Wentner and Rater
[2010] FamCA 1188
•20 December 2010
FAMILY COURT OF AUSTRALIA
| WENTNER & RATER | [2010] FamCA 1188 |
| FAMILY LAW – PROPERTY – Settlement in relation to marriage |
| Family Law Act 1975 (Cth) |
| Balnaves v Balnaves (1988) FLC 91-952 Coghlan and Coghlan (2005) FLC 93-220 Figgins and Figgins (2002) FLC 93-122 Gosper and Gosper (1987) FLC 91-818 Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143 JEL and DDF (2001) FLC 93-075 Kessey and Kessey (1994) FLC 92-495 Kowali and Kowali (1981) FLC 91-092 Mallett v Mallett (1984) FLC 91-507 McLay and McLay (1996) FLC 92-667 Omacini and Omacini (2005) FLC 93-218 Pellegrino and Pellegrino (1997) FLC 92-789 Pierce and Pierce (1999) FLC 92-844 Rosati v Rosati (1998) FLC 92-804 SMB and MFB (2006) FamCA 46 Spencer v Commonwealth (1907) 5 CLR 418 Stay and Stay (1997) FLC 92-751 Williams v Williams (1985) FLC 91-628 Woodcock and Woodcock (1997) FLC 92-739 |
| APPLICANT: | Mr Wentner |
| RESPONDENT: | Ms Rater |
| FILE NUMBER: | MLC | 1003 | of | 2007 |
| DATE DELIVERED: | 20 December 2010 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | THE HONOURABLE JUSTICE CRONIN |
| HEARING DATE: | 7, 8 AND 9 DECEMBER 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | MR DE VRIES |
| SOLICITOR FOR THE APPLICANT: | GADENS LAWYERS |
| COUNSEL FOR THE RESPONDENT: | MR NICHOLSON |
| SOLICITOR FOR THE RESPONDENT: | SCHETZER CONSTANTINOU |
Orders
That by 4.00pm on 1 February 2011, the wife pay to the husband $80,000.
That contemporaneously with the payment in paragraph 1:
(a)The husband withdraw any caveat lodged by him on the title to the property at B Street at his expense;
(b)The wife withdraw any caveat lodged by her on the title of L Street, at her expense;
(c)The husband arrange for the removal of the wife as a mortgagor relating to the mortgage securing the loan over the real property at L Street; and
(d)The wife arrange for the removal of the husband as a mortgagor relating to the mortgage securing the loan over the real property at B Street.
That the application of the husband filed 30 July 2010 and the response of the wife filed 15 January 2010 be otherwise dismissed.
That any material produced pursuant to subpoenae be returned to the recipient of the subpoena.
That should any party desire to make any application for costs arising out of these orders, such application be made by written submission filed and served no later than 4.00pm on 24 January 2011 and upon receipt of any such application, the recipient shall have until 4.00pm on 7 February 2011 to file and serve any written submission in reply.
That upon the receipt of any such submissions relating to costs referred to in these orders, the matters be determined by me in chambers.
IT IS NOTED that publication of this judgment under the pseudonym Wentner & Rater is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 1003 of 2007
| MR WENTNER |
Applicant
And
| MS RATER |
Respondent
REASONS FOR JUDGMENT
Mr Wentner (“the husband”) and Ms Rater (“the wife”) seek orders from the court because they cannot agree on the division of their property.
The discrete issues are:
a)What is the property to be divided and what values are to be ascribed to those items and in particular, jewellery;
b)How to assess the parties’ respective contributions including those made on their behalf but also whether unusual or extra skill can be attributed to the husband in relation to the acquisition and conservation of assets;
c)Whether property no longer in existence but having been taken by a party, can be added back notionally to the pool;
d)Who should retain specific items of jewellery which each party has a desire to retain; and
e)What adjustment should be made if any, for the future disparate financial circumstances of each of the parties.
Initially, the husband also sought an order for spousal maintenance but during the running of the proceedings, his counsel abandoned that stating that the husband would seek to have the concept of a “need” factored in when the s 75(2) factors were considered.
Notwithstanding the proceedings began with all issues in dispute, a number of matters changed during the hearing.
Background
The husband is currently unemployed. He is 61 years of age. Until 2010, he was a lecturer at a tertiary institution. He was offered a retirement package in 2007 which enabled him to continue on contract to work for a further three years until January 2010. It has been since January 2010 that he has been unemployed.
The wife is almost 44 years of age. She is a school teacher. Although she could work full-time, she has chosen a part-time position. She has had significant health issues but they appear to have abated. She repartnered in February 2009 and whilst she and her new partner do not have property together and tend to keep most of their finances separate, the inter-relationship of financial matters particularly in relation to his assistance with her costs would suggest that they are in a committed relationship.
The only child of the relationship of the husband and wife is a son who was born in May 1997. He is 13 years of age and attends high school in Year 7. He has no health issues and is progressing well academically.
The child spends his week sharing his time between both parents.
Considerable emotional energy and expense went into the husband’s affidavit material. His counsel in final address described the husband as a person who focussed on fine detail. Unfortunately, much of the material was irrelevant.
The husband and wife began living together in January 1989 or thereabouts and married in April 1989. Neither had been married before and neither had children.
When the relationship commenced, the wife had just completed her tertiary education but the husband had many years in academia.
The parties ultimately separated in 2005 and a divorce of their marriage was subsequently granted.
One of the contentious issues between the parties was that at the time of separation, they divided assets on a reasonably amicable basis. Each had a view about whether the division was intended to be final. I find in this case that it does not matter for reasons to which I shall turn.
Another unusual feature of this dispute was that the husband had a passion for collecting antique jewellery. The collection which grew over the years was valued by two valuers who disagreed on the valuation methodology. Neither valuer was called to give evidence and I have been left to determine on the papers, the correct amount to be added to the pool of assets.
Another unusual feature was a claim by the husband for his contribution in having acquired, improved and conserved the jewellery and also a period-featured house which became the parties’ initial home. It was painstakingly restored.
