BELLENGER & BELLENGER
[2015] FamCA 645
•5 August 2015
FAMILY COURT OF AUSTRALIA
| BELLENGER & BELLENGER | [2015] FamCA 645 |
| FAMILY LAW – PROPERTY – final orders – marriage of short duration with modest assets – neither party is in full time employment and both care for the only child of the relationship – whether global or asset by asset approach appropriate – where the property interests of the parties is considered globally – where the considerations in respect of the superannuation interests are considered separate to 75(2) factors – where one party had a significantly greater salary than the other – comparison of contributions. |
| Family Law Act 1975 (Cth) s 4, 75(2), 79 |
| Chorn & Hopkins (2004) FLC 93-024 |
| APPLICANT: | Mr Bellenger |
| RESPONDENT: | Ms Bellenger |
| FILE NUMBER: | ADC | 2169 | of | 2014 |
| DATE DELIVERED: | 5 August 2015 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 9 and 10 June 2015 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Anderson |
| SOLICITOR FOR THE APPLICANT: | Dewar Legal |
| COUNSEL FOR THE RESPONDENT: | Mr Jordan |
| SOLICITOR FOR THE RESPONDENT: | Cares Lawyers Pty Ltd |
Orders
In full and final settlement of any claim that either party may have against the other by way of settlement of property or variation of settlement of property:-
(a)That within sixty (60) days the husband do pay or cause to be paid to the Trust Account of Cares Lawyers for and on behalf of the wife the sum of SEVENTY TWO THOUSAND FOUR HUNDRED AND EIGHTY SIX DOLLARS ($72,486) (“the settlement sum”);
(b)That pending payment of the said settlement sum, the husband be restrained and an injunction is granted restraining him from encumbering, selling, disposing of or otherwise dealing with the property situate at B Street, Suburb C in the State of South Australia (“the Suburb C property”) save as may be required for the payment of the settlement sum in paragraph 1 (a) hereof;
(c)That in default of payment of the settlement sum pursuant to paragraph 1 (a) hereof and should such default continue for more than thirty (30) days THEN the Suburb C property shall forthwith be placed on the market for sale by public auction or private treaty upon such terms and conditions as the parties may agree and in default of agreement as may be ordered by this Honourable Court, with the net proceeds of sale to be applied as follows:-
(i)In payment of all costs, commission and expenses of the default sale;
(ii)To discharge any encumbrance in respect of the said Suburb C property;
(iii)In payment of the settlement sum or so much thereof as may be outstanding with default interest from the due date until the date of payment at the rate prescribed pursuant to the Family Law Rules 2004 (Cth) from time to time;
(iv)The balance if any to the wife.
(d) The husband shall retain to the exclusion of the wife the following:-
(i)Subject to the payment of the settlement sum in paragraph 1 (a) hereof, his interest in the Suburb C property;
(ii)Funds standing to his credit in bank accounts;
(iii)His motor vehicle;
(iv)His superannuation entitlements;
(v)Any personalty, furniture and effects currently in his possession.
(e)Subject to these orders the wife shall retain to the exclusion of the husband the following:-
(i)Funds standing to her credit in bank accounts;
(ii)Her motor vehicle;
(iii)Her superannuation entitlements subject to these orders;
(iv)Any personalty, furniture and effects currently in her possession.
(f)That pursuant to section 90MT (1) (a) of the Family Law Act 1975 (Cth) whenever a splittable payment is payable in respect of the superannuation interest of the wife in the Public Service Superannuation Scheme (PSS Scheme):-
(i)(A) The husband is entitled to be paid an amount calculated in accordance with the Family Law (Superannuation) Regulations 2001 (Cth) using a base amount in the sum of FIFTY THREE THOUSAND NINE HUNDRED AND TWELVE DOLLARS ($53,912) at the operative time; and
(B)The trustee or trustees make a corresponding reduction in the entitlements the wife would have had in the said PSS Scheme but for these orders.
(ii)That the operative time for the purpose of these orders is four (4) business days following the service of these orders on the trustee.
(iii)That the trustee of the PSS Scheme shall do all such acts and things and sign all such documents as may be necessary so that the trustee, in accordance with the obligations set out under the Family Law Act 1975 (Cth) and that the Family Law (Superannuation) Regulations 2001 (Cth) can calculate the entitlement of and make payment to the husband in accordance with these orders.
