Alcorta & Badami [2020] FCCA 3427 (16 December 2020)

Last Updated: 11 February 2021

FEDERAL CIRCUIT COURT OF AUSTRALIA

Alcorta & Badami [2020] FCCA 3427

ORDERS

THE COURT ORDERS THAT:

1. Within 30 days of the date of these Orders, in consultation with the wife, the husband shall do all acts and things necessary to list for sale the property known as C Street, Suburb D, being the whole of the land more particularly described in Certificate of Title Volume ... Folio ... (“the C Street, Suburb D property”).
2. The terms and conditions of the sale including the estate agent to handle the sale be as agreed between the parties and in default of agreement either party may apply to the President of the Real Estate Institute of Victoria who shall thereupon appoint a person to decide the terms and conditions of the sale including the agent to handle the sale.
3. Upon the completion of the sale, the proceeds of the sale be applied as follows:

(a) Firstly, to pay all costs, commissions and expenses of the sale;

(b) Secondly, the sum of $307,922 be paid to Mr E;

(c) Thirdly, the balance to the parties as follows in the following order of priority:

(i) 60% of the remaining proceeds of sale to the husband; and

(ii) The 40% balance to the wife.

4. Pending the completion of the sale:

(a) The wife have the sole right to occupy the property and that during such right of occupation the husband pay all instalments pursuant to all rates and insurance payments of the property as they fall due; and

(b) Neither party encumber the property without the consent in writing of the other party.

5. Save as otherwise provided for in these Orders and save for the purpose of enforcing any monies due under these or any subsequent Orders, the husband retain, to the exclusion of the wife:

(a) His personal savings;

(b) His personal belongings; and

(c) His superannuation entitlements.

6. Save as otherwise provided for in these Orders and save for the purpose of enforcing any monies due under these or any subsequent Orders, the wife retain, to the exclusion of the husband:

(a) Her personal savings;

(b) Her personal belongings; and

(c) Her superannuation entitlements.

7. The husband indemnify and keep the wife indemnified in relation to all debts in the husband's sole name.
8. The wife indemnify and keep the husband indemnified in relation to all debts in the wife’s sole name.
9. In the event that either party should fail, neglect or refuse to sign or execute any deed, document or instrument required by or to give effect to these Orders, then pursuant to s.106A of the Family Law Act the Registrar of the Federal Circuit Court of Australia, Melbourne Registry shall be and is hereby authorised, empowered and directed to sign and execute such deed, document or instrument in the place and instead of such party and to thereafter do all things and acts as are necessary to give validity and operation to same.
10. Paragraphs 10 to 15 are binding on the trustee of Super Fund F (“the Fund”) of which the applicant husband, Mr Alcorta is a member (member number ...).
11. The base amount to be allocated to the respondent wife out of the applicant husband’s interest in the Fund is $65,255.50, being an equalisation of the parties’ superannuation subject to the husband and wife providing updated statement.
12. Pursuant to Section 90XT(1)(a) of the Family Law Act 1975 whenever a splittable payment becomes payable in respect of the interest of the said applicant husband in the fund:

(a) the respondent wife shall be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (“the Regulations”) using the base amount, providing such base amount shall not exceed the value of the interest determined under Section 90XT(2).

(b) There be a corresponding reduction in the superannuation interest of the applicant husband to whom the splittable payment would have been made but for these orders.

13. Order 11 has effect from the operative time and the operative time is four (4) business days from the service of a sealed copy of these Orders on the Fund.
14. The Trustee shall do all such acts and things and sign all documents as may be necessary to:

(a) Calculate, in accordance with the requirements of the Family Law Act 1975, the entitlement created in Order 11 of these Orders; and

(b) Pay the entitlements whenever a splittable payment becomes payable from the Respondent’s interest in the Fund.

15. After service of the payment split notice, in accordance with the Superannuation Industry (Supervision) Regulations 1994 (“the SIS Regulations”), the respondent wife shall do all such acts and things and sign all documents as may be necessary, including but not limited to exercising the applicant husband’s request in accordance with the SIS regulations, for the rollover or transfer of the non-member spouse interest to the complying superannuation fund of the applicant husband’s choosing in accordance with the SIS regulations.

