Bardsen and Bardsen

[2018] FCCA 2382

FEDERAL CIRCUIT COURT OF AUSTRALIA

BARDSEN & BARDSEN [2018] FCCA 2382

Catchwords:
FAMILY LAW – Property Settlement – weight to be given husband’s superior initial financial contributions – s.75(2) adjustment to the wife.

Legislation:

Family Law Act 1975 (Cth) ss.75(2), 79(4)

Cases cited:

Stanford v Stanford (2012) 247 CLR 108
Russell v Russell (1976) 134 CLR 495

Clauson & Clauson (1995) FLC 92-595

Applicant: MS BARDSEN

Respondent: MR BARDSEN

File Number: LNC 536 of 2017

Judgment of: Judge McGuire

Hearing date: 22 August 2018

Date of Last Submission: 22 August 2018

Delivered at: Adelaide

Delivered on: 5 September 2018

REPRESENTATION

Counsel for the Applicant: Ms A Trezise

Solicitors for the Applicant: Andrea Trezise

Counsel for the Respondent: Mr P McVeity

Solicitors for the Respondent: Philip Welch Lawyers

ORDERS

1. That within 90 days of the date of these Orders the husband pay to the wife a lump sum of the $244,260.00.

2. That contemporaneously with the payment referred to above the wife transfer to the husband all her right, title and interest in the following absolutely:

   (a)The husband's interest in Business 1 Pty Ltd;

   (b)The assets of Bardsen partnership including but not limited to the property situate at Property A in Tasmania;

   (c)Farming plant and equipment;

   (d)The balance of Bank 1 cheque account ending …;

   (e)The assets of the Bardsen Family Trust;

   (f)The boat;

   (g)The Motor Vehicle A;

   (h)All personalty and chattels in the possession of or under the control of the husband as at the date of these Orders;

   (i)Balances of any bank accounts or like investments in the name of or to the benefit of the husband as at the date of these Orders; and

   (j)The husband’s superannuation benefit and entitlement.

3. That contemporaneously with the above Orders the husband transfer and/or vest all his right, title and interest in the following to the wife absolutely:

   (a)All personalty and chattels in the possession of or under the control of the wife as at the date of these Orders;

   (b)The balances of any bank accounts or like investments in the name of or to the benefit of the wife as at the date of these Orders; and

   (c)The wife’s superannuation benefit and entitlement but subject to these orders.

4. That husband be solely responsible for and indemnify the wife in respect of the following liabilities:

   (a)Any and all liabilities incurred by the husband since separation in either joint names or in his name alone;

   (b)Any and all liabilities attaching to any of the assets retained by the husband pursuant to these Orders including but not limited to the Bank 1 mortgage secured by the property at Property A in Tasmania and that the husband provide to the wife releases from any current mortgagees under which she has liability;

   (c)The Bardsen Family Trust loan liability; and

   (d)The loan liability to Ms A.

5. That the wife be solely responsible for and indemnify the husband in respect of any and all liabilities incurred by her since separation in either joint names or in her name alone but subject to these Orders.

6. That within 90 days of the date of these Orders the parties do all acts and things and sign all documents necessary to wind up the Bardsen partnership as at 30 June 2018 and that the husband be responsible for any accountancy costs associated with the severing of the partnership.

7. That in any event, the wife be permitted to remain in occupation of the residence located at Property A in Tasmania rent free until 1 January 2019.

8. That the parties or either of them have liberty to apply in respect of the husband been unable to/or in default of making the payment to the wife referred to in order 1 hereof and/or providing releases for the wife in respect of any mortgage liabilities.

9. That paragraphs 9 to 15 (inclusive) of these orders are binding on Superannuation Fund P ('the Trustee') as Trustee of Super Fund P ('the Fund').

10. That the base amount of $21,548 is allocated, as required by section 90MT(4) of the Family Law Act 1975 (“the Act”), to the husband out of the interest of the wife’s (member number) interest in the Fund ('the base amount').

11. That in accordance with section 90MT(1)(a) of the Act:

    (a)the husband is entitled to be paid the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 ('the Regulations'); and

    (b)the husband’s entitlement (and the entitlement of such other person to whom a splittable payment may be made) to payments out of the wife's interest in the Fund is correspondingly reduced.

