BAGNOLD & BAGNOLD
[2012] FMCAfam 1215
•18 September 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BAGNOLD & BAGNOLD | [2012] FMCAfam 1215 |
| FAMILY LAW – Property – relationship of nearly 19 years – asset pools – add back money disposed of by one party – contributions – subsection 75(2) factors. |
| Family Law Act1975 (Cth) ss.75, 79, 117B Family Law (Superannuation) Regulations 2001 (Cth) Part 6 |
| Bigelow & Reuter [2006] FamCA 1455 Clauson (1995) FLC 92-595 C & C (2005) FLC 93-220 Ferraro (1993) FLC 92-335 Hickey (2003) FLC 93-143 Lee Steere (1985) FLC 91-626 Mallet v Mallet (1984) FLC 91-507 Pierce v Pierce (1999) FLC 92-844 Rolfe and Rolfe (1979) FLC 90-62 Russell v Russell(1999) FLC 92-877 Townsend and Townsend (1995) FLC 92-569 |
| Applicant: | MS BAGNOLD |
| Respondent: | MR BAGNOLD |
| File Number: | MLC 11267 of 2011 |
| Judgment of: | Roberts FM |
| Hearing date: | 17 September 2012 |
| Date of Last Submission: | 17 September 2012 |
| Delivered at: | Melbourne |
| Delivered on: | 18 September 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr D Staindl |
| Solicitors for the Applicant: | Frank Randle |
| Counsel for the Respondent: | Not represented by counsel |
| Solicitors for the Respondent: | Not applicable |
ORDERS
That in accordance with s.90MT(1)(a) of the Family Law Act1975 (the “Act”) whenever a splittable payment within the meaning of s.90ME of the Act becomes payable to or on behalf of MR BAGNOLD (“the husband”) from his interest in the [A] Superannuation Fund, MS BAGNOLD (“the wife”) is entitled to be paid by the Trustee of the [A] Superannuation Fund the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001, using a base amount of $33,000.00 and there is a corresponding reduction in the entitlement the husband would have had but for these orders.
That the operative time for Order No. 1 hereof is four business days after the service of these orders on the Trustee of the [A] Superannuation Fund.
That on or before 19 December 2012 the husband must discharge the mortgage currently registered in the name of the husband and the wife, over the property currently registered in the name of the husband and situated at [M], in the State of Victoria (“the property”).
That the husband must indemnify the wife, and keep her indemnified in respect to all payments and liabilities pursuant to the mortgage currently registered in the name of the husband and the wife over the property.
That the husband must pay to the wife the sum of $70,200.00 (“the required sum”) by 19 November 2012.
That interest is payable by the husband to the wife upon the required sum or any part that remains unpaid beyond 19 November 2012 at a rate two percent greater than the rate provide for in the applicable rules of court pursuant to section 117B of the Act.
That in the event that the husband does not pay the required sum or any part thereof by 19 November 2012 he must pay to the wife any amount outstanding (inclusive of interest) by instalments at the rate of $2,000.00 per month payable on the first day each month commencing on 1 December 2012 and continuing on the first day of each month thereafter until the required sum and any applicable interest has been paid.
That in the event that any instalment provided for in Order No. 7 hereof remains unpaid by the eighth day of the relevant month, the entire unpaid balance of the required sum together with any applicable interest will immediately become due and payable by the husband to the wife.
That the parties must do all acts and execute all documents that may be reasonably necessary to implement these orders.
That the parties have liberty to apply in relation to the implementation of these orders.
That on or before 19 October 2012 the husband must pay the wife’s costs of and incidental to the investigation of the husband’s superannuation entitlements, fixed in the sum of $2,500.00.
That all extant applications are otherwise dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Bagnold & Bagnold is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 11267 of 2011
| MS BAGNOLD |
Applicant
And
| MR BAGNOLD |
Respondent
REASONS FOR JUDGMENT
Introduction
The matter before me relates to competing applications for property settlement orders.
