Watling and Watling
[2008] FMCAfam 581
•25 July 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WATLING & WATLING | [2008] FMCAfam 581 |
| FAMILY LAW – Property settlement – relatively short marriage – husband has significantly greater earning capacity – wife has care and control of three year old child – 60:40 split. |
| Family Law Act 1975, ss.75, 79 |
| Hickey v Hickey (2003) FLC 93-143 Mallett & Mallett (1984) FLC 91-507 McLay & McLay (1996) FLC 92-667 |
| Applicant: | MS WATLING |
| Respondent: | MR WATLING |
| File Number: | MLC 1457 of 2007 |
| Judgment of: | Riley FM |
| Hearing date: | 6 June 2008 |
| Date of Last Submission: | 6 June 2008 |
| Delivered at: | Melbourne |
| Delivered on: | 25 July 2008 |
REPRESENTATION
| Counsel for the Applicant: | Bronia Tulloch |
| Solicitors for the Applicant: | JH Legal Pty Ltd |
| Counsel for the Respondent: | Rohan Hoult |
| Solicitors for the Respondent: | Beaumont Lawyers |
ORDERS
Within 30 days:
(a)the husband sign all documents and do all things necessary to transfer to the wife, at the expense of the wife, all of his right title and interest in the property situate at and known as Property B being the land more particularly described in Certificate of Title Volume [8] Folio [6] (“the real property”);
(b)contemporaneously with the transfer referred to in order 1(a), the parties sign all documents and do all things necessary to discharge the mortgage registered number [A] in favour of Westpac Banking Corporation and the wife refinance the mortgage into her name solely; and
(c)contemporaneously with the transfer referred to in order 1a), the wife pay to the husband the sum of $86,811.40.
In the event that the wife does not pay the husband the sum of $86,811.40 within 30 days, the real property be sold and upon completion of the sale the proceeds be applied:
(a)firstly, to pay all costs, commissions and expenses of the sale;
(b)secondly, to discharge the mortgage and any other encumbrance affecting the real property; and
(c)thirdly, the balance be divided between the parties so as to give the wife 60% of the asset pool, after taking into account the property she is to retain under these orders, and so as to give the husband 40% of the asset pool, after taking into account the property he is to retain under these orders.
Pending the transfer referred to in order 1 and the sale referred to in order 2:
(a)the wife have the sole right to occupy the real property and during such right of occupation the wife pay all mortgage repayments, rates, taxes and like outgoings in respect of the real property as they fall due;
(b)the parties hold their respective interests in the real property upon trust; and
(c)neither party encumber the real property without the consent in writing of the other.
The wife retain the Telstra Ltd shares and the AMP Ltd shares held in her name.
The husband retain the Oxiana Resources Ltd shares and the Virgin Blue Ltd shares held in his name and the 2003 Subaru Forrester.
The husband be liable for and indemnify the wife against all payments in respect of Westpac Visa Credit Card account number [4].
Unless otherwise specified in these orders and save for the purpose of enforcing any monies due under these or any subsequent orders:
(a)each party be solely entitled to the exclusion of the other to all other property (including choses-in-action) in the possession of such party as at the date of these orders (the furniture, personal possessions, and like chattels in the real property being deemed to be in the possession of the wife);
(b)all monies standing to the credit of the parties in any bank account in that party’s name are to remain the sole property of that party;
(c)each party forego any claims they may have to any superannuation benefits belonging to or earned by the other;
(d)insurance policies remain the sole property of the owner named therein;
(e)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders;
(f)any joint tenancy of the parties in any real or personal estate is expressly severed; and
(g)each party will be solely liable for any taxation assessments issued by the Taxation Department against them for both past and future financial years, and may retain any taxation refunds received by them for those years and both parties agree to make no claims in relation thereto.