12. That the Trustee do all such acts and things and sign all such documents as may be necessary to:

    (a)Calculate, in accordance with the requirements of the Act and the Regulations, the entitlement created by paragraphs 11 and 12; and

    (b)Pay the entitlement whenever a splittable payment within the meaning of section 90ME of the Act becomes payable from the wife’s interest in the Fund.

13. That paragraphs 14 to 17 inclusive hereof have effect from the operative time which is four business days after the date of service of a sealed copy of this Order upon the Trustee of the Fund.

14. That pursuant to section 90MZD of the Act the Trustee of the Fund is bound by, and shall from the date of service upon the Trustee give effect to these Orders.

15. That until the happening of any of the following:

    (a)The establishment of a separate account in the name of the husband;

    (b)The transfer or rolling over into another superannuation fund of the payment created by these Orders;

    (c)The husband satisfying a condition of release and being paid the payment split created by these Orders; and

    (d)The husband executing a waiver of rights within the meaning of section 90MZA of the Act relation to the payment created by these Orders;

    the wife be and is hereby restrained by herself, her servant or agents from drawing upon, encumbering or executing a death benefit nomination in favour of any other person, or doing any other act or thing that would have the effect of defeating, diminishing or otherwise reducing the allocated amount or rendering part of his interest in the Fund ‘a not-splittable payment’ within the meaning of Regulation 12 or 13 of the Regulations.

16. That the husband, the wife and the Trustee have liberty to apply in relation to the implementation of these Orders affecting the wife's superannuation interests.

17. That each party do all such things including the signing of all documents to give effect to these orders.

18. That pursuant to section 81 the parties intend these orders shall be as far as practicable finally determine the financial (and other) relationships between them and avoid further proceedings between them.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT LAUNCESTON

LNC 536 of 2017

MS BARDSEN

Applicant

And

MR BARDSEN

Respondent

REASONS FOR JUDGMENT

Applications

1. These are proceedings for parenting orders in respect of the parties’ two children being [X] born 2007 (11 years) and [Y] born 2010 (8 years) and for property settlement between the parties. The wife commenced the proceedings by an application filed 10 November 2017 seeking final orders in respect of financial matters. That application was amended to include children's matters by a document filed 30 April 2018.

2. To the great credit of the parties, I was able to make final parenting orders in on the first day of the trial.  The effect of those orders is that the parents have equal shared parental responsibility for [X] and [Y] and that the children live in a shared care regime between their parents spending eight nights per fortnight with their mother and six nights with their father.

3. The wife argues for financial orders whereby she receive 65% of the net tangible assets and superannuation of the parties. The husband proposes that both tangible assets and superannuation be divided on a basis of 50% to each party.

Background

1. The husband is 46 years of age and the wife is 39 years. They commenced cohabitation in 2006 and were married that year. Separation occurred on 10 June 2017 although the parties remain living on the same rural property with the wife and the children being in the former matrimonial home and the husband occupying a 'granny flat' on the property.

2. The husband comes from a farming background in the Region S region of Tasmania. He works predominantly, however, as a (occupation omitted) in a business established with his father and operated under a Trust. The husband suffered an injury and was gainfully employed only on a limited basis during late 2017 and early 2018. That situation seems to have been rectified. In addition he leases out sections of the family farming property for cropping and/or agistment. Further, the parties have run beef cattle on that the property.

3. The wife suffers a number of medical issues including a diagnosis of Meniere’s disease. She receives a disability benefit from Centrelink to supplement her income from employment of about four hours per week as a (occupation omitted).

The Evidence

1. Both parties provided trial affidavits and sworn financial statements. They were each cross-examined.

2. The husband's mother, Ms J, also gave an affidavit sworn 8 August 2018 and was cross-examined. Ms J’s evidence effectively corroborates that of the husband in respect of a specific contribution towards the purchase of a property in 2006 at Property B.

3. The husband adduced evidence on affidavit from Mr S, chartered accountant. Mr S was not required for cross-examination.  His affidavit annexes a report dated 7 August 2018 titled ‘Valuation Report – Bardsen Family Trust'. Mr S confirms the family Trust operates the business Business 2 and its other assets. He provides a valuation for the business and its assets.