All of the parties’ contributions were clouded because the wife’s parents also helped in the various renovations but the extent of that help was disputed.
In an endeavour to highlight a negative side of the wife’s contribution, the husband pointed to her acquisition of motor cars which were later sold at a price less than that for which they were purchased. Whilst his evidence in chief related to the wastage of good money by the wife including in relation to some extravagance in acquiring clothing, ultimately, his counsel did not pursue that argument in final address.
On the wife’s side, she was adamant that a holistic agreement had been reached about the division of property in 2005 and to a large degree that the husband was reneging on the deal.
In this case, I am required to make findings of fact. I do so on the basis that the party who asserts the fact must prove it and that the standard of proof is the balance of probabilities.
Each party gave evidence and viewed their historical relationship through the prism of their current jaundiced view about their respective roles. Each did their best to be honest. To some extent, each was attacked as to credit but I do not find there is any basis to say that I could prefer one party’s evidence over the other. Each endeavoured to do what their lawyers presumably asked them to do; that is, to highlight their respective contributions using the other’s party’s contributions as some form of yardstick.
Unfortunately, as with many cases, trying to compare disparate contributions leads to the difficulty of assessing totally different efforts. There is also the danger of being distracted by contributions which have a monetary value against those which do not.
As I pointed out to the parties, at some point, the assessment of the disparate contributions has to move from a qualitative assessment to a quantitative one. In making that assessment, I have considered the nature, form, substance and origin of not only the assets now in existence but also the contributions of the parties that gave rise to them and the assets that they have had historically.
Accordingly, what follows as statements of fact are in fact, findings.
At the commencement of the relationship, the husband had interests in a property at Y, another at K, various antiquarian and other books, artworks and prints, jewellery and furniture. The husband also had a very modest superannuation entitlement.
When the relationship commenced, the wife had just completed her studentship and unsurprisingly, had no assets other than a car that had been provided to her by her parents.
The husband calculated in his evidence that the equity in his assets including superannuation was over $500,000. Some time was spent during the hearing on whether he had produced documents to prove the equity in those assets. Considerable angst occurred when it became apparent that he had had some documents and they had been produced to his legal practitioners but apparently not received by the other practitioners because of some technical glitch. I am quite satisfied that there was no attempt made by the husband to be evasive or difficult in his disclosure obligations. On the contrary, his devotion to detail in pursuing an issue was evident. Having said that, a significant portion of the husband’s evidence that gave rise to his estimated value was his own view historically as to the value of the assets. The wife refused to accept those values. The husband produced schedules of items that he had, including some that he had sold, and that was supported by one of his witnesses. The difficulty I have however is that I could not be confident that the figures represent an accurate picture of exactly what his equity was at that time.
One of the significant disputes in the proceedings was about the equity in the property at Y. The husband sought to prove the extent of his equity by calling a valuer to give a retrospective valuation. Mr L was that valuer. There was no suggestion that he was not appropriately qualified. He estimated the valuation of the Y property to be $310,000 as at 1 April 1989.
Mr L said that his estimate of value came about after he resorted to newspaper advertisements relating to sales of similar properties. The major difficulty however, related to the condition of the property. There could be little doubt that in 1989, whilst the structure was much the same as it is now, the condition of the property was substantially different. In 1989 when the husband purchased it, it had been divided into flats. The husband’s evidence was that he did an enormous amount of aesthetic work restoring the property to its former glory. Mr L was not able to assist much in relation to how that would have impacted on his judgment. That was because trying to use comparable sales was not easy. For example, the suburb had become “gentrified”. When pressed, Mr L said that it would not have made much difference to the value but he was prepared to concede that it might be $50,000 less than what he was talking about but that was the ultimate end of the spectrum. Mr L selected four properties in the area which he described had the capacity to give him comparable sales but there were many other properties that he rejected. He said the council rate notice did not really assist him because it used a different approach to valuation.
I have the evidence of what the husband purchased the property for not long prior to 1989 and the estimate of Mr L factoring in all of the possibilities. I am therefore entitled to say that the value was somewhere between $166,000 and $310,000 and probably closer to the latter than the former. Importantly, the husband had purchased the property in 1987 and to do so had borrowed $100,000 of the $166,000 purchase price. He said and it was not disputed, on the day that the parties married, he owed the bank $102,000 on the mortgage. For the purposes of contribution therefore I can conclude that the husband’s contribution was somewhere between $60,000 and $200,000.
Subsequent to cohabitation commencing, and over the ensuing three years thereafter, Y property was extensively renovated. Physical labour was extensive and painstaking. Money was spent on necessary materials, planning permits were pursued and obtained and gardening work was undertaken. Where skilled work was necessary, tradesmen were employed and paid. The husband’s evidence was extensive down to the precise details of what he did. There is a danger in looking at the finite detail in circumstances where the wife took a broad brush approach and said simply that she was a willing participant in the project. I am conscious of that disparity.
Despite varying assertions by each party that there was some distinction in their efforts to the renovations, I find there may have been in degrees but not such that it would affect their respective contributions. In an indication of the pettiness to which the jaundiced view of the husband fell, he said that the wife preferred to go shopping with her mother whilst he and her father did the heavy work. There was no evidence that any complaints were made at the time. To his credit however, he conceded that during this labour, the wife and her mother prepared food. No doubt, workmen cannot toil without sustenance.
The wife asserted a significant contribution to the renovations by her parents. She boldly estimated their contributions were worth $100,000 being $70,000 cash and $30,000 in labour. The husband only conceded that the contribution that the parents made in total was worth about $30,000. I place little weight on any of those assertions because they too amounted to a labour of love and little, if any, corroborative evidence was produced. In addition, the husband said that these payments made by the parents were small although he conceded that over three years, the parents had contributed a number of sums of money but that included money associated with a car. The husband asserted and his counsel was required to cross-examine the wife’s parents, the only reason the parents undertook these tasks was to make up for the way they treated the husband when the relationship first began. I reject all of that. Even if the money that was given by the parents and the labour they undertook was a gift to both parties, which was denied by the wife and her parents, it was unidentifiable in terms of specific items now in the pool. The wife’s father gave evidence and he too was pedantic about such things as acquiring tools of his own to enable some of these jobs to be undertaken. I shall return to the legal issues below as to how I have approached the question of whose contribution and to what extent, all of these belong.