IT IS NOTED that publication of this judgment under the pseudonym Watling & Watling is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 1457 of 2007
| MS WATLING |
Applicant
And
| MR WATLING |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application for property settlement. The husband was born in 1973 and is now 34 years old. The wife was born in 1976 and is now
31 years old. The parties commenced cohabitation in April 2000 and married in 2002. Their daughter [E] was born in 2005 and is now 3½ years old. The parties separated on 3 October 2005 when [E] was about nine months old and divorced on 28 April 2007.
History
When the parties commenced cohabitation in April 2000, both were working full time, although the husband's earnings were significantly greater. On 16 March 2002, the parties entered into a contract to purchase Property B for $287,250 plus stamp duty and the usual costs of purchase. The deposit of $28,725 was paid from savings in a bank account in the name of the husband. The purchase was settled in May 2002 with a first home buyer’s grant of approximately $14,000, $13,000 provided by the wife's mother, $8,000 from a savings account in the name of the wife and $241,000 borrowed from a bank and secured by way of a mortgage. The husband claimed in an affidavit that he had contributed $38,000 to the initial cost of the home, but his counsel conceded that it could not have been more than $30,000.
Both parties paid all their wages into the mortgage account and the mortgage and other payments were made from that account as required. Renovations were carried out on the home.
In May 2004, the parties purchased a Subaru Forester for $27,000. Monthly repayments for the car of $531.11 were directly debited from the mortgage account. On 20 October 2004, the husband was made redundant and ceased work. In October and November 2004, the parties travelled together to Europe. In late November 2004, the wife commenced maternity leave. [E] was born in 2005. The husband returned to work in February 2005.
On 3 October 2005, the parties separated. The husband left the former matrimonial home. He initially lived with his parents, but from February 2006 he rented a flat. The wife remained living in the matrimonial home with the [E].
Initially, the husband spent time with [E] for three hours each Sunday and one hour on one night each week. From October 2006, the husband spent six hours with [E] each Saturday or Sunday. From June 2007, he has spent from 10.00 am Saturday to 5.00 pm Sunday each alternate weekend. When [E] begins kindergarten, she will also spend half school holidays with her father.
The outstanding balance on the mortgage at the time of separation had been reduced to $173,415 and monthly interest payments were between $1,025 and $1,080 per month. The wife kept the Subaru. From 7 December 2005, the husband stopped paying his wages into the mortgage account and neither party made any other arrangements to pay the mortgage. As a result, the outstanding balance increased.
On 27 January 2006, the husband was assessed to pay child support. The wife agreed that he had always paid child support as assessed. The amount was about $300 per month at the time of trial. However, the husband was unemployed from June 2007 to about March 2008. For that time, he was in receipt of unemployment benefits and assessed to pay child support of $30 per month.
In February 2006, the wife returned to work part time and [E] commenced in child care.
On 25 July 2006, the wife was granted an ex parte interim intervention order until 8 August 2006 when the matter was settled by the husband giving an undertaking to the court which was due to expire on
17 August 2006. On that day, the wife the wife delivered the Subaru to the husband, and the wife and [E] travelled to the United Kingdom to spend time with the wife's mother. The wife said that the trip cost her about $2,000 or $3,000.
On 12 September 2006, the wife obtained a further interim intervention order after she discovered that the husband had broken into the former matrimonial home in her absence and removed certain items.
The matter was eventually resolved with the parties providing mutual undertakings which expired on 7 March 2008.
By 2 July 2007, the mortgage balance had increased to $212,602 as no repayments had been made since 7 December 2005. The mortgage account had reached its limit. On 4 July 2007, the wife began making mortgage payments of $1,350 per month. In April 2006, the wife had an income for the month, including family tax benefit and car allowance, of $2,302. In May 2006, her income was about $2,300 and in June 2006 it was $2,641. In October 2006, it was about $3,800. The wife said she might have worked a couple of extra hours from home in October 2006. She said that at the time of trial, she was earning about $500 per week, which included family tax benefit and a car allowance. The interest payable on the mortgage in June to September 2006 was $1,110 to $1,213. The wife agreed that she could have paid the mortgage in October 2006. She also agreed that since separation, she had had holidays in England, Queensland and Tasmania.
