various controversies arising between the parties can be summarised as follows:
·The husband contends moneys retained by the wife, in the form of her savings and a distribution already received from her from the sale of the B Street, Suburb C property should be notionally added back into the pool. The sums total $89,000.00;
·The husband contends that the wife has retained household effects valued at $40,000.00, whilst he has effects worth $7,000.00. He seeks that both sums be included;
·The wife contends that the husband has retained furniture and effects to the value of $15,000.00 and she herself took little from the former family home;
·The wife contends that the husband received a partial property settlement of $27,000.00, which should be included. The husband does not agree;
·The parties disagree about the value of a motor vehicle purchased by the wife and retained by her. The wife estimates its value to be $22,000.00, whilst the husband attributes a sum of $28,000.00 to its value;
·The parties disagree about the extent of the husband’s savings – the wife attributing the sum to be $6,571.38, whilst the husband asserts the proper figure is $3,500.00;
·The wife asserts that the husband has financial resources in the form of long service leave, bonuses and frequent flyer points to the value of $35,000.00. The husband does not agree.
The husband owns a property located at J Street, Suburb H. It is subject to a significant mortgage and is rented. The tenant concerned pays the husband the sum of $300.00 per week by way of rent.
The husband also pays the recurrent weekly mortgage payment, on the property, which is currently $460.00 per week. There is no controversy that the mortgage secured against the J Street, Suburb H property is $444,979.00.
The parties disagree as to precisely when the property was purchased. The wife contends that it was early 2019, with settlement occurring after the date of separation. The husband puts it some two years earlier, in 2017. The parties also disagree about what is the property’s current value – the wife asserting it to be approximately $495,000.00; whilst the husband asserts it is $475,000.00.
I have not been provided with precise evidence as to what was the purchase price of the J Street, Suburb H property. It is the wife’s position that she provided the husband with approximately $27,000.00, from her compensation moneys, to enable him to complete the purchase.
In these circumstances, she contends that this sum should be notionally added back into the parties’ pool of property and allocated to the husband. The husband does not agree, asserting the sum in question represents a contribution towards the purchase of the J Street, Suburb H property.
The husband was born in Country K. The wife asserts that his mother had significant interests in large tracks of community land in Country K, which he inherited on her death in early 2015 and which are likely to provide him with a regular source of income. The husband refutes this assertion. For the purpose of these proceedings, the wife is prepared to accept that these are not matters which can be considered in this case.
Neither party asserts that he/she has significant financial resources in the form of superannuation. As a consequence of his involvement in the paid workforce, the husband has significantly more superannuation than the wife. He asserts his superannuation is around $138,000.00. The wife asserts that her superannuation is around $30,000.00.
The parties have not disclosed significant liabilities. It is agreed that the mortgage on the J Street, Suburb H property is just under $445,000.00. Notwithstanding the various disputes between the parties as to the overall composition of the asset pool, in dollar terms, they are not a great distance apart.
The wife asserts that the net non-superannuation assets amount to $617,386.78; whilst the husband asserts that the net non-superannuation assets amount to an estimated total of $654,128.00.
In respect of superannuation, the husband asserts that the total superannuation held by the parties comes to $180,347.00; whilst the wife asserts the total amount to be $189,536.23. Neither party proposes any specific splitting order be made in respect of superannuation.
Recently, in Trevi & Trevi[8] the Full Court has reiterated that the court’s authority to add back is both discretionary and exceptional in nature. It should only occur when, in the particular circumstances of the case concerned, considerations of justice and equity require it.
[8] Trevi & Trevi [2018] FamCAFC 173 at [30]
In addition, it is not necessarily an exercise which requires any direct arithmetical tabulation. Rather, add back issues can be approached in general terms at the third step of proceedings under the rubric of any other fact or circumstances the justice of the case requires be taken into account [section 75(2)(o)].
In the second step, I must ascertain the contributions, which each party has made towards the pool of assets, as I have found them, following the first step. Contributions fall into two broad categories.
The first kind is contributions to the property: financial contributions and non-financial contributions, made directly or indirectly, by or on behalf of a party to the marriage to the acquisition, conservation or improvement of any of the property of that relationship.
