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[1990] FamCA 174
defendant. The Court ordered the specified property transfers and ownership declarations, discharged the husband’s $50,000 debt to the wife, and reserved costs; it made no cash adjustment in the wife’s favour.
Cohen J did not treat the wife’s lottery win as automatically hers alone for property division, or as automatically shared equally. The judge looked at when it occurred, how it was obtained, how the parties viewed and used the money, and what remained in the family asset pool. The judge also treated the husband’s increased superannuation payout as a windfall and considered it within the overall financial picture. After considering both parties’ contributions and circumstances, including the wife’s work as a homemaker and parent, the judge concluded that their contributions were approximately equal and ordered no additional cash payment to the wife. The orders redistributed particular assets and discharged the husband’s $50,000 debt to her.
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In Holmes and Holmes [1990] FamCA 174, Cohen J of the Family Court of Australia at Sydney determined a property adjustment dispute after a marriage that began in September 1957 and ended in separation in late 1985 or early 1986. The judgment was delivered on 8 October 1990. The supplied text contains no numbered paragraphs, so citations below refer to the judgment’s described facts and passages rather than paragraph numbers.
The parties had three daughters. The wife was not yet 19 when they married and had been working in a clerical role, but had not accumulated property. The husband, then already employed for eight years, had savings, land, vehicles and a motorcycle. Over the marriage, the wife became primarily responsible for the daughters’ care and the household. She also performed clerical work in a pet food business operated by the parties, while the husband made deliveries and maintained other work.
Two financial events figured prominently. First, the wife received $666,666 from a Lotto win in February 1984. The winning ticket had been purchased in her own name, using her usual numbers. The husband did not claim to have supplied the ticket money. The family, including the husband, regarded the win and proceeds as the wife’s, but the wife said she regarded the money as “family money”. She used it for a range of purposes: property, family purchases, loans to the husband and a daughter, a gift to her sister, and a business purchase. The judge observed that more than $400,000 of the winnings remained in the parties’ hands in different forms and had been brought into the family asset pool by the wife.
Second, the husband’s superannuation payout rose from an expected amount of about $160,000 to $520,000. The increase followed a takeover of the newspaper company, which involved the sale of shares held by the superannuation fund’s trustees. The judge regarded the increase as a windfall to which neither spouse had contributed.
The parties agreed on much of the proposed distribution of property. Their principal dispute was whether the husband should make a further cash payment to the wife. She sought $310,000, including the $50,000 she said he owed her and an amount based on his superannuation. The husband’s position was that he should pay nothing. Cohen J concluded that the overall division, without a further cash payment, was just and equitable on the circumstances considered. The orders transferred or confirmed interests in specified property and declared the $50,000 debt discharged.
Cohen J’s key analytical point was that the amount of money contributed does not, by itself, determine the contribution. The judgment states: “the extent of contribution is not a mere product of the amount contributed.” The judge considered that effort, timing and the surrounding circumstances also mattered. That approach applied to cash contributions as well as non-financial contributions such as homemaking and parenting.
For the Lotto win, the judge did not adopt either party’s proposed simplified treatment. The wife’s counsel argued that the winnings were her property and should largely count as her financial contribution. The judge accepted that the proceeds were legally hers, but did not consider ownership alone resolved their significance in the property adjustment. Conversely, the judge did not treat the windfall as having no contribution significance or as necessarily belonging equally to both parties.
The circumstances pulled in different directions. The ticket was purchased with little effort, but the judge regarded family money as having been used. The win occurred during a longstanding marriage, not immediately before separation. The wife described the proceeds as family money and spent much of them in ways intended to benefit the family. She also controlled how they were used, however, and made a loan rather than a gift of $50,000 to the husband. The retained portion of the winnings was brought into the family asset pool by the wife; the husband had not contributed to that portion. The judge considered all of those features together, including expenditure that may have relieved other family assets from meeting family costs.
The judge also considered what happened to the money after the win. Some funds were spent on family members or property; some were lent; some were given away; and the wife purchased a business that later performed poorly. The judgment did not treat every use of the money as having the same significance. Rather, the win and its subsequent disposition formed part of the overall history of the parties’ assets and contributions.
The superannuation increase was considered in a similar contextual way. The husband had contributed to the scheme over 39 years, and the wife had made a notional contribution to those contributions for about 29 years. But the increase from about $160,000 to $520,000 arose from the takeover, not from further effort by either party. The judge considered a mathematical division of that increase likely to overlook matters that could not be captured in an equation. It was therefore considered in the global assessment rather than isolated and divided by a percentage calculation.
The judge then considered the parties’ other contributions and circumstances. The wife had been the primary homemaker and parent, and had also contributed clerical work to the business. The husband had made the original financial contribution to the marriage and continued to work in the newspaper job and business activities. Each party had experienced business losses after separation. The judge also considered their substantial capital, debts, income-producing capacity and housing needs.
The wife argued that her health and the nature of the assets she would receive supported a cash adjustment. The judge did not consider those matters justified an adjustment. The wife was to receive assets exceeding $900,000 after the relevant liabilities, including a substantial home. The judge reasoned that retaining a larger home rather than using some of its value to produce income should not, in these circumstances, give her an advantage in the property division. The husband, too, had adequate capital to obtain a home and provide for himself.
The resulting conclusion was that the parties’ contributions were approximately equal and the factors considered under s 75(2) did not require a further payment.
The judgment discusses three earlier Family Court decisions on windfalls: McTaggart and McTaggart [1987] FamCA 39; (1988) FLC 91-920, Zappacosta and Zappacosta [1976] FamCA 56; (1976) FLC 90-089, and Anastasio and Anastasio [1981] FamCA 76; (1981) FLC 91-093.