The husband agreed that during the relationship, although he earned more than the wife, the funds were pooled in a joint account. Decisions about expenditure were made in various discussions. Accordingly, the renovation of Y property was a joint labour of love and not just one-sided. The expenditure came in part from the sale of assets that predominantly the husband owned.
In November 1987, the husband had an interest in the K property. It was sold just before the marriage and the husband received $8720. In addition, the husband sold a collection of antiquarian books. He said he received about $54,000 for those books but was either unable or did not produce to the court proof of that. He sold another collection of books through an auction house for about $57,780 and did produce evidence of that. After all these years, common sense dictates that receipts are not retained for that sort of activity. No clear tracing exercise was undertaken but I have concluded that at least some of the funds from those assets did go towards the Y property renovations. But so too did the incomes of both of the parties. There was little focus in the proceedings on the homemaker and parent role at that time which preceded the birth of the parties’ child.
The funds from the various assets that the husband held prior to cohabitation would have given some impetus to the parties’ wealth but its precise detail is something I cannot make anything other than a broad brush finding about because the wife too made a contribution to the renovations physically.
Y property was sold in 2002 for a profit. There is no evidence as to what part of that profit was market forces such as for example arising out of what Mr L described as the gentrification of the suburb and what was due to the parties’ efforts.
In his evidence, the husband applied estimates to values of the many items he said he owned. Those statements were simply his opinion unsupported by cogent expert evidence. In some cases, the wife made no concessions as to those values and accordingly, I am left to do the best I can with the evidence whether it is challenged or not.
I find therefore at the time of cohabitation, as a general proposition the husband’s contribution was greater than the wife.
Before the child was born, the parties lived together for about eight years. Both worked during those years and as I have indicated, the husband earned more than the wife. Whilst both parties pointed to their various employment roles and in particular, the duration of those roles, neither made a complaint about the efforts of the other. Upon the marriage, the husband knew the wife was just starting out in her career whilst he had been well established. The joining of financial resources and the discussion about acquisitions and profits clearly indicated that each took the marriage relationship as a partnership seriously. At least in those early years, both parties were working towards joint goals.
When the child was born, the wife went out of the workforce for three months but then immediately returned to full-time employment and the child went to a crèche. The delivery of the child there was a task that each party shared. The evidence in this case descended to the question of who undertook the travelling not only in respect of the child but also in relation to the husband attending sales of antique items. The wife pointed to the fact that the husband did not have a licence and she therefore did all of the driving. In respect of the child, there were times where the husband travelled with him on a train. None of those matters is any more than part of the rich tapestry of the lives of these parties.
In respect of their various roles in the household otherwise, each promoted theirs as greater than that of the other. The husband conceded that the child was breastfed or given formula. He was quick to point out that he and the wife shared the formula feeds but seemed to skirt around the breastfeeding part. Domestic chores were shared and as the child grew, each shared in his activities. I find their respective homemaker and parent roles indistinguishable.
In 1999, the husband received an inheritance from the estate of his mother. His mother apparently died in Canada and there was a litigious dispute between the husband and his sister. Eventually, the husband received $170,000 and that money was used to buy the property at H. Again, time was spent challenging the husband about the lack of proof of documents but I accept that the wife did not really dispute the fact that the husband had received that sum of money. H property could not have been acquired without the inheritance. The parties only kept H property for two years during which time there was a significant increase in its value but that was due to market forces because the parties did very little other than superficially, to improve the property. However, and again this highlights the dilemma, the parents of the wife assisted in some of that superficial improvement.
The sale of the H property gave rise to the purchase of a property at V. V property was also sold not long later at a significant profit.
In 2002 when Y property was sold, the parties jointly bought what became their matrimonial home at G. There was a shortfall of about $450,000 and that was raised by mortgage finance and both parties were mortgagors. No doubt, the purchase of G property could not have occurred without the initial efforts of the husband in introducing Y property and the joint efforts of the parties after cohabitation began. However, the property at Y that was ultimately sold was significantly different from that which was originally acquired and that was entirely as a result of the efforts of the parties albeit at disparate levels.
Even so, I am satisfied that the contribution in respect of G property can be in part attributed to the husband more than the wife.
The marriage broke down in 2005 and the parties to some extent, lived under the same roof until their physical separation at a time when they each then bought properties. In her evidence, the wife said that the division of assets at the time of separation was done amicably and without the assistance of lawyers. She noted that the division was intended to be final. That led to the husband retaining his superannuation and more of the chattels. The wife retained the chattels in which she had a particular interest. They included a collection of Royal Crown Derby and also the jewellery. The husband wanted some of that to be given to him. His evidence was that each had helped the other pack and move out of the former matrimonial home. However, because of the extensive value of the jewellery, it had been retained in a safe which was owned by the husband. He said there was no agreement about the jewellery and that at the time of separation it was still “an issue”. The husband asserted that the agreement was to leave the jewellery in the safe and divide it when things were ultimately settled. His view was that he acquired the jewellery for the purposes of an investment whereas the wife was more attracted to it as an adornment.
The inference that the wife would have me draw was that everything was amicable and final. That was not quite the case that I could find. In her own evidence, the wife said that there was disagreement about the proceeds of the sale of the property at V. She said she was angered when she found out that the husband had taken more than she did. The husband’s version was that he had purchased a property before the settlement of the sale of V property and it was agreed that his purchase would be completed on the settlement of V property occurring. There is a ring of reality about the husband’s position. To the extent that it is at all relevant, I accept that there was no finality about the division of property and that the jewellery was a contentious issue.