The second kind is contributions to the welfare of the family: in the words of the section, “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.”[9]
[9] See Family Law Act at section 79(4)(c)
It is clear from the authorities that this second kind of contribution must be given appropriate weight and is not to be treated as a token matter or as a contribution which is inherently less valuable or important than a financial contribution to property.
At this second step stage, the task set for me requires the balance and comparison of a multiplicity of contributions, many of which are necessarily different in nature, within the framework of a marriage.
Many contributions in a marriage, such as being a homemaker, do not result in the direct acquisition of assets. They are also difficult to value in absolute dollar terms.
In contrast, the monies contributed by a wage earner are easier to quantify. However these difficulties do not absolve the court of its obligation to undertake the required assessment of contributions. The court’s discretion is a wide one but must be exercised judicially.
It is Ms Walstrom’s position that her contributions, both in financial and non-financial terms, during the parties’ marriage, have been substantially greater than those of Mr Walstrom, and therefore justify her receiving a greater weighting when the court comes to consider contributions at the second step.
Her submission, in this regard, rests on the following assertions:
·When the parties commenced their relationship, she injected cash in an amount of $160,000.00, into the marriage, which she brought by way of a property settlement from her first marriage;
·This sum was the basis on which the parties were able to purchase the B Street, Suburb C property, in 2017, for the sum of $457,000.00;
·As a consequence, this contribution requires special recognition given the proceeds of sale of the B Street, Suburb C property is by far the most significant marital asset, in dollar terms;[10]
·She performed the larger proportion of domestic duties during the parties marriage, including parenting not only her own children, but those of the husband;
·When the B Street, Suburb C property was sold, it was unencumbered. This was because she utilised $251,709.62 from her work injury settlement to discharge the mortgage.
[10] See Pierce & Pierce (1999) FLC 92-844
Accordingly, it is her position that, in dollar terms, her financial contributions to the acquisition of the property must be regarded as overwhelmingly superior to that of the husband. She provided the sum required to purchase the property from the settlement relating to her first marriage; and paid off the mortgage with her settlement monies.
The husband filed an affidavit in response to the wife’s application on 17 July 2020, approximately one month after the wife’s application had been filed. Accordingly, in my view, he had ample time to respond to the various issues raised by the wife.
In this regard, it is notable that he has chosen to respond to some aspects of her case but has ignored other aspects of it. This is particularly noteworthy so far as the wife’s assertion that her personal injury settlement was utilised to discharge the mortgage on the B Street, Suburb C property. The husband has simply not responded to this assertion.
In respect of contribution issues, the husband asserts as follows:
·He was the family’s main, if not sole breadwinner during the parties’ marriage;
·As such, his income serviced the mortgage on the B Street, Suburb C property;
·He was significantly involved in the provision of home making and parenting responsibilities, during the parties’ marriage, as the wife was frequently bed ridden, due to her significant level of disability.
In these circumstances, he contends that, if the sum sought by the wife is removed prematurely from the pool of assets, which he contends Ms Walstrom has artificially inflated to suit her own ends, particularly in respect of the inclusion of nebulous items of property, which she wishes to attribute to him, it will accord him a significant level of injustice and ultimately cause the proper application of the court’s discretion, at the final hearing stage, to fail.
The third step involves the assessment of the parties’ prospective needs, by reference to the factors set out in section 75(2) of the Family Law Act. As indicated above, pursuant to section 75(2)(o), the court is entitled to take into account “any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account”.
Again, it is Ms Walstrom’s contention that the various factors arising under this section greatly favour her. She is in poor health as a consequence of suffering ill health relating to breast cancer and F Disease.
Her capacity to engage in paid employment is greatly diminished because of the disabilities suffered by her as a consequence of the surgery following her work place injury. She suffers PTSD and right leg weakness.
Until recently she was able to derive an extremely modest income as an administrative assistant. However, it is her evidence that she will not be able to return to this employment because she is immuno-suppressed and the work environment puts her at risk because of potential exposure to COVID19.