Cohen J understood McTaggart as treating lottery winnings as neither a contribution by either party nor different from other matrimonial property. He did not adopt that approach as a universal rule. He considered that the circumstances surrounding a windfall could matter, and that Zappacosta, which concerned value increased by rezoning, could be read more narrowly. In his view, the reasoning in that case addressed a windfall where there were no other relevant factors about the source or context that should affect the Court’s discretion.
The judgment also discussed Anastasio, in which a lottery win occurred during a marriage and was treated as a matrimonial asset in the circumstances of that case. Cohen J considered that decision consistent with examining the specific circumstances of a windfall, rather than applying a categorical rule.
The decision’s contribution is therefore best described with care. It does not establish that lottery winnings always count as the purchaser’s contribution, or that they should always be shared equally. It rejects a one-size-fits-all treatment and explains the factors Cohen J considered relevant in this particular assessment. The judgment’s reasoning is anchored in the statutory property adjustment exercise it describes, including contributions and the factors referred to as s 75(2). The supplied text does not reproduce the statutory provisions in full.
The “after” state cannot be established from this judgment alone. It is a 1990 first-instance decision, and the supplied material contains no later cases or appeal history. Its reasoning may be described as the approach taken by Cohen J, but the judgment itself cannot show how later courts treated it or whether subsequent authority modified it.
The judge’s statement, “the extent of contribution is not a mere product of the amount contributed”, is the central caution. In plain English, a court should not decide contribution simply by adding up dollars. It should also look at how the asset or money came about and the surrounding circumstances.
Cohen J continued that “the effort made to achieve it is relevant, as is the time when it was made and all the other circumstances surrounding its making.” Applied to the Lotto win, this directs attention to the ticket purchase, the point in the marriage when the win occurred, and how the proceeds were treated and used. It does not mean every factor carries the same weight in every case.
The judge said that treating the winnings “as though neither party has any greater or lesser claim to it would, in my view, overlook the true situation.” In plain English, the Court should not assume the win was necessarily equal property just because it happened during the marriage. Equally, the judgment did not hold that the person named on a ticket must automatically receive all the benefit in the adjustment.
On the final balance, Cohen J found that “a proper division of the assets based upon the parties’ relative contributions, including the wife’s contribution as a homemaker and parent, is achieved if there is no payment by the husband to the wife.” That passage shows the relationship between the Lotto and superannuation issues and the overall result. The judge did not make a separate award for each contribution; he weighed them together and concluded that a further cash adjustment was not required.
The operative orders are important to understanding the result. The husband’s $50,000 debt to the wife was declared discharged. The judgment also transferred interests in properties and made declarations concerning the parties’ interests in other assets. Thus, “no payment” referred to no additional cash adjustment of the kind the wife sought, not to an absence of property orders.
The judgment is most directly relevant to a property adjustment in which one spouse receives a significant windfall during a marriage and the parties dispute how it should affect their respective contributions. The decision identifies several potentially relevant features: whether the windfall was generated by effort or skill; when it arose in the relationship; whether the parties regarded it as personal or family money; who controlled its use; how it was spent or invested; and whether a substantial portion remained in the asset pool.
It also illustrates that the form of the windfall may differ. The wife’s Lotto win came from a ticket purchased in her name. The husband’s superannuation increase arose from a corporate takeover and the sale of fund-held shares. Cohen J considered both as windfalls, but assessed them in their particular contexts. The judgment does not make their circumstances identical.
The decision also concerns a long marriage in which non-financial contributions were significant. The wife’s homemaking and parenting, and her contribution to the family business, were part of the global assessment. A later case with materially different relationship length, source of funds, use of proceeds, or contributions cannot be assumed to produce the same result merely because it involves a lottery win.
Finally, the judgment illustrates why a windfall issue may not be resolved in isolation. Other assets, debts, post-separation losses, housing needs and income-producing capacity formed part of Cohen J’s reasoning. The case is therefore most useful as an example of contextual assessment, not as a numerical precedent for dividing lottery proceeds or superannuation.
The supplied judgment does not identify later decisions citing Holmes and Holmes, and it provides no appeal or subsequent treatment. It would therefore be unsupported to say that later courts followed, approved, distinguished or limited this decision.
What can be said from the text is that Cohen J discussed earlier cases and explained how he understood them. He read McTaggart as taking a general view that a lottery win was not a contribution and was not different from other matrimonial property, but declined to treat that view as controlling the particular assessment before him. He read Zappacosta as capable of being confined to a windfall unconnected with other relevant factors. He considered Anastasio instructive because it treated the lottery win in its factual context.
Those are relationships between this judgment and the earlier authorities, not evidence of how later courts treated Holmes. Any account of later judicial treatment would require sources beyond the judgment supplied here.
The judgment does not set out a comprehensive test for all windfalls. It gives factors that Cohen J regarded as relevant, but does not rank them or specify how much weight each should carry. The relationship between legal ownership of a windfall and its significance in a property adjustment is also not reduced to a formula. Here, the wife’s legal ownership was acknowledged, but the judge assessed the winnings within the wider circumstances.
The text also leaves open how the analysis would differ where a windfall arose shortly before separation, much earlier in a marriage, or after separation. Cohen J’s hypothetical comparison between a win just before separation and one in the first year of marriage signals that timing may matter, but the judgment does not decide those alternative cases.
There are further questions about how to assess a windfall that has been partly spent, partly invested, or used to benefit relatives. The judgment took account of the wife’s gifts and loans, and considered whether some expenditure relieved other family resources. It does not state a general accounting method for tracing proceeds or valuing past expenditure.