The husband initially argued that he had a special skill in acquiring the jewellery. In final address, counsel for the husband moved away from the use of the word “special” and was content to use the word “extra”. The husband described his skill as “particular”, “specialised knowledge”, “skill and expertise” in jewellery, art and antiques. He said he scoured newspapers, visited auction houses and other places where these chattels were sold. He spent many hours on e-Bay and researched these items so that he became aware of the potential for growth in value. The wife’s contribution was to consult with the husband about the acquisition of these things and she drove him to the various locations for these ventures. Whilst the wife had an opinion about whether items should be purchased, the husband seemed to make the final decision.
In a self-serving and unfortunate statement, the husband said his devotion to all of this was “largely without much assistance” from the wife other than as he set out in his affidavit. I reject that. The various activities of partners in a marriage are all part of the contributions they make. It was a partnership effort in this case. Various interests are not always shared but in this marriage, the wife had to be intricately involved because of not only the logistics of getting to the various acquisition sites but the funds were also drawn down from joint resources. In addition, and again at various levels, the wife was contributing to the care of the family.
I have made reference to the wife’s parents’ role. The happiness that parents get out of seeing their efforts enjoyed not just by their offspring but also that child’s partner or spouse ought to be obvious. That does not mean that the gift of money, chattels or labour should be seen simply as a joint gift. If there is to be a submission put that a gift is to be treated as a joint contribution, the evidence needs to be something more than the usual situation that arises of parents helping their offspring. It is hardly surprising that a parent who has either a dislike or a deflated sense of happiness as a result of the ending of the relationship would see anything other than that their contribution was made on the part of their offspring. In this case there was nothing unusual about the evidence of the parents of the wife. Initially they were strongly opposed to the relationship but eventually accepted the inevitable. Out of support for their daughter and respect for their son-in-law, they gave significantly of their money, time and labour. Neither party argued this particular point strongly. In Gosper and Gosper (1987) FLC 91-818 Fogarty J said that an advance by a member of family ought generally be treated as a contribution made by or on behalf of the party from whose family it came. If there was significant evidence of an intention to benefit both spouses, that conclusion may not necessarily follow. If that was the situation and the evidence was clear, a court might treat the contribution as one that was equal to both parties (see Balnaves v Balnaves (1988) FLC 91-952 and Kessey and Kessey (1994) FLC 92-495).
Importantly, as Chisholm J pointed out in Pellegrino and Pellegrino (1997) FLC 92-789, there is often no specific evidence of intention at the time. That is hardly surprising. The difficulty is compounded by the fact that many of the gifts made early in a marriage cannot be seen specifically today or even if they can, what portion of the current value is a direct result? It is important to remember that these gifts or contributions have to be viewed as part of the overall contributions made by the parties and in this case, during a long relationship.
In all the circumstances, I find there is nothing unusual about this case and the efforts of the parents should be seen as a contribution by the wife.
In his evidence, the husband highlighted his “extra” contribution. This was initially seen in two areas. The first related to the labour connected with Y property and the second related to his ability to seek out and acquire antiques that not only retained their value but usually produced a profit. His counsel in final address described this as the “Midas touch”.
In Mallett v Mallett (1984) FLC 91-507 Mason J (as he then was) said:
No doubt a conclusion in favour of a quality 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 longstanding. 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 a homemaker and parent. (emphasis mine)
The first observation that must be made was that there can be no doubt that the husband had an uncanny ability to acquire jewellery that retained if not increased in value. The question is whether or not that ability which gave rise to wealth should be recognised at all and if so, should it be given a quantitative value.
In McLay and McLay (1996) FLC 92-667 the Full Court referred back to previous decisions where assets were of a very significant value and where businesses were involved that required business acumen or entrepreneurial skill. The Full Court provided the reminder that s 79(2) required the Court to do what was just and equitable in all of the circumstances of the case.
In Stay and Stay (1997) FLC 92-751 the Full Court (Nicholson CJ, Ellis and Lindenmayer JJ) said at 84,132:
In the instant case, the application of the skills of the husband, his ingenuity and enterprise produced assets in the medium rather than the high range as in the three authorities we have referred to and in our view, the trial judge erred in concluding that his contribution had the quality described in the authorities as special or extra or as she found as being extraordinary.
In Stay, the trial judge had found that the assets had been acquired largely through the husband’s efforts and the Full Court said that when looking at the totality of the contributions, the trial judge attached too much weight to the financial contributions and the efforts associated with the acquisition of the property. That was a long marriage and there were five children. The parties performed their allotted roles and the wife had a much lower earning capacity.
In this case, it could not be said that the efforts of the husband brought extraordinary wealth. It could not be said that whatever wealth was achieved just came from business acumen or entrepreneurial skill. That must be so because of the wife’s involvement.
In this case, the parties played different roles but in one form or another, the purpose was to acquire assets either for investment purposes or for pleasure. This was not a case in which the end result was entirely the result of one person’s effort. The husband’s own evidence was that he spent long hours involved in this pursuit. There was no evidence of what the wife was doing at that time. The husband could not have done what he did without the concurrence of the wife. Even on the husband’s evidence, the wife was very much a part of the project. In my view, that does not constitute an extra contribution as envisaged by the relevant authorities. In saying that, I have no doubt that the husband could be described as astute but his talents were hardly exceptional. He had a good eye for a bargain and a potential future profit but that was something in which the wife was involved as well perhaps for different reasons.
In JEL and DDF (2001) FLC 93-075 a differently constituted Full Court said that there were opportunities for the Court to recognise special factors which took contributions outside the “normal range” which was the concept used in McLay (supra). The Full Court said that when considering the financial aspect, one had to be careful to recognise and distinguish a windfall gain and the size of the pool or the impact of the contribution on that pool was not the major issue. Ultimately, their Honours said that it was an exercise of the trial judge’s discretion that regulated the outcome.
