Yerby and Leon - [2012] FMCAfam 1206

FEDERAL MAGISTRATES COURT OF AUSTRALIA

YERBY & LEON

[2012] FMCAfam 1206

FAMILY LAW – Whether amounts paid by husband's family debts to family – without husbands share trading losses relevant to contributions – whether one parties’ financial contributions greater than the other parties financial contributions.

Family Law Act 1975 (Cth), ss.75(2), 79(1), 79(4)

Hickey [2003] FLC 93-143
C & C [2005] FLC 93-220

Applicant:

MS YERBY

Respondent:

MR LEON

File Number:

DGC 1955 of 2011

Judgment of:

Phipps FM

Hearing date:

9 May 2012

Date of Last Submission:

9 May 2012

Delivered at:

Dandenong

Delivered on:

9 November 2012

REPRESENTATION

The Applicant appearing in person:

The Respondent appearing in person:

ORDERS

That on or before 18 January 2013 (the date) the wife pay the husband the amount of $177,300 (the amount).
That upon the wife paying the husband the amount on or before the date:
(a)The husband at the expense of the wife transfer all his right title and interest in the property situate at and known as Property K Victoria (the property) to the wife;
(b)The wife refinance the existing mortgage over the property so that the husband is discharged from all further liability in relation to the existing mortgage and the property.
That if the wife does not pay the husband the amount on or before the date the property be sold at a price and in a manner agreed and if not agreed by an estate agent nominated by the President for the time being of the Real Estate Institute of Victoria or his or her nominee in a manner and at a price determined by the estate agent and the proceeds paid as follows:
(a)First in payment of the costs and expenses of the sale;
(b)Second to discharge the mortgage and any other encumbrances over the property;
(c)Third to pay to the husband the amount plus interest at the rate of 9½% from the date until payment;
(d)Lastly to pay the balance to the wife.
The husband is solely responsible for any amounts owing to his parents and sister and will indemnify the wife against any claim for payment made by the husband's parents or sister.
Otherwise each party is declared to have no interest in the property, including superannuation, in the name or possession of the other party, the chattels furniture and fittings in the property are deemed to be in the possession of the wife.
Otherwise all extant applications are dismissed.

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

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT DANDENONG

DGC 1955 of 2011

MS YERBY

Applicant

And

MR LEON

Respondent

REASONS FOR JUDGMENT

Introduction and proposals

The husband and wife, both self represented, cannot agree on the distribution of their matrimonial property. The property, apart from household contents, motor vehicles and small amounts in banks and investments are the former matrimonial home and superannuation. The value of the former matrimonial home is agreed at $500,000 with a mortgage of $106,000. The wife has superannuation of $27,037.62 and the husband has superannuation of $54,126.35. The husband claims he owes his parents and his sister $60,895,
The wife proposes that the non-superannuation property be divided 60% to her 40% to the husband and superannuation be divided equally. The husband proposes that the non-superannuation be divided 60% to him and 40% to the wife. He did not make any specific proposal for superannuation but I take from what he said that each party keep their own superannuation. This is close to a 60/40 division in his favour.
The husband says he has borrowed $60,895 from his parents and sister. He says that $22,000 was used to pay his margin loan debt and the balance is for mortgage payments on the matrimonial home.
The wife alleges that the husband lost $90,000 trading in shares using a margin lending account and that that should be taken into consideration. There is a dispute about initial contributions.
The significant issues are:
a)What were the initial contributions of the parties?
b)Does the husband have a debt of $60,895 and how should it be taken into account?
c)How the husbands share trading is taken into account?