Finally, the judgment offers no later history and no full statutory text. It cannot answer whether its approach was subsequently adopted or qualified, or how the relevant statutory provisions have changed since 1990. Those are matters requiring additional, current legal sources.
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Other publishers' citations: (1990) 101 FLR 341
Appearances: Mr Mater of counsel (instructed by McDonell Milne Fowler) appeared for the wife; Mr Goldstein of Laurence & Laurence appeared for the husband.
Cohen J.: The parties before me have had what would appear to be remarkably good fortune in the latter years of their long marriage. It has brought them little happiness. They married in September 1957 and separated in late 1985 or early 1986.
The husband, who is aged 65, served in the R.A.A.F. during the Second World War and spent a short time studying engineering when he was demobilised. He left his studies to work in the newsprint room at The Sydney Morning Herald. He remained there until early 1988. This job was not very onerous. He usually commenced work as a leading hand at about 10.30 p.m., but was finished by about 2 a.m. Throughout the period from 1949 to 1988 he contributed to the staff superannuation scheme. He was due to receive about $160,000 on retirement, but, a very short time before this happened, there was a take-over of the newspaper. The trustees of the superannuation fund owned most of the shares in the company which produced the newspaper and sold these on the take-over. The result was that the husband's superannuation payout on his retirement increased to $520,000 when it was made in mid-1988.
The husband had been working for eight (8) years when the parties married. At the time they had assets which could not be said to be insignificant. The husband had a block of land at Como which he sold two (2) years later for £600. He had about £4,000 in savings. This was a considerable sum at the time. A new Holden cost about £1,000, and £4,000 would have bought a pleasant house in a moderate suburb. He also had two (2) motor cars and a motorcycle, but I was not informed of the value of these.
When they married, the wife was not yet nineteen (19) years old. She is now aged 51. She was employed in a clerical position, but had not had any opportunity to accumulate any property.
After living for about a year with the husband's mother, the parties purchased a house at Suburb O. It cost £2,650, was on a large block of land, and had a waterfrontage. The home itself was small and basic. I mention these latter facts because some measure of the husband's contribution at the start of the marriage can be judged from this property as it then was.
Before the parties moved to their first home, the wife, who was pregnant, left work and their first child, A, was born in 1959. Their second child, M, arrived in 1961, and they had their last, C, in 1965. The girls are all self-reliant now, but C still lives with the wife at Suburb O.
Before separation the wife had acted as a parent and homemaker. There is very little evidence on this aspect of the wife's contributions, but the fact that they had three (3) daughters and the wife had prime responsibility for their care and for the other usual household duties indicates that her contribution in this area has been substantial, particularly as the husband has usually been operating small business enterprises in the time he had to spare after working in his job. The wife was often involved in the business operated by the husband, but it was not suggested that this adversely affected her contribution as homemaker and parent.
In about 1966 the land at Suburb O was subdivided. One (1) lot was sold for about $11,000, the original house was demolished, and a new home was then built. It cost approximately $17,000, $11,000 of which came from the sale of the subdivided lot, with the balance being borrowed from War Service Homes. The repayments of this exceptionally low interest loan are $28.40 per month. Naturally, the loan has not been discharged, although less than $5,000 is currently outstanding. The loan instalments were paid from the husband's earnings until 1974, but, between then and 1986, they were met from money coming from a partnership between the parties. Since 1986 the wife has taken responsibility for these payments. The property is still in the parties' joint names, but is now worth $610,000. I do not except the loan to be discharged by early payment. The house has two (2) storeys and three (3) main bedrooms, a rumpus room, as well as a self-contained one (1) bedroom flat. Only the wife and C live in these premises. Its furniture is worth $5,000.
In about 1969, because his work was not very demanding, the husband obtained additional work delivering pet food. By 1974, a co-operative society acquired the pet meat supplier, and the parties took shares in it. They then commenced a pet food delivery business in partnership. These deliveries were made in two (2) runs per week; the customers mostly being pet shop proprietors. The husband did the runs and the wife did the clerical work. The profits were used for living. During 1976 the parties commenced to employ a driver to do the deliveries for them. This continued until 1986 when, after a dispute, the wife ceased taking an active part in the business. It was about $24,000 in debt at the time, but about a year after the husband took complete control he sold it for $27,000. At approximately the same time the co-operative redeemed the parties' shares for about $12,000, but the proceeds were used to partially discharge the debt to it. Because of this the husband got relatively little from the sale of the business. Despite the sale he continues to operate a pet food run. He does it twice each week and spends a total of eleven (11) hours for an average profit of a little more than $60 per week. The parties have not retained any shares in the co-operative.
In June 1982 the parties and their daughter M purchased a property at Suburb S. It cost $65,000. Half the purchase price was borrowed from a credit union and the balance was provided equally by the parties and M. In June 1985, when M married, the wife lent her $100,000, but purchased her share of the Suburb S property for an additional $20,000. The loan is interest free and repayable at will. So far, about $10,000 has been repaid, but the balance of $90,000 is worth very little to the wife. I do not think that probability favours early or any substantial repayment of this balance, but feel that payments in partial discharge of it will be in small amounts spread over many years. I doubt whether the wife truly expects to be repaid, but I think that further payments, which will probably total about $15,000, will be made in the next ten (10) years, and no other payments will then be made. The present value of $15,000 payable over ten (10) years at 5% is $11,500.
M, the husband, and the wife are still the registered proprietors of this property, but the equitable owners are the husband and the wife. It does not matter whether their equitable interests are equal or in the proportion of two-thirds to the wife and one-third to the husband, because both parties agree that the orders in this cause should include an order for transfer to the husband of the wife's share, no matter what that might be.