In Figgins and Figgins (2002) FLC 93-122 the Full Court (Nicholson CJ and Buckley J) grappled with contributions. Their Honours thought that the doctrine of special contributions should be reconsidered because otherwise the Court was required to descend into the distinction between good and not so good business activities and homemaker roles. This gave rise to the invidious position of a judge having to “mark” the efforts of the parties. Their Honours went on to say:
Marriage is and should be regarded as a genuine partnership to which each brings different gifts. The fact that one is productive of money in large quantities is no reason to disadvantage the other. We think that cases such as JEL and DDF (supra)…have missed this point and have led to an imbalance of gender considerations in arriving at results that unduly favour the male partner.
I do not consider that the husband’s contribution is being asserted here on the basis of some gender issue. What is asserted is that he had a peculiar interest which was different from that of the wife at least in extent. For good or bad, the husband highlighted what he did for the purposes of distinguishing the roles that he played in the marriage as against that of the wife. Whilst the distinction can be seen, the end result could not have occurred without the concurrence and effort of the wife. No evidence was led as to what she was doing at the time during the husband’s long hours pursuing his passion. No suggestion was made that either party complained about the role of the other during those pursuits. The one important thing was that the husband conceded that the wife was involved and consulted.
I do not consider that this is a basis upon which I could give the husband any extra credit for the pursuit of the jewellery.
The same logic must apply in respect of the renovations to the home. I have no doubt that Y property was a labour of love and that the husband researched it diligently and passionately. However, that is not a basis to say that his contribution was greater than the wife. What it simply reflects is that his contribution was different from the wife and he highlighted the difference.
Another of the significant disputes between the parties related to the valuation of the jewellery. Two very experienced valuers became involved in the dispute. The nub of the argument was whether or not the value should be taken as the sale value. Valuer Mr J determined his figure based upon a sale then taking place. The wife had had experience of that because she sold jewellery at auction at a significant loss because that was what the market was prepared to pay for it. The husband sought an alternate value from a Mr R. Mr R took the view that if the sale was not immediate but was to take place in an ordered way, the values would be much higher. There is no question in this case that neither party intends to sell the property.
In Spencer v Commonwealth (1907) 5 CLR 418 at 432 the longstanding statement was made that value was to be determined on the basis of a willing but not anxious purchaser offering to induce a not unwilling vendor to sell the land. In this case, the vendor is not willing to sell and I consider Mr J’s approach to be that of a willing and anxious purchaser because that is what occurs at an auction type sale. The husband’s evidence in relation to the extra skill to which I have just referred is a good example of how he operated over the years. He picked up a bargain knowing that over a period of time, it would acquire value and he could make a profit on it. That would be the vendor determining the appropriate time and place to dispose of the item at its highest possible value including at a time when the market was not flooded with similar items. Market value must be defined as the price to be negotiated in an unrestricted market. That is not what is contemplated here.
Accordingly, I find that the appropriate value to place on the assets is that of Mr R.
I have already mentioned about the respective views of the parties in 2005 and thereafter concerning whether there was a final agreement. Each party acknowledged that the Court was not bound by any such settlement because it did not result in an exhausting of the power in Part VIII of the Act. In Woodcock and Woodcock (1997) FLC 92-739 a similar situation arose and it was argued that the agreement, although not finalised by orders, gave rise to an argument of estoppel. The Full Court (Murray, Baker and Kay JJ) said that the parties by their conduct or agreement cannot oust the jurisdiction of the court. That may be different if the parties had entered into a financial agreement. The Full Court went on however to say that the circumstances under which the agreement was reached may be of relevance in determining whether it was appropriate to make an order, whether it was just and equitable and whether it is was necessary to make orders.
In this case, I find there was no concluded agreement and it is difficult to have a precise view of how the parties approached the division that they then made. Counsel for the wife endeavoured to point to a percentage division which he said might be seen as reflecting a just and equitable outcome but the evidence does not support that that is what the parties intended. It is clear that subsequent to separation, discussions were ongoing albeit informally for awhile. Ultimately, lawyers became involved. As such, what the parties did in 2005 is of little assistance.
There was also considerable dispute between the parties about notional amounts being added to the pool generally and specifically, in relation to legal fees. The parties and counsel each asserted adjustments should be made. Some of those sums related to legal fees.
Between August 2005 until 2010, the parties bought properties with bank finance assistance and therefore muddied the financial waters. Each worked during those periods and made contributions to superannuation funds directly and indirectly. The husband salary sacrificed knowing his employment tenure was limited. After the husband’s employment came to an end, he received a lump sum which included all of his accrued emoluments. It was the husband’s evidence that he had to live on capital thereafter but he also paid his mortgage and drew down on his superannuation. From these blended capital sources, mortgage payments were made, living expenses were incurred, investment chattels were acquired and legal costs were paid.
The evidence of the husband was that he increased his mortgage by $50,000 and reduced his superannuation by $205,000 but apart from a statement that he paid legal fees including one payment of $40,000, I do not know exactly what the delineation was. To the extent that I may not be putting absolutely correct figures into the pool, I agree. I indicated that the parties could file an agreed statement or I would do the best with the evidence I had. I have done that as no agreement was reached.
From the wife’s perspective, she had her partner and parents assist her with legal fees but she too increased her mortgage to pay legal fees.
The best evidence I have is that the wife’s mortgage was increased to $260,000 to cover $30,000 in legal fees.
In their respective balance sheets, the husband “added back” for legal fees $85,170 for himself and $74,377 for the wife. The wife added nothing into her balance sheet saying that the expenditure was represented in the figures in the balance sheet. I agree with the wife’s position about her mortgage but I also agree with the husband’s position about his superannuation. Each of those matters seems to reflect the evidence bearing in mind the blurred boundary between legal fees and living expenses together with all the other attendant variations that occurred after a separation. I take into account that there was a long delay until trial.