4. Mr S notes at page 8 of his report:

   An adjustment for wages and superannuation has been made for both Mr Bardsen and Mr M (the husband's father).

   Mr Bardsen advised that he works 60 to 70 hours in the business (other than when recovering from his motor bike accident discussed above). He takes remuneration via a contractor’s fee using his personal ABN, depending on how much cash is in the business at any particular time. He has not paid himself superannuation.

   …

   Mr Bardsen advised that a fair wage for his and Mr M’s work would be in the range of $60 – $70 per hour. The (occupation) Award states that the minimum wage for someone of their level and responsibility to be approximately $52.00 per hour inclusive of superannuation.

   For the purposes of this valuation, we have removed the contractor's fees paid to Mr Bardsen , and added in a commercial wage inclusive of super based on 40 Hours per week @ $52 per hour for 46 weeks of the year (to account for the holidays). This calculates to $96k per annum. This has been apportioned in the 2018 financial year to account for Mr Bardsen’s time away from the business.

5. The wife adduced evidence on affidavits from Dr E (17 August 2018) and Dr A (6 August 2018). Dr E is the wife's general practitioner.  His affidavit provides a summary of the wife's dealings with his medical practice and notes diagnoses of Meniere’s disease, Irritable Bowel Syndrome and anxiety. Dr A is an occupational and musculoskeletal medicine physician. He provides a comprehensive and historical report in respect of the wife dated 31 July 2018 setting out a number of symptoms of her conditions. In the final paragraph of that report Dr A opines:

   If I was to perform a fitness for work or pre-employment assessment, I would advise on the need for precautionary measures. She should not participate in any work which could result in serious consequences including death as a result of unexpected dizziness and balanced compromise This includes direct exposure to unprotected height, moving machinery or equivalent hazards.  In addition, she won't tolerate work which places postural demands on the musculoskeletal system of her neck and shoulder girdle.  She won't tolerate neck flexion and reach, particularly if repetitive, prolonged and associated with force application. For instance, she would struggle with jobs which require moderate to heavy manual work. She should not be involved in jobs which require climbing ladders or work at heights.  This includes work in certain processing industries i.e. work at a conveyor belt. On the other hand, she should have capacity to work in sedentary type work, or jobs which require only mild manual work.  This includes administration, sales work and reception type work, provided that the ergonomic setup is appropriate e.g., height adjustable desk, optimum screen height, adjustable seat, use of an ergoport.

The Issues

1. The parties agreed the relevant property pool and its valuation shortly prior to the taking of evidence. Their dispute is a relatively simple one where both parties acknowledge superior contributions by the husband to this 11 year relationship. The husband seeks a greater adjustment in this respect of approximately 15% whereas the wife concedes only a 5% adjustment to the husband on contributions. Conversely, both parties also agree that there should be a further adjustment in favour of the wife on account of the ‘needs' or factors under section 75(2) of the Family Law Act 1975 ('the Act'). The wife claims an adjustment of 20% in her favour would be just and equitable in all the circumstances giving her 65% of the property pool. The husband would concede an adjustment to the wife of 15% which would, after consideration of contributions, result in a 50/50 division of the parties’ property.

2. Both parties argue simplistically that superannuation should be divided in accordance with the tangible assets.

3. I have had the advantage of seeing and hearing both parties give evidence and be cross-examined albeit not subject to lengthy cross-examinations. I generally gleaned both Mr and Ms Bardsen to be witnesses of the truth which is evidenced by them being able to agree the children's issues and the content and value of the property pool.  Suffice to say that they each have confident expectations in respect of maximising their awards in this matter on the bases as set out above.

Relevant law

1. Matters of property adjustment are provided for in s.79 of the Act. Subsection (2) states that the Court shall not make an order unless it is satisfied that, in all the circumstances, it is just and equitable to do so. This is a determination to be made independently of and not conflated with the contribution considerations in s.79(4).[1] In the matter now before me, Counsel for each of the parties acknowledges that the circumstances of this marriage and nature of the property pool are such that it is quite clearly just and equitable to consider an alteration of the property interests.