From the evidence, I am not quite sure whether any money is owing on the mortgage which was taken from the credit union for the original purchase. The net value of the Suburb S home is agreed to be $100,000. There could be a small mortgage balance of about $5,000, which would make the actual value of this property $105,000, but it does not matter provided I also order the husband to indemnify the wife for any outstanding part of the debt undertaken to purchase this land. Since 1986 the husband has been keeping the rent received for this property. He has also been making all mortgage payments on it. Until then all co-owners contributed equally.
In February 1984 the wife was paid $666,666 she had won in Lotto in December 1983. The most contentious issue in the presentation of each party's case has been the effect that this should have on the orders I am to make. Apparently the wife was in the habit of purchasing Lotto tickets. Each week she purchased one (1) in partnership with a friend and one (1) with her daughter M. When she purchased it with M she always used the same numbers, and these were based on the birthdays of family members including the husband. In December 1983 she received a request to call on a solicitor to attend to some business connected with her father's estate. The solicitor's office is opposite the newsagency where the wife usually purchased the Lotto tickets and, on leaving the solicitor's office is opposite the newsagency where the wife usually purchased the Lotto tickets and, on leaving the solicitor's office on that day, she purchased a set of coupons to last for five (5) weeks. These coupons were purchased in her own name. She used her usual numbers and paid about $40 for them. One (1) was the winning ticket.
All members of the family, including the husband, have regarded the win and the proceeds as the wife's. At law the proceeds are certainly hers. The wife gave evidence that she felt that the money was ``family money'', and that she spent it for the benefit of the family. The manner in which she used it is consistent with her attitude. I shall list the way she used the money and interest she earnt on it:
(a) In June 1984, purchase, in wife's sole name, of land and construction of a second home at Suburb O, at a total cost of $206,600. It was purchased as a home for A and her family although $150,000 was regarded by the wife as a loan. I shall return to this later.
(b) In November 1984, purchase, in the joint names of the husband and the wife, of a three (3) acre property at Suburb H for $134,483. It has always been tenanted. For taxation purposes the rent is alleged to be divided equally, but the wife has always kept the rent. It was probably used for living expenses for the family. It is now worth $245,000, and is security for the business debts of the wife.
(c) $50,000 was lent to the husband in about September 1985 for purchase of a property he now owns at Suburb D.
(d) $16,550 was used to purchase a caravan with annex for family use.
(e) $2,700 was used to purchase a horse float to transport C's horse.
(g) In June 1985, $20,000 was paid to M for her share in the Suburb S property.
(i) About $25,000 was spent on renovations to the family home.
(k) In April 1986, $63,500 was used to purchase a small business for the wife.
(1) About $20,000 was used to purchase shares in the husband's name.
The total is about $700,000, but all the money was not paid at the same time, and interest was earned on the unexpended capital.
On behalf of the wife, her counsel argued that the Lotto winnings were his client's property, and that all or most should be regarded as a financial contribution to the family by the wife. He also said that she should get an adjustment of property which reflects this large contribution but, apart from this, the parties' contributions have been about equal. In support of this he relies on the wife's purchase of the ticket and choice of the winning numbers. At the time she had her own income, and the husband has not suggested he provided the money for the ticket. He submitted that the husband has always recognised the winnings to be the wife's, and said the ownership is confirmed by the fact that the wife has chosen how to spend the winnings.
I do not view the issue in such simple terms. It seems to me that the extent of contribution is not a mere product of the amount contributed. I think, for example, the effort made to achieve it is relevant, as is the time when it was made and all the other circumstances surrounding its making. Just as these matters are important in assessing the extent of a non-monetary contribution, they have the same importance in assessing a cash contribution.
In this case, the fact that the contribution came as a result of a windfall is of exceptional importance. The view I take of a windfall, such as the wife had, is a little different from the view taken by_Mullane_ J. in McTaggart and McTaggart [1987] FamCA 39; (1988) FLC 91-920. In that case his Honour, when dealing with $500,000 won by the husband in a lottery, said at p. 76,671:
``I do not accept that the lottery winnings should be treated as a contribution by either party. I do not accept that they should be treated differently to any other matrimonial property acquired by the parties during the marriage.''
``The $500,000 was a windfall. It is nothing more. It was not the fruit of some labour or skill of the husband. It was not a contribution by him to the matrimonial property. The courts have declined to recognise windfalls during the marriage as contributions by one of the parties.''
In coming to his view, his Honour relied on two (2) other decisions of this Court. The first decision is that of McCall J. in Zappacosta and Zappacosta [1976] FamCA 56; (1976) FLC 90-089 where he said, at p. 75,421:
``This does raise the question as to whether a windfall such as the rapidly accelerated value of a property due to re-zoning should be dealt with in any special way. On consideration I am of the view that if a property appreciates, as obviously this one has, but not due to any particular effort or act of either of the parties, then the reason why the property did so appreciate is not relevant to the question of what interests the Court may decide that the parties to the marriage should have in it when exercising jurisdiction under sec. 79 of the Act. It is simply a windfall and, accordingly, in my view neither party has any greater or lesser claim to the benefits of the windfall. Accordingly, in my view, the increased value of the property due to re-zoning is not a relevant consideration in my decision.''
