Adair and Adair

[2016] FCCA 364

FEDERAL CIRCUIT COURT OF AUSTRALIA

ADAIR & ADAIR [2016] FCCA 364

Catchwords:
FAMILY LAW − Division of property when husband bankrupt − whether superannuation should be valued at date of separation or of hearing − whether the proceeds of sale of boat by husband after separation should be added back.

Legislation:

Family Law Act 1975 (Cth), ss.75(2), 79, 90MT(1)(a), 90MT(4)

Family Law (Superannuation) Regulations 2001 (Cth), rr.12, 13, 14F
Superannuation Industry (Supervision) Regulations 1994 (Cth), rr.7A.03, 7A.05, 7A.11

Cases cited:

Miller & Miller [2009] FamCAFC 121 at [71-72]

Applicant: MS ADAIR

Respondent: MR ADAIR

File Number: DGC 1098 of 2013

Judgment of: Judge Phipps

Hearing date: 13 July 2015

Date of Last Submission: 13 July 2015

Delivered at: Dandenong

Delivered on: 26 February 2016

REPRESENTATION

Counsel for the Applicant: Ms Mccreadie

Solicitors for the Applicant: Quintessential Lawyers

The Respondent: Appearing on their own behalf

ORDERS

1. That the court allocate pursuant to s.90MT(4) of the Family Law Act 1975 (Cth) a base amount of the whole of (omitted) - Personal Super Plan (“the fund”) to the applicant wife out of the respondent husband’s interest in the fund.

2. That this Order is binding on the Trustee.

3. That pursuant to s.90MT(1)(a) of the Family Law Act 1975 (Cth), wherever a splittable payment becomes payable in respect of the interest held by the respondent husband in the fund:

   (a)The applicant wife is entitled to be paid, and the Trustee of the fund shall pay her, an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (Cth) using the “base amount” of the whole of the fund;

   (b)There is a corresponding reduction in the entitlement of the person to whom the splittable payment would have been made but for these Orders;

   (c)That these Order have effect from the operative time;

   (d)The operative time is the beginning of the fourth business day after the day on which a sealed copy of these Orders is served on the Trustee;

   (e)That the respondent husband is hereby restrained by himself, his servants, or agents from executing and/or giving to the Trustee of the fund, a binding death nomination in favour of any person, doing any act or thing, which would render any part , or payment, from superannuation interest in the fund a “non splittable payment” within the meaning of the r.12 or 13 of the Family Law (Superannuation) Regulations 2001 (Cth) such as would defeat the applicant’s entitlement pursuant to this Order;

   (f)That the applicant, the respondent and the Trustee of the fund have liberty to apply in relation to the implementation of the Orders insofar as they relate to superannuation;

   (g)That, after service of the payment split notice pursuant to r.7A.03 of the Superannuation Industry (Supervision) Regulations 1994 (Cth), the applicant shall do all such things and sign all such acts and things and sign all such documents as may be necessary, included but not limited to, exercising her request pursuant to r.7A.05 of the Superannuation Industry (Supervision) Regulations 1994 (Cth) for the creation of a new interest in her name in the fund;

   (h)That the court notes:

   (i)The value of the transferrable benefits to be transferred from the respondent husbands interest to the applicant wife will be calculated by the Trustee in accordance with r.7A.11 of the Superannuation Industry (Supervision) Regulations 1994 (Cth); and

   (ii)Pursuant to r.14F of the Family Law (Superannuation) Regulations 2001 (Cth), any payments from the respondent husband’s superannuation interest in the fund made after the Trustee has created a new interest in the applicant wife’s name in the fund, as contemplated by paragraph 5 of these orders are not splittable payments.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DANDENONG

DGC 1098 of 2013

MS ADAIR

Applicant

And

MR ADAIR

Respondent

REASONS FOR JUDGMENT

Introduction and Proposals

1. The application concerns both children and property.  The final hearing for children’s matters is fixed on 14 April 2016 for 2 days.  The respondent husband is bankrupt and the wife and the husband’s trustee in bankruptcy reached agreement on the division of non-superannuation assets and orders were made on 10 July 2015.  This judgment is concerned with the division of superannuation, property in which the trustee in bankruptcy has no interest.

2. The parties superannuation is as follows:

   a)Wife: (omitted) $64,791.10;

   b)Husband:

   i)(omitted) $177,096.90;

   ii)(omitted) $64,483.70.