In these circumstances, at best, she will remain characterised as a seriously injured worker and will not be able to return to the workforce unless she retrains. She will also continue to have some level of financial responsibility for her disabled children although they are now each adults.
In these circumstances, she points to the fact that although the husband cannot be regarded as a highly skilled person and although she accepts that he has his own health issues, it is her case that he is able to take out of the marriage a viable capacity to earn an income which is more than double hers.
The husband has not elected to address with any degree of precision, if at all, the issues relating to section 75(2) raised by the wife. It would appear to be his position that he himself is not currently in a strong financial position because he is living in rented accommodation and owns a property in respect of which the outgoings, for which he is liable, are greater than the receipts it generates in the form of rent.
Finally in determining what order the court should make under section 79, the court must be satisfied that in all the circumstances, it is just and equitable to make the relevant orders. Overall, it is the justice and equity of the actual orders that the court must consider.[11]
[11] See Russell & Russell [1999] FamCA 1875 at [80]
Accordingly the so called fourth step is for the court to take a step back and examine whether the orders it proposes are just and equitable. These considerations must also inform each of the preceding steps. [12]
[12] See Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 at 78,386 [39] and Bevan & Bevan [2013] FamCAFC 116 at [60]
Section 80 of the Act provides the court with what are described as general powers. In particular section 80(1)(h) empowers the court to make an order pending the disposal of proceedings. However, it is clear that the same principles, set out above, apply both at the interim and the final hearing stage.
In addition, pursuant to section 80(1)(k) the court is authorised to make any order which it considers is necessary to do justice between the parties.
In Strahan, apropos the making of an interim property order, the Full Court said as follows:
“Once a court proceeds to exercise the power in s 79 of the Act, being in the substantive phase, a court is required to undertake consideration of the matters in section 79(4) including by reference to s 79(4)(e) the matters in section 75(2) so far as they are relevant. However consideration of such matters may be brief and if it is established that ‘it seems likely to the Court that…the applicant…will be likely to receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made’.”[13]
[13] See Strahan v Strahan (2010) 42 Fam LR 203 at 230 [137]
In general terms, bearing in mind the limited nature of an interim hearing, the court is required to follow the process prescribed by section 79(4) in respect of both final and interim matrimonial property proceedings. Accordingly, it is necessary for the court to consider whether it is just and equitable to make such an order and whatever order is made must be referable to the criteria set out in section 79(4).
Accordingly, the court must make some assessment of the parties’ various contributions to the pool of assets in question and importantly must have regards to any applicable factor arising under section 75(2). Necessarily, any interim order must be referable to the final order made in the case concerned, as both depend on the exercise of the same power.
Given these circumstances, the Full Court of the Family Court has pointed out that, as there can be only one exercise of the power under section 79(4) of the Act, it is usually preferable that there be only one final hearing of section 79(4) proceedings, rather than a succession of subsidiary provisional hearings.[14]
[14] See Strahan v Strahan (supra) at [114]
In Strahan, the Full Court considered an earlier decision of the Full Court Harris & Harris.[15] In this case, the Full Court delineated the relevant considerations applicable to the making of what is conveniently described as an interim property order. The Full Court, in the case, considering it unnecessary to draw a distinction, in terminology, between an interim order and a partial order.
[15] See Harris & Harris (1993) FLC 92-378 at 79,930
In Harris, the Full Court, whilst affirming the preference that there be only one final hearing of property proceedings, identified three criteria applicable to the exercise of the power to make an interim property order namely:
·the exercise of the power should be confined to cases where the circumstances at the time were “compelling”;
·the exercise of the power, depending as it did on section 79 of the Act, must be exercised within the parameters provided by that section, notwithstanding the difficulty arising for any decision maker concerned in making final findings;
·the exercise of the power must be exercised “conservatively” in the sense that any remaining property needed to be sufficient to meet the “legitimate expectations” of both parties at final hearing, or the order being contemplated is itself capable of being reversed or adjusted at a later stage, if necessary.