My understanding of what his Honour has said is that the specific windfall, that is, the increased value resulting from the rezoning, could not be due in any way to either party's efforts at the time of purchase of the property, as that was not a matter that was considered at that time. As there could be no other consideration relating to the windfall, I think it is safe to view his Honour's decision as being restricted to windfalls where there are no other factors which should be allowed to affect the Court's discretion. It seems to me, for example, that, if the wife in the proceedings before me had won Lotto the week before separation took place, this win would have to be viewed differently from a proportionately equal win occurring within the first year of the parties' marriage. It follows that win in 1984, at a time when the marriage was of substantial duration but well before separation, a time when the parties treated the money in some ways as family money yet in others as owned by the wife, must be treated in a way which takes all the surrounding circumstances into account. To treat the money as though neither party has any greater or lesser claim to it would, in my view, overlook the true situation. I do not think McCall J. intended that to be the result of his judgment in Zappacosta's case.
The second case relied upon by Mullane J. is Anastasio and Anastasio [1981] FamCA 76; (1981) FLC 91-093. In that case Baker J. dealt with a lottery win in circumstances which have much in common with the case before me. It is quite instructive to set out what his Honour said, as it speaks more eloquently of his approach than any summary I might attempt. At pp. 76,649-76,650 he said:
``The husband from the time of the marriage frequently purchased lottery tickets. The ticket which ultimately won the lottery was purchased by him in his own name and from his own funds. The wife at the time of the marriage had a reluctance to buy lottery tickets. She stated in evidence that she subsequently did in fact buy tickets, although whether she did or whether she did not, in my view, is of little consequence. The winning ticket was purchased in the name of `New Home' which, in my view, corroborates the parties' common purpose to which I have referred earlier. The question for me to determine is the manner in which I should treat the lottery win. The sum of $60,000 which came into the husband's hands did so at a time when the parties were married and still living together. The moneys for the purchase of the ticket came from the husband's earnings. I am of the view that a win in the lottery is in no different position to the acquisition of a piece of furniture, a block of land or other asset purchased or acquired by parties during a marriage with funds provided by either or both of them.
Whilst I am not normally attracted to a mathematical approach to applications of this nature, in the present case, having regard to the facts already enumerated and, in particular, having regard to the shortness of the marriage, each party should take from this marriage what he or she contributed directly to it financially. That being so, I am of the view that the win in the lottery should be regarded in the same light as any other asset acquired by parties during a marriage and be distributed between them in the same proportion and in the same manner as other assets.''
His Honour later went on to summarise his view of the lottery win. He said, at p. 76,650:
``I have no doubt that the purchase of lottery tickets was in furtherance of a joint matrimonial purpose and therefore any resultant win in the lottery must be regarded as a matrimonial asset.
Although the lottery ticket was purchased by the husband, it was so purchased with the object and hope of achieving a matrimonial objective and I propose therefore to regard same as a matrimonial asset.''
From the above, I think that his Honour has made it perfectly clear that a windfall must be looked at in all of the circumstances. I do not feel that, by what he said, his Honour intended to give the impression, or has given the impression, that he has not recognised the windfall to be a contribution within sec. 79(4)(a) of the Act. In the case before him, I think that his Honour recognised the lottery win to be a contribution of each party equally. I think that his Honour made it clear that a windfall is like any other matter which affects the financial circumstances of the parties at the time of the hearing, and must therefore be viewed in the light of all circumstances surrounding its acquisition and subsequent disposition, together with the effect of these on the ultimate position that the parties have reached by the time of hearing.
The relevant considerations relating to the way in which the windfall Lotto win should be viewed are these. Little effort was put into the purchase of the ticket, and family money was used for it. The wife regarded the fruits as ``family money'', but, nevertheless, determined its use in a way which, to some extent, is inconsistent with her own feelings about it. She did not give $50,000 to her husband; she lent it to him. It appears from the way in which the balance was spent that she played the dominant role in deciding how it was to be used. In contrast to the loan to her husband, she made a gift of $50,000 to her sister. But, apart from the purchase of the business, she used the balance of the money in a most unselfish manner. All of this occurred within the context of a subsisting martial relationship of longstanding, and it appears to have been intended to further that relationship. In some instances the money has been spent in ways which took the burden off the parties' other financial resources, because some money would have been expended in those instances in any event. If the Lotto money had not been available to spend on the daughters, the parties probably would have provided assistance to them from other sources, although probably in a lesser amount. However, a large amount of the win, more than $400,000, is still in the hands of the parties in various forms. Yet, ignoring any contribution to the price of the winning ticket, this part of the winnings was brought into the pool of family assets by the wife, and no contribution to it was made by the husband.
Until the date of hearing, the situation in relation to the second property at Suburb O was the source of dispute between the parties. This dispute was settled at the commencement of the hearing, but the terms are relevant to the decision I must make. These terms are exhibit ``A'', and for the purpose of them, the parties' daughter, A, and her husband were permitted to be interveners. By the terms of settlement, the wife is to transfer her interest in the second property at Suburb O, which is the whole legal estate, to the interveners on the payment by them of $150,000. That payment is to be made by the interveners within eight (8) weeks of 8 August 1990, but, if it is not made, the husband is to pay the same amount to the wife forthwith. The husband will have to pay this money as the interveners cannot raise the full amount of this payment. They could have borrowed $50,000, but the husband has decided, in effect, to give them $150,000. I do not think his decision is unreasonable. For the last year the wife has been receiving payments of $125 per week from A. These were intended to be in repayment of moneys expended by the wife on the second Suburb O property. They will not continue.