3. The wife’s proposal is that there be a splitting order of both the husband’s superannuation funds so that she receives the whole amount of the (omitted) fund and $30,000 of the (omitted) fund.  The husband’s proposal is that superannuation valued at the date of separation should be divided evenly so that the wife receives a splitting order for $40,000 of his superannuation.  The wife submits her proposal means that she receives 65% of the total property pool as she calculates it.  To understand how the wife makes her calculation of the property pool requires a description of the background.

Background

1. The husband was born on (omitted) 1975 and the wife on (omitted) 1978.  They commenced living together in 2002 and married on (omitted) 2004.  They separated on 13 February 2012 and divorced on 19 June 2013.

2. There are three children of the marriage X born (omitted) 2007, Y born (omitted) 2008 and Z born (omitted) 2011.  The children live with the wife and spend a few hours each week with the husband supervised.

3. On 23 May 2005 the parties purchased a residence at unit Property F for $432,500 with a mortgage of $346,000 and a contribution from the wife of $75,000 from her investments.  The property was sold in September 2007 for $531,000 and the parties purchased Property J for $395,000 with a mortgage of $269,000 after paying out loans on the former house.

4. On (omitted) 2011 the husband purchased a (omitted) boat for $160,000.  To finance the purchase the parties extended their mortgage.  The boat was purchased from (omitted).

5. On 3 May 2013 the sale of the former matrimonial home at Property J was settled.  The net funds placed in trust were $136,689.95.  Subsequently, an interim order provided for each party to receive $20,000 from these funds.

6. In December 2012 the husband sold the boat to his father’s business, (omitted), for $50,000.  The sale was through (omitted) and the invoice, dated 28 December 2012, is from (omitted) to (omitted).  The husband’s father affirmed an affidavit on behalf of the wife and in that he says his company was not operating and the $50,000 he paid was his own money.  He says that his son originally proposed $75,000 and then reduced to $50,000 saying that that was all the boat was worth.  The husband did not bank the cheque immediately but did so 12 months later.

7. In January 2014 the husband purchased a property at Property P.  The husband by this stage had re-partnered with Ms T and she arranged the purchase.  She says that the property was purchased in the husband’s name because she was not working.  She says that of the $50,000 received from the husband’s father $35,000 was used in the purchase of this property and $15,000 on legal costs and other expenses.

8. Although the boat was purchased by the husband’s father or his company, (omitted) and the sale price paid, the registration of the boat was never transferred into the name of the husband’s father or his company.  In early 2014 the husband, although largely through Ms T, advised Mr T, one of the owners of (omitted), that he had sourced a sale of the boat for about $95,000.  The unchallenged affidavit of Mr T says that most of the dealing was with Ms T who was authorised by the husband to deal with the matter on his behalf.

9. The sale did not eventuate.  The boat had been stored at (omitted) and there was a debt of $5350 for storage and various repairs.  Mr T advised the husband that (omitted) would purchase the boat for the same price less the debt and a price of $89,500 was agreed.  The sale document, including an acknowledgement by the husband of unencumbered title in his name, was signed on 22 February 2014.  The husband instructed (omitted), by written authority, to pay the sale funds to Ms T and this was done.  The cheque was made out to Ms T and paid into her account.  According to the husband and Ms T they did intend to pay the money to the husband’s father.

10. That payment did not take place.  The husband’s father says in his affidavit that he was aware the husband’s and Ms T’s difficult financial position and so sent his son a cheque for $100,000.  The father and Ms T, after discussion, returned that cheque because they already had $89,500.

11. The husband was made bankrupt in the first part of 2015.  This was on the application of his former solicitors for their unpaid account.  The trustee of the husband’s bankrupt estate and Ms T were joined as parties.

12. On 10 July 2015 a consent order between the wife and the trustee, dealing with property matters except for superannuation, was made between the wife and the trustee.  This order provides:

    a)The funds held in relation to the sale of the former matrimonial home being $96,689.95 be divided, $12,500 to the Trustee and $84,189.95 to the wife;

    b)The wife retain her Subaru (omitted) motor vehicle;

    c)The wife remove the caveat over the property at Property P and relinquish all right, title and interest in the property;

    d)The trustee retain for the benefit of the bankrupt estate all shares held in the name of the husband and the wife relinquish all claims, right, title and interest in the shares;

    e)Otherwise a residual clause leaving any other property in the possession of the party holding the property.

13. On 13 July 2015 the application in relation to Ms T was dismissed.  This leaves the only remaining property issue, the issue of superannuation.