Property provisions

Section 79(1) of the Family Law Act 1975 (Cth) provides that in property settlement proceedings the court may make such order as it considers appropriate. The following sub-sections set out the considerations the court is to take into account in deciding what is appropriate. This is a four step process. First, determine what are the assets and liabilities of the parties, next consider the parties’ contributions taking into account the matters in s.79(4)(a)-(c), next consider whether an adjustment should be made taking into account the matters referred to in ss.79(4)(d), (f) and (g) and s.75(2) insofar as they are relevant, and finally consider whether in all the circumstances it is just and equitable to make the proposed order. The four step process is usually applied to superannuation and non superannuation assets separately, but there are cases where this may not be appropriate.[1] In Hickey the Full Court said at [39]:
39. 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: Lee Steere and Lee Steere (1985) FLC 91-626; Ferraro and Ferraro (1993) FLC 92-335; Davut and Raif (1994) FLC 92-503; Prpic and Prpic (1995) FLC 92-574; Clauson and Clauson (1995) FLC 92-595; Townsend and Townsend (1995) FLC 92-569; Biltoft and Biltoft (1995) FLC 92-614; McLay and McLay (1996) FLC 92-667; JEJ and DDF (2001) FLC 93-075 and Phillips and Phillips (2002) FLC 93-104.
[1] Hickey [2003] FLC 93-143. For superannuation C & C [2005] FLC 93-220

The relationship

Both parties were born in China. Both are 52. The husband came to Australia in 1990 and worked as a [omitted]. The parties met in China in 1992 and the wife came to Australia in April 1993. They married [in] 1993. There is one child of the marriage [X] born [in] 1998. They separated in May 2009.
Initially after the marriage they lived with the husband's parents. In 1994 the wife worked in casual employment [omitted]. From 1995 to 1998 she worked at [omitted]. In 1995 she completed an [omitted] training course.
Property K, Victoria, the matrimonial home, was purchased in the husband’s name in February 1998 for $184,500. The amount each party contributed is disputed and is dealt with later.
After the birth of the child the wife started casual employment as an [omitted] in 2000. From 2001 to 2002 she was employed as a [omitted] and she completed [omitted] training course in 2002. The husband was retrenched in October 2001 and the payout of his long service and holiday meant he was paid until March 2002. He was unemployed until October 2006 receiving social security payments and continued on with share trading activities. He says he paid the wife $700 a month up until March 2002. The wife denies the payment.
The wife was [omitted] qualified in China. In 2003 she started a [omitted] training course and upon its completion she commenced working as a [omitted] in February 2008.
The husband opened a margin lending account in 1998 and traded in shares until 2010. His share trading showed a profit of about $90,000 prior to the global financial crisis in 2007, but then the reduction in share values meant all the shares were sold and he was left with a $22,000 debt which he paid by borrowing from his parents and sister. His share trading stopped in 2010.
After separation the wife and the child remained living in the matrimonial home. The child did not spend any time with the father. A consent order made on 9 May 2012 provides for the child to live with the wife, that she have sole parental responsibility and for the child to spend time with the husband as agreed between the husband and child. The order provides for the husband to send the child cards and letters.