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

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

REASONS FOR JUDGMENT

JUDGE HARLAND:

1. The parties were in an eight year relationship. The parties resolved their parenting dispute. Their two children, X born in 2011 aged nine, and Y, born in 2015 aged five, live primarily with their mother and spend four nights a fortnight with their father during school terms. They share special days and half the school holidays. The parties could not resolve their property dispute.
2. The husband is 42 years old. He works as an artist in his parents’ business. He says he and the wife began living together in 2011. They married in 2017 and separated on 22 June 2018.
3. The wife is 37. She migrated to Australia in 2003 and is a permanent resident. She says she and the husband started dating in mid-2010 and commenced living together in 2010. She agrees the parties separated on 22 June 2018. Nothing turns on the difference between the parties as to whether they started living together in 2010 or in 2011.
4. Despite the husband’s affidavit evidence and answers in cross-examination, both counsel submitted that the parties’ contributions during the relationship were equal.
5. The parties agree that at the beginning of the relationship the husband owned two properties. There is no evidence as to the value of the properties at the commencement of cohabitation. The issues in dispute are:
   1. The weight to be given to the husband’s initial contributions;
   2. Whether or not the sum allegedly owed to the husband’s father should be paid before the proceeds of sale are distributed between the parties or whether it should be recognised as a contribution on the husband’s behalf;
   100. What adjustment should be made in the wife’s favour for s.75(2) factors; and
   4. Whether or not the sum the husband withdrew from the joint account shortly after separation should be notionally added back.
6. Regardless of whether the sum advanced by the husband’s father of $312,000 was a loan or a gift, it is a significant contribution that must be given real weight.