The wife is still operating the business she purchased in 1986. In the financial year 1988 it had gross sales of $96,000 or more, but a taxable income of only $6,900. Nevertheless, the wife did obtain some value over and above the net taxable income. The costs of her motor vehicle are to a large extent, charged against business expenses. The vehicle is worth $7,500. For the financial year ended 1989 sales had dropped to a little over $81,000 and there was a net loss of $2,114. In the last financial year it is estimated that sales will have dropped to about $32,000, with a net loss of something like $42,700. The change in business fortune is attributed to the fact that the wife has recently spent some time away from work due to illness and, in Hurstville where the business is situated, shopping centre development has moved the focus of attention away from the place where it is located. The lease on this business is soon to expire and the wife does not intend to renew it. The stock is worth $35,000 if it continues to be used as trading stock, but, if the business is closed and the stock sold at auction, it is worth no more than $12,500. The business has no goodwill and the fixtures and fittings are of no value. Although I accept the wife's evidence that she is going to close the shop, she might choose to open a business elsewhere, yet I am by no means sure she will open the same type of business. In those circumstances, I think it is appropriate to value the stock at not more than $12,500.
The wife has been involved in an arbitration over trading stock which she purchased for this business. She lost this arbitration and, as a result, is now liable to pay more than $20,000 for the verdict and costs. She has appealed to the District Court and has been told by counsel that she has ``a good chance''. The appeal has not been heard, and, in all probability, in view of the judgment already existing against her and the likelihood that she will incur further legal costs on the appeal, she will eventually lose about $20,000, in any event. She will get some tax relief from this loss so the real loss will be about $10,000.
The only property owned by the wife which I have not yet mentioned is a stamp collection worth $5,800. There is technically a dispute over the value of her caravan, annex and horse float. She says they are worth $17,250, whereas the husband claims the total value of these items to be $23,000. Counsel for both parties informed me that this technical issue was not a matter which caused either party great concern and was not worth calling expert evidence about. I think counsel have taken a sensible and cost-saving approach. I find the value of this property to be $17,250. The wife has been contributing to a superannuation fund for the last five (5) months. She is probably entitled to withdraw her contributions, which amount to about $1,000 on immediate voluntary retirement, but is not likely to do this. I do not regard this fund as having any substantial present value to the wife.
As a result of the unsuccessful operation of her business her overdraft has now grown to about $95,000. This is secured by the second Suburb O property and as a result of the arrangement she now has with her daughter and son-in-law which is embodied in exhibit ``A'', she will have to discharge this overdraft or secure it over other property. As there is an obligation to pay her $150,000 at the time of transfer, I expect her to discharge the overdraft. The other debts that she has are not great and total about $3,400, apart from the arbitration debt. Even though there is currently $20,000 owing under the arbitration, because it is a debt which must be paid, I feel bound to regard the whole $20,000 as being the wife's debt. Nevertheless, I shall take account of the fact that the payment of this debt will give some tax advantage. In all, the wife's debts total about $118,400, apart from debts which I have already taken into account by looking at the net value of property rather than the gross value.
In the financial year ended 30 June 1989 the total income of the wife amounted to $2,778. She paid no tax. This income came from $4,800 in rents she collected from the Suburb H property less the loss she made on her crafts business. There was also a very small sum of interest paid to her. For reasons which I shall expand upon later, the past income of the wife is not very significant. What I regard as much more important is the total value of the wife's property and her ability to convert these into income-earning assets if she so chooses. It would be most unfair to allow the wife to rely upon lack of income to increase her proportion on division of property if she has property which, if used appropriately, is capable of providing a substantial return.
On 30 October 1985, not long before the parties separated, the husband purchased premises comprising of ten (10) flats at Suburb D. The purchase price was $200,000. Of this, the wife lent the husband $50,000, and $95,000 came from a bank loan secured by mortgage. The balance came from cash resources, about $20,000 of which the husband obtained by selling shares he had bought with money provided by the wife from her Lotto winnings. The husband claims he spent another $50,000 or $60,000 on renovations. The premises are now worth $490,000. The money for the renovations came from cash which the husband had on interest-bearing deposit with a finance company called Tri-Continental. Originally the husband said that this money had been used to repay the loan to the wife. He maintained this position during the first part of his cross-examination, but after an overnight adjournment the husband had a change of heart. He then admitted that the wife had not been repaid. The money on deposit with Tri-Continental came from the sale of an interest the husband had had for many years in a pet meat processing business at Town C. Apparently he bought his share in the business for about $10,000 in 1976 and sold it in about mid-1985 for $51,000.
The Suburb D property has a net value of $219,000, because it is now subject to a mortgage securing a loan of $271,000. The evidence on the way in which this came to pass is sparse, as is the evidence on most matters relating to the husband's financial circumstances and past financial situation. The loan of $271,000 permitted the husband to buy a property at Suburb P. This was purchased in September 1988 by a company called R Pty. Limited. There are two (2) issued shares in the company. One (1) is owned by the husband and the other is held by a friend of his, Mr M. They are the sole directors of the company. Mr M gave no evidence, yet the allegations and issues relating to the beneficial ownership of the company are such that it would be normal to expect the husband to have called him to give evidence which would enlighten the Court on the relevant facts. This expectation has been highlighted by the lack of evidence from the husband. What information he has provided has been lacking in specific detail. The result is that it has made my task much more difficult.
The way in which the husband's case was presented on his behalf characterised the premises at Suburb P as being partly owned by the husband rather than in accordance with the strict legal position. The wife's legal advisers did not take exception to this. What is suggested is that, by the husband's ownership of the property together with Mr M, his interest in the property is half the property value less $30,000 which he is said to owe Mr M for some furniture that Mr M provided. What I have been told is that the parties are agreed that the husband's interest in this property has a net worth of $196,250 after payment of the debt to Mr M. The husband alleges that Mr M provided $130,000 of the initial purchase price and that he provided the balance from $271,000 which was borrowed from the Newcastle Permanent Building Society. Of the loan, about $85,000 was used to pay off the already existing mortgage to the bank. The balance of the loan, that is, about $186,000, went towards the cost of purchase of the Suburb P property. The additional money necessary to purchase the premises came from funds the husband had on deposit with a credit union and a bank.