In September 2007, the wife began cohabiting with her new partner, Mr P. He bought a 2007 Nissan four-wheel drive which the wife drives whenever she needs a vehicle. Mr P has another vehicle for work. Mr P pays the loan repayments on the Nissan and pays for the petrol. The wife also agreed in cross examination that he paid some household expenses but was evasive about how much he contributed. In her financial statement sworn on 10 May 2008, the wife said that she did not know how much Mr P paid towards her living expenses and said that she did not know his average weekly income. However, at trial, she said in cross examination that he earned about $35,000 or $40,000 per year.
On 29 January 2008, the husband began making monthly payments into the mortgage account of $435.80 for the Subaru as the previous direct debit for the Subaru had been dishonoured. As of 28 April 2008, the mortgage balance was $215,993.96.
The husband is now earning about $85,000 per year and the wife earns about $28,000. She is also in receipt of about $3,600 per year in child support.
The legislation
Section 79 of the Family Law Act 1975 (“the Act”) empowers the court to make such orders as it considers appropriate altering the interests of the parties to a marriage in their property. In determining applications for property settlement, s.79(2) of the Act provides that:
The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
Section 79(4) of the Act sets out the matters the court must take into account when considering the orders it should make for the alteration of the interests of the parties in their property. Those matters are:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
The matters to be taken into account under s.75(2) of the Act are as follows:
(a)the age and state of health of each of the parties;
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
(d)commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain;
(e)the responsibilities of either party to support any other person;
(f)subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party;
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
(h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income;
(ha)the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant; and
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
(k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
(l)the need to protect a party who wishes to continue that party’s role as a parent;
(m)if either party is cohabiting with another person–the financial circumstances relating to the cohabitation;
(n)the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party;
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p)the terms of any financial agreement that is binding on the parties.
The four step approach
In Hickey v Hickey (2003) FLC 93-143 at [39], the Full Court of the Family Court described the preferred four step approach in property matters as follows:
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), ("the other factors") including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case ….
STEP 1: The asset pool
With the exception of the value of the mortgage on the matrimonial home, the parties agreed that their assets, liabilities and financial resources were as follows:
| ITEM | VALUE | Retained by |
| Property B | $525,000.00 | W |
| Mortgage to Westpac | ($215,000.00) | W |
| Husband’s ANZ bank accounts | $9,500.00 | H |
| Wife’s ANZ bank accounts | Nominal | W |
| Husband’s 3750 Oxiana Resources Shares | $12,187.00 | H |
| Husband’s 2333 Virgin Blue Shares | $1,714.00 | H |
| Wife’s 480 Telstra Shares | $2,303.00 | W |
| Wife’s 193 AMP shares | $1,433.00 | W |
| Husband’s 2003 Subaru Forrester | $16,000.00 ($10,000.00) | H |
| Husband’s Superannuation | E$55,400.00 | H |
| Wife’s ARF Superannuation Fund | $30,494.00 | W |
| TOTAL NET POOL | $429,031.00 |
As far as the value of the mortgage on the matrimonial home is concerned, the law is clear. The mortgage should be valued as at the date of the hearing. Whether the wife's failure to pay the mortgage after separation might be regarded as a negative post separation contribution is a different issue. It is dealt with below.
STEP 2: Contributions
Initial contributions
The wife claimed that at the commencement of cohabitation, she had $1,000 to $2,000 in savings. The husband conceded that the wife had $1,000 in savings. The wife was unable to substantiate her claim with documentary evidence. In the circumstances, I accept that she had $1,000 in savings at the commencement of cohabitation. The husband claimed, and the wife conceded, that at the commencement of cohabitation he had savings of $7,500, a car worth about $8,000 and some shares.
The husband claimed the shares were worth $14,000 but the wife said that she could not say what they were worth. The husband said, and I accept, that he bought and sold shares in various companies at various times. He produced a bundle of records relating to his purchase and sale of shares, but conceded that they did not demonstrate that he held shares worth $14,000 in April 2000.
