Martin & Wilson [2016] FCCA 235 (11 February 2016)

Last Updated: 15 March 2016

 

FEDERAL CIRCUIT COURT OF AUSTRALIA

 

 

 

 

 

 

 

 

 

 

 

 

REPRESENTATION

 

 

 

 

ORDERS

(1) That each party do all things necessary and sign all necessary documents to sell the land known as Property D.

(2) Upon completion of the sale the proceeds be applied as follows:

(a) Firstly in payment of the costs and expenses of the sale; (b) Secondly in satisfaction of any mortgage or other encumbrance over the land; (c) Lastly by paying 40% of the balance to the applicant and 60% to the respondent.

(3) That unless otherwise specified in these orders:

(a) Each party be solely entitled to the exclusion of the other to all property (including choses-in-action and superannuation) in the possession of such party as at the date of these orders; (b) Money standing to the credit of the parties in any bank account in their sole name remain the property of the party; (c) Any insurance policies become the sole property of the owner named therein; (d) Each party is solely liable for and indemnifies the other party against liability encumbering any item of property to which that party is entitled pursuant to these orders.

(4) Otherwise all extant applications are dismissed.

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

DGC 3293 of 2013

Applicant

And

Respondent

REASONS FOR JUDGMENT

Introduction and proposals

1. 1. The applicant (the de facto husband) and the respondent (the de facto wife) lived in a de facto relationship from July 2002 until April 2013, an 11 year relationship. The only existing assets are a block of land at Property D and the respondent’s superannuation of approximately $50,000. The parties agree the value of the block of land is $80,000.
   2. The issues are:
      1. Whether an amount of $90,000 should be added back into the property pool against the respondent. This is an amount she withdrew from her superannuation at separation and after this proceeding was commenced. She used the money to establish a (business omitted). The (business omitted) failed. The respondent relinquished possession of the premises to the landlord and may still have a liability for rent;
      2. How contributions and adjustments under s.90SF(3) of the Family Law Act 1975 (Cth) should be assessed.
   3. The applicant proposes that the matrimonial property be assessed as:
      (a) Property D $80,000;

(b) Applicant’s superannuation $50,000; (c) Respondents superannuation (added back) $90,000,

He proposes that these be divided equally between the parties.

4. The respondent proposes that she retain the land at Property D and the applicant retain his superannuation. She opposes the adding back of $90,000.

Background

5. The applicant was born on (omitted) 1963 and is now aged 52. The respondent was born in (omitted) 1957 and is now aged 58. They commenced living together in (omitted) 2002. They separated in April 2013. This is the date of the breakdown of the de facto relationship.
6. There are no children of the relationship. The applicant has two children from a previous relationship, now adults. They spent some time with the parties during their relationship. The applicant has a child support debt which he is repaying.
7. At the commencement of the relationship, the applicant owned a (omitted) motorcycle which he says was worth approximately $10,000, and superannuation of $14,650. He says he had household furniture items worth approximately $500. The applicant had an amount of money from the property settlement of her previous relationship. She says it was $130,000 while the respondent acknowledges that she contributed $70,000 to a property the parties purchased and about $20,000 for household goods. The respondent had a Mazda motor vehicle of little value.
8. The applicant sold his motorcycle soon after the relationship commenced. There is some dispute whether the proceeds were used for the payment of joint bills or the applicant’s bills only. While the applicant values the motorcycle at approximately $10,000 it was subject to finance and so the amount available after its sale must have been relatively small.
9. When the parties commenced their relationship they purchased 38 Property E, for $270,000. They obtained a mortgage loan of $210,000 and the respondent paid a deposit of $70,000. This property was sold in September 2009 for $340,000. The net proceeds the parties received was $70,000. This was used to purchase the block of land at Property D. Originally the title to this property was in joint names but was subsequently transferred into the sole name of the respondent. After the sale of the property in Property E the parties lived in a unit at the applicant’s parents’ home between 2009 and 2011. They lived in rented accommodation both before and after the unit.
10. Both parties were employed throughout the relationship. The applicant worked as a (occupation omitted) and as a (occupation omitted) between 2002 and 2009. In 2009 he did some work for the (employer omitted). This was for a few weeks only. At one time, because he was unwell, he was unemployed. He had accumulated sick leave and long service leave. In 2005 he withdrew $19,000 from his superannuation to pay some outstanding bills. While living in the unit behind his parents’ house he helped look after his mother and received a carer’s pension. The respondent was employed throughout the relationship as a (occupation omitted).
11. The applicant paid his salary into the parties’ joint account from which mortgage payments were made. He had liability for child support payments for his two children from a previous relationship, including arrears after those children became 18. The applicant says that the mortgage payments on the Property E property largely came from the payments he made into the joint account. The respondent says she contributed to the mortgage by way of salary sacrifice. The respondent, the applicant says, paid for some shopping and some household bills. The applicant says the parties shared the cost of improvements to the property.
12. After the purchase of the block of land the applicant erected a fence around the block and placed a shed there. The applicant paid for the shed. He says he paid the whole of the cost of materials for the fencing. The respondent alleges she paid half. The cost was not great, $800 for the posts and $400 for the fencing wire. Since separation the respondent has paid the rates on the block of land.
13. The respondent left her employment with the (employer omitted) in August 2014. The final payment was $36,000 being accumulated long service leave and the like. She then received the whole of her superannuation, $90,000. She signed a lease for a (business omitted) in (omitted) at about that time, August or September 2014. The lease was for three years with two options of three years each. The rent was $1,500 per month.
14. The respondent used $90,000 to $100,000 establishing the (business omitted) in (omitted), purchasing the necessary equipment and fitting out the (business omitted). She set up a company, (business omitted) to run the (business omitted). She started operating the (business omitted) in February 2015. Two family members helped her.
15. The (business omitted) was not successful. She received no income from it. In late August or September 2015 she relinquished possession and returned the property to the owner. She owed about $1,500 rent and was liable for another two years rent on the initial three-year term unless another tenant was found. The total of that rent is $36,000. If the new tenant did not want the (omitted) and other fittings she would have to remove them. There is no evidence of the value, if any, of the (omitted) and other fittings.