In Strahan, the Full Court affirmed Harris in the sense that it accepted that an interim property application comprised a two-step process. Firstly what was described as an “adjectival stage” and secondly what was described as the “substantive stage”. The first step being concerned with the description or particularisation of the circumstances required to be established before an interim property order was made. The second step dealing with the mechanisms applicable to the making of such an order.
The controversy ventilated in Strahan centred on the phrase “compelling circumstances” used in Harris and whether such a formulation unduly fettered the court’s power to make an interim property order, which was “appropriate” at that stage of proceedings. This being the expression used in the enabling provision contained in section 79(1) of the Act.
In this regard, the Full Court said as follows:
“In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.”[16]
[16] Strahan v Strahan (2010) 42 FamLR 203 at 236 [132]
In reaching this conclusion, the Full Court noted the idiosyncratic nature of litigation, under the Family Law Act, when compared with other civil litigation. In the former, there was often a marked imbalance in the power of the parties concerned and artificialities in how property available to be divided was legally controlled in the period leading up to final hearing.
In this context, the Full Court approved the comments of Riethmuller FM (as His Honour then was) in Wenz v Archer[17] as follows:
“It cannot be the case that a party who has an irresistible claim to a substantial share of the property of the parties should be held out of that property while the matter is litigated, left to rely upon applications for exclusive occupation of the matrimonial home or spousal maintenance alone, particularly where the parties are asset rich but have relatively modest incomes (such as the present case). Nor could it be appropriate that a party should be denied the ability to liquidate assets when there are real needs for those resources, such as to meet debts which may result in the party being pursued by creditors, or the need for the party to make payments for the benefit of the children, or to take advantage of other financial opportunities (for example the superannuation contribution cases).”
[17] See Wenz v Archer (2009) 40 FamLR 212 at 223 [53]
In terms of the second or substantive phase, the Full Court in Strahan confirmed the second and third considerations delineated in Harris, namely that the relevant provisions of section 79, including section 75(2), needed to be considered and so far as any adjustment made, at this stage, it needed to be capable of reversal or to be clawed back at a later stage.
Examples of where it may be appropriate to use the power to make an interim property order include where both the parties agree to the disposal of some assets pending trial; urgent situations to avoid injustice being wreaked upon one party, if the power was not exercised; and where one party requires funds to assist in the defrayal of legal costs arising from the litigation involved.[18]
[18] See Strahan (supra) at [133]
In this particular case, it is Ms Walstrom’s position that it is appropriate for the court to make the orders, which she seeks at an interim stage, because:
·She is committed to the purchase of another property;
·Her idiosyncratic circumstances require her to have stable accommodation;
·Mr Walstrom acknowledges that when the Suburb C property was purchased, she provided the vast majority of the funds which he conservatively conceded were 65/35% in her favour;
·Contributions relating to her personal injuries settlement resulted in the Suburb C property being unencumbered when it was sold;
·The parties agreed to sell the property and having followed through with the sale it would be inequitable to deprive her of her proper entitlements in such circumstances;
·Considerations of financial contributions greatly favour her;
·The husband has not specifically answered her evidence in respect of these issues;
·Her prospective needs, particularly because of her various injuries and illnesses and her compromised income earning capacity, when contrasted with that of the husband, are significantly greater than those of Mr Walstrom;
·The division proposed is modest and is capable, if necessary, of being rectified, which is highly unlikely;
·Mr Walstrom’s conduct throughout the proceedings has been obstructive and characterised by obfuscation. As such, it would be unfair, in all the circumstances of the case to deprive her of the opportunity to complete the purchase of the home to which she is contractually liable and in which she wishes to live.
In all these circumstances, it is Ms Walstrom’s contention that it is demonstrably both appropriate and just and equitable that an order be made that she receive a portion which is slightly more than half the proceeds of sale of the B Street, Suburb C property, given the cash she put into the property herself and each of the parties concerned agreed that the property needed to be realised as each would have to make alternative accommodation arrangements with the end of their marriage.