(iv)That upon receipt by the husband of a payment split notice when issued by the trustee pursuant to Regulation 7A.03 of the Superannuation Industry (Supervision) Regulations 1994 (Cth), the husband may exercise his election pursuant to Regulation 7A.06 of the said Regulations to request the trustee to roll over or transfer the transferable benefit as defined by Regulation 1.03(1) to another fund of the husband’s choosing.
(v)That following the action taken by the trustee of the PSS Scheme as contemplated in Regulation 14F (2) (b), the provisions of Regulation 14 of the said Regulations will make any splittable payments, following the action by the trustees, non-splittable.
(g)That each party shall be liable for their own separate debts and obligations to the exclusion and exoneration of the other party.
That all matters be removed from the active pending list of cases.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Bellenger & Bellenger has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: ADC 2169 of 2014
| Mr Bellenger |
Applicant
And
| Ms Bellenger |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
The proceedings are for settlement of matrimonial property arising from a relationship comprising a period of cohabitation of nine years.
Mr Bellenger (“the husband”) commenced the proceedings by filing an Initiating Application on 19 June 2014. He seeks orders for settlement of property pursuant to Part VIII of the Family Law Act 1975 (Cth) (“the Act”). Ms Bellenger (“the wife”) opposes the orders sought by the husband in her Response filed 21 July 2014. By his Initiating Application, the husband sought orders for the “matrimonial property to be distributed between the parties on a 60:40 basis in the applicant’s favour in a manner to be agreed ordered”.
Following further reflection by the husband and set out in his case outline document filed 9 June 2015, he now seeks the following outcome:-
(1)That the husband do retain as his sole property free from any claim, right or entitlement of the wife his interest in the property situate at [B Street, Suburb C] (“the [Suburb C] property”) together with his motor vehicle, monies standing to his credit in any bank or financial institution, and all other items of personalty in his possession and/or control.
He also seeks an order that the wife would retain as her sole property free from any claim, right or entitlement of the husband her interest in the property situate at D Street, Suburb E in the Australian Capital Territory (“the Suburb E property”), her motor vehicle, any monies standing to her credit in any bank or financial institution and any personalty in her possession and control.
In summary, each of the parties would retain such items of realty and personalty without adjustment in favour of the other and free from any further claim.
By her Response filed 21 July 2014, the wife sought orders as follows:-
(1)That the Suburb E property be excluded from the matrimonial pool.
(2)That the interests of the parties in their separate or joint property be divided on a 70:30 basis in favour of the wife.
(3)That an amount representing the “value of the superannuation interest” of the wife in the PSS Defined Benefit Superannuation Scheme as at the time of cohabitation be excluded from the superannuation interests of the parties accumulated during the period of cohabitation and that of that accumulated entitlement the wife should receive a splittable benefit representing 70 per cent.
The wife now seeks the orders as set out in her case outline document filed 9 July 2015 in the following terms:-
(1)That by way of settlement of property or alteration of interests in property:-
(a)the husband pay the wife the sum of $133,086 within sixty days;
(b)the husband do have a superannuation split from the wife’s PSS superannuation interest using a base amount of $50,000;
(c)each party otherwise retain all asset presently in their sole name and/or in their respective possession.
(2)The husband pay the wife’s costs.
DOCUMENTS RELIED UPON
The husband relies upon the following documents:-
(1)Initiating Application filed 19 June 2014.
(2)Financial Statement filed 1 June 2015.
(3)Trial Affidavit filed 5 May 2015.
(4)Case Outline document of the husband filed 9 June 2015.
The wife relied upon the following documents:-
(1)Response filed 21 July 2014.
(2)Trial Affidavit filed 22 May 2015.
(3)Affidavit of Ms F filed 22 May 2015.
(4)Affidavit of Ms G filed 22 May 2015.
(5)Financial Statement of wife filed 22 May 2015.
I was also assisted by the case outline document of the wife filed 9 June 2015.
