Property Settlement – Trial Judge Erred in Holding that it was Just and Equitable to Adjust Wife’s Ownership of Property.

Background

In the recent case of Zaruba [2017] FamCAFC 91 (21 May 2017) the Full Court of the Family Court (Bryant CJ, Thackray & Murphy JJ) heard cross-appeals against a property order made by Moncrieff J of the Family Court of Western Australia. The Parties had separated their finances in 1988, maintaining that arrangement ever since (for over 30 years). They were divorced in 1996 but lived together in the Parties’ home in Hilton (a suburb of Perth) until 2005. The wife gave birth to twins in 1996 to another relationship, the children lived with the Parties until the wife moved out with them in 2005.

 

Wife’s Submission

The non-legally trained and self-represented wife argued before the Court that  their Mindarie property was not ‘a marital asset’ and that s 79 of the Family Law Act (dealing with contributions of the parties in determining the distribution of property) applied to the ‘property of the parties or either of them’. The wife’s submission was that the property was owned solely by her and acquired without reference to or financial support from, the husband at a time well after they had commenced living separate financial lives should not be the subject of a s 79 order.

 

Decision of the Trial Judge

In 1993 (five years after they separated their finances) the wife bought a block of land at Mindarie (an outer coastal suburb of Perth) for $74,000 provided by the wife’s friend Mr S. A home was built on the land in 2004, the wife and children moved there in 2005. The Mindarie property was worth $1 million. Moncrieff J at first instance adopted an “asset by asset” approach and assessed the husband’s contribution to that property as 10 per cent ($100,000).

Reasoning of the Trial Court  

 The acquisition of the Mindarie property occurred five years after the Parties commenced living separate financial lives. It was acquired almost solely through monies provided by a friend of the wife, Mr S. The land could not have been purchased without those funds. In 2004, a home was built on the land. The wife’s mother provided $125,500 toward the construction and Mr S provided a further $146,000 or $150,000.

The husband made no financial contribution to the acquisition, maintenance or preservation of the Mindarie property. His Honour found, from 2005 the wife and the children occupied the property to the exclusion of the husband. The property was at all times, and remains, unencumbered.

His Honour approached the parties’ respective cases on an asset by asset basis.

His Honour determined that the husband should be seen as having made a contribution to that property assessed as 10 per cent of its value (or, in dollar terms, $100,000).

 

The Full Court’s Consideration

The Court considered that his Honour erred in the application of s 79(2) of the Family Law Act in relation to the Mindarie property. Having determined to approach the parties’ respective s 79 claims on an asset by asset basis, his Honour did not consider whether it was just and equitable to make any order pursuant to s 79(2) in respect of that property.

According to the Full Court, it was not just for his Honour to conclude that it was just and equitable to make any order altering the wife’s interests in the Mindarie property. There was no evidentiary basis for his Honour’s finding that the husband had made ‘non-financial and indirect’ contributions to Mindarie in the period between its purchase in 1993 and the wife’s departure from their shared residence in 2005.

In addition, despite finding that the husband had performed ‘some parental responsibilities’ for the children (who were not his biological children but with whom he claimed he had a loving and supportive relationship), the Court was unable to see how that should translate into the husband acquiring an interest in a property to which the wife herself made virtually no financial contribution.

The wife’s acquisition, preservation, and improvement of Mindarie took place wholly without reference to the husband. The husband only became aware of its existence well after it was purchased. His Honour found at first instance that the parties had separated their financial lives some five years prior to its purchase. Accordingly, the wife has, and has always had, the sole legal and equitable interest in the Mindarie property.

In Stanford [2012] HCA 52, the High Court held it was not the event of the separation that marked the end of the marital relationship; rather it was the end of any existing ‘express and implicit assumptions that underpinned the existing property arrangement’. According to the Full Court in the present case, on no view of the evidence could it be said that any express or implicit assumptions arising from the marriage relationship underpinned the acquisition, preservation or improvement of  the Mindarie property. Indeed, the evidence was to the contrary. And, of course, there was never any common use of Mindarie nor was there ever intended to be.

According to the Full Court, to the extent there were any express assumptions, they were solely those of the wife and they were to the effect that the husband had, and would have, nothing whatsoever to do with Mindarie – something which was given expression by her having the sole legal interest in it and the husband having made no financial contribution of any kind to it.

In the vast majority of cases, it was appropriate to address the section 79 question by ascertaining the legal and equitable interests in property without making distinctions between individual assets. This is because the ‘express and implicitly assumptions that underpinned the existing property arrangements’ can be seen to apply (to the extent and degree to which they do apply) to all of the property of the parties or either of them, including property in which legal interests vary.

According to Full Court, however, the position was likely to the different in circumstances where, as here, the characteristics of the property and the circumstances of its acquisition, improvement and the like can be seen to differ significantly and where, as here, the parties’ relationship had taken to quite different characteristics during the period to which the s 79 inquiry was directed.

The Court was unable to see any evidentiary foundation by which it was open to his Honour at first instance to conclude that it was just and equitable to alter the wife’s legal and equitable interest in Mindarie. In that respect a sharp distinction was drawn between that property and the Hilton property. There were little doubt that common assumptions, both express and implicit, underpinned the acquisition and use of the Hilton property. It was significant that, despite the finding that the parties led separate financial lives from about 1988 onwards, the use of the Hilton property continued for another 17 years and, by 2005 when the wife and children left the property, the common use of that property had spanned some 20 years.

 

The Assessment of Contributions

Even if his Honour was correct to consider an alteration of the wife’s interests in Mindarie, the Court considered that his Honour erred in his assessment of the contributions in respect of it.

The only direct financial contribution made by either of the Parties to the acquisition of the Mindarie land and, subsequently, the construction of a home upon it, was made by the wife in 1993 in the amount of $2,000. The husband made no direct financial contribution at any time.

The consequences of his Honour’s finding that monies advanced from Mr S should not be treated as a loan but as a contribution made on behalf of the wife. The same was true of the monies advanced by the wife’s mother. According to the Full Court, the authorities were clear that ‘contributions’ to non-biological children should have been assessed as a factor of potential relevance under s 75(2)(o) (dealing with adjustments to property contributions by the Court to achieve a just and equitable distribution) rather than as contributions made pursuant to s 79(4)(e). The Court stated that not everything a party does for the benefit  of their spouse’s children should result in some monetary reward in property settlement proceedings.

The Court stated that it was extremely difficult to understand how the ‘performance of some parental responsibilities’ coupled with an apparent acceptance that the wife was ‘solely responsible for the financial support of the children’ should in an assessment with respect to Mindarie, the result in a dollar value of $100,000 in favour of the husband (ie 10%). There was no evidence that the husband made any other indirect contribution to the Mindarie property. There was no evidence that the husband by any actions contributed to the maintenance or preservation of the property.

 

Orders

The wife’s appeal was allowed, the Full Court declared that she had held her legal and equitable interest in the Mindarie property to the complete exclusion of the husband.

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