The discretion to make an interim property order must be closely considered, bearing in mind the different nature of an interim hearing, as opposed to a final hearing, which nonetheless involves the exercise of the same power. Again Riethmuller FM expressed the dilemma arising in this way:
“…Because the orders under s.79 are the exercise of such a broad and complex discretion, generally the interests of the parties are better served by there being one final hearing under s.79. If the s.79 proceedings are not completed in one decision various options may not be left open and therefore the Court may not be able to ensure that a ‘just and equitable’ outcome overall is achieved. However, there will be cases where it would not be ‘appropriate’ to deny interim relief, as this would not permit a ‘just and equitable’ result in the interim.”[19]
[19] See Wenz v Archer (ibid) at [54]
Considerations of this type led the Full Court in Strahan to say as follows:
“We also emphasise that in order to establish an appropriate case for an interim property settlement order more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party.”[20]
[20] See Strahan (ibid) at [139]
Conclusions
The first significant area of factual controversy between the parties concerns the actual composition of their pool of marital assets. As previously indicated, although in dollar terms they are not a great distance apart, where they differ is in the attribution of property, particularly in the context of notional assets or add backs.
In these circumstances, in my view, it is useful to contrast the manner in which each party has approached the construction of their respective asset pool. Firstly, the wife’s asset pool is as follows:
ASSETS – (STATED BY THE WIFE) J
Net proceeds of B Street, Suburb C held in D Conveyancing trust account
$456,607.40E
H
J Street, Suburb H *
$495,000E
W
Motor Vehicle 1*
$22,000.00E
W
Trailer*
$2,000.00E
W
Distribution to wife from trust account (amount remaining as at 5/6/20 after payment of living expenses) #
$3,187.00E
H
Savings (Husband) #
$6,571.38
H
Long service leave entitlements#
$15,000E
H
Bonuses (estimated on anecdotal evidence)#
$15,000E
H
Furniture and effects #
$15,000E
H
500,000 Frequent Flyer Points #
$5,000E
H
Share in Community Lands in Country K #
unknown
H
Payment from wife to husband (partial property settlement at separation) #
$27,000
Total assets $1,062,365,78E
Plus H’s share in Community lands
LIABILITIES
H
Mortgage secured against the J Street, Suburb H property as at 22.04.20
$444,979E
TOTAL
$444,979
NET NON-SUPERANUATION ASSETS
$617,386.78
Plus H’s share in Community lands
SUPERANNUATION
W
Super Fund L
$13,025.28E
W
Super Fund M as at 30/6/19
$17,088E
H
Super Fund N as at 14/2/20
$159,422.95
TOTAL SUPERANNUATION:
$189,536.23E
NET ASSETS
$806,923.01
The husband’s affidavit formulates the following pool of assets. In each case, I have marked with an * the items of property which are in dispute, as to their value and with a # those the inclusion of which is disagreed.
ASSETS – (STATED BY THE HUSBAND) J
Proceeds of sale of B Street, Suburb C (joint)
$456,607
H
J Street, Suburb H *
E$475,000
W
Motor Vehicle 1*
E$28,000
W
Partial property settlement #
$50,000
W
Savings at separation #
$39,000
H
Savings at separation *
$3,500
W
Household contents #
$40,000
H
Household contents *
$7,000
Total assets:
E$l,099,107
LIABILITIES
Mortgage on J Street, Suburb H
$444,979
NET ASSETS (excluding superannuation)
E$654,128
SUPERANNUATION
W
Super Fund L
$25,451
W
Super Fund M
$17,088
H
Super Fund N
$137,808
TOTAL SUPERANNUATION:
$180,347
NET ASSETS (including superannuation)
E$834,475
Although in net terms, the parties are not a huge distance apart in the calculation of their non-superannuation assets $617,386.78 (the wife) and $654,128.00 (the husband), there are radical differences in how each has elected to compose the asset pool, with each allocating a number of add backs, which are to be accounted in the other’s favour. In addition, each has allocated a higher value to items of property to be retained by the other.
Accordingly, whether it be calculated or not, each party has followed the usual protocol, in proceedings such as these, of constructing an asset pool, on a total basis, which will favour him or her when the actual readily identifiable assets are divided – such as cash – in percentage terms.
