Weston and Weston
[2011] FMCAfam 512
•26 May 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WESTON & WESTON | [2011] FMCAfam 512 |
| FAMILY LAW – Property – assessment of contributions and section 75(2) factors – determined five percent adjustment for the husband’s initial contributions and five per cent adjustment in the wife’s favour section 75(2) factors – ordered an equal division of the parties’ property. |
| Family Law Act 1975, ss.75, 79 |
| Hickey and Hickey and Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 |
| Applicant: | MS WESTON |
| Respondent: | MR WESTON |
| File Number: | MLC 11214 of 2010 |
| Judgment of: | Bender FM |
| Hearing date: | 25 May 2011 |
| Date of Last Submission: | 25 May 2011 |
| Delivered at: | Castlemaine |
| Delivered on: | 26 May 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr Middlemis |
| Solicitors for the Applicant: | J. A. Middlemis |
| Counsel for the Respondent: | Mr Allen |
| Solicitors for the Respondent: | BJT Legal |
ORDERS
The property situate at Property H being Certificate of Title Volume [omitted] (“Property H”) be forthwith sold and the sale take place as follows:
(a)the husband is to have the conduct of the sale to the extent Property H shall have a contract of sale entered into in the sum of $150,000.00 within 14 days of this order with a settlement date of 60 days from the date of signing the sale contract;
(b)in the event the provisions of order 1(a) herein are not complied with then Property H be sold altogether out of court under the control of the wife;
(c)the proceeds of the sale of Property H pursuant to orders 1(a) and 1(b) herein be applied as follows:
(i)firstly to pay all costs, commissions and expenses of the sale; and
(ii)the balance then remaining be paid into the trust account of the wife’s lawyers J. A. Middlemis for payment out to the wife.
The husband and wife each pay their share of any Capital Gains Tax liability against Property H as assessed by the Australian Taxation Office.
Liberty be reserved to either party to apply with respect to the sale of Property H.
The husband pay to the wife the sum of $100,000.00 (“the payment”) on or before 26 August 2011.
Contemporaneously with the payment:
(a)the wife do all such acts and things and sign all such documents as may be required to transfer to the husband at the expense of the husband all of her right, title and interest in the real properties situate at and known as:
(i)1 Property A also known as Certificate of Title Volume [omitted] (“1 Property A”); and
(ii)2 Property A (“2 Property A”)
(b)the husband indemnify the wife against all payments and liability pursuant to any mortgage (“the mortgage”) and all rates, taxes and outgoings of or with respect to the husband’s real properties of whatsoever nature and kind; and
(c)the husband refinance the mortgages on the husband’s real properties so as to discharge the wife’s liability therein.
In the event that the whole of the payment has not been made (or the mortgage has not been refinanced) by the date then the husband sign all documents and do all things necessary to transfer to the wife 2 Property A to be held on trust for sale and that 2 Property A be forthwith sold altogether out of court (“the sales”) and the proceeds of the sale be applied:
(a)firstly to pay all costs, commissions and expenses of the said trust transfer and the sales;
(b)secondly to discharge the mortgages and any other encumbrance affecting the real properties;
(c)thirdly so much of the payment as is then outstanding together with interest thereon at the rate of 10.4 per centum per annum adjusted monthly from the date to the wife; and
(d)fourthly the balance to the husband.
Pending the payment and or the refinancing or the completion of the sales:
(a)the husband have the sole right to occupy the husband’s real properties and that during such right of occupation the husband pay all instalments pursuant to the mortgages and all rates and taxes and like apportionable outgoings of the real properties as they fall due;
(b)the parties hold their respective interests in the real properties upon trust pursuant to these orders; and
(c)neither party encumber or further encumber the real properties without the consent in writing of the other party.
Liberty be reserved to either party to apply with respect to the terms and conditions of and execution of the sales.
It is declared that the partnership trading at [MR & MS WESTON] be dissolved as at 1 January 2011 and that with respect to such partnership:
(a)the husband retain to the exclusion of the wife all chattels and financial interests comprising the partnership;
(b)the husband indemnify the wife with respect to any liabilities he may have arriving out of a membership of the partnership, be they past, present or future; and
(c)the husband indemnify the wife with respect to any income tax liability imposed on the wife as a consequence of her membership of the partnership.
The wife forthwith sign all documents and do all things necessary to transfer to the husband all of her right, title and interest in the jointly owned Telstra shares.