Just and equitable

16. Section 90SM(3) requires that an order must not be made unless the Court is satisfied that, in all the circumstances, it is just and equal to make the order. The parties’ de facto relationship has come to an end and the circumstances in which they shared their financial arrangements no longer exist. In the circumstances it is just and equitable to make an order.

Assets and liabilities

1. 17. The next step is to determine the assets and liabilities. The one issue is whether the respondent’s $90,000 superannuation payment should be added back in.
   18. In Miller & Miller [2009] FamCAFC 121 the Full Court said at [71-72]:

       In OMACINI the court identified the following circumstances in which it is appropriate to notionally add back assets to the pool, at 79,617:

(a) Where the parties have expended money on legal fees.

(b) Where there has been a premature distribution of matrimonial assets.

(c) In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644:

“As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:

(a) Where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial asset; or

(b) Where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.

Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec 75(2)(o) to applications for settlement of property instituted under the provisions of sec 79.

The principle emanating from Miller & Miller [2009] FamCAF 121is that as a general rule funds reasonably expended on living expenses are not added back.

19. The applicant’s argument that the respondent’s withdrawal of her superannuation and spending on the establishment of a (business omitted) should be added back into the property pool is twofold. It is either premature distribution of a de facto relationship asset, or the money was lost through conduct of the respondent which was reckless, negligent or wanton.
20. The unrepresented respondent’s approach was that this was her money and she was entitled to use it. The arguments for her case are two. One is that, while at the time of separation superannuation was part of the property available for distribution as an asset of the de facto relationship, this was an attempt by her to establish for herself a means of earning an income and so it should be treated as analogous to reasonable living expenses. The other argument is that the court has the discretion to consider all the circumstances and that in all the circumstances it should not be added back.
21. The respondent had no experience in running a (business omitted). On the other hand there is no evidence, one way or the other, about its likely prospects for success. For instance, there is no evidence about whether it was in a location where there would be a demand for (omitted). There is no evidence one way or the other about any attempts by the respondent to promote the (business omitted).
22. There is no evidence that the respondent embarked on a course of conduct which was designed to reduce or minimise the value of the de facto relationship property. She believed she could successfully conduct a (business omitted). She was attempting to enhance the value of her superannuation, not reduce it or minimise it.
23. The evidence does not show that the expenditure on the (business omitted) was reckless, negligent or wanton. The respondent may have been naive in thinking that she could successfully conduct a (business omitted), but the evidence does not show that the success of the venture was impossible or even improbable. It may have been successful in which case the applicant would have benefited.
24. Arguably the respondent’s expenditure is analogous to funds reasonably expended on living expenditure. I do not need to make a finding about this. If the (business omitted) had been a success it would have been part of the property pool and an assessment would need to be made of the applicant’s contribution to the value of the (business omitted). If that had occurred he would have been the beneficiary of the respondent’s enterprise and hard work. Rather than reasonable expenditure on living expenses I consider the loss the same as, or analogous to, Baker J’s description of financial loss incurred by a party or either of them during the course of the relationship. This was after the relationship had come to an end but it was using relationship property.
25. Another consideration is the small value of the property pool. If the $90,000 was added back in the respondent’s share of the property available for distribution would be very small if not completely eliminated unless there was a contribution assessment and adjustment very much in her favour. In these circumstances, adding back the $90,000 is not the appropriate way to assess the parties’ property. As I describe later in these reasons it is appropriate to take it into account under s.90SF(3).
26. The assets of the de facto relationship, for the purposes of the adjustment of the party’s property, is the $80,000 value of the block of land and the applicant’s $50,000 superannuation.