Given the way in which the interim hearing has been conducted, I am not in a position to construct a definitive pool of assets. What is noteworthy, in my view, is that there can be no controversy about the parties’ major item of property, the proceeds of sale of the B Street, Suburb C property. That sum has been crystallised by the property’s sale. The parties also agree what is their level of indebtedness – the mortgage secured against the J Street, Suburb H property.
In addition, the valuation discrepancies in respect of the other tangible items of property – the value of the J Street, Suburb H property ($20,000.00); and the wife’s motor car ($6,000.00) are comparatively modest. The exception in this regard being the contents of their former family home, which have not been valued.
In this context, neither party points to any particular item of property that has any special intrinsic value. Rather, in the absence of any specific evidence, they have estimated the value of their former shared goods and chattels and now individually assert that the manner in which they have been divided is unfair.
These are difficult issues to resolve at trial. It is likely to be a depressing (and potentially expensive) exercise for items of furniture and related items to be professionally valued. However, if this is to be done, in theoretical, if not practical terms, it will be possible for there to be an adjustment to how these specific items have been divided.
The other contentious items, from each party’s perspective, relate to potential dollar amounts, which are either notional – monies to be added back, which have been spent or otherwise utilised – or contingent, such as the husband’s long service leave, bonuses and frequent flyer points.
The contentious amounts total, on the wife’s pool from the husband’s perspective, to an amount of around $70,000.00 and vice versa to an amount of $89,000.00, on the husband’s pool from the wife’s perspective.
On the wife’s figures the husband has access to an amount of equity, in the J Street, Suburb H property, in an amount of $50,021.00, of which she says she contributed the sum of $27,000.00 to enable the completion of the property. The husband agrees that this sum was contributed but he calculates the equity as being around $30,000.00.
I appreciate that, given this is an interim hearing, I need to be cautious and approach the husband’s evidence on the assumption that it is correct, unless it is demonstrably unreliable.
In this context, by my calculations, utilising the husband’s pool, if the wife receives $230,000.00 from the proceeds of sale of the B Street, Suburb C property and the husband receives the balance ($226,607.40) and each retains the items of property attributed to him or her by Mr Walstrom, it would result in a division, in percentage terms of 59/41%, in the wife’s favour, arising from a pool of $654,128.00.
If the same approach is applied to the wife’s pool, it would result in a 42/58% split in the husband’s favour on a pool of $617,386.78. Given these various calculations, the issue for the court is whether it is just and equitable to proceed in the manner proposed by the wife.
In this context, it is necessary to consider the evidence available relating to the parties’ various and disparate contributions and whether those contributions should be considered by reference to all the disputed items of property or to individual items of property.
The task required of me pursuant to section 79(4) of the Family Law Act thus is to weigh and assess the disparate contributions of the parties to arrive at an outcome, which is both appropriate and just and equitable in all the circumstances. Contributions, which are different in quality and nature, must be compared. The exercise is not purely an arithmetical or accounting one.
In assessing the parties’ contributions towards the acquisition of the assets of their marriage, it is necessary to consider whether the court should adopt a global approach or an asset by asset approach. In the former, the court assesses the parties’ contributions to their assets in a total or comprehensive manner.
In the latter, the court assesses the parties’ contributions to individual items of property. Both approaches are legitimate, however the High Court has held that the global approach is generally more convenient, particularly when it is necessary for the court to assess contributions, which are different in nature.
In Norbis v Norbis[21] it was said as follows:
“Although it is natural to assess financial contributions under sec. 79(4)(a) by reference to individual assets, it is also natural to assess the contribution of a spouse as home maker and parent either by reference to the whole of the parties’ property or to some part of that property. For ease of comparison and calculation it will be convenient in assessing the overall contributions of the parties at some stage to place the two types of contribution on the same basis, i.e. on a global or, alternatively, on an ‘asset-by-asset’ basis. Which of the two approaches is the more convenient will depend on the circumstances of the particular case. However, there is much to be said for the view that in most cases the global approach is the more convenient.”