Unless otherwise specified in these orders and save for the purposes 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 superannuation and other property (including choses-in-action) owned by or in the possession of such party as at the date of these orders;
(b)monies standing to the credit of the parties in any joint bank account are to be credited to the wife;
(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 life insured 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 hereby expressly severed; and
(g)each party foregoes any claim they may have to any inheritances to which the other party is entitled to either presently or in the future.
The husband and wife bear their own costs of these proceedings.
The application of the wife filed 6 December 2010 and the response of the husband filed 22 February 2011 be otherwise dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Weston & Weston is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CASTLEMAINE |
MLC 11214 of 2010
| MS WESTON |
Applicant
And
| MR WESTON |
Respondent
REASONS FOR JUDGMENT
Introduction
This matter relates to the adjustment of property between the parties after 17 years of marriage.
The wife seeks orders that the parties’ assets be divided such that she receives 70 per cent of those assets. She argues that this adjustment reflects the section 75(2) factors relevant to this matter, being her primary care of the parties’ three children and the husband’s greater earning capacity.
The husband seeks orders that the parties’ assets be divided equally. He argues that he made a greater contribution to the asset pool as a result of his parents allowing the parties to live rent-free in the former matrimonial home for four years before selling it to the parties for $10,000.00 less than its true value. Further the husband received $105,000.00 between 2002 and 2007, being the sale proceeds of his share of property he owned prior to cohabitation. Those monies were utilised by the parties to purchase an investment property and equipment for the husband’s [omitted] business. He argues this greater contribution offsets any section 75(2) adjustment that may be in the wife’s favour.
Background
The wife was born [in] 1974 and is 36 years of age. She is a qualified [omitted], currently working part-time and earns $39,000.00 per annum. She has not re-partnered.
The husband was born [in] 1971 and is 40 years of age. He is a [omitted] employed in his own business [W] Ptd Ltd. He has re-partnered but he and his new partner do not live together.
The parties married [in] 1993 and separated on 3 May 2010. They have three children [X] born [in] 1993 (“[X]”), [Y] born [in] 1996 (“[Y]”) and [Z] born [in] 1999 (“[Z]”).
[X] is in Year 12 at [M] School. [Y] is in Year 9 at [M] School. [Z] is in Year 6 at [A] School.
[X] and [Y] live with the wife and currently spend no time with the husband.
[Z] has an informal shared care arrangement, living approximately six nights each fortnight with the husband (coinciding with his sporting commitments) and otherwise living with the wife. Next year [Z] will attend [M] School for his secondary schooling.
When the parties married, they resided in the now former matrimonial home at 1 Property A which, at that time, was owned by the husband’s parents. They lived there rent-free for four years.
In 1997 the husband’s parents sold 1 Property A to the parties for $45,000.00. The parties agree that the true value of the property at that time was $55,000.00.
When the parties married, the husband worked for his parents on their farming property between five and seven months each year. He did so for some ten years. He did not receive a salary for the work he performed for his parents. In 2002, the husband’s parents “gifted” him $60,000.00 paid by way of $30,000.00 in 2002 and $10,000.00 per annum for the next three years.
When not working for his parents, the husband was employed as a [omitted] earning an income. The wife was engaged in home duties as well as working in her parent’s business.
Further, when the parties married, the husband had an interest with his brothers in some farming land at [R]. In 2002 the husband entered into an agreement with his brothers to sell his interest in [R] to them for $105,000.00, which amount he received pursuant to a written agreement dated 30 November 2002 over a period of five years.
The parties utilised the monies received from the [R] sale to purchase an investment property at Property H for renovations to the former matrimonial home and to purchase plant and equipment for the business.
During the marriage, though neither party deposes to exactly when, the parties established a business [W] Ptd Ltd. During the marriage the business operated as a partnership and after separation the husband operated and continues to operate as a sole trader.
The business generated a profit of $40,000.00 in the financial year 2007/2008 and a profit of $90,000.00 in the financial year 2008/2009. In 2009/2010, the business had an operating loss of $7,000.00. In 2010/2011, it is anticipated the business will generate a profit of approximately $20,000.00.
In 2009, the wife completed her [omitted] training and commenced employment with [omitted].
The wife currently works part-time, doing three shifts a week, usually two day shifts from 7.00 am to 3.30 pm or an afternoon shift being from 2.30 pm to 11.00 pm.
At separation, the husband remained in the former matrimonial home. His business is conducted form these premises. The wife and children moved to rental accommodation in [M].