The husband then produced a summary of his share transactions which he said he had prepared for tax purposes. The summary was marked as exhibit R2. It included a number of share purchases made after the date of cohabitation. For present purposes, it indicated that the following shares were purchased prior to cohabitation and retained as at the date of cohabitation:
| Company | number of securities | date acquired | Price | Value | date disposed | Price |
| Formida Holdings | 400 | 07/10/1997 | 7.00 | 2,800.00 | ||
| Telstra 1 & 2 | 750 | Acquired in float | 3.30 | 2,475.00 | November 2003 | 4.95 |
| United Energy | 500 | 08/05/1998 | 2.25 | 1,125.00 | ||
| Reckon Ltd | 900 | 29/07/1999 | 2.26 | 2,034.00 | 27/11/2003 | |
| e corp | 1000 | 09/07/1999 | 2.65 | 2,650.00 | 11/04/2001 | |
| Optus | 1000 | 26/11/1998 | 2.24 | 2,240.00 | Transferred to SingTel |
In cross examination, of the husband agreed that he had sold the United Energy shares prior to cohabitation. The husband also agreed that he had sold the Reckon shares in 2003 at a loss. They were bought in 1999 for $2,034 and sold in 2003 for $500. The shares in the husband's summary, excluding United Energy, had a purchase price of $12,199. The Reckon shares had lost $1,500 in value by 2003. There was no evidence about the value of any of the shares as at April 2000. The value of all of the shares could have increased or diminished at various times after their purchase and before their sale.
Records of the precise shareholdings of the husband as at April 2000 could have been obtained by the husband from the companies involved. The value of all of the shares held by the husband as at April 2000 would be a matter of public record and accurate evidence of those values could have been adduced by the husband. In the absence of such evidence, the best I can do is estimate that the husband held shares to the value of $8,000 as at the date of cohabitation. I have settled on that figure because, if the shares were worth any more, I think that the husband would have provided proper evidence of their value.
In summary, at the commencement of cohabitation, the wife had $1,000 in cash and the husband had cash, a car and shares worth a total of $23,500.
Contributions during the marriage
The parties agreed that the husband’s earnings during the marriage were much greater than the wife’s. They also agreed that the wife is and was the primary carer of [E]. She was born towards the end of the parties’ relationship. The wife accepted in cross examination that the husband did the cooking during the relationship. However, she did all other household chores.
The wife’s mother contributed approximately $13,000 for the purchase of the matrimonial home. Otherwise, except that the wife had initial savings of $1,000 and the husband had initial savings of $7,500, the matrimonial home was purchased with money saved by the parties during their relationship, a first home owner’s grant and a bank loan. The parties’ expenses, including their car payments, were paid from their joint earnings.
The parties renovated the matrimonial home. Much of the work was done by the husband personally after work and on weekends. The husband’s father assisted with such jobs as painting the weatherboard house externally, substantially renovating the kitchen and refurbishing the decking. However, the wife claimed, and I accept, that she personally assisted with such jobs as painting and sanding floors.
Contributions post separation
After separation, the wife has cared for [E], except during the limited amount of time that [E] spent with her father. The husband paid no spousal maintenance as such and none was sought. The husband paid child support as assessed.
The wife remained in the matrimonial home. Except for a modest amount of social security payments that were credited to the mortgage account, the wife made no contribution to the mortgage for about 21 months, from the date of separation on 3 October 2005 until 4 July 2007, when she began paying $1,350 per month. The monthly repayments under the mortgage were added to the balance outstanding. The interest alone was over $1,000 per month. The husband since separation lived initially with his parents and then in rental accommodation.
The wife retained the Subaru from the date of separation, being
3 October 2005, until the husband gained possession of the car when the wife went overseas on 17 August 2006. The wife made no contribution post separation to the mortgage payments. Car payments were taken from the mortgage account and increased the balance outstanding until the husband began making monthly repayments of $435.80 on 29 January 2008. The wife had the benefit of the car, without contributing to the cost, for about 10 months. The husband had the benefit of the car, without contributing to the cost, for about
17 months.