The balance sheet of R Pty. Limited for the financial year ending 30 June 1989 shows that the land cost $395,778, but that additions cost $89,055, and furniture cost a further $40,151. The profit and loss account of the company shows a loss of $32,409, but this includes allowances for depreciation of $6,001. The deficit between income and outgoings is in fact $26,408. The company has current assets of $7,857. The total of all of the moneys which must have been put into R Pty. Limited by the husband and Mr M is the sum of the above amounts, which is $559,249. The husband's only contribution was to the initial purchase price. It is no coincidence that in the balance sheet the loans owing to shareholders are specified at $559,247. Apart from all the moneys put into the company by Mr M after purchase of the premises, Mr M's initial contribution was $130,000. That means that Mr M must have provided about $293,471, leaving $265,778 to be provided by the husband. The husband was only certain that the mortgage over the Suburb D property was $271,000, and that he had paid the earlier mortgage out for about $85,000 leaving $186,000 of the borrowed money to pay the loan. He said he contributed the balance from cash deposits, but did not say how much. However, he must have contributed about $80,000 of his cash funds to the purchase. The difference between the husband's contribution of $265,778 and Mr M's contribution of $293,471 is $27,700, close enough to $30,000 to confirm the husband's evidence that he owes Mr M $30,000, although this is probably not strictly accurate. It is probably the situation that Mr M has contributed $30,000 more than the husband has to the property.
The next question I must ask myself is: How does this relate to the agreed value of the husband's interest in the land at Suburb P? This is not difficult to work out from the balance sheet of R Pty. Limited. The total cost of the land plus additions is $484,833. If there is a deduction of the net loss incurred by the company's operations in the financial year in question, which is $32,409, this leaves $452,424. Half of this is approximately $226,250. The interest which it was agreed that the husband held was after deduction of $30,000 said to be owing by him to Mr M. It is more appropriate to regard the husband as liable to contribute another $30,000 to the company. If this sum is taken from $226,250, $196,250 is left. But this would mean that the husband has an interest in the furniture, which is probably worth approximately $35,000 after depreciation, plus the other current assets of the company which total about $7,850 plus the additional $30,000. Thus, I think the husband's share in R Pty. Limited is worth half the total of the last three (3) figures, that is $36,425, plus $196,250; the total being $232,675. As this is the limit of the husband's share of the company's assets, the husband's loan account should not be regarded as an asset of any value.
In the case of both the Suburb D and Suburb P properties it is submitted on behalf of the husband that, although the value of each has been agreed upon, each property is worth less to the husband because, on sale, each will be subject to capital gains tax. As there is no evidence before me to suggest that the husband has any intention of selling his share in either property, I do not feel that I can regard this submission as being strictly correct. The value of the properties in each case is not reduced while the properties are in their present ownership. But it is correct to take into account the fact that, on sale, each property might return a lesser amount than its full value because of capital gains tax.
Using the same technique for calculating capital gains tax as Mr L has used in his report of 31 July 1990, but modifying it because he used an estimated sale price of $500,000 for the Suburb D property, whereas the parties have agreed that it is $490,000, and correcting an error in the C.P.I. which for Sydney in December 1989 was 145.9, and not 147.1 as used by Mr L, capital gains tax would be payable on sale of the Suburb D property on about $175,000 at the husband's marginal rate of tax. His rate would probably be the maximum, that is about 47 cents in a dollar, so the tax will be $82,250 and the proceeds of sale will be $407,750 rather than $490,000. However, it must be remembered that this sale may not take place and, in view of the lack of evidence of intent to sell, it is not likely to take place for some time. Nevertheless, I shall take the prospect of capital gains tax into account just as I shall take the present actual value of the Suburb D property into account.
With the Suburb P property the husband swore that it is now worth $500,000. However, the land and its additions cost a total of more than $484,000, which, with the increase in the C.P.I., means that there is little or no taxable gain on sale. I shall disregard capital gains tax on sale of the Suburb P property.
Apart from his interests in the Suburb D property and R Pty. Limited, the husband still has most of his original superannuation payout. When he received the original payment he spent about $15,000 and placed $505,000 on interest-bearing deposit. Although he spent some further moneys, because of interest increments, he still has $475,000. He also has $30,000 deposited with the Government Insurance Office. I do not know where this money came from. In 1988 he purchased a Toyota four-wheel-drive motor vehicle which cost about $50,000. It is now valued at $28,000. He has a Honda sedan worth $4,500 and some coins worth about $1,200. Apart from the debts I have already referred to, he owes about $6,300.
The husband is not engaged in paid employment and regards himself as being retired. Although the parties separated under the one roof in late 1985 or early 1986, the husband continued to live at the first Suburb O property until November 1989. The husband now resides at Suburb K in a flat owned by a male friend. He pays $90 per week rent and shares the flat with this friend. In his latest statement financial circumstances, that filed on 31 July 1990, he swore that his income for the 1988/89 financial year was $90,490, of which $3,640 came from his pet food run and $86,850 came from rent. I assume this is rent from the Suburb D and Suburb S properties. The larger deposit is in what the husband referred to as a ``roll-over fund'' and I assume that this is an approved deposit fund which earns no income. There is no mention of the $30,000 deposited with the Government Insurance Office in the husband's statement of financial circumstances and, therefore, no reference to income from it. Nevertheless, I do not feel that I can gain any assistance from knowing the husband's true income because there is adequate capital to permit each party to arrange his or her affairs to give a substantial income from the capital which each will own after I make orders.