   [1] Stanford v Standford (2012) 247 CLR 108

2. As mentioned above, the Court is assisted by the parties having reached agreement as to the content and value of the property pool.  Property includes the assets, liabilities and financial resources of the parties and each of them. It is generally considered proper to ascertain the property pool and its value as at the date of the trial although considerations of post-separation contributions to assets are often proper and necessary. Superannuation interests and entitlements are to be 'treated' as property for the purposes of this consideration.

3. The Court is then to consider and give weight to the various contributions by the parties to the acquisition, conservation or improvement of any part of the property pool.  Contributions may be of a direct or indirect financial kind or may be of a non-financial type including as homemaker or parent.

4. In the matter now before me, the husband argues for an adjustment in his favour on account of contributions only by reason of what he says were superior initial contributions. That is, each of the parties agrees and concedes that their contributions during the relationship and post-separation have been equal.

5. After considering the contributions, the Court will then determine whether any further adjustment between the parties is just and equitable on a consideration of any relevant factors set out in s.75(2) of the Act. In this matter the wife argues that her health, disparity in income and income potential together with her needs to re-establish accommodation and facilities for herself and the children should cause the Court to make the adjustments sought in her favour.

6. Permeating the entire process of consideration is one of justice and equity where after the above considerations, the Court is to 'stand back’ and consider whether the proposed orders do actual justice and equity between the parties.[2]

   [2] Russell v Russell (1976) 134 CLR 495

The Property Pool

1. The parties now agree that the property pool for my consideration as follows:

Assets

20% interest in Business 1 Pty Ltd – (H)

$9,109

Assets of Bardsen Partnership:

(a)   Property A

(b)   Farming plant & equipment

(c)   Bank 1 cheque account

$720,000

$57,460

$2,448

Bardsen Family Trust - (H)

$78,054

Boat - (H)

$30,000

Motor Vehicle A - (H)

$1,000

Part property settlement paid to wife

$20,000

TOTAL

$918,071

Liabilities:

Debts of Bardsen Partnership (a)     Bank 1 mortgage re: Property A (b)    Bank 1 mortgage re: Property A GST payments/refunds	$272,045 $114,344 $1,371	$387,760
Loan from Bardsen Family Trust – (H)	$16,958
Loan from Ms A – (Joint)	$10,000
Total Liabilities	$414,718
NET TANGIBLE ASSETS	$503,353
Superannuation: Husband – Bank 1 Account	$16,484
Wife – Super Fund O	$59,580
Total Superannuation	$76,064

Contributions

1. The husband owned a property at Property C at the date of commencement of cohabitation and subject to a mortgage with the Bank 2. The husband's affidavit deposes that the property was valued on 2004 at $235,000. The parties commenced their relationship two years later in 2006. The husband provides a Rates Notice from the local council as at 2005 with a capital value of $247,000. He estimates, with no expert corroborative evidence, that the value of the home as of 2006 was $300,000. The outstanding mortgage as of 30 June 2006 was $171,559.81. At its highest, therefore, the husband would claim an initial contribution from this property of approximately $128,400.

2. The wife does not concede the husband’s estimate of the value of $300,000 in 2006. She, not surprisingly, prefers a lower valuation and hence a lesser equity in the property perhaps by as much as $50,000 or an equity of around $80,000.

3. The husband owned a boat and Motor Vehicle A as at the date of commencement of cohabitation. He still owns a boat and an motor vehicle although the originals of each have been disposed of.

4. The husband says that he had a store or rack of timber valued at $15,200. The wife does not concede this assertion given that she says she never observed the timber. The husband produced bank accounts evidencing deposits of around $15,000 at the time that he says that he sold the timber. I am satisfied on the balance of probabilities that the husband did have timber valued at $15,200 as at the date of commencement of cohabitation.

5. The husband claims that he held his interest in Business 1 Pty Ltd as at the date of cohabitation. He also claims to have a term deposit held in the joint names of himself and his mother at that time totalling $37,078. Both the husband and his mother deposed to purchasing a property at Property B in 2006, approximately six months after separation, with the purchase price of $170,000 and utilising the term deposit ($37,078.22) towards that purchase. The Property B property was sold in 2008 netting $78,808 with the husband having a 50% entitlement or $39,404. The unchallenged evidence of the husband is that his share of proceeds was deposited in or utilised for the business operated by Bardsen Family Trust. The husband sold some assets that he owned at the commencement of cohabitation including the aforementioned timber and a boat together with a motorbike. Any balances on these transactions have been put towards the business and/or family.