LOAN AGREEMENT

7. The husband says that his father loaned him $312,000 in 2007 to assist him finance the purchase of the former matrimonial home at C Street, Suburb D (“the C Street, Suburb D property”).
8. The husband annexes the loan agreement between him and his father that was signed in 2007. It was witnessed. The loan agreement stipulates that it is interest free and repayable within 60 days of written demand. In his trial affidavit filed 26 October 2020 the husband says that the loan was not secured by way of mortgage over the C Street, Suburb D property because he would not have been able to borrow sufficient funds from the bank to complete the purchase because he had a mortgage of approximately $341,000 over the property he owned at G Street, Suburb H (“the G Street, Suburb H property”).
9. The husband says that on or around 23 July 2013 his father demanded that he repay part of the loan, the demand being made orally and in person, and that as a result he withdrew two sums from his Westpac Rocket Deposit account being $3077.18 and $1,000. He says he paid those sums in cash.
10. The affidavits of the husband’s parents almost mirror the parts of the husband’s affidavit that discuss the advances from his father.
11. The wife’s Counsel cross-examined the husband and his parents about the loan. She put to the husband that he could not have paid these sums in cash as it is not possible to pay $0.18 in cash (one cent and two cent coins were withdrawn from circulation in Australia in 1992). When the husband was cross-examined about this he said he paid by bank cheque and suggested that this is the same as cash. The wife’s Counsel submits that the husband’s evidence and his parents’ evidence about this is inconsistent and that the Court should not accept that this was a loan. The husband’s father said under cross-examination that he needed those two sums of money quickly at the time for a personal matter and did not want to disclose what that was and was not pressed to do so.
12. The husband’s father has advanced other sums to the husband by way of gift. He gifted approximately $41,000 to the husband towards the purchase of the G Street, Suburb H property. He gifted another $40,000 shortly before the husband moved into the C Street, Suburb D property which the husband used to purchase household items and pay for minor renovations.
13. The husband says that he is obliged to repay the loan to his father as his father is now 74 and the business has been significantly affected by COVID-19. The business has only been able to trade for a few months of the year due to the lockdown and restrictions in place in Melbourne for several months, which were only recently lifted.
14. The husband says in his trial affidavit that his father was not prepared to advance such a large sum without a formal loan agreement. The husband’s father filed an affidavit which is in similar terms with respect to the loan agreement. He states that he did not require the sum of $41,000 he advanced towards the purchase of the G Street, Suburb H property in 2003 and the sum of $40,000 advanced in 2007 to enable the husband to buy household items and carry out minor renovations for the C Street, Suburb D property to be paid back, because his financial circumstances at these times were such that he could afford to gift those sums. He was not prepared to gift over $300,000. He goes on to say that his business is not doing well and he is contemplating retiring. He says he needs the money returned for his living expenses and in the event he does not retire, he wants to invest the money in the business which he says provides the husband and therefore the children the benefit of income.
15. The husband’s mother also filed an affidavit on 26 October 2020 although the loan agreement does not involve her and she simply repeats what her husband and son say about the agreement and other advances the husband has made. She was briefly cross-examined. Her evidence does not advance matters.
16. The husband’s father issued a written notice of demand (marked as exhibit 1) via his lawyers in February 2020 seeking the balance of $307,923 be repaid within 60 days. The timing is significant as the demand was issued the day prior to a mention hearing in Court before me. I required the husband’s father to be formally put on notice of these proceedings. Rather than seeking to join the proceedings, as it would have been appropriate given his contentions, the husband’s father filed proceedings in the County Court of Victoria. Unsurprisingly, given his position in this case, the husband did not participate in those proceedings and his father obtained a judgment debt against him for the original sum owing of $307,922.82, as well as interest from the date of filing, totalling $2,952.68 and Court costs of $3,045.70. Understandably, these actions are seen by the wife as an attempt to elevate the husband’s father’s claim by now having a legally enforceable judgement debt. As I indicated during the trial, given the manner in which this came about, I place no weight on it when determining this issue.
17. The wife says in her affidavit filed on 26 October 2020 that she did not know anything about a loan from the husband’s father. She says the first notice of it was upon receipt of the husband’s financial statement filed on 7 August 2019. The husband claimed during cross-examination that the wife knew about the loan before this, as when he collected his belongings with the assistance of the police he saw a pile of his papers on top of the stairs, with the loan agreement being on top. The wife denied this. She said there were no loose papers on top of the stairs. The husband kept his paperwork in a black two drawer filing cabinet in their bedroom. She said she put the filing cabinet with the papers in it in the garage for the husband to collect. I prefer the wife’s evidence on this point. It is more credible that she would place items in the garage for the husband to collect to avoid him being in the house than for her to leave papers on top of the stairs with the loan agreement on top for the husband to see. In any event whether she knew then or many months later makes no difference.
18. It is not entirely surprising that the loan was not mentioned during the relationship given it was made many years before the parties met. The husband said he did not include reference to the loan in his initial material due to poor legal advice and once he changed firms he disclosed the loan agreement. I accept his evidence about this.
19. The wife challenged the legitimacy of the loan and in her trial affidavit refers to the witness as being a lady called Ms J, who has since passed away, as being unable to speak English and therefore queries how she could have read and understood the loan document. Of course all she needed to do was to witness the signatures of the parties to the agreement. She did not need to read, let alone understand the agreement at all.
20. The wife asserts in her trial affidavit that she believes the husband has asserted this loan exists in order to minimise the pool and any payment to her. I do not accept this. It is clear that the loan agreement predates their relationship by some years. The wife does not challenge the fact that husband’s father advanced these sums nor the fact that the husband made the overwhelming financial contributions to the relationship bringing in the two properties at the commencement of the relationship. The issue is whether or not I should treat the sum as a contribution on the husband’s behalf or as a loan which the husband needs to repay. In these types of cases it is common for it to be argued that a parent will not actually require their child to repay the sum, but rather make the demand in the context of the breakdown of the relationship and family law proceedings.
21. The wife’s Counsel argued that it was not a loan and focused on the inconsistencies in the evidence, including the reference in 2013 to the payment in cash including an amount of 18 cents. She also referred to the fact that the husband’s father had advanced him $40,000 in 2003 and $41,000 in 2007 without requiring any repayment. She also focused on the fact that in 2016 the husband lent his parents $100,000 for a two month period whilst they were in the process of buying and selling a property. This enabled them to avoid more expensive bridging finance. The husband’s parents repaid that sum plus a gratuity of $5000 approximately two months later. The wife’s Counsel questioned the husband and his father about this and suggested that if the $312,000 really was a loan, then the $100,000 would have been applied to reduce that loan.
22. The wife’s Counsel clarified in submissions that the wife is not suggesting that the loan agreement document is false. Really her argument is that the husband’s father does not require the husband to repay the sum and is only saying he will for the purposes of the proceedings. It is significant to note that this advance was made some four years before the parties’ relationship, and the loan agreement is contemporaneous with the advance of the money. The husband annexed bank statements showing the receipt of those funds to his trial affidavit.
23. The wife’s argument would carry much more force if it were not an arrangement between father and son. The husband is an only child. I accept the evidence of the husband’s father that he gifted the amounts of $40,000 and $41,000 respectively as he could afford those sums at the time. I accept the husband’s father’s evidence that he was not prepared to advance the larger sum without a loan agreement reflecting the fact that he wanted to be able to call on that loan if he needed to.
24. It is credible that in a family arrangement parents may decide to gift some sums of money to an adult child to buy property and to require some of the money to be repayable if the need arises. When seen in that context, the explanation for repaying the $100,000 in 2016 is credible. Despite my criticisms of the actions taken with respect to the County Court of Victoria proceedings for the judgement debt, I am satisfied that the $312,000 sum was indeed a loan, not a gift and that the husband’s father now wants it repaid. This is particularly so considering the fact that the husband’s parents run a small family business, which like many businesses, has been adversely affected by COVID-19 and also considering the husband’s father is of an age where he could retire. I will make orders that the sum of $307,922 be repaid from the proceeds of sale of the C Street, Suburb D property but do not propose to include the interest and costs ordered by the County Court of Victoria. It will be a matter for the husband if he pays that amount, which I acknowledge is relatively modest, from his share of the proceeds.