The husband sought to add back money that the wife should have obtained in her actions in selling some chattels. The wife conceded she had been told by her previous lawyer that she could sell whatever she liked. In this case, having regard to her evidence, I accept that that is what occurred. It would be unfortunate however if that view permeated the legal community. I suspect it does not. It is not so much a question of the party’s right to dispose of the asset that is contention but rather its impact upon the ultimate orders that the Court can make. In this case, the dispute was not about the items but the way in which they were sold. The husband accused the wife of wastage because she sold the items expeditiously through the auction process rather than by the ordered sale concept. The evidence here does not permit me to find that the actions of the wife were wanton, reckless or negligent. I say that having regard generally to the authorities about add-backs to which I shall now turn.
In SMB and MFB (2006) FamCA 46 the Full Court (Bryant CJ, Kay and Warnick JJ) said the following:
69.In Chorn and Hopkins (2004) FLC ¶93-204, the Full Court considered the issue of add- backs to the asset pool, particularly in relation to post-separation expenditure and legal costs. At paragraph 42 and following they cited extensively from WBM v RCM [1998] FamCA 42, 1 May 1998 (per Baker, Kay and Chisholm JJ):
“2.10It is well settled that save in exceptional circumstances a trial Judge should deal with the property as at the date of the hearing and make adjustments taking into account the various matters set out under s.79. (Wells v Wells (1977) FLC ¶90-285; Wardman v Hudson (1978) FLC ¶90-466; In the Marriage of Geyl 7 Fam LR 219). However, the particular justice of the case may make it appropriate to notionally add back assets which have been demonstrated to have been dissipated either during the marriage or post-separation. Normally it is necessary to demonstrate an appropriate basis for doing so, for example by wastage such as gambling or extravagant living. (Kowaliw v Kowaliw (1981) FLC ¶91-092; Fane-Thompson v Fane-Thompson (1981) FLC ¶91-053; Winnel v Winnel (1984) FLC ¶91-580; Townsend v Townsend (1995) FLC ¶92-569; Doherty v Doherty (1996) FLC ¶92-652) Additionally, because of the requirement for each party to bear their own costs, it is generally appropriate to add back to the pool of assets notionally any legal costs that have been spent on the litigation and to deal with the costs as a separate issue at the end of the litigation. (see Farnell(1996) FLC ¶92-681).
2.11 There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support. Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial Judge (WBM v RCM [1998] FamCA 42, 1 May 1998, per Baker, Kay and Chisholm JJ).”
70.The Full Court summarised the principle in the following passage :
“46.Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives. (GVC v HPC [1998] FamCA 143, 8 October 1998, per Nicholson CJ, Ellis, Kay JJ.)”
71.In the present case, no finding was made by the trial Judge that the wife had either embarked on a course of conduct designed to minimise the value of the matrimonial assets, or that her expenditure was reckless, wanton or negligent.
72.Thus, we think that there is a fundamental flaw in the pool created by the trial Judge which included a notional add back of the monies that the wife had received on account during the hearing. Absent any negative finding about the wife’s expenditure which she had detailed in her affidavit and which she asserted to be her reasonable annual expenses, we cannot see any basis upon which his Honour ought reasonably to have added back the sum of $102,500 to the asset pool.
I am satisfied on the evidence that the wife was somewhat shocked about what she received in the sale. There is no basis for me to find that she acted other than legitimately. It was not wastage or extravagance that gave rise to her receiving less than perhaps the husband might have received.
In final address and in the aide memoir provided to me by counsel for the wife, a concession was made as to adding back those moneys received. I do not otherwise know what happened to the funds but on the basis of the concession, I have added the sum back. Whilst that jewellery may have been valued by Mr R notionally on his method, this jewellery was sold and I propose to round that net sum up to $5000.
Counsel also drew my attention to the fact that in his valuation, Mr R made reference to the fact that from the value he ascribed to jewellery, 33.3 per cent should be taken for commission. That of course was on the basis that the jewellery would be sold and as I earlier mentioned, there was no suggestion of that. In Rosati v Rosati (1998) FLC 92-804 the Full Court (Ellis, Lindenmay and Kay JJ) whilst dealing with the treatment of capital gains tax payable on the possible sale of a business said that for the deduction for tax to be made from the value of the asset, the sale had to be contemplated. The very opposite is the case here. There is no suggestion of either party intending a sale. It would be inappropriate therefore to allow a commission albeit that it might be something that might occur in the distant future. I propose therefore to put the gross value of the jewellery into the pool.
Another dilemma in this case caused by the delay subsequent to separation related to the value of the superannuation. I have already mentioned the fact that the parties each contributed directly and indirectly after separation to the current values. The husband sought to reduce his current superannuation by 10 per cent because of his salary sacrificing and contributions generally subsequent to separation. That is not an appropriate course of action to take. Apart from the artificiality, the evidence does not permit me to find what the precise mathematical details were about how he calculated the 10 per cent.
In Williams v Williams (1985) FLC 91-628 the High Court (Mason ACJ, Wilson, Brennan, Deane and Dawson JJ) said relating to compensation for personal injury that:
There is no general presumption that the award should be left out of account in determining what order should be made under s 79 of the Family Law Act 1975 (Cth).
What their Honours were referring to was the fact that all property of the parties once identifiable, is subject to division. I see no reason to exclude a portion of the superannuation. I do that for the reasons that follow.
Section 79(1) of the Act reads:
In property settlement proceedings, the court may make such order as it considers appropriate:
(a)in the case of proceedings with respect to the property of the parties to the marriage or either of them--altering the interests of the parties to the marriage in the property; or
(b)in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the marriage--altering the interests of the bankruptcy trustee in the vested bankruptcy property;
including:
(c)an order for a settlement of property in substitution for any interest in the property; and
(d)an order requiring:
(i)either or both of the parties to the marriage; or
(ii)the relevant bankruptcy trustee (if any);
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.
There can be no doubt that there will be particular cases where the evidence justifies using a date other than that of the trial.
In Omacini and Omacini (2005) FLC 93-218 (Holden, Warnick and Le Poer Trench JJ) referred to three clear categories of cases where it was appropriate for the Court to notionally add back assets that no longer existed. Those were:
(a)where the parties had expended money on legal fees;
(b)where there had been a premature distribution of assets; and
(c)the wastage situation referred to in Kowali and Kowali (1981) FLC 91-092.