The matrimonial home has increased in value considerably since the date of separation, simply by reason of a general increase in property values.
Contribution based entitlements
The wife submitted that the husband’s greater contribution at the commencement of cohabitation was modest and of no great consequence. She submitted that the parties’ contributions during the marriage were equal, except that her mother's $13,000 contribution tipped the balance slightly in her favour. The wife submitted that her additional post separation contributions, particularly in the form of her care of [E], warranted a contribution based adjustment in her favour of 5%.
The husband submitted that he had made a vastly greater contribution than the wife. In particular, he made a greater initial contribution and his greater earning capacity had enabled the mortgage to be reduced by $60,000 in three years. The husband also noted that the wife’s contribution as primary carer of [E] did not begin until late in the relationship. The husband submitted that there should be an adjustment in his favour of 5% by reason of his greater contributions.
In Mallet and Mallet (1984) FLC ¶91-507, Mason J observed at page 79,120 that the proposition of equality developed by the Family Court:
obscures the need to make an evaluation of the respective contributions of husband and wife by arbitrarily equating the direct financial contribution of one to the indirect contribution of the other as a homemaker and parent. …
Earlier, at page 79,120, his Honour said:
The requirement that the court “shall take into account” these factors imposes a duty on the Court to evaluate them. Thus, the Court must in a given case evaluate the respective contributions of husband and wife under para. (a) and (b) of subsec. (4), difficult though that may be in some cases. In undertaking this task it is open to the Court to conclude on the materials before it that the indirect contribution of one party as homemaker or parent is equal to the financial contributions made to the acquisition of the matrimonial home on the footing that that party’s efforts as homemaker and parent have enabled the other to earn an income by means of which the home was acquired and financed during the marriage. To sustain this conclusion the materials before the Court will need to show an equality of contribution – that the efforts of the wife in her role were the equal of the husband in his.
No doubt a conclusion in favour of equality of contribution will be more readily reached where the property in issue is the matrimonial home or superannuation benefits or pension entitlements and the marriage is of long standing. It will be otherwise when the property in issue consists of assets acquired by one party whose ability and energy has enabled the establishment or conduct of an extensive business enterprise to which the other party has made no financial contribution and where the other party’s role does not extend beyond that of homemaker and parent.
Gibbs CJ said in Mallet at page 79,111 that:
… [T]he Parliament has not provided, expressly or by implication, that the contribution of one party as a homemaker or parent and the financial contribution made by the other party are deemed to be equal, or that there should, on divorce, either generally, or in certain circumstances, be an equal division of property, or that equality of division should be the normal or proper staring point for the exercise of the Court’s discretion. Even to say that in some circumstances equality should be the normal starting point is to require the Courts to act on a presumption which is unauthorised by the legislation. The respective values of the contributions made by the parties must depend entirely on the facts of the case, and the nature of the final order made by the Court must result from a proper exercise of the wide discretionary power whose nature I have discussed, unfettered by the application of supposed rules for which the Family Law Act provides no warrant.
Wilson J said in Mallet at page 79,126 that:
The contribution [of a homemaker and parent] must be assessed, not in any merely token way, but in terms of its true worth to the building up of the assets. However, equality will be the measure, other things being equal, only if the quality of the respective contributions of husband and wife, each judged by reference to their own sphere, are equal. The quality of the contribution made by a wife as home maker or parent may vary enormously, from the inadequate to the adequate to the exceptionally good. She may be an admirable housewife in every way or she may fulfil little more than the minimum requirements. Similarly, the contribution of the breadwinner may vary enormously and deserves to be evaluated in comparison with that of the other party. It follows that it cannot be said of every case where the parties reside together that equal value must be attributed to the contribution of each. That will be appropriate only to the extent that the respective contributions of the parties are each made to an equivalent degree. What the Act requires is that in considering an order that is just and equitable the Court shall “take into account” any contribution made by a party in the capacity of homemaker or parent. It is a wide discretion which requires the Court to assess the value of that contribution in terms of what is just and equitable in all the circumstances of a particular case. There can be no fixed rule of general application.