Contributions

27. The applicant’s submission is that contributions are equal. The respondent put her claim on the basis that she wanted to keep the amount she had put into the Property E property.
28. Section 90SM(4) sets out the matters that court must take into account in determining the parties contributions. These are the financial and non-financial contributions to the acquisition and maintenance and preservation of the property and the parties’ contributions as homemaker.
29. The respondent made an initial contribution of $70,000 to the purchase of the Property E property. She says she had an additional $60,000 which went towards the relationship. The applicant acknowledges that she spent $20,000 on furniture and contents for the property.
30. To an extent the parties disagree on who made the most mortgage payments. They both contributed to improvements to the property and both did their share of caring for the property. Bank accounts are part of the evidence which show each party making payments towards the mortgage. A calculation of how much each party paid towards the mortgage and how much each party otherwise paid for their living expenses is not needed. That is not the approach in assessing contributions. The proper approach is an overall assessment of the parties’ contributions as described in s.90SM(4). Both parties worked throughout the relationship earning more or less equal amounts. The applicant says that both parties gambled throughout the relationship and that may be an explanation why they were not able to sustain the mortgage payments. The overall assessment is that parties’ contributions following the respondent’s initial were equal.
31. Following separation the respondent says she has paid the rates on the block of land. They are not high and make little difference, not enough to make an adjustment to the parties’ contributions.
32. The parties lived together in the de facto relationship for nearly 11 years. That means that the influence of the respondent’s initial contribution has substantially eroded. The length of time has to be looked at in the context of the amount of the applicant’s initial contribution and the current value of the assets. The respondent contributed $70,000 to the purchase of the Property E property, the one durable asset the parties held. The value of their current block of land, the only asset apart from superannuation, is $80,000, not a great deal more. This means that the applicant’s initial contribution must be taken into account.
33. Taking into account the applicant’s initial contribution in this way the overall assessment of contributions is 40% by the applicant and 60% by the respondent.

Section 90SF(3)

34. The relevant considerations under this section are the age and state of health of each of the parties to the de facto relationship, the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment. In addition the respondents loss of her superannuation and the unsuccessful (business omitted) venture is a matter I will take into account under s.90SF(3)(r) as a fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account.
35. The parties are aged 52, the applicant and 58, the respondent. The applicant has some superannuation. The respondent has none. Both are capable of employment. The applicant has full-time employment earning $52,000 a year. The respondent, at the time of the hearing, was unemployed, having just closed the (business omitted). She had worked as a (occupation omitted) before leaving that employment and her evidence was that she should be able to get further employment. Given the uncertainty about the respondent’s employment and that she is six years older a small adjustment in her favour, perhaps 5%, would be appropriate. However, I intend taking into account the loss of her superannuation as a circumstance which the justice of the case requires to be taken into account.
36. If the respondent had remained in her employment she would still have that income and would have $90,000 superannuation. If that was the case then no adjustment would be appropriate. Given that the applicant has more working years left than the respondent an adjustment to the superannuation would not have been appropriate. The applicant had no part in the respondent’s decision to use her superannuation for a (business omitted). He did not know of it and had no opportunity to assess the risks and influence the use of the money. The respondent took the risk.
37. The circumstances of the loss of the respondent’s superannuation means that there should be no adjustment for s.90SF(3) considerations and that the applicant should retain his superannuation without any splitting order.
38. The result is that the block of land must be sold and the net proceeds divided 40% to the applicant and 60% to the respondent.

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of Judge Phipps

 

Date: 11 February 2016