1. The husband currently has superannuation of only $16,484. The best evidence before me suggests that he had all or the majority of that balance as of the date of commencement of cohabitation given the evidence that he no longer contributes to superannuation.

2. The wife concedes that the husband entered the relationship in a superior financial position. Her unchallenged evidence is that she came into the relationship with Investment Account of approximately $15,000 together with superannuation of $19,000 and a motor vehicle valued at approximately $2,000.

3. This was a relationship of approximately 11 years duration. The parties agree that the net value of their tangible assets now sits at $503,353. The husband's Counsel properly made concessions that the contributions of the parties during and post separation should be seen as roughly equal. Consequently, the first issue for the Court is as to the adjustment to be afforded the husband by reason of his superior initial financial contributions.

4. I agree with Counsel for both of the parties that this is not a marriage which might easily fit the definition of 'short' marriage but neither is it of overly long duration.

5. Notably, four years after the commencement of cohabitation the proceeds of the sale of the husband's Property C property, owned by him at the commencement of cohabitation, reaped some $175,170 which funds were applied to the purchase of the 50 acre property at Property A in which the parties continued to reside and it is now the major and valuable asset in the property pool. Despite the differences in opinion as to the equity in Property C as at 2006, I am easily satisfied that this equity did provide the 'springboard' for the current asset pool. Further, the purchase of the Property B property in 2006, only months after cohabitation, but with funds held by the husband and his parents at the date of cohabitation, was essentially doubled by the purchase and sale of that property. This is also a 'springboard' investment from an asset held by the husband at the commencement of the relationship. These are contextually significant contributions by the husband when seen against the contents and value of the property pool as it currently stands.

6. In other respects, the value of the husband's assets at the date of commencement of cohabitation was also superior to that of the wife save and except in respect of their superannuation entitlements which I will formally treat as an independent or 'second pool’ and although the parties seek percentage distributions in accordance with those of the tangible assets. On the evidence before me, and as at the date of commencement of cohabitation, I calculate that the husband held other assets with a value of approximately $50,000. The wife concedes coming into the relationship with assets of a total value of approximately $17,000. I make these comments noting the 11 year duration of the relationship and the equality of contributions during and post the relationship.

7. In conclusion as to contributions, I am comfortably satisfied that the husband made an overwhelmingly superior initial financial contribution to this relationship than did the wife. I take into account the duration of the relationship but also the type and “springboard” effect of those contributions which are still evident in the current property pool. I also take into account the quantum of those contributions relative to the current value of the pool. That is, relative to the pool as it currently stands, I am satisfied that the husband's initial contributions should be given some considerable weight. Where contributions during the relationship and post-separation are considered as equal, I think it proper to adjust the property pool on the basis of contributions as to 67.5% to the husband and 32.5% to the wife.

Section 75(2) factors

1. The wife claims that she should receive a loading or adjustment of 20% in her favour after consideration of the relevant factors under s.75(2) of the Act. Specifically, she argues that she has a lesser current and potential income than does the husband. She says that the husband will, in all likelihood, retain the Property C property pursuant to these orders whereas she will be required to re-establish herself in accommodation with consequent stamp duty and other costs. She argues, and related to her inferior income, that she will assume a disproportionate responsibility in respect of the financial support of the children where orders are made for the children to live with her for eight nights a fortnight but where the husband currently contributes only approximately $50 per week child support which may be further reduced by reason of the parenting orders I have made. The wife seeks the adjustment of 20% noting the limited value of the property pool at only net $503,353. Counsel for the wife refers me to the decision of the Full Court in Clauson & Clauson[3] arguing that any consideration of an adjustment pursuant to s.75(2) should have a test of 'reality' with reference to the limited quantum of the property pool where in the matter now before me for instance, a 10% adjustment would result in a loading of only $50,000. Interestingly, Counsel for the husband also referred me to their Honours’ decision in Clauson (supra) arguing it is proper to consider attribution of weight to both contributions and s.75(2) factors with reference to the limited quantum of the property pool. Counsel for the husband reminded the Court that it should be wary of entering into some course of 'social engineering' by moving outside the parameters and guidelines of s.79(4) of the Act. I generally accept and adopt the submissions of both Counsel and think it timely to revisit the decision in Clauson where the factual platform has some similarities to that now before me and to remind myself of the process of consideration undertaken by their Honours. In circumstances where the trial judge in Clauson had made an adjustment to the wife of 15% on account of s.75(2) factors the Court at pp 81,910 – 81,911 says:

   Largely that is because in our view the assessment of 15% in relation to the s.75(2) factors falls well below the legitimate exercise of the wide discretion given under that provision.