Against this backdrop, counsel for the wife cited the following passage from McLay and McLay (1996) FLC 92-667, but, for unknown reasons, omitted the words set out below in bold:
60. The reference to “normal range” in Ferraro and in her Honour’s judgment is not a return to a presumption of equality as a starting point or any other presumption or starting point but is a practical recognition of the circumstance that in many marriages each party contributes in ways which might be described as the normal way in our society and that in any qualitative evaluation of those matters the likely outcome is one of equality. This is repeatedly recognised in the day to day experience of this court over many years in dealing with a very large number of s. 79 cases. In many cases any assessment of the facts readily makes it clear that an outcome of equality within pars. (a) to (c) is most likely and that a lengthy trial in which those facts are examined in detail will produce no different result. It will only mean significant extra costs to the parties and an unproductive use of the time of the Court.”
By way of general comment, I note that relatively few marriages nowadays involve the breadwinner/homemaker dichotomy referred to in Mallet. In 21st century marriages, fortunately, there is a new paradigm in which both partners very often make a substantially equal contribution to the family finances, household tasks and parenting. As a result, it should be easier to assess the respective contributions of each of the parties. But, as Mallet says, the contributions must be assessed and weighed.
The marriage and the period of cohabitation in this case were of relatively short duration. The husband's initial contributions were vastly greater than the wife's, but were still relatively modest. They were partially offset by the subsequent $13,000 contribution from the wife's mother. The husband had substantially greater earnings than the wife at all material times, notwithstanding that he had a period of unemployment during cohabitation, and another after the parties were divorced.
I am satisfied that the husband, and on his behalf, his father, undertook the bulk of the renovations to the matrimonial home. However, I also accept that the wife contributed to a lesser extent to the improvements to the property.
The wife conceded that the husband did the cooking for the household. I accept her evidence that otherwise she attended to all of the usual household tasks.
The wife undertook the bulk of the parenting responsibilities after [E] was born nine months before separation. After separation, the wife undertook even more of the parenting responsibilities and did so as a single mother with a baby. The husband's parenting role after separation was very limited indeed.
As described above, the balance outstanding under the mortgage increased from $173,000 at the time of separation to $215,000 at the time of trial. That is an increase of $42,000. For about 18 months, the wife made no repayments on the house although she had the benefit of living in it. On the evidence, the wife could have paid at least the interest on the mortgage of about $1,100 per month. This would have left her with about $1,200 per month for her other living expenses. There are many people who live on that amount of money, though, clearly, meeting the interest cost would have caused a substantial reduction in the living standard of the wife and [E]. Ultimately, the wife did begin to meet the mortgage repayments. That demonstrated that she was able to afford them.
By not making the payments on the house for 18 months, the wife in effect gave herself spousal maintenance without any adjudication by the court and without the husband's consent. This sort of self-help borders on the dishonest. Nevertheless, I consider that for the
18 months that the wife failed to pay even the interest on the mortgage, she and [E] were in a transition period between a very comfortable standard of living and a much less comfortable standard of living. In all the circumstances of this case, I consider that it was reasonable for the wife not to make any house repayments for about 12 months. The other six months, in my view, should go into the balance as far as contributions are concerned.
The wife made no payments on the Subaru for the eight months between December 2005 and August 2006. The husband then made no payments on the Subaru for the 16 months between August 2006 and January 2008. Except for the eight months after June 2007 when he was unemployed, the husband would have been well able to meet the car payments, even though he was in the process of re-establishing himself financially. I do not consider that the wife could have reasonably afforded the car repayments as well as the house repayments. As far as the car is concerned, the balance is in the wife's favour.
Taking into account all of these factors, I consider that the contributions of the parties were equal. I accept that the husband's financial and non-financial contributions to the property were significantly greater than the wife's. However, since separation, the wife has made a vastly greater contribution than the husband as a parent. She has done so under the very difficult conditions of being the single mother of, as time has gone by, a baby, a toddler and a preschooler.