Assets

1. The wife, taking what her counsel called a pragmatic view, proposes that the parties assets be assessed as follows:

   a)Proceeds of sale of former matrimonial home $96,689.95;

   b)First sale of boat $50,000;

   c)Second sale of boat $89,500;

   d)Husband’s superannuation $241,580.60;

   e)Wife’s superannuation $64,791.10;

2. The wife then proposes that these assets be treated as one property pool and be divided 65% to the wife and 35% to the husband.  This results in the proposal put by the wife.  The wife calculates this in the following way.  She has received $84,189.95 from the proceeds of sale of the former matrimonial home and retains her superannuation of $64,791.10.  The husband, through his Trustee, has received $12,500 from the former matrimonial home funds, and $50,000 and $89,500, total $139,500, from the two boat sales.  When these are taken into account her proposal means that she will have received 65% of the total asset pool.

3. The wife’s proposal does not include as an asset the property at Property P.  This is registered in the husband’s name and the evidence shows that at least $35,000 of the proceeds of sale of the boat went into this property.  Ms T’s evidence is that she paid some funds towards the purchase of the property.  The property has not been valued and the extent to which the husband has a beneficial interest is uncertain.  The consent orders with the Trustee leave whatever that interest is with the Trustee.  Nevertheless, it has to be taken into account in the current property assessment.

4. There have been numerous interlocutory hearings concerning discovery by the husband and the provision of information by him.  The wife alleges a lack of compliance by the husband with orders for discovery and provision of information; this is disputed by the husband.  The Counsel for the wife said the wife had concluded that pursuing any additional issues about discovery and provision of information was counter-productive.

5. The husband proposes that the superannuation be divided evenly, valued at the date of separation.  He says he had about $125,000 of superannuation at separation and the wife about $54,000.

6. One issue the husband raises is the distribution of funds in the joint account at the time of separation.  He acknowledges he took $5000 leaving $30,000 which he says was left with the wife.  The wife says that prior to separation, renovations to the bedroom and ensuite bathroom had been agreed upon.  This was paid for out of the $30,000 leaving $12,000 and she sent $6000 to the husband and kept $6000 herself.  The wife’s evidence is convincing and I accept it.

7. The benefit of the money spent on the renovations is reflected in the funds remaining from the sale of the former matrimonial home and the wife’s approach is to ignore these amounts, the $5000 paid to the husband, the $6000 each party received after the renovations and the $20,000 each party received once the former matrimonial home had been sold.  Given the issues surrounding the husband’s bankruptcy and the proceeds of sale of boat and subsequent purchase of the property in (omitted) I consider this is a sensible and reasonable approach.

Section 79

1. Section 79 of the Family Law Act 1975 (Cth) contains provisions for the alteration of property interests. The court may make such order as it considers appropriate. The court must first consider whether it is just and equitable to make an order. In this case the parties’ marriage is at an end and the relationship in which they shared their finances has ceased to exist. They both apply for orders to be made, and orders have already been made in relation to non-superannuation assets. It is just and equitable to make an order.

2. The court must next assess the parties contributions taking into consideration the matters described in s.79(4) and further consider whether there should be any adjustment for the matters referred to in s.75(2).

3. The question of the parties’ contributions received little attention during the hearing.  The wife contributed $75,000 to the purchase of the first home.  The wife describes the husband as the primary breadwinner and she says she was pregnant and caring for the children for at least seven and a half years of the relationship.  The husband was employed in his father’s business and according to his father was a successful employee until later years when he effectively ceased working.  He now, apparently because of mental health problems, receives a weekly insurance payment of $1831 per week.  He continued paying the mortgage after separation and pays child support.  In January 2014 he was paying $1412.75 a month.  The approach by the wife is that contributions should be assessed as equal and the husband, although not stating explicitly, does so by inference because of his proposal for superannuation to be divided equally between the parties valued as at the date of separation.

4. The party’s assessment of contributions as equal is correct.  The wife made an initial contribution of $75,000.  This has to be put in the context of the length of the relationship and the subsequent history of the purchase of the two matrimonial homes.  The husband has made the greater financial contribution, including after separation but that is balanced by the wife’s homemaker and child carer role.

5. The relevant matters under s.75(2) are: the age and state of health of each of the parties, the income property and financial resources of each party, the physical and mental capacity of each for appropriate gainful employment, whether either party has the care or control of the children of the marriage who are under the age of 18 years, the commitments of each party to support the party and children under the parties care, payment of child support and in particular in this case s.75(2)(o),” any fact or circumstance which, in the opinion of the Court the justice of the case requires to be taken into account.”