   
   

   The relevant factors are quite striking in this case. In particular they relate to the enormous disparity in the income and income earning capacities of the parties coupled with the circumstance that the wife is the custodian of four children aged between 3 and 8. In an asset pool of this dimension the assessment of those and other (lesser) s.75(2) factors by a figure of $210,000 is inadequate. It is a comparatively insignificant sum compared with the dimension of the assets and the difference between the parties' present and future circumstance

   …

   It is long been recognized that in most cases the most valuable "asset" which a party can take out of the marriage is a substantial, reliable, income-earning capacity: see Best & Best (1993) FLC 92-418 at 80,295.

   There is, we think, at times a tendency to assess s.75(2) factors in percentage terms without considering its real impact, and we think there is legitimacy in the views expressed in more recent times that the Court has tended to operate in this area within artificially delineated boundaries. That is, it appears almost to be inevitable that the s.75(2) factors will be assessed in a range between 10% and 20%. A number of cases will justify an assessment outside those parameters and in any event it is the real impact in money terms which is ultimately the critical issue.

   [3] (1995) FLC 92-595

Conclusion – section 75(2) factors

1. It is indisputable that the husband has a current and potential superior earning capacity than does the wife. His income from the Business 2 business together with that from agistment of stock/lease of land and his own farming activities give him, on my calculations, a potential income in excess of $120,000 per annum. The wife, on the other hand, works only four hours per week and her income is supplemented by Centrelink benefit. I accept, however, that the medical evidence suggests that the wife has a potential for further remunerative hours of employment, subject to such employment being available, and some of her voluntary responses in cross-examination suggest she might not be inclined yet to maximise that potential. Nevertheless, the wife does suffer some significant and ongoing medical conditions which, I am satisfied, will impact on her employability in the context of availability in a rural township and, in any event, her income potential is substantially less than that of the husband.

2. The children will live in a shared care arrangement between the parties but those circumstances, together with the income difference, will impose some financial support obligations on the wife relatively more onerous than those of the husband.

3. The husband will have the opportunity to retain the home and farm pursuant to these orders whereas the wife will be required to re-establish herself in accommodation whilst noting, however, the husband will in all likelihood need to borrow in order to settle upon the wife.

4. I except generally the submissions of Counsel for the wife that the net value of the property pool is relatively small and consequently any adjustment pursuant to s.75(2) of the Act should be given some real effect rather than a bland provision on a percentage basis. As such, and with emphasis on the income differentiation and the matters that flow from that, I accept the submission of the wife’s counsel that there should be an adjustment to the wife of 20% of the pool of the tangible assets.

5. Consequently, and after consideration of both contribution and s.75(2) factors, the wife will receive 52.5% of the net tangible asset pool.
   That pool has a net value of $503,353. The wife's entitlement would be $264,260.

6. The wife has received a part property settlement of $20,000. The husband will retain the balance of the assets and liabilities. Consequently, the husband will be required to make a cash settlement upon the wife of $244,260.

Superannuation

1. The parties between them have superannuation entitlements of just $76,064 with the majority of that being in the name of the wife. The husband apparently does not contribute currently to his own superannuation. The wife has also already received post-separation the benefit of a withdrawal from her fund of $8,001. Although no argument was taken as to the reasonableness of that withdrawal, it has been a post-separation benefit to the wife. In those circumstances and where the majority of the wife's fund appears to have been accrued during the relationship, I am of the view that a split from the wife's fund to the husband so as to give each of the parties one half of the remaining total superannuation entitlements, would be just and equitable. The current total entitlements are $76,064. The husband's policy has a value of $16,484. I calculate, therefore, a split to him from the wife's fund of $21,548.

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

Date: 5 September 2018