STEP 3: The other factors
The wife submitted that an adjustment of 15% in her favour was warranted by the husband having a significantly greater earning capacity than she has, and because of the wife’s responsibility of caring for [E] for at least the next 15 years. Orders were made by consent on 29 May 2008 whereby [E] is to spend alternate weekends from
10.00 amon Saturday and until 5.00 pm on Sunday with her father. When [E] starts kindergarten, she will also spend half school holidays with her father. On any view, [E] will be spending relatively little time with her father.
The husband accepted that the wife's future needs might warrant a 5% to 10% adjustment in her favour. However, the husband also noted that the wife had repartnered, and little had been disclosed about her new partner’s financial circumstances.
In terms of s.79(4)(d) of the Act, it was not suggested that the proposed orders would have any effect on the earning capacity of either party to the marriage. As to the s.75(2) factors, both parties are healthy. The husband is 34 years old and the wife is 31 years old. The husband has an income of about $85,000 per year and the wife has an income of about $28,000 per year. Both parties have the physical and mental capacity for appropriate gainful employment. The husband submitted that the wife could expect some financial support from her mother. However, the extent of any such support was not put to the wife. In the circumstances, the prospect of the wife receiving financial support from her mother is too speculative to be given any weight. Otherwise the parties have the property and financial resources listed in the agreed asset pool.
The wife has the care and control of the three old child of the marriage and will continue to do so for the foreseeable future. The parties have the usual commitments to support themselves. It was not suggested that either party has any responsibility to support any other person. The wife is in receipt of Family Tax Benefit A, but otherwise neither party presently receives a pension, allowance or benefit under a law or under a superannuation fund.
The parties when together had a standard of living that was probably a little above average. As they have now separated, it is not reasonable to expect that that standard of living could continue. Neither party is seeking maintenance from the other. None of the proposed orders would affect the ability of a creditor to recover his debt. The marriage was of relatively short duration. The wife has the care of [E] which to some extent will affect her future earning capacity. However, even prior to [E]'s birth, the wife had a modest income.
The wife was less than frank about the financial circumstances of her cohabitation with Mr P. She answered questions in relation to him evasively. Her financial statement said that he paid living expenses for her benefit but the amount was unknown and the amount of his income was unknown. Those answers are not credible. In cross-examination, the wife conceded that Mr P pays the repayments on a 2007 Nissan four-wheel drive used by the wife and he pays for its petrol. She also conceded that Mr P earns $30,000 to $40,000 per year. However, she provided no substantiation of that vague answer. I am not at all confident that Mr P earns only $30,000 to $40,000 per annum and I am not at all confident that Mr P pays only for the four-wheel drive.
The orders proposed to be made under s.79 of the Act are the subject matter of this proceeding and will involve an adjustment of between 50% and 70% in favour of the wife.
The husband has always paid child support as assessed. However, during his period of unemployment from June 2007 until about March 2008, the husband was paying only $30 per month. He is presently paying about $300 per month. There was a suggestion that his assessment will increase to about $1000 per month in July 2008. However, there was nothing to substantiate this suggestion and I disregard it. I anticipate that the husband will continue to pay child support as assessed.
Under s.75(2)(o) of the Act, the court may take into account the potential for Mr P to contribute financially to the wife’s household, even though the details of his contribution were not made known to the court: F and F (1982) FLC ¶91-214 at page 77,146. Otherwise, I do not consider that there are any relevant s.75(2)(o) factors. There it is no financial agreement that is binding on the parties. In terms of s.79(4)(f) of the Act, the only other relevant orders are the parenting orders discussed elsewhere.
Taking all of these matters into account, I consider that there should be a 10% adjustment in the wife's favour. Given that the wife was less than frank about the financial circumstances relating to her cohabitation, I do not consider that the court should accede to her submission that a 15% adjustment should be made in her favour. While the husband clearly has a greater earning capacity than the wife, and while the wife has the care of the very young child of the marriage, the court has been left in the dark about a significant factor in the balancing exercise, namely, the financial circumstances relating to the wife's cohabitation with Mr P.