CHRONOLOGY
Date of birth of wife
Husband graduates with a Bachelor of Management
Wife graduates with a Bachelor of Commerce and commences a Bachelor of Laws
Feb 1998Wife commences employment with public service
Parties meet
12.4.2001Husband purchases property at B Street, Suburb C for $188,000 with a mortgage of approximately $100,000
5.11.2002Wife purchases property at D Street, Suburb E, ACT for $273,000 with a mortgage of $218,000, some money provided by her mother and a deposit of $43,000
Feb 2004Parties commence a relationship and become engaged in 2004
14.8.2004Parties commence cohabitation at the Suburb C property
Aug 2004Suburb E property is rented out
Aug 2004Husband is employed fulltime at H Org and wife remains in fulltime employment with the public service
13.11.2004Parties marry
2.3.2006Date of birth of A (“A”) (9 years)
11.8.2006Mortgage over the Suburb C property is discharged
April 2011A commences primary school
27.11.2013Parties separate under the same roof
Dec 2013Wife leaves the Suburb C property. Husband remains living in the property to the present date
12.12.2013Wife repays her mother $30,000 drawn down on the ACT mortgage
20.1.2014Wife withdraws $30,000 from term deposit and repays her mother
April 2014Parties execute a parenting plan with the parties to equally share the care of the child
19.6.2014Husband files Initiating Application
21.7.2014Wife files a Response
29.5.2015Following the sale of the Suburb E property for $450,000, net proceeds of sale is $370,247
BACKGROUND
The husband is 47 years of age. The wife is 38 years of age. Each of the parties have significant tertiary education qualifications. The husband graduated in 1996 with a Bachelor of Management. That qualification ultimately saw him employed with the public service from 2001 in the area of information technology.
The wife completed her Bachelor of Commerce in 1997 and was also studying for a Bachelor of Laws. As a result of her skill set, she obtained fulltime employment with the public service and it was there that the parties met. In 2002 the wife moved to Canberra to take up a promotion. Soon after her transfer she entered into a contract for the purchase of the Suburb E property for $273,000 and upon settlement in March 2003 she contributed $27,300 of her own savings, $20,000 provided by her mother and an additional sum from savings held with an aunt. The mortgage over the Suburb E property with Members Equity was in the sum of $218,400.
To set up the home and purchase furniture, the wife alleges that her mother advanced her considerable funds totalling an additional $6,500.
The parties did not form a relationship until about February 2004. They were aware of each other but it was only after some months of each of them travelling between Adelaide and Canberra that they decided to commence cohabitation in the husband’s property at Suburb C. He had purchased this property in about 2001-2002 for $188,000 with borrowed funds of almost $100,000.
In 2002 but in any event prior to the commencement of their relationship, the husband ceased employment with the public service and commenced with H Org (“H Org”).
The parties progressed their relationship with some speed. They were engaged in April 2004 and the wife transferred from Canberra to Adelaide with the public service. There is some potential relevance to the issue of the wife transferring to Adelaide. The husband considers that her transfer was a matter of discussion as part of an overall agreement. He asserts that it was a joint decision that the wife would rent out the Suburb E property.
Whilst there is no doubt that the parties discussed their future together, the wife does not concede that the management of her Suburb E property was in any way a matter of joint and equal consideration. It was obviously a consequence of her move to Adelaide that the best use of the property was now as an investment device and any decision as to the selection of tenants, the rental to be charged and how the net income was to be used is, on the wife’s case, at her sole election.
She says that virtually all of the net rental was used to meet the mortgage. As at August 2004 being the date of commencement of cohabitation, the mortgage then stood at $208,000.
It is her recollection that the husband’s mortgage was $79,635. As far as the husband remembers, the decision to leave the Suburb E property in the name of the wife was significantly influenced by her higher income and therefore the greater benefit from being able to negatively gear any loss in respect of the property.
As appears uncontroversial, there was a modest loss generated from the property for the financial years 2005 to 2008 inclusive. The loss was of some benefit to the wife.
It was a feature of the relationship that the wife’s income and potential for increased salary was recognised by the parties to exceed that of the husband.
Notwithstanding that the husband’s income was supplemented with a PSS super pension arising from his earlier employment with the public service, paragraph 25 of the wife’s trial affidavit sets out a comparison of the after tax income of the parties. The difference is not significant until the husband transitions to permanent part-time employment in or about 2008.
The parties were married in 2004. The ceremony followed religious tradition. It was an observation of the husband and accepted by the wife that the wedding was ultimately costly but the wife’s family contributed a significant proportion of the expense.
This issue is raised because the wife submits that the money expended by her family on the costs of the wedding should fall into a consideration of the respective contributions made by each of the parties or by others on behalf of each of the parties.