The applicant she tells me that, if I am to go by her birth certificate, she is [MS BAGNOLD], but in the Court documents she is known as [MS BAGNOLD]. I will refer to her simply as “the wife”. She seeks orders for:
a)a superannuation split in her favour of $33,000;
b)payment to her of $78,000 within two months;
c)the removal of her as a joint mortgagor in relation to a property that I will refer to later;
d)payment by the respondent of the mortgage; and
e)indemnification of her from any payment of that mortgage.
The respondent is MR BAGNOLD, and I will refer to him as “the husband”. I am aware that the parties are divorced. However, the terms “husband” and “wife” roll more easily off the tongue than “ex-husband” and “ex-wife”. The jurisdiction that I have arises from their marriage, so I will refer to them as “the husband” and “the wife” in relation to this matter.
The husband agrees that there be a superannuation split in the wife’s favour of $33,000. However, he is of the view that the wife should receive no further payment.
The evidence
The wife relied upon a trial affidavit filed on 7 September 2012 and upon two earlier affidavits to a minor degree, and also upon her financial statement. She also gave oral evidence.
The husband relied upon his affidavit filed on 2 February 2012 and a financial statement filed on the same day. Those documents were prepared by his former solicitor, but he was not represented by a lawyer at the hearing of this matter yesterday.
I had an opportunity to observe both parties in the witness box. I must say that I was not impressed by the husband’s somewhat cavalier attitude to important financial matters. In that regard, one can only hope that he looks after his employer’s business affairs better than he does his own financial affairs, and I will refer to that further in due course.
Background
The parties are both aged 44 years. They started living together in 1990 and were married [in] 1993. Separation occurred either at the end of 2008 or early 2009. However, not much turns on that.
It seems to me that there is at least agreement that they physically separated in early 2009, although the husband says that the marriage was over prior to that. On either interpretation, it was a relationship of nearly 19 years.
The parties have two daughters aged 15 years and 12 years. In March 2012, the parties entered into consent orders in relation to their daughters, and pursuant to those orders the girls live predominantly with the wife but spend time with the husband on a regular basis, which is essentially alternate weekends, one night during the week and half of school holidays.
At the start of the relationship, the wife had savings of approximately $6,000 but the husband had debts of approximately $1,000. Later in 1990, the wife inherited approximately $30,000 from her father’s estate.
Both parties worked in the early years, but the wife gave up her employment for a time to be able to look after the children. She returned to work in 2004, and since September 2010 she has worked [occupation omitted] on the basis of approximately 30 hours per week.
In very rough terms, the husband currently earns approximately twice what the wife earns. He works [omitted].
In July 2006, the parties purchased a parcel of land at [M] in country Victoria. They are joint mortgagors, but the property is registered in the husband’s name alone, and I will refer to it generally as “the property”.
Last year, the husband sold water rights in relation to the property. Two payments were received by him in August and September last year which totalled slightly less than $102,000. I accept that the first the wife knew about the sale of those water rights was when she read about it in a valuation report obtained for the purposes of these proceedings. At that time both parties were represented by solicitors.
I shall refer to the property and the water rights below in relation to the asset pool.
Relevant Law
Section 79 of the Family Law Act 1975 (“the Act”) sets out the matters that the court must take into account when considering what orders should be made for the alteration of the property interests of parties. They include:
a)the financial and non-financial contributions made directly or indirectly by or on behalf of each party or by a child to the acquisition, conservation or improvement of any property of the parties;
b)the contribution made by a party to the welfare of the family including any contribution made in the capacity of homemaker or parent;
c)the effect of any proposed order upon the earning capacity of either party; and
d)the matters referred to in sub-section 75(2) as far as they are relevant.
The general approach to the determination of a property settlement application has been well established by authority[1]. It is essentially a multi-step process. The first step is to identify the property, liabilities and financial resources of the parties (generally at the time of the hearing). The second step is to evaluate the contributions made by the parties as defined in section 79(4) of the Act and the third step is to consider those matters contained in section 75(2) that are relevant.