6. The wife’s gross income is $897.35 per week comprised of a single parenting payment of $371.80, family tax benefit $277.55 and child support $248.00.  The husband’s income is about $1831 per week as an insurance payment.  He is not working and it is uncertain how long the insurance payment will continue and when he will be able to resume working.

7. The husband is bankrupt and the wife’s only substantial asset is the car.  She has the money she received from the settlement with the husband’s bankruptcy trustee.  The wife has the care of the three children and has the normal commitments for their care.  The husband lives with Ms T who is employed.

8. There are matters which I consider must be taken into account under s.75(2)(o). The husband’s asset position is uncertain, even though he is bankrupt. I consider I should treat him as having received the benefit of the $139,500 received from the sale of the two boats. He received the first $50,000 and the second payment, $89,500, went to his partner in circumstances where a reasonable inference is that together with his partner he has received the benefit of the payment. He was registered as the owner of the house at Property P although any interest he has in it has now vested in his bankruptcy trustee. For the purposes of division of property under s.79 it is his property.

9. The (omitted) boat, the source of the funds, was a matrimonial asset.  It was purchased during the parties’ relationship and the $160,000 for its purchase was obtained by increasing the mortgage over the matrimonial home.  The payment to the husband and Ms T was a premature distribution of matrimonial assets and so one way of dealing with it is to add it back into the property pool, which is effectively what the wife proposes. The amounts can be added back into the property pool in limited circumstances and a premature distribution of matrimonial assets is one of the circumstances according to Miller & Miller [2009] FamCAFC 121 at [71-72].

10. That may not be fair to the wife.  At least $35,000 went to the purchase of the property in Property P registered in the husband’s name.  Ms T said that that from the first $50,000 received from the boat.  Some or all of the second payment for the boat, $89,500, may have gone towards the house and the husband’s interest may now be greater than the amounts paid in.

11. The amount of $139,500 should be treated as part of the property pool either by adding back as a premature distribution of matrimonial assets or by taking it into account under s.75(2)(o).

12. Leaving aside the issue of assets, the adjustment under s.75(2) is 15% in favour of the wife. The husband’s work is uncertain but the inference I draw from the evidence is that he does have the ability to earn a substantial income. He has the support of his partner and a reasonable inference is, if necessary, he will have the financial support of his parents. The wife relies on government payments and child support and has a modest income earning potential. She has the care of the children. These considerations lead to the conclusion that a 15% adjustment is appropriate.

13. The wife has received $84,189.95 from the sale of the matrimonial home (leaving aside the initial distribution of $20,000 to each party) the husband, by his bankruptcy trustee, has received $12,500 and the $139,500 from the two boat sales, a total of $152,000.  The wife’s share of the combined total of these assets, $236,189.95, is 35.6%.  65% is $153,000.  For the wife to receive 65% of the $236,189.95 requires a further $70,000 (rounding the amount).

14. This leaves the question of how superannuation should be treated for the purpose of determining the property pool.  The wife proposes treating the property as a single pool, using valuations of the date of the hearing, and applying the appropriate percentage division.

1. The normal principle for valuing property as at the date of the hearing should be applied in this case.  The wife’s contribution to the marriage has continued after separation.  She has carried the major care of the children.  How much of the increase in the father’s superannuation from after separation is due to investment income on money paid into the superannuation funds during the relationship is not known.  For some time the husband will not have been contributing to the superannuation.  That time is not known.  The circumstances justify a finding that the wife has continued her contribution to the acquisition, conservation and improvement of the husband’s superannuation fund after separation.

2. The s.75(2) considerations do not result in an adjustment for superannuation. At the point of retirement, when the superannuation becomes available to the parties, none of the considerations I have referred to will be relevant. Therefore, leaving aside the other questions relating to assets, the superannuation should be divided equally.

3. The husband has a total of $241,580.60 in superannuation and the wife $64,791.10.  The total is $306,371.60.  An even distribution requires an adjustment of, in round figures $88,000 in the wife’s favour.  An adjustment of 65% to her and 35% to the husband of the non-superannuation assets requires a further payment of $70,000 to the wife, a total of $157,000.

4. Taking into account all the circumstances already discussed the appropriate adjustment for the wife is an order by which she receives the whole of the husband’s superannuation in (omitted), $177,096.90.  An adjustment in the wife’s favour can only be done through superannuation.  Using superannuation is the only way to compensate the wife for the underpayment to her from non-superannuation assets.

I certify that the preceding forty one (41) paragraphs are a true copy of the reasons for judgment of Judge Phipps

Date: 25 February 2016