INITIAL CONTRIBUTIONS

25. The wife did not have any assets or liabilities of any significance at the beginning of the relationship. The wife was working casually. The husband says he believes the wife had some credit card debt at the beginning of the relationship but does not know how much. The wife says she did not have any debt and when cross-examined she said she has never had a credit card.
26. At the beginning of the relationship the husband owned the property at G Street, Suburb H which was subject to a mortgage and the C Street, Suburb D property which was also subject to a mortgage. The parties did not obtain a historical valuation for the C Street, Suburb D property. In his affidavit the husband asserts that the C Street, Suburb D property was worth approximately $1,000,000 but does not provide any basis for this. He asserts the mortgage was approximately $327,000 on the C Street, Suburb D property. He annexes the mortgage statement for both properties to his affidavit.
27. The husband sold the G Street, Suburb H property in 2014 receiving net proceeds of sale of $445,424. He applied this sum to discharge the mortgage over the C Street, Suburb D property which was $303,368 and used the remaining funds to pay the capital gains tax arising from the sale and for living expenses.
28. In his affidavit and under cross-examination the husband sought to exaggerate his own contributions and minimise the wife’s to such a degree that both his written and oral evidence lacks credibility and does not do him any credit. I note that the parties will continue to be co-parenting the children for years to come and that they agreed that it was in the children’s best interest for them to live primarily with their mother. Fortunately and sensibly, the husband’s Counsel submitted that despite the husband’s disparaging attitude and poor presentation in this regard, he and the wife’s Counsel agreed that apart from the husband’s financial contributions from the two properties, the parties’ contributions during the relationship were equal.
29. The husband’s Counsel also acknowledged that the wife has made post separation contributions for the care of the children. After separation interim parenting orders were made on 12 September 2018 where the husband initially had supervised time with children from September 2018 to November 2019. From 20 November 2019 the husband spent time with the children from 1:00pm each Saturday until 1:00pm Sunday. Then from 9 September 2020 the father’s time was increased to three nights a fortnight, until the final consent orders were made on 16 October 2020 which provide for the father to have the children for four nights a fortnight.