Property and the liabilities

The majority of property and liabilities are agreed except for the husbands claim that he has borrowed money from his family. The major items property are:
Property K Victoria    $ 500,000.00
Husbands superannuation   $   54,126.35
Wife's superannuation   $   27,037.62
The party’s financial statements show that each has small amounts in financial institutions, household contents and each has a motor vehicle. The husband in his first financial statement lists shares valued at $4,190 but does not list them in his second financial statement. The wife alleges the husband has jewellery valued at $3,000-$5,000.
The husband traded in shares using a margin lending account eventually closed because of losses. Whether the investment he describes in his first financial statement is shares left over from his trading or something purchased subsequent to separation is not clear. Household contents and motor vehicles are listed in each parties’ financial statements. The values are estimates by the parties. The accuracy of the values cannot be assessed and since they are not significant amounts in the context of the value of the house, the major asset, I will not include them. The wife describes a credit card debt of $2,200 and a Higher Education Loan of $9,453 and other personal liabilities of $699.
The Higher Education Loan is not a debt in the sense that it is or could become payable immediately. It is payed off over time by deductions similar to taxation depending on the wife's income. The appropriate way to take it into account is under s.75(2). Otherwise the various small amounts in financial institutions household contents and cars more or less cancel each other out and do not need to be taken into account.
When the wife’s credit card debt was incurred and what the other personal liabilities are is not clear. The wife says she has a credit card debt of $2,200 and says that it usually has a debit balance. The credit card debt may have been similar at the time of separation but there is no direct evidence that that is the case. While it is part of the assets and liabilities of the parties at the time of the hearing there is insufficient evidence to show that it should be attributed to the joint marriage endeavour of the parties.
The husband says that when he became unemployed his sister and his parents paid the mortgage and then when his margin lending loan had to be paid out they lent him $22,000. He says that that they lent him a total of $60,895.
The wife acknowledges that the husband always paid the mortgage and that this continued when he became unemployed. He was receiving Newstart social security payments and trading in shares and until 2007 or 2008 trading profitably. He does not say that he withdrew money from the share trading account. The mortgage repayment was $835 a month, an amount the husband could not have paid from his Newstart allowance. The husband annexed to one of his affidavits a compact disc containing a number of scanned documents. These include copies of his sister’s bank statements showing regular transfers of amounts of money. The probability is that he was receiving help from his family to pay the mortgage.
The husband’s parents and sister did not give evidence and the husband does not say that they now require repayment. The husband says that he assisted his parents in purchasing their house and that they gave him $30,000 to help with the purchase of Property K Victoria. I accept that the husband’s family did assist in paying the mortgage and provided money to pay off the margin loan, but I find that neither his parents nor his sister require immediate payment and that they will not require repayment. Evidence of family arrangements in the past shows that should the husband’s parents or sister require financial assistance in the future and he is able to provide it he will do so, but that will be a family arrangement rather than repayment of a debt.
The only liability to be taken into account is the mortgage of $106,000. The net assets are Property K Victoria $500,000 less mortgage $106,000 that is $394,000.