[1] See Lee Steere (1985) FLC 91-626; Ferraro (1993) FLC 92-335; Clauson (1995) FLC 92-595, Hickey (2003) FLC 93-143 and C & C (2005) FLC 93-220
In determining what order the court should make under section 79, the court must be satisfied in all the circumstances that it is just and equitable to do so.[2] It is the justice and equity of the actual orders that the court must consider and this has sometimes been referred to as “the fourth step”.[3]
[2] See Sub-section 79(2)
[3] See Hickey (2003) FLC 93-143 and Russell v Russell(1999) FLC 92-877
Since the end of 2002 courts have been required to treat any superannuation interest as “property” for the purposes of property settlements between parties to a marriage and in appropriate cases courts may “split” superannuation interests. [4]
[4] See sections 90MC and 90MT of the Act
The asset pool
In accordance with the majority decision in C & C, I propose to deal with the assets in two pools; being a superannuation pool and a non-superannuation pool. That is effectively the way in which Mr Staindl urged me to deal with the assets.
The superannuation pool
In round figures, the superannuation pool is as follows:
[A] Super - Husband $48,000 [I] – Husband $36,000 Sub-total $84,000 [P] – Wife $18,000 Total $102,000
The non-superannuation pool
The property at [M] is worth $125,000, according to the valuation. In round figures, the outstanding mortgage balance as at 16 March 2012 was $126,000, so at that time there was a negative equity in the vicinity of $1,000. However, the husband stated that he had stopped making mortgage repayments, so it is logical to assume that the negative equity is likely to be much greater than $1,000.
The husband’s claimed reason for stopping the mortgage payments was due to financial pressure. Frankly, I do not believe him. His [omitted] Bank statements reveal that he clears nearly $5,600 per month, which is paid into his bank on or about the 14th of each month. His claimed expenditure in his financial statement sworn earlier this year shows that, either he is spending excessively and he needs to curb that expenditure, or he simply over-exaggerated his expenditure. I suspect it is the latter. Just two examples are that he claims to be spending $5,200 per annum on motor vehicle maintenance and $10,400 per annum on education expenses. Those were not the only examples of what I consider to be excessive expenditure, however, I only highlight those two.
In my view, in calculating the value of the asset pool, the most effective way of dealing with the property at [M] is to ignore its value because it is likely to be a negative value. That is simply an expedient way of dealing with it, because the wife cannot be held responsible for the husband’s failure to keep up the mortgage payments.
The sold water rights are a different matter.
The husband attempted to have me believe, firstly, that he did not understand that the water rights were “property”, and secondly, that because time had passed since he and the wife separated, he believed that the wife was not entitled to any part of the $102,000 he received. Frankly, I do not believe him on either count and I therefore conclude that he deliberately failed to complete Part M of the Financial Statement that he swore to the truth of on 1 February 2012. Part M requires a party to specify property sold in the preceding 12 months.
Mr Staindl submitted that the sum of $102,000 disposed of by the husband should be added back into the asset pool.
The question of “add-backs” is a vexed question at times. However, In Townsend and Townsend,[5] the husband had sold a taxi licence after the separation of the parties. He spent much of the proceeds for his own benefit. Nicholson CJ said:[6]
In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal with the husband's receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.
[5] (1995) FLC 92-569
[6] At page 81,654
In my view, that part of Nicholson CJs judgment in Townsend is on all fours with this particular matter and one need only substitute the words “water rights” for “taxi licence” and it is completely applicable to this particular case. So with that in mind, I agree with Mr Staindl’s submission that a sum of $102,000 should be added back into the asset pool.
The husband has a motor vehicle that he said was worth $15,000 in his Financial Statement in February. He now tries to say that it is worth $12,000. I will say two things about that:
a)Firstly, I find it to be more than likely than not that the husband gave an estimate of its value on the low side in his financial statement anyway, because that is human nature; people do not generally put a high valuation on something that is going to increase their asset base; and
b)Secondly, depreciation of $3,000 (which is 20 per cent of the total value of the vehicle) in only seven months is also highly unlikely.
I, therefore, intend to include his motor vehicle in the asset pool at $15,000.
The wife has a car but she owes as much as it is worth so I will not include that in the non-superannuation asset pool.
I will also exclude both parties’ household contents. Generally, second-hand household contents do not attract premium prices and neither party is claiming that the other has any valuable antiques or artworks or anything of that nature.