SECTION 75(2) ADJUSTMENTS

30. The parties are of a similar age and neither party raises any health issues.
31. The husband’s taxable income for the last financial year was $52,099. Due to COVID-19 he has not been working and has been receiving jobseeker payments. The COVID-19 restrictions in Melbourne have only recently been eased. The husband says the business has been declining for several years and he is not sure if the business will recover. He does not think he will earn anything like the $80-$90,000 he earned in previous years.
32. The wife does not have any formal qualifications. She is studying and has just finished the final assessments for her certificate. She intends to study for a diploma in 2021. She intends to study part-time as she did for her certificate. She works casually at the Employer K where Y currently attends. She says she is the most junior member of staff and therefore is only offered shifts when others do not want them. She says the number of shifts she has week to week vary greatly. She refers to this variability in her affidavit. Her employment was also affected by the lockdown in Melbourne. As she is a casual employee she was not eligible for job keeper payments. She says when the employer reopened generally in September 2020 she received one six hour shift and as at the date of swearing her trial affidavit, she had not received any further shifts. Currently she is paid an hourly rate of $28.87.
33. Whilst I accept that the husband’s income has decreased due to COVID-19 and how well the business may recover is uncertain, I am satisfied that the husband has a higher income earning capacity than the wife. It is reasonable for the wife to continue further study in order to improve her earning capacity. It is also reasonable for her to study part-time and work casually or part-time due to her caring commitments for the children who are still young.
34. The husband will continue to be in a stronger financial position than the wife as a result of the property adjustment he receives. The wife also will continue to have care of the children for the majority of time.
35. The husband is paying child support as assessed.

THE PARTIES’ LEGAL AND EQUITABLE INTERESTS

36. Initially the husband sought to retain the C Street, Suburb D property but it is now his position that the property will need to be sold. He seeks to pay the amount he says he owes his father from the proceeds of sale before the remainder of the proceeds are divided between the parties. The property was valued at $1,525,000. There is no mortgage on the property.
37. The only other asset that the husband seeks to include in the pool is a white gold diamond ring he gave to the wife. He has not had this valued. He included a value of $8,660 which he says is what the jeweller told him it would be worth on resale. He says he paid about $13,000 for it. The wife disputes that he paid that much and says he paid about $9,000. For family law purposes, the value would be second-hand value and not insurance value. As I do not have any evidence of the value of the ring and given its minimal amount in the context of the pool I do not propose to include it in the pool.
38. The wife seeks to add back to the pool the sum of $24,657 which the husband withdrew from the parties’ joint bank accounts about two weeks after separation on 9 July 2020. In doing so he reduced the joint account to nil. The husband opposes this.
39. The husband claims that he withdrew the balance available in the joint account as he had received advice that he should do so from the bank and had left the home “with the shirt on his back” and needed to re-establish himself. He complained that the wife had significant sums at separation that she did not disclose. The husband’s Counsel did not cross-examine the wife about this. The wife’s evidence showed that she had approximately $100 in her separate account. The husband claimed that he paid the wife $400 a week. The wife denied this. The husband did not produce any documents to support his claim that the wife had other sums. He did not produce statements showing payments to the wife of $400 a week.
40. Whilst I accept the husband would have had some costs in re-establishing himself, that does not justify draining the joint account. I am not satisfied that the wife had funds that she did not disclose. The husband has not provided any other information with respect to what he did with those funds. The wife also referred to other sums taken by the husband between 31 July 2018 and 26 October 2018 totalling $27,300 which she says were also matrimonial funds. She also makes complaints about the husband failing to disclose some of his bank account statements. She was not challenged about this in cross-examination. The husband was not challenged about those sums either and the wife has not sought that those further sums be added back to the pool. In all of the circumstances I am not prepared to add back the sums removed from the joint account at separation.
41. The husband seeks that the wife reimburse him the sum of $2,348 for the mediation fee in February 2020 and was initially seeking reimbursement of half of other fees but no longer does so. The wife opposes this, referring to the husband’s cancellation of mediation that was due to take place before the matter return to Court before me in February 2020. The husband agreed he cancelled the mediation in the days leading up to it but could not remember why, but said he needed some time.
42. I will not make any of the add backs sought by the parties with respect to the wedding ring, the half mediation fees and the funds taken at separation by the husband, taking all of the circumstances into account.
43. The parties have agreed on a superannuation split that equalises the parties’ respective superannuation entitlements which total $183,762. They have accorded the fund procedural fairness and I will make the orders in terms sought.