[21] Norbis v Norbis (1986) FLC 91-712 at page 75,268 per Mason C J & Deane J
In a separate judgment delivered in Norbis, Wilson & Dawson JJ said as follows in regards to the issue as to whether a global or asset by asset approach was preferable in the assessment of marital contributions pursuant to the section 79 exercise:
“If the parties’ interests in specific items of property differ or they have made differing contributions, it may be desirable to proceed upon an item by item basis in the division of the property between them. In such a case, justice and equity may best be served by treating the items separately for the purpose of determining the proportions in which they are to be divided, particularly if the overall division is to be effected by the transfer or retention of interests in individual assets, as was convenient in this case.”
Clearly the most important consideration, in whether to adopt a global or asset by asset approach, is which approach is more conducive to achieving an outcome which is “just and equitable”. Factors which have been identified as influencing the decision include the duration of the marriage in question and how the parties themselves have dealt with any particular item of property during it.
In this case, the parties’ most significant asset, in dollar terms, is the crystallised value of their former family home to which the wife asserts her contributions, in financial terms, have been overwhelmingly superior. This assertion must be examined in the overall context of the parties’ marital relationship.
In this context, it is necessary to examine what each party has deposed in respect of the property and what has not been revealed. The wife asserts as follows:
“In 2011 Mr Walstrom and I purchased the B Street, Suburb C property in our joint names for $457,000.00 plus fees using my $160,000.00 savings as the deposit and the balance by way of mortgage.”[23]
[23] Wife’s affidavit filed 19 June 2020 at [13b (i) 1]
The husband does not disagree. He deposes as follows:
“In response to paragraph 13b of the wife's affidavit, I admit that the wife's $160,000 was used to purchase the B Street, Suburb C property. However, the wife was unable to obtain finance at the time as she was unemployed. My salary and her deposit were both required to secure finance for the purchase. At the time, we agreed that the property would be purchased in the proportions of 65/35 in the wife’s favour.”[24]
[24] See husband’s affidavit filed 17 July 2020 at [10]
Accordingly, when the property was purchased, the extent of the debt was in the vicinity of $297,000.00. It is also clear that the property was sold consensually in early 2020. Neither party revealed the sale price in their affidavit material. In these circumstances, after the case was reserved for judgment, I requested that I be provided with a settlement statement in respect of the sale of the property.
To the credit of the parties’ respective solicitors, this was provided. It revealed the property was sold for $570,000.00. This indicates a capital gain of $113,000.00. It also indicates that an amount of $50,444.79 was required to discharge the mortgage on the property concerned and the wife was provided with the sum of $50,000.00.
The husband’s case can be summarised as follows. He made the necessary mortgage payments, which preserved the parties’ major jointly owned asset and paid down firstly, interest as it accrued and secondly, reduced the level of debt owed by them both, increasing the marital capital the property represented. Therefore he has a significant interest in any capital appreciation, which has arisen over the period of the parties’ ownership of the property, which is around nine years.
The wife has provided evidence as to what the level of the mortgage was on sale. She deposes as follows:
“I suffered a work injury in 2016. I received two payouts totalling $448,000 net ($39,000 in 2015 and $409,000 in 2019). The payouts were applied to:
$251,709.62 to discharge the B Street, Suburb C property mortgage;
$56,356.86 to discharge a personal loan in Mr Walstrom’s name;
$12,773.20 to discharge the joint Virgin credit card and $8,634.69 to discharge Mr Walstrom’s Go Master Card. Both cards were primarily used by Mr Walstrom (including for his personal use);
$48,000.00 to purchase my motor vehicle;
Approximately $15,000 for a shopping trip to Melbourne with Mr Walstrom’s daughters and my daughter. Ms O spent $4,500.00 on 12 pairs of shoes and clothing. When I challenged Mr Walstrom about what he had allowed Ms O to spend he was furious with me. We separated as a consequence of this argument.”[25]
[25] See wife’s affidavit (supra) at [13b(c)(i)]
The husband has studiously failed to respond comprehensively to these assertions, particularly in respect of the sum required to discharge the B Street, Suburb C property mortgage. The issue of whether the wife significantly discharged the original mortgage on the property remains an issue at large.
The settlement statement provided to me indicates a modest mortgage at settlement ($50,444.79) which has been reduced by around $247,000.00 from the $297,000.00 required to complete the purchase in 2011.