Contributions

The husband lived and worked in West Germany from 1983 to 1989. Initially he worked in [omitted] and then from January 1985 until 1989 he worked as a [omitted]. He came to Australia and worked for [omitted] from January 1990 until he was retrenched in 2001 with payment that extended into 2002.
When the parties first married they lived with the husband’s parents. The husband says that his parents’ home was paid off by 1991 and that he made payments towards that totalling $30,000. He says, therefore, that at the commencement of the parties’ relationship he had the $30,000 investment in his parent's property and $50,000 in cash and shares. He could not say how much was cash and how much was shares and he had no documents.
One of the documents on the compact disc annexed to one of the husband’s affidavits is the settlement price for the purchase of the house. It shows the purchase price as $184,500 and a deposit of $16,450. After adjustments the balance to be paid at settlement was $168,083.31. The amount provided by the bank was $136,031.50 requiring a bank cheque of $32,052.31. The husband says that his parents paid him $30,000 and that he had $50,000 in cash. He says that the maximum he could borrow at the time was $140,000 and that with other expenses a total of just over $200,000 was needed. He says he provided $50,000 and the wife $5,000.
The husband therefore claims that he brought to the marriage $80,000. He says he lost his job in 2002 and he had to pay the mortgage until 2008 when he found further employment and that was where the balance of the $30,000 was spent.
The wife disputes the husbands claim that he had that much money. She argues that if the husband had $80,000 he did not need money from her or need to obtain such a large mortgage. She says that the husband would not pay a small amount of money to his mother for the ingredients used in preparing a lunch on the wedding day and that he wished to use money given to them at their wedding for their honeymoon. She says this shows that the husband could not have the large amount of money he says he had.
Having substantial assets and being parsimonious when it comes to small amounts often go together. The husband adopting what might be called a mean attitude over small amounts of money can be consistent with him having a substantial amount of money at his disposal. What happened about payment at the time of the wedding does not assist in determining whether the husband did have a substantial amount of money.
There is no documentary evidence but the husband had been securely employed for some time prior to the marriage and while it is not possible to make a finding that he had exactly $50,000 in cash and shares, that he invested $30,000 in his parent's home and that it was returned to him is probable and it also seems probable that he had additional money. I accept that he had a substantial amount of money at the commencement of the relationship.
The wife says that she had $2,000 at the commencement of the relationship, given to her by her uncle in Hong Kong. She says she contributed $10,000 to the purchase of the home. The husband said it was $5,000 but the wife produced a bank statement which shows two withdrawals totalling $10,000. The husband says that the home was purchased in February 1998 and the deposit paid at that time. The two withdrawals are $2,000 on 19 January 1998 and $8000 on 11 March 1998 so he alleges that the wife is using them as convenient payments to point to equalling $10,000. He says that the wife contributed only $5,000 to the purchase of the house.
The husband says an amount of $200,000 was needed to purchase the house, the purchase price plus expenses. The mortgage loan was $140,000, and that the wife contributed $10,000 and he the $50,000 are consistent with the other figures.
The husband commenced a share trading account, using a margin loan, about the same time as the house was purchased. A margin loan statement for 1 December 2007 to 31 December 2007 shows the value of all securities as $243,909.68 and the loan $159,797.00. The value of securities fell and when the account closed it was in debt $22,000. Other than these figures there is no history of the margin loan share trading account.
The history of financial transactions is consistent with the husbands claim that he had about $80,000 in financial assets, if not at the commencement of the relationship at the time the former matrimonial home was purchased. About $50,000 was needed for the purchase of the home. He was able to continue paying the mortgage and other expenses while he was unemployed, admittedly with family help. The share trading transactions are consistent with his starting with $20,000, as he claims and then using margin lending account to trade shares in what is well-known as a lengthy rising market, which came to an end in late 2007 or 2008.
In their affidavits and evidence the parties give much detail about the amounts each spent during the marriage. Some is agreed, some is disputed. The husband and wife agree that the husband paid the mortgage payments and rates. When the parties were first married and living with the husband’s parents the husband gave his mother $600 a month for living expenses. The husband says he gave the wife $700 a month until he was made redundant in 2002.
The wife says that she paid all of the child's school fees and fees for swimming school, football, school bus, purchase of two computers, school uniform, school camp, the child's mobile phone, internet use and Chinese school. She produced many receipts. She says that the husband paid only one amount of $500.00 for Chinese school. The husband says that he paid half of the child’s expenses.
The wife travelled to China five years after she arrived in Australia, then every two years until 2008 and every year after that but twice in 2011.
Each party was intent on demonstrating the amount of money each had spent. The husband in particular claims that he contributed more money, especially to the house and that he continues to make the mortgage payment, although it has been reduced to interest only.
The husband made a substantial initial contribution. He had cash, shares and his contribution to his parent’s home at the commencement of the relationship. The wife had about $2,000. The dispute between the husband and wife whether she contributed $5,000 or $10,000 to the purchase of the home is of no real consequence. Her bank statement shows that she had $17,000 in a cash management account in 1998, much of what she must have saved since arriving in Australia.
The husband had a significantly higher income than the wife until he was retrenched in 2002. After that his financial contributions included mortgage payments some made on his behalf by his family. The husband alleges he did much of the care of the child after he was retrenched, something the wife disputes. She says that when she was not available friends helped.