LEGAL PRINCIPLES

44. Part VIIIA of the Family Law Act (“the Family Law Act”) governs property, spousal maintenance and maintenance agreement between married couples. The major provisions relating to marital property division are contained in ss.79(1); 79(2); 79(4); & 75(2) of the Family Law Act.
45. Until the High Court decision in Stanford v Stanford [2012] HCA 52; (2012) 247 CLR 108, the position in respect of the process to be applied to the resolution of matrimonial property cases was said to be well settled with a preferred approach as set out by the Full Court in Hickey & Hickey & Attorney-General (Intervener) [2003] FamCA 395; (2003) FLC 93-143 at 78,386 [39].
46. The High Court considered the operation of s.79 of the Family Law Act (which has almost identical terms to s.90SM) in the matter of Stanford. In this case, the majority stated at [35]-[36] that:

35. “It will be recalled that s 79(2) provides that "[t]he 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) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.”

36. The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds.” [Footnotes omitted]

47. The High Court found three fundamental propositions with respect to the application of s.79, which can be summarised as follows:

1. Firstly, in order to ascertain whether it is just and equitable to make a property settlement order, it is necessary to identify the existing legal and equitable interests of the parties in the property. The High Court emphasised the word ‘existing’.

2. Secondly, although s.79 gives the court a broad power to make property settlement orders it may not be exercised in an unprincipled fashion. There must be no assumption that the parties’ interests are or should be different to their existing interests.

3. Thirdly, when considering whether making a property settlement order is just and equitable the court must not assume that one or the other party has the right to a property adjustment order. The court must give separate consideration to s.79(2) in addition to the matters referred to in s.79(4).

48. In Stanford the High Court indicated that, in the vast majority of matrimonial property cases, the requirements of s.79(2) will be readily satisfied, largely as a result of a consideration of the circumstances of the parties concerned, particularly the nature of their separation. Both parties seek property adjustment orders.
49. The High Court also pointed out that what is just and equitable is different in every case.

SUBMISSIONS AND CONCLUSION

50. In his case outline the husband seeks to have sole conduct of the sale of the C Street, Suburb D property, relying on an email to the wife sent in 2018 wherein she stated she did not care what the property sold for, provided the husband pays her the sum she requires. I am not satisfied that that is sufficient justification to exclude the wife from having any involvement in the conduct of sale. It is in both parties’ interests now that they both agree the property must be sold that the best price is obtained. It is also appropriate for the wife to have sole occupation of the home pending sale, given she and the children remain living there since separation.
51. In the husband’s case outline he includes an order seeking to attend the home to remove belongings. As part of that order he seeks that the wife vacate the home for a period of 48 hours. This was not raised during the course of the trial and is an unreasonable requirement. I would expect that the parties should be able to arrange an agreed time for the husband to collect any belongings.
52. The husband contends that there should be an adjustment in the wife’s favour for s.75(2) factors of 10%. The husband’s position was consistent throughout the trial that the wife should receive 35% of the net proceeds of sale of the C Street, Suburb D property, taking into account her contributions which include post separation parenting contributions and the s.75(2) factors. The wife contends this adjustment should be between 10 and 15%. The wife’s position at the beginning of trial was that she should receive 50% of the net proceeds of sale of the property, ignoring the husband’s father claim. She adjusted her position to seek 40% at the end of the trial.
53. Having considered the totality of the evidence I am satisfied that it is just and equitable to make orders for the husband’s father to be repaid from the proceeds of sale in the sum of $307,922 and that the remaining proceeds of sale be divided as to 60% to the husband and 40% to the wife.

Associate:



Dated: 16 December 2020