The husband responded, in the following terms, to the wife’s assertions above:
“In response to paragraph 13c of the wife's affidavit, I say that:
$56,356 was used to discharge a personal loan in joint names which had been used to fund renovations to the B Street, Suburb C property;
$12,773 was used to discharge the joint Virgin credit care which had been used to fund a trip to Country K for the wife and me, and the Go Mastercard had been used to buy furniture and appliances for the B Street, Suburb C property;
Only $4,500 was spent on the Melbourne trip, all of which was bought on a credit card.
The wife and I paid about $10,000 for my mother's funeral. We subsequently received about $7,000 back from my siblings and others who attended.”[26]
[26] See husband’s affidavit (supra) at [12]
If the wife’s evidence is correct, it would indicate that over the period of the parties’ ownership of the property the mortgage was reduced to around $50,000.00. I have not been advised of the terms of the parties’ loan agreement but assume that the husband has paid significant amounts of interest in respect of the loan. I accept, of course, that this must be regarded as a financial contribution referrable to the conservation of the property concerned.
Notwithstanding the not inconsiderable lacunae in the evidence concerned, the husband concedes that the wife contributed directly toward the initial purchase of the property ($160,000.00) and monies towards improving it ($56,356.00).
As previously indicated, if the court confines its consideration to the proceeds of sale of the B Street, Suburb C property alone, in strict percentage terms, if the wife takes $230,000.00 it would represent an almost equal division of the proceeds of sale.
In addition, it would also appear to be the case that the husband concedes that the wife made some form of direct financial contribution towards his acquisition of the J Street, Suburb H property owned by him. Although the parties dispute the specific level of their respective domestic and parenting contributions, it seems clear that the wife did make some contributions in this form, particularly in respect of the husband’s children from his earlier relationship.
I also acknowledge that I must be careful not to discount the husband’s contributions made in the form of his income, as the major breadwinner during the parties’ marriage. It is his case that he kept the family afloat, in financial terms, through his annual salary of $90,000.00, whilst he asserts the wife was significantly incapacitated from time to time.
However, in my assessment, the remainder of the settlement monies, from the B Street, Suburb C property, provide a sufficient buffer to guard against any injustice in respect of how the court approaches the issue of add backs and other uncertainties in respect of the construction of the asset pool.
It also seems incontrovertible that the various factors arising under section 75(2) of the Act greatly favour the wife. She is in poor health and her income earning capacity has been greatly reduced if not wholly extinguished. On the other hand, the husband continues in paid employment.
Finally the court is entitled to examine any fact or circumstances which it consider relevant to the overall justice of the case concerned. In this context, it may have been imprudent for the wife to have entered into a contract to purchase a property before all issues of property between her and Mr Walstrom had been resolved.
However, by entering into the licence agreement, it is open for a conclusion to be reached that she had provided herself with a reasonable margin for error, in all the circumstances, given the fact the parties had agreed to sell the B Street, Suburb C property; she had need of somewhere to live; the property she had purchased for herself was of more modest value than that of the former matrimonial home; and given her view of her level of contribution toward the acquisition of the former matrimonial home.
In all these circumstances, I do not think it would be just for the wife to be placed at risk of losing the property to which she is committed and in which she wishes to live. In my assessment, it cannot be said that she has not made significant and substantial contributions towards the assets of the marriage, particularly the B Street, Suburb C property.
It is incontrovertible that the wife’s contribution of $160,000.00 enabled the purchase of the property in the first place. Accordingly, this contribution is the undisputed basis on which the parties’ current wealth is based. This contribution should be accorded special recognition.
For all these reasons, I propose to make the orders as sought by the wife. The orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and forty eight (148) paragraphs are a true copy of the reasons for judgment of Judge Brown.
Associate:
Date: 27 August 2020
Clauson v Clauson (1995) FLC 92-595; and Hicky & Hicky & Attorney-General (Intervener) (2003) FLC 93-143 at 78,386
[22] Norbis v Norbis (supra) at 75,173–75,174
Key Legal Topics
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Family Law
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Civil Procedure
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