The wife retained $25,000.00 of the parties’ savings when the parties separated. She also retained the parties’ Nissan X-Trail motor vehicle. She traded the Nissan motor vehicle in for $17,000.00 and used an additional $7,000.00 from the savings to purchase a new motor vehicle. The wife paid $5,000.00 in legal costs, plus her half share of the valuation costs, from the savings and currently has $10,000.00 of the savings remaining.
The parties own three pieces of real estate – the former matrimonial home, 2 Property A (a vacant block of land next to the former matrimonial home) and an investment property at Property H which has a rental income of $180.00 per week.
At separation the mortgage on the former matrimonial home was $195,000.00. The mortgage has an overdraft/withdrawal capacity that the business is able to draw upon, up to a maximum borrowing of $200,000.00. The mortgage is currently at the $200,000.00 maximum. Since separation it has been served from the rental income from the Property H property and the shortfall by the husband.
Both parties have relatively small superannuation entitlements and neither seeks any orders that include superannuation.
The Issues
The parties’ evidence as to their financial history was fairly consistent and the detailed background set out in this judgment is an accurate reflection of that history.
The issues identified by me in relation to the division of property between the parties can be summarised as follows:
a)What constitutes the property pool and in particular:
i)Should a tax refund for the year 2009/2010 of $6,700.00 which, by agreement with the husband, the Australian Taxation Office retained to offset any tax liability of the husband for 2010/2011, be included in the pool?
ii)Should the business assets include the wife’s estimate of business debtors, bank balances and stock, as well as the agreed value of plant and equipment?
iii)Should the $15,000.00 of the joint savings utilised by the wife after separation for a new car and legal costs be added back to the pool?
b)
What adjustment, if any, should be made to reflect the contributions of the husband from the [R] sale and the provision of rent-free accommodation and the reduced sale price of the former matrimonial home by the husband’s parents and is this offset by the husband working “salary free” for his parents for
10 years and by the wife’s post-separation contribution in being the primary carer for the parties’ daughters?
c)What should be the adjustment in relation to section 75(2) factors?
The legislation
Section 79 of the Family Law Act1975 (“the Act”) defines the Court’s powers in determining applications for property settlement. Sub-section 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 what orders should be made for the alteration of the interest of the parties in 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 four-step approach
In Hickey and Hickey and Attorney-General for the Commonwealth of Australia (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 ….
Assets and liabilities
The parties agree that the husband shall retain the former matrimonial home and [W] Ptd Ltd. They are also in agreement that Property H and 2 Property A are to be sold.
The parties, having obtained joint valuations, are agreed as to the value of [W] Ptd Ltd, being its plant and equipment and trade creditors.
Thus, the only issues as to “the pool” are those identified in paragraph 26(a) of this judgment and I will address each of these in turn:
The tax return
Whilst the husband’s tax return was “earned” whilst the parties were still together and as such could be seen as a “matrimonial asset”, I am satisfied that in utilising those monies to create a credit with the Australian Taxation Office, the husband was making a sound business decision and this was a proper utilisation of those funds by him. To the extent that this is an advantage to the husband, it offsets the benefit to the wife of her spending a similar amount from the parties’ joint savings to purchase her new car post-separation.
Business “Assets”
In the wife’s statement of assets and liabilities, she estimated [W] Ptd Ltd has business debtors of $17,120.00, a bank balance of $19,995.00 and stock of $6,000.00. She provided no independent evidence that supported those figures.
It was the husband’s viva voce evidence that there are currently no business debtors, though accounts were to shortly issue for work about to be completed. It was his evidence that the business bank account is currently $9,000.00. The husband estimated there were currently outstanding accounts for supplies of $15,000.00. The husband was not cross-examined as to the current “stock” levels of the business.
It was apparent from the husband’s evidence that the business finances are constantly shifting on the basis of the work in hand and that to try and isolate figures for these fluctuating amounts would be an artificial exercise.
In these circumstances I intend only to include in the pool the figures the parties are in agreement with, being the sworn value of the plant and equipment, the agreed creditor’s figure, the bank balance at separation and the loans outstanding on the equipment.
Savings Add-back
As noted earlier in this judgment, the amount spent by the wife on her new car is equivalent to the husband’s tax return and I am satisfied no adjustment against either party is warranted for those amounts.
It is accepted law that where parties meet their personal legal costs from joint assets, the amount expended on those costs should be added back to the pool.