The child of the parties was born in 2006. The wife ceased work in early February 2006 and took extended maternity leave at half pay. She returned to work on 11 December 2006.
She says that the parties agreed on a management plan for the parenting of the child in her early years. It was allegedly agreed that the wife would return to work fulltime but that the husband would take a year off to look after the child.
Notwithstanding their intentions, the arrangements were modified such that each of the parties worked on a part-time basis. That has continued to the present date notwithstanding that the husband’s employment is at a more modest level of 19 hours per week with the wife working between 20 and 26 hours per week.
I do not consider that ultimately anything turns on the extent to which each of the parties pursue their modified employment. The husband conceded in evidence that it was possible he could seek to work a further day and still be able to supervise and properly parent the child.
There is little impediment to each of the parties seeking some further extension of their hours of employment and they both conceded that this would become more likely as the child got older.
Notwithstanding that the parties may work similar hours, the wife’s employment with the public service is more remunerative than that of the husband with H Org.
It is to the credit of the parties that whatever their differences, their prime focus has been the care of the child and the parenting plan ultimately put in place appears to regulate parenting arrangements without rancour.
In July 2010 the wife’s mother agreed to provide her with $30,000 to enable her to undertake further studies and possibly a PhD. On 27 July 2010, $20,000 was deposited into the wife’s CBA Streamline Account and then in April and May 2011, a further two payments of $5,000 was banked by the wife. The total sum of $30,000 was ultimately placed into a 90 day ING Term Deposit account on or about 22 October 2012. The wife did not ultimately take up the anticipated studies and on 22 January 2014 following separation, the wife “repaid” $30,000 to her mother from a total amount as at the date of maturity of $31,580.
The parties separated on 27 November 2013 with the wife leaving the premises on 4 December 2013. On 6 December 2013 in a telephone conversation with her mother, the wife raised the issue of monies that she considered were outstanding namely, the original money provided by the wife’s mother to enable the purchase of the Suburb E property to take place (“the first loan”) and the funds provided to assist her further intended studies (“the second loan”).
It is her evidence that she offered to repay her mother the two loans totalling $60,000 which was accepted. On 12 December 2013 the wife transferred $30,000 from her CBA account and when the term deposit matured she transferred $30,000 on 20 January 2014 from the ING account and ultimately into her mother’s account on 22 January 2014.
The husband’s position is that he does not consider the wife has provided any satisfactory explanation as to the repayments of the purported loans and does not accept that there is any validity in respect of the wife’s position.
Following separation the husband remained in the former matrimonial home whereas the wife took up residence in rental accommodation at $380 per week. She paid a bond of $2,280. She continues to remain in her rental accommodation and her lease expires in December 2015. The wife is uncertain as to her future plans.
Whilst the parties give different evidence as to the division of furniture and effects in and around the former matrimonial home, neither of them press for any orders in relation to furniture although I generally accept that the wife incurred a higher level of expenditure to assist her in relocating to her current rental accommodation and providing an appropriate level of comfort in her home.
Fortunately the parties were able to negotiate arrangements in respect of A and executed a parenting plan on 12 April 2014. The effect of the agreement is that the child’s care is shared between the parties. A consequence of the agreed position is that the wife has been assessed to pay child support currently in the sum of $250.42 per month. The husband continues his employment with H ORG. By his own admission the husband intends to continue working in this area but by necessary implication he accepts that his position is not well remunerated and whilst he would expect annual pay increases they are applied to a relatively modest base income. At present he works part time over 27 hours per week and earns $39,000 per year. He supplements his income by a draw down from his defined benefits superannuation scheme. In evidence, the husband was prepared to accept that he could currently work one extra day which would see some increase in his income although there is some uncertainty as to whether the extra work is available. The wife is critical of the extent to which the husband is prepared to work. She considers that he has a significant skill set and has the potential for higher paying employment not necessarily with his current employer.
The wife is employed as a senior public servant with the public service. She has a degree in commerce and law and is currently undertaking her Graduate Diploma of Legal Practice which would enable her to obtain a practising certificate. It is likely however that at least for the foreseeable future she will remain in her employment with the public service at a salary of about $115,000.
It is a feature of this case that there has been a focus on the differential of income received by the parties both during the course of cohabitation and following separation.