The husband's financial contribution for a time included his share trading but because of the change in the share market in 2007 and 2008 he lost the original investment.
Although the husband alleges in one of his affidavits that the wife must have secret savings, there is no evidence to suggest that this is the case.
The mortgage was changed to interest only in 2009 or 2010 and the payments reduced to $650 a month.
Whether the wife contributed $5,000 or $10,000 to the purchase of the house does not make a difference to contributions. She had $2,000 at the commencement of the relationship and the bank statement shows that she had more than $10,000 at the time of purchase of the house. The money was used for the family's purposes, which did include her travelling to China, but that is an expense in the family context.
While the husband made a substantial contribution at the commencement of the relationship, he made a substantial loss through his share trading. Share trading loss is not waste such as excessive gambling but it still must be taken into account. It has to be looked at in the overall context of contributions.
The amounts of money lent by the father's family must be taken into account, but again in the overall context. $22,000 of that money was needed to pay out the margin loan account after all shares had been sold.
The husband, while employed, earned more than the wife. The wife studied and gained her qualifications as a [omitted] and then had greater income then the husband. The wife's lower income while studying and gaining a qualification again has to be looked at in the overall context.
Subsequent to separation the husband has continued to make mortgage payments while the wife lived rent-free in the family home with the parties’ child. The wife has worked four days a week as a [omitted], earning more than that the husband and has cared for the child including most of the financial burden of caring for the child.
When all matters are taken into account the parties contributions have been equal.

Section 75 (2)

The husband says he has some health problems, although there is no medical evidence. His previous employment with [omitted] shows that he has qualifications for relatively well paid employment. Given the length of time he has been away from that employment he is unlikely to be able to re-enter that field of endeavour. The wife is qualified as a [omitted], works four days a week, and so has a secure form of employment as long as her health enables her to do so. She does not say she has any health problems.
The husband has at least a moral financial obligation towards his family because of the assistance they gave him in paying the mortgage and the debt on his share trading. I have found that his family are not enforcing repayment. His income earning ability is limited.
The wife has the care of the parties’ son, aged fourteen and a half and so she has another three and a half years of financial and parental responsibility for a child under the age of 18 years. After that it is clear she will continue to assist in and maintain him should he undertake tertiary study, which is likely.
The husband pays minimal child support and he lives with his parents.
While the wife has a better income earning ability she has the care of the parties’ child which includes almost all of the financial responsibility. The proper adjustment, including the matters set out on superannuation in the following paragraphs, for s.75(2) considerations is 5% in favour of the wife.

Superannuation

The wife's superannuation is $27,037.62 and the husband's $54,126.35. The wife seeks a division of superannuation whereas the husband says there should be none.
The husband had superannuation prior to the commencement of the parties’ relationship but the evidence does not show how much and it does not say whether any superannuation he accumulated in Germany came with him to Australia. He worked for [omitted] in Germany from January 1985 until April 1989 and then in Australia from January 1990 until March 2002.
The marriage was in [omitted] 1993 and the husband had at least three years of superannuation accumulated by then and possibly more. He then had another nine years of contributions until the termination of his employment. Separation was in May 2009 and so there has been three years since then when the wife has not made a contribution to the husband superannuation except by way of caring for the parties’ son.
An equal division of superannuation would allocate to the wife about $13,500 of the husband’s superannuation. A two thirds one third split would mean none. A reasonable assessment is somewhere in between and if it was half way then there would be an allocation to the wife of about $6,750.
The wife wishes to retain the former matrimonial home if she can. She will work for a number of years to come and so will increase her own superannuation. The husband’s future work is uncertain and so it is likely that when each retires the wife will have a substantial amount of superannuation more than the husband.
The combination of these matters means that it is appropriate to deal with superannuation as a financial resource or other relevant matter taken into account under the s.75(2) considerations.

Just and equitable

The wife wishes to keep the home. The husband proposes a sale and distribution of the proceeds. The just and equitable manner of putting the proposed order into effect is to order that the husband transfer the property to the wife, the wife pay the husband 45% of the net value of the assets, $177,300 that is 45% of $394,000 and refinance the property with an order for sale and division of the proceeds if she does not.
A division of property 55% to the wife and 45% to the husband with each retaining their superannuation is just and equitable.

I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of Phipps FM

Date: 09 November 2012