The wife’s evidence is that she has paid her legal costs of $5,000.00 plus half the valuation fees from the parties’ joint savings retained by her at separation.
The husband’s evidence is that he has paid his legal costs of $2,200.00 plus half the valuation fees from the income generated by the business.
Thus both parties have arguably utilised joint assets to meet their legal fees.
Given the relatively small amounts involved, I am of the view that it is only fair as between both parties that there be no “add-backs” in relation to any legal costs they have paid to date.
Accordingly, I find the matrimonial pool of the parties to be as follows:
Real Estate
The former matrimonial home situate at
1 Property A- Less current mortgage to Bendigo Bank
$325,000.00
<$200,000.00>
$125,000.00
2 Property A $100,000.00 Property H (net of sale costs and Capital Gains Tax) $140,000.00 Total $365,000.00 [W] Ptd Ltd
Plant & Equipment $197,250.00 Cash at Bank $18,000.00 Less Creditors <$16,200.00> Bendigo Bank loans on plant and equipment <$68,407.00> Total $130,643.00 Assets
Wife’s Nissan X-Trail (trade-in) $17,000.00 Husband’s motorbike $3,000.00 Husband’s Power Boat $10,000.00 Joint Term Deposit $8,000.00 Wife’s savings $10,000.00 Telstra shares $1,500.00 Total $39,500.00
NET TOTAL ASSETS $535,143.00 Superannuation
Wife’s superannuation entitlement with [omitted] $15,000.00 Husband’s superannuation entitlement with [omitted] $3,000.00 Total $18,000.00
Contributions
It is common ground between the parties that the parties had the benefit of rent-free accommodation from the husband’s parents for the first four years of the marriage and that they were then able to purchase the former matrimonial home for $10,000.00 less than its true value.
It is also common ground between the parties that the husband had an interest in farming land at [R] when they married and that he sold his interest in that land to his brothers for $105,000.00, which the parties used to purchase Property H as well as to renovate the former matrimonial home and purchase plant and equipment for the business.
The parties agree that for 10 years the husband worked at least half the year for his parents on their farm and received no salary for this work. He was “gifted” $60,000.00 by his parents in 2002 – in part at least in recognition for that work.
Whilst conceding those contributions by the husband, the wife argued that any benefit the parties received from the husband’s parents in relation to the former matrimonial home was offset by the husband’s unpaid work for his parents over some 10 years, which was only in part compensated by their “gift” to the husband of $60,000.00.
It was further argued by the wife that the [R] contribution is offset by her contributions as homemaker and parent, both during the marriage and after separation. It was argued this was particularly relevant post-separation as a result of the breakdown of the relationship between the husband and [X] and [Y].
It was argued on behalf of the wife that both parties had worked hard during their marriage and that their asset base reflects the hard work of both of them.
It was therefore submitted on behalf of the wife that the parties’ contributions should be considered equal.
It was submitted on behalf of the husband that his greater initial contributions to the parties’ finances was the foundation that enabled the parties to build up their current assets and that absent those contributions, the parties would not have those assets.
It was also argued that the husband was an equal contributor as homemaker and parent, especially once the business was started as it was operated from the former matrimonial home which enabled him to be much more available to be involved with the children. This was even more so when the wife commenced her [omitted] career as she often worked night shift which meant he was caring for the children.
It was therefore submitted on behalf of the husband that his greater financial contribution must be given appropriate weight and that there should be a loading in his favour of no less than five per cent.
Whilst there is no doubt both parties worked very hard to achieve their current financial situation, and that the contributions of the husband’s parents is offset by the 10 years of the husband’s unpaid work on their behalf, I am satisfied that absent the initial greater financial contribution of the husband, through the sale of his [R] interest, the parties’ asset base would not be as it is.
During the marriage, I am satisfied the wife was the primary carer for the children, especially in the early years of the marriage when the husband was working for his parents or was [work omitted]. I am also satisfied that post-separation the wife has been the primary carer of [X] and [Y], albeit both are in their teenage years.
On balance, I am of the view that the husband has made a greater contribution to the parties’ asset base and that there should be an adjustment in his favour of five per cent.
Section 75(2) factors
It was argued on behalf of the wife that there should be an adjustment in her favour of 20 percent on the basis she has the primary care of [X] and [Y] and, in all probability, [Z] once he starts school in [M] next year, and because of the husband’s greater earning capacity.