Their Honours then said:
46.The four important steps to be taken in determining a property dispute are well defined (see for example Ferraro and Ferraro (1993) FLC 92-335 at 79,560) and they are:
(a)To identify and value the net property of the parties (usually as at the date of trial);
(b)to consider the contributions of the parties within paragraphs (a)-(c) of s 79(4);
(c)to consider the s 75(2) factors; and
(d)to consider whether the order proposed is just and equitable.
In this case, there is no basis for me to reduce the current value of the superannuation based on the evidence presented by the husband. Any post-separation contributions will be taken into account in the second step of the assessment process.
I have set out the four step process.
In relation to the pool of assets, I have rounded off the figures for convenience sake only. I find the pool of assets for division between the parties to be the following:
D Street property $825,000
Less mortgage 292,000
Net 533,000
E Street property 750,000
Less mortgage 222,000
Net 528,000
Husband’s superannuation 301,000
Chattels:
Husband 77,000
Wife 60,000 137,000
Artwork:
Husband 61,000
Wife 52,000 113,000
Jewellery
Husband 8,000
Wife 197,000 205,000
Husband’s library 45,000
Wife’s car payout 9,000
Total $1,871,000
Not included in the pool above is the wife’s superannuation which I accept as $168,000. That cannot be added into the pool because it is not an asset of the substance or form of the other assets. Neither party sought a splitting order although the husband suggested through his counsel in submission that I might permit the trustee to be put on notice in case I decided that the wife had to pay the husband some money. She would then be able to pay the husband cash by virtue of his entitlement to a superannuation splitting order, he being of retirement age. However, it was made clear by counsel for the wife that that would not be a course of action she would contemplate as there are other avenues available.
In Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143, the Full Court said that the interest of a party in superannuation was to be treated as property even though it was not. In Coghlan and Coghlan (2005) FLC 93-220, the majority Bryant CJ, Finn and Coleman JJ described superannuation as another species of asset which was different from property as defined in s 4(1) in relation to which orders could be made in proceedings under s 79 of the Act.
In Coghlan (supra), the majority said that the Court had a discretion as to how the superannuation interests were to be treated including placing them in a separate pool. That should be the case if the nature and form of the superannuation is different from that of the nature and form of the other assets. Despite separating this separate species of assets, the Court is still obliged to undertake the necessary tasks set out in s 79(4) and ultimately come up with a solution which satisfies s 79(2) of the Act.
In separating the superannuation, it is important to be cautious about treating it differently because of its form and characteristics. It is not something that the wife can use. It does not have the same immediate value that the other property has albeit its long term value may be greater. Because of the very nature of the superannuation, it is surrounded in uncertainty.
I propose therefore to approach the superannuation of the wife in a different way to that of the pool of assets otherwise referred to above.
Section 79(4) of the Act requires the Court to consider all of the various aspects of contribution. That provision reads:
(4)In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(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.
In summarising the position set out earlier, there can be no doubt that the husband’s initial contribution in 1989 was greater than that of the wife. To a realistic degree, that initial contribution in its various forms was traced by the parties and is reflected in the current pool of assets. (See Pierce and Pierce (1999) FLC 92-844). However, many things changed over the years and a variety of different contributions occurred. During the relationship, the parties contributed equally for the majority of the time. The disparity in contribution is reflected in the incomes they earned and the non-financial contributions they made. Each was content for the other to do the best they could and neither seriously suggested that the other’s contribution was anything other than a full commitment to the role in their marriage partnership. In assessing the contributions during the relationship, one can see a variety of distinctions but in giving those contributions weight, the differences are either irrelevant or only marginal. Save for the inheritance to which I shall now turn, I see no difference between the contributions of the parties during their time after cohabitation commenced.
The inheritance received by the husband was $170,000 and it gave rise to an increase in the wealth of the parties. It was not at the end of the relationship but rather during it. On any view, it made a difference to the wealth position. As such, the husband’s contribution in the form of the inheritance and the purpose for which it was used must be given significant weight.
Subsequent to separation, the parties have each been involved in the life of the child and assisted each other physically and financially with his care. The distinguishing feature of their contributions otherwise subsequent to separation lies in the fact that each of them conserved their respective assets, improved them where the circumstances were appropriate and continued to work in their chosen careers which gave rise to superannuation entitlements. There was no distinction between the parties in respect of their superannuation contributions save for the fact that the husband salary sacrificed. I know little about the impact of that course of action and no complaint was made by the wife about receiving less child support because of a reduced taxable income. I presume therefore on the unchallenged evidence that the salary sacrifice was made. Having regard to the duration of the relationship and the fact that the superannuation of the husband was nominal at the commencement of their time together, whilst the salary sacrificing to superannuation must be given weight, I do not accept that it was as significant as portrayed by the husband.
In the circumstances, in this long marriage, I have no doubt that the contributions of the husband exceeded those of the wife.
In final submissions, counsel for the husband urged me to make the assessment as between 60 per cent and 65 per cent in favour of the husband whilst counsel for the wife urged me to find that the husband’s contribution was 52.5 per cent.
Weighing up all of the factors to which I have earlier referred, I assessed the contributions as to 55 per cent to the husband and 45 per cent to the wife. I do so on the basis that a 10 per cent differential is justified in this case. Ten per cent reflects almost $200,000.
Is there a justification for saying that the husband contributed more than the wife to the extent of $200,000 or thereabouts? I find the answer is that there is.
The same contribution approach should be taken in respect of the wife’s superannuation. She began the relationship with no superannuation and all of that which is now before me accrued during their time together save for the period subsequent to separation in 2005 when it no doubt increased by virtue of market forces and her attendance at work. The distinction between the assessment of contributions in relation to the superannuation and that relating to the other assets is that there is no similar contribution that should be taken into account such as the inheritance. I see no reason in the circumstances why the wife should not be given some credit for the fact that she continued to work after separation but I do not have sufficient evidence to enable me to quantify that. In my view therefore the contributions to the superannuation should be deemed to have been equal.