There has been agreement between them on how most of the property should be distributed. The difference between the parties is limited to any order which might be made for payment of cash to the wife from the husband's liquid funds. The wife claims a payment of $310,000, made up of the $50,000 said to be owing to her by the husband together with half the value of his superannuation payout. The husband takes the stance that nothing should be paid to the wife. The parties agree that the following should be the way in which the assets are to be notionally distributed before any cash adjustment. The values placed upon the assets are those which I have found to apply.
If there is no adjustment of cash, after the wife's debts of $118,400 are taken into account, she would have net assets of $941,150. The husband's small debt of $6,300 and the $150,000 he is due to pay to the wife would reduce his net assets to $934,075. The parties' net assets are sufficient for any proper adjustment under sec. 79 to give each party ample earning capacity if that party's share is used reasonably.
Of the 39 years that the husband was a member of the superannuation scheme, the wife made a notional contribution to his contributions for about 29 years. Had it not been for the take-over, to which neither party contributed, the husband would have received $160,000 on retirement. I think that the additional money received as a result of the take-over is to be characterised as a windfall. The effect of the take-over is much the same as the effect of the rezoning in Zappacosta and Zappacosta (supra). However, as I am taking a global approach to the application before me, it is of no assistance to make a division of the superannuation based on mathematical analysis of contributions. I think that if this is done it is likely to lead to injustice, because no account is taken of factors which must be considered but which cannot be put into the mathematical equation.
Aside from the issues I have already considered, the wife has based her case for a cash adjustment partly upon allegations of poor health and partly upon the fact that the property which the parties have agreed she should receive will not give her much income. I think that neither of these aspects of the wife's case have any substance.
It is accepted that she will have more than $900,000 in assets. The home she wishes to live in is the major asset. It is much larger than she needs, and I take the view that, if she chooses to use this asset as a home, and chooses thereby to deprive herself of income, this should not give her an advantage over the husband in the circumstances of this case. If, for example, she eventually decides to live in a home worth $400,000, she would have about $500,000 to invest in income-earning assets. This would give her a very adequate income.
Her illness is only relevant to ability to work to earn income. It is quite unlikely that the wife will seek employment. Her past history in business indicates that she will attempt another business but, having lost a large amount of money in her previous business, and having such earning capacity from her assets that she has no need to have a business, I regard a business as a risk or luxury she may wish to indulge in but which should not be permitted to disadvantage the husband. The result is that her illness should not be considered to have an adverse effect on her earning capacity, so far as it is relevant.
The husband will need to purchase a home for himself. He has ample investments to permit him to do this and have an excellent income, even if a substantial sum is transferred from him to the wife. Whatever order I make, provided it is within reasonable bounds, the husband will have enough to provide properly for himself.
Since separation the wife has lost a substantial sum on her business venture, whereas, in relation to R Pty. Limited, the husband has lost about $33,000, that is, the difference between the present value of his share and the amount he contributed by way of loan. The wife has chosen to give large sums of her Lotto winnings to relatives, but, in part, by doing so, has relieved other family assets from being used to discharge what might otherwise be regarded as family obligations. The husband received $50,000 from the wife and used it to assist in financing a business, but will, in effect, give $150,000 to the parties' daughter which is to be paid to the wife. After these and all other matters which I have so far dealt with, including the Lotto win, superannuation, and the husband's original contribution to the family property, are considered, a proper division of the assets based upon the parties' relative contributions, including the wife's contribution as a homemaker and parent, is achieved if there is no payment by the husband to the wife. This results in nearly equal distribution of assets which, in my view, is just and equitable, because, on an overview, I assess that each party has contributed approximately equally to these assets, and the sec. 75(2) factors which I have considered do not demand any adjustment from such a division of property. It follows that the husband should be relieved of any obligation to repay the $50,000 he borrowed from the wife.
1. Within one (1) month the husband is to do all things necessary to transfer to the wife all his right title and interest at law and in equity in the first Suburb O property.
2. I declare that the furniture and contents of the said premises are the sole property of the wife.
3. On transfer of the said premises to her the wife is to indemnify the husband for all and any liability under any debt secured over the first Suburb O property and for all instalments and other charges due in reduction of and relating to that debt.
4. Within one (1) month the wife is to do all things necessary to transfer to the husband all her right title and interest at law and in equity in the property situate at Suburb S.
5. On transfer of the said premises to him the husband is to indemnify the wife for all and any liability under any debt secured over the property situate at Suburb S and for all instalments and other charges due in reduction of or relating to that debt.
6. Within one (1) month the husband is to do all things necessary to transfer to the wife all his right title and interest at law and in equity in the property situate at Hoxton Park.
7. I declare that the debt of $50,000 owed by the husband to the wife is discharged by the orders herein.
8. I declare that the husband has no interest in the stamp collection, Ford motor vehicle, horse float, caravan and its annex presently in the possession and control of the wife.
9. I declare that the wife has no interest in the coin collection, Toyota and Honda motor vehicles presently in the possession and control of the husband.
10. I declare that the wife has no right title or interest at law or in equity in the premises situate at Suburb D.
11. I declare that the wife has no right title or interest at law or in equity in the share held by the husband in R Pty. Limited.
12. I declare that the wife has no interest at law or in equity in the loan account in the name of the husband in R Pty. Limited.
13. I declare that the wife has no interest at law or in equity in the funds deposited in the name of the husband with the Government Insurance Office or with any approved deposit fund.
14. I declare that except as otherwise provided above each party is declared to have no further interest in the items of personal property in the possession of the other.
(1990) 101 FLR 341
The Court ordered the specified property transfers and ownership declarations, discharged the husband’s $50,000 debt to the wife, and reserved costs; it made no cash adjustment in the wife’s favour.