The husband claimed in his financial statement in February to owe his sister $10,000. By yesterday, he said that that had increased to $20,000. He produced no documentation to support the existence of that loan and from what he said yesterday it seems that his indebtedness, if it exists, relates to a family matter that post-dates the parties’ separation. Clearly, that loan, if it exists, has done nothing to increase the asset pool by a purchase of some property or anything like that and the wife was not either a contributor nor was she consulted about that loan. In my view, it is expedient to simply exclude it when calculating the asset pool rather than treat it as a negative contribution.
Therefore, it seems to me that the non-superannuation pool essentially consists of two assets; the add-back of the water rights worth $102,000 and the husband’s motor vehicle worth $15,000, making a total of $117,000.
Contributions
Clearly the wife’s initial contributions (i.e. at the start of the relationship) were greater than those of the husband. She had $6,000 in savings. He had minus $1,000. Later on in 1990 she inherited $30,000.
For almost the entirety of the relationship the husband was paying child maintenance or child support for a child of a previous relationship. That would have reduced the funds available to the household but I do not regard it as a substantial negative contribution.
The parties both worked initially, as I have mentioned. The wife then stayed at home for some years to look after the children before returning to work. It is clear that contributions “made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent”[7] should not merely be recognised in a token manner, but rather, they should be recognised in a substantial way.[8]
[7] See section 79(4)(c)
[8] See Rolfe and Rolfe (1979) FLC 90-62 and Mallet v Mallet (1984) FLC 91-507
This was reinforced in Ferraro, when the Full Court said:
The task of evaluating and comparing the parties’ respective contributions where one party has exclusively been the breadwinner and the other exclusively the homemaker, is a most difficult one to perform because the evaluation and comparison cannot be conducted on a “level playing field”. Firstly, it involves making a crucial comparison between fundamentally different activities, and a comparison between contributions to property and contributions to the welfare of the family. Secondly, whilst a breadwinner contribution can be objectively assessed by reference to such things as that party’s employment record, income and the value of the assets acquired, an assessment of the quality of a homemaker contribution to the family is vulnerable to subjective value judgments as to what constitutes a competent homemaker and parent and cannot be readily equated to the value of assets acquired. This leads to a tendency to undervalue the homemaker role.[9]
[9] (1993)FLC 92-335 per Fogarty, Murray and Baker JJ at page 79,572
In Bigelow & Reuter, [10] Kay J (sitting as the Full Court of the Family Court of Australia) said:
What was the relevant finding is that the wife, whatever she was doing in the course of the relationship, was not able to earn money at the same rate that the husband was able to earn, but there is nothing to indicate that she was not pulling her weight in terms of effort and endeavour.
[10] [2006] FamCA 1455
There is no evidence in this case to suggest that either party’s general effort or endeavour towards the welfare of the family was less than that of the other party. So, apart from the parties’ initial contributions, I assess their overall contributions as being equal. While that initial injection of funds by the wife must be given some credit, it is clear from many cases that it is simply not a precise mathematical exercise. In other words, I cannot simply put $36,000 on the wife’s side of the ledger and minus $1,000 on the husband’s side.
Some early cases referred to an “erosion” of an initial contribution simply by the passage of time. However, in Pierce v Pierce,[11] the Full Court said:
In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all the other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home ...[12]
[11] (1999) FLC 92-844
[12] At page 85,881
Clearly, the wife’s initial contribution of $36,000 in this matter was not put into the purchase of a home as was the case in Pierce. She did not put that contribution into any asset that can now be identified, so it seems to me that a lesser weight must be attributed than would otherwise have been attributed to an asset that had increased in value.
Consequently, if my decision was to be based solely on contributions, it would be unlikely that there would be much of an adjustment away from a 50/50 division in this matter. However, as I have said earlier, these matters are not decided solely on contributions.
The subsection 75(2) factors
The parties are both 44 years old and they are both employed. As I have already mentioned, the husband earns approximately twice what the wife earns.
Neither party appears to have much in the way of property but one cannot help but feel that the husband may have some property that he is not disclosing.
His bank statement reveals that, between 26 August 2011 (when he received the first payment for the water rights) and 3 April 2012 (which was the end of the statement that was provided to me), a total of $141,300 went into that account, inclusive of his pay. Only $2,887 remained on 3 April 2012.