COURT PROCEEDINGS
Early in the proceedings the husband caused a caveat to be lodged on the title of the Suburb E property. The wife took steps to warn the caveat and the husband sought interim orders of injunction and restraint against the wife from selling, encumbering or disposing of her interest in the property.
That application came before Judge Simpson on 24 June 2014 on which occasion it was noted that there was no appearance by or on behalf of the wife. Orders were made in the following terms:-
(1)That the respondent be and is hereby restrained from selling, encumbering or disposing of the interests of the parties or either of them in the land described and comprised in ACT Certificate of Title Volume 1411 Folio 58 being land at D Street, Suburb E.
(2)The respondent be and is hereby retrained from drawing down on any loan account associated or secured by mortgage over the ACT property.
On 27 October 2014 the proceedings were transferred to this Court and was listed for interim argument before Justice Dawe on 4 February 2015.
On that occasion the parties reached a consent position which discharged the orders of injunction and enabled the wife subject to certain terms and conditions to sell the Suburb E property with the ability to disperse a sum up to $40,000 to cover the costs of sale and the preparation of the property.
The Suburb E property sold with settlement taking place on 29 May 2015 and the parties have agreed that the wife retain the net proceeds of sale of $370,247.
On 9 April 2015 the matter was listed for trial directions. It is important that the parties considered the following represented the issues in dispute:-
(a)an evaluation of the respective contributions of the parties;
(b)the value of the real property (historical and current) situate at D Street, Suburb E, ACT and B Street, Suburb C, SA;
(c)the financial assistance provided by the wife’s family;
(d)the financial resources of the parties including their future employment opportunities;
(e)the proper approach to be taken global or asset by asset;
(f)the extent and consideration of any add backs.
The trial commenced on 9 June 2015. The husband gave evidence in chief and was then the subject of cross examination.
The wife gave her evidence later that day with her cross examination concluding in the morning of 10 June 2015. As part of her case the wife called her mother Ms G. Final submissions were made at the close of the evidence.
Separate to the trial the parties obtained a Divorce Order on 15 June 2015 in respect of an Application for Divorce filed 23 April 2015.
At the commencement of the trial counsel for each of the parties relied upon their separate case outline documents.
The husband’s proposition is that it is in all the circumstances just and equitable for the Court to consider orders for settlement of property and on that basis the preferred approach is to adopt a global assessment of contributions. The significant issue in respect of the interests of the parties in property is as to the treatment of the alleged withdrawal by the wife of $61,580 (the first and second loans).
If the Court does not consider that there should be an “add back”. Then it should fall to consideration pursuant to s 75(2)(o) of the Act.
Generally however the husband does not seek any adjustment for factors pursuant to s 75(2) and in any event even though on his calculation the property of the parties (as distinct from their separate superannuation entitlements) should be adjusted on a 60/40 basis in favour of the husband, his position at trial is that there should be no adjustment of either the property of the parties or their superannuation entitlements.
I assume that the position adopted by the husband is a pragmatic consideration.
For her part, the wife focusses on a relatively short period of cohabitation and taking into account her purported substantial contributions during the period of the relationship and the marriage, an asset by asset approach should be preferred rather than a global approach.
The wife seeks no adjustment for her rental bond, the purchase of furniture and household effects post-separation and the travel costs that she alleges were wasted by the cancellation of the Country I holiday.
She does however wish to bring into consideration the rent of $380 per week that she paid following separation for a period of about 80 weeks and taking into account the husband’s expenses in his retention of the former matrimonial home, there should be an accounting in her favour of about $13,600.
The wife however accepts that it is not appropriate that this notional sum should be the subject of an “add back” but rather seeks an adjustment pursuant to s 75(2)(o).
When considering the contributions of the parties, the extent to which his contribution to the Suburb E property should be recognised is based upon a relatively convoluted argument namely, that because the husband made no contribution to the acquisition of that property and no contribution to its maintenance or improvement, the only contribution arises from his involvement with the household and his contributions as a homemaker during the marriage. The equity in the ACT property increased by about $244,889 (with CGT of $18,503 having been deducted) and on the basis that his contribution should not exceed 10 per cent of this figure, in some way there should be an allowance to the husband of $24,488.
This is in sharp distinction to what the wife says was a valuable contribution to the Suburb C property by the