Whilst conceding [X] finishes school this year and will be leaving home for university (she is a very good scholar), the wife argued [Y] is in Year 9 and [Z] is only 11 years of age.
The wife argued that as [Z] will be at school in [M] next year, his sporting and social commitments will in all likelihood shift to [M] and he will, of choice, spend less time in [A] and therefore less time with the husband.
The wife argued that the husband has provided minimal financial support for the children since separation. His Child Support Assessment is minimal. The wife has received two payments from the husband, being one of $600.00 shortly prior to the conciliation conference and a recent payment of $1,800.00. The latter amount is a reimbursement to the wife by the husband of the children’s expenses which he paid after she provided him with receipts for the monies spent by her.
The wife also challenged the stark downturn in [W] Ptd Ltd between 2008/2009 and 2009/2010 when the business went from generating a $90,000.00 profit to a $7,000.00 loss.
The husband was cross-examined at length on this issue. It was put to him that he had either been putting money aside or was not utilising the business to its full potential.
It was therefore argued that the husband, though his business, had the capacity to generate an income greatly in excess to that of the wife.
In his evidence, the husband was unable to explain the downturn in the business profits. He denied any putting aside of money or that he was not running his business to the best of his ability. It was his evidence that the wife, who did all the business books during the marriage, had access to 2009/2010 figures until separation in May 2010 and that she was fully aware of the difficulties the business was encountering during this period.
It was the husband’s evidence that he was doing everything in his power to turn the business around.
I found the husband to be an honest, straightforward witness and I accept his evidence in relation to the ups and downs of the business.
It was submitted on behalf of the husband that the court should consider the parties’ earning capacities as equal. Whilst the wife chooses to work part-time (it was her evidence she did so to be available for the children), she has the capacity to work full-time in the future, especially once [X] and [Y] finish school. If she chooses to do so, her earning capacity will be in the range of $65,000.00 to $70,000.00 per annum.
It was argued the average profit of the business over the previous three years was approximately $40,000.00 and in the circumstances of the proven vagaries of the business, a finding of equal earning capacity was appropriate.
Whilst the husband spoke of hoping to repair his relationship with his daughters, he had little idea as to how to achieve this and conceded that they will be in the wife’s primary care.
It was argued on the husband’s behalf however that as [X] is
17 years of age and [Y] is 15 years of age, the wife’s responsibility in relation to the girls is for a relatively short period.
In relation to [Z], the husband argued that he is currently in a shared care arrangement and that this would continue into the future as [Z]’s social and sporting network is [A]-based and would continue to be so next year when he and all his [A] School friends move to high school in [M].
It was the husband’s evidence there is a bus stop out the front of the former matrimonial home that will take [Z] to school in [M], as it did his sisters prior to the breakdown of the marriage.
It was the husband’s evidence that he wished to assist in the financial support of the children. He indicated he had asked the wife to provide him with receipts for their expenses so that he could pay “his half” and that, until very recently, she had refused to do so. When those receipts were recently provided, he paid the wife $1,800.00 by way of his half share of those costs. The husband indicated he would continue to assist in this way into the future.
I cannot accept the wife’s argument that there be an adjustment of
20 per cent in her favour for section 75(2) factors.
I am satisfied that the parties’ earning capacities should be considered equal on the basis that the wife has the capacity to earn up to $70,000.00 per annum and the husband’s business has a capacity to generate a good profit of between $40,000.00 and $90,000.00 per annum.
Whilst [X] and [Y] are teenagers, their primary care falls, at this time, solely on the wife. [Z]’s care is currently shared between the parties and I am of the view that it is probable, even with the change of school next year, that this will continue into the future.
In all these circumstances, I am of the view there should be an adjustment in the wife’s favour for section 75(2) factors of five per cent.
Just & equitable
It is therefore apparent from these findings that I have determined the parties’ assets should be divided equally between them.
When the asset pool is examined closely, an equal division of the parties’ assets results in a logical division of the parties’ assets between them.
Such division has the husband retaining the former matrimonial home and the business, as well as his motorbike and boat and indemnifying the wife in relation to the mortgage on the former matrimonial home and all business liabilities. The division has the wife retaining
2 Property A, Property H, the term deposit, her savings and the Telstra shares. The parties would otherwise retain all other assets currently in their possession, including their superannuation entitlements.
Such an outcome will allow the husband to continue his business and the wife to realise the remaining assets as she so chooses.
I certify that the preceding eighty-two (82) paragraphs are a true copy of the reasons for judgment of Bender FM
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