STEP 4: What order is just and equitable
The fourth step is to consider what order is just and equitable in the light of the findings and considerations set out above. A 60% adjustment in favour of the wife would result in her receiving $257,418.60 from the asset pool of $429,031. From the $257,418.60, there needs to be deducted $3,736 and $30,494 for the shares and superannuation respectively to be retained by the wife. That would leave a net settlement for the wife of $223,188.60.
There was a good deal of discussion at the hearing about the capacity of the wife to retain the matrimonial home. She produced a letter from a finance broker saying that her loan application for $315,000 had been conditionally approved. She explained that she would need to discharge the existing mortgage of $215,000 and pay $30,000 for legal costs. The wife submitted that she could only retain the house if the amount she was required to pay the husband was $70,000 or less. The wife submitted that it was for the benefit of [E] and her stability that the wife be able to retain the family home. The wife also referred to the costs of sale and said that money would be wasted if the wife could not retain the home.
The wife did not produce to the court the material on which the bank based its conditional approval of a loan of $315,000. The court does not know how much income the wife declared to the bank. The wife was very vague about how much her loan repayments would be, with an extra borrowing of about $100,000 above the existing loan. She eventually suggested that they would be about the same as they presently are. That could only be true if the loan was extended for a substantial period of time. The wife’s evidence about how she would repay the $315,000 was unsatisfactory.
A 60:40 split in favour of the wife means that the husband would receive a settlement of $171,612.40. From that sum there would need to be deducted $9,500 in the husband's savings account, $13,901 for the husband shares, $6,000 for the Subaru and $55,400 for the husband’s superannuation. That leaves a net figure of $86,811.40 which the wife would have to pay to the husband if she were to keep the house.
The husband submitted that his $9,500 of savings was acquired after separation and should not be included in the property pool for division. I do not accept that submission. I consider that it should be treated in the normal way as part of the pool.
The husband also submitted that there should be a super split to enable him to receive more cash and more readily re-establish himself. If the wife were to receive 60% of the $25,000 difference between the parties’ superannuation, it would amount to about $15,000. I do not consider that a super split in this case would be just and equitable. The husband's earnings are considerably more than the wife's and he is in a better position to re-establish himself. I consider that the superannuation contributions should stay where they are.
The wife submitted that if the property settlement was such that the wife could buy out the husband’s interest in the house for not much more than $70,000, it would be just and equitable for the court, as its fourth step, to reduce the amount payable to $70,000. This was said to be just and equitable because it would enable the wife to retain the house. As it happens, the settlement requires the wife to give the husband almost $17,000 more than the $70,000 that she says she can afford.
In my view, it would be far from just and equitable to, in effect, waive that almost $17,000. It is almost one quarter of the $70,000 that the wife said she can pay. In any event, I do not consider that moving house would be a significant detriment to [E]. She is only three years old and would regard any house that she moved to now as her family home.
The wife referred to Phillips & Phillips [2002] FamCA 350. That case turned in part on the difficulty with valuing the property in question. It also concerned a much longer marriage and the family home of children who were considerably older, and, no doubt, much more attached to their family home than [E] is. Cases such as Phillips and the present matter all turn on their individual facts. I do not consider that Phillips sheds any particular light on the adjustment proposed in this matter.
I consider that it would be just and equitable for there to be a 60:40 settlement in favour of the wife. It may be that the wife will be able to find the extra $17,000 to enable her to retain the family home. The orders therefore will give the wife 30 days to provide the appropriate settlement sum to the husband failing which the property will be sold. Otherwise, the orders will provide for the parties to retain the assets that they have agreed to retain. In my view, the orders I have outlined are just and equitable in all the circumstances of this case.
I certify that the preceding seventy (70) paragraphs are a true copy of the reasons for judgment of Riley FM
Associate: Catherine Wilson
Date: 25 July 2008
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