That means that he spent in excess of $138,000 in “after tax dollars” over a period of slightly less than six months. Not only does he fail to give a proper explanation for that, but he also says that he cannot afford the mortgage payment on the property at [M].
The wife has the primary care of the parties’ two daughters. However, they spend regular time with the husband and he pays child support (albeit that I get the impression he does not pay it particularly willingly).
Both parties have formed new relationships. The wife lives with her partner and pays that partner rent. That may seem a little unusual, but the financial circumstances of her partner were not explored. In any event, it is clear that the wife’s partner has no legal obligation to support the parties’ children.
I am aware that the husband has a girlfriend, but I know little of the financial aspects of that relationship other than that the husband has on occasions treated her to expensive meals and stays at very expensive hotels.
When I consider the subsection 75(2) factors overall, it seems to me that the two factors that stand out primarily in favour of the wife are her lower income and her greater responsibility for the care of the children.
Conclusions
When I weigh up all the subsection 75(2) factors as well as the contribution factors, I conclude that:
a)it is appropriate to effect a superannuation split of $33,000 which will result in a 50/50 division of the parties’ superannuation (which is agreed to by the husband); and
b)in relation to the non-superannuation asset pool there should be a ten per cent adjustment in favour of the wife. In other words, she should be paid a sum equivalent to sixty per cent of the asset pool of $117,000, which is $70,200.
I propose to make orders that will provide for that, and provide some incentive to comply with the orders.
The first two orders will simply be the orders that were handed up. They will be the order for a superannuation split of $33,000 and the operative time for the order being four business days after service of the order upon the trustee of the superannuation fund.
The next order will be that on before 19 December 2012, being three months from tomorrow, the husband must discharge the mortgage currently registered in his name and that of the wife over the property currently registered in his sole name at [M]. As I understood matters, the husband does not have a problem with such an order.
There will be a further order that the husband must indemnify the wife, and keep her indemnified, in relation to all payments and liabilities under the mortgage.
There will then be an order that the husband is to pay the wife the sum of $70,200 to which I have already referred (“the required sum”) by 19 November 2012. That is two months from tomorrow.
There will be an order that interest is payable by the husband on the required sum of $70,200, or any part that remains unpaid beyond the 19 November 2012 at a rate of two per cent greater than the rate provided for in the applicable Rules of Court pursuant to section 117B of the Act. When I last looked, the applicable rate was three per cent more than the Reserve Bank rate, so this is two per cent more than that. By any bank standard, that is a high rate of interest and my reason for ordering that is quite deliberate; it should provide an incentive to get the required sum paid off as quickly as possible.
There will be a further order that, if the husband does not pay the required sum or any part of it by 19 November 2012, he must pay to the wife any amount outstanding, inclusive of any interest, by instalments at the rate of $2,000 per month payable on the first day of each month commencing on 1 December 2012 (being the first day of a month after 19 November 2012) and continuing on first day of each month thereafter until the required sum and any interest has been paid.
If payment by instalment becomes necessary, there will a further order that if any instalment remains unpaid by the eighth day of the particular month in which it was due, the entire unpaid balance of the required sum (together with any applicable interest) will immediately become due and payable.
There will be further machinery orders. One is fairly standard; that each party do all acts and execute all documents that may be reasonably necessary to implement the orders.
I will give the parties liberty to apply in relation to the implementation of the orders and, in providing for that, I had in mind the suggestion made by Mr Staindl that there may need to be some sort of garnishee or garnishment order. However, it will be necessary to wait and see what happens.
I will otherwise dismiss all applications.
Subject to being provided with the correct name of the superannuation fund, those will be the orders that will be made.
FURTHER DISCUSSION RECORDED: NOT TRANSCRIBED
(The husband made no submissions in relation to the application by the wife’s counsel for an order that he pay the wife’s costs in the sum of $2,500 associated with the investigation of his superannuation entitlements.)
I certify that the preceding sixty-six (66) paragraphs are a true copy of the reasons for judgment of Roberts FM
Associate:
Date: 9/11/12
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