The third step in the process in respect of both pools is to make the necessary assessments by virtue of s 75(2) of the Act.
Counsel for the husband urged me to make a further adjustment in favour of the husband by between 5 per cent and 10 per cent. Counsel for the wife suggested that a 2.5 per cent adjustment should be made having regard to the fact that the wife is retaining her superannuation but I have given the husband an entitlement to that by virtue of his contributions generally. Each party argued the various aspects of s 75(2) to which I shall now turn.
The husband is 61 and currently not in employment. His evidence was that he has had difficulty obtaining employment. I note that he has had a specialised career and it would be unlikely that he would have opportunities to change. He was the author of a number of publications but his evidence was that there was little prospect of him making any money out of that because of lack of demand. The wife is in employment and has some security. She is able to work part-time. She could work full-time if she so desired. She currently enjoys good health notwithstanding problems associated with a thyroid difficulty and past issues with cancer. I find therefore that there is a disparity between the incomes and the earning capacities of the parties. Those disparities favour the wife.
The parties share the responsibilities for the child and there will be a number of years ahead for both of them. It is disconcerting that the wife is currently in dispute over her child support obligations. Whilst she gave evidence about the payments she made, child support obligations are important for the benefit of the child. The lack of commitment in that area even where it is subject to objection would tend to suggest that there is little likelihood that the commitment to that responsibility will be fulfilled in the future. I have therefore concluded that the husband will carry the financial burden in his household without assistance of the wife. That should not necessarily be the case where there is a disparity of income which favours the wife.
Neither party gave any evidence about specific commitments that each of them had that they required as necessary to enable them to support themselves. Neither party has the responsibility to any other person to support them. Conversely, the wife has a partner who is very supportive and upon whom she could rely. Evidence of that is the fact that he has contributed to her legal costs to date. The husband has a companion but it is not suggested that there is a sufficiently committed relationship there to enable me to find that the companion is a resource.
Neither party appears to be eligible for any State or Commonwealth benefits at this stage. The wife is certainly the member of a superannuation scheme but I have already taken that into account in the assessment that I have made relating to the contributions above. The husband has the money from his superannuation and has invested it in a variety of chattels in the expectation that they will be profitable in the longer term. That course of action might be seen as imprudent in some people’s eyes but I have concluded that the husband was sufficiently confident about what he was not to withhold the superannuation cash to live on as he had been doing earlier in 2010.
This is not a case in which I can take a lot of notice of the standard of living. The fact that the husband has the capacity to purchase antiques as he had during the marriage and now has his own home which is subject to a mortgage must mean that he has a standard of living which in all the circumstances is reasonable. The wife is in a similar position with her own home and a mortgage and has the assistance of a committed partner.
I have taken into account the fact that both parties have an intention to support the child in a physical sense for a number of years to come. The child is 13 years of age and therefore the parenting role will exist for a number of years yet.
It is important to note that each party will benefit under the orders that I propose to make. The wife will have to reduce her asset pool somewhat to enable the husband to enjoy the benefits of the order that I propose. That will affect the wife marginally but having regard to the support of her partner and her earning capacity, I do not think that will make a substantial difference to her lifestyle. On the other hand, the husband will have a small amount of money extra in his hands and if he chooses to put that into investments as he has done in the past, he will be in a similar position to the wife in terms of lifestyle. There is no evidence before me that the husband’s current financial position even without that extra payment is significantly worse off than he was during the relationship.
I have taken into account all of the other matters in s 75(2) and it is clear on the evidence that there is a justification for an adjustment in favour of the husband having regard to the disparity that arises out of all of the factors to which I have just referred. That adjustment however should be modest because the economic distinction between the parties is modest. In my view, there is a justification for a further adjustment in respect of the non-superannuation pool of 2.5 per cent. I would make no adjustment in respect of the superannuation interest of the wife having regard to its limited use to her at this stage of her life.
Because there are two pools and different entitlements arising out of the assessments that I have made, it is important to look at what order is just and equitable. Notwithstanding the finding of equal contributions in respect of the wife’s superannuation, it does not automatically follow that the sum of $168,000 should be divided in half. It is the underlying value of what each party receives from the order which must be just and equitable. For the wife to be made to wait for many years to share in the superannuation whilst the husband has the benefit of enjoying his entitlements now requires an adjustment that cannot be adequately reflected by simply using some form of discount tables. In my view the appropriate way to adjust the disparity is by ordering that the wife give the husband a payment of $30,000 out of other assets to satisfy his entitlement to her superannuation.
An adjustment as to 55 per cent of the non-superannuation pool means that the husband is entitled to $1.075 million and he currently has approximately $1.025 million in his power or control. The disparity therefore is approximately $50,000. To that must be added the sum of $30,000 in respect of the superannuation.
Accordingly, I propose to order that the wife pay to the husband the sum of $80,000. I do not propose to make specific default orders at this stage on the basis that the parties can work out between themselves how that is to be paid but I think a payment in 45 days is appropriate in the circumstances.
In my view, the payment of $80,000 by the wife to the husband would be a just and equitable result.
As part of the fourth step to which I have referred, it is necessary for me to consider the application of the husband for specific items of property. I have given consideration to that and decided that it is inappropriate in the circumstances for me to make specific orders. I do so for two reasons. First, the parties have had possession of these items for a number of years now and each has a different passion associated with them. I would not be able to decide who should own the property based upon their desire or passion. There is a significant difference between how they approach that passion. The second issue is that the wife will be obliged to pay the husband money by virtue of the calculations I have done above and there is no logical reason why she could not satisfy part or all of that order by delivery of some of the chattels pursued by the husband. If that was to occur, they should be transferred at the value attributed to them by Mr R.
In so far as any party has any application for costs in these proceedings, I shall make orders for those matters to be considered on written submission.
I certify that the preceding One Hundred and Twenty (120) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 20 December 2010.
Associate:
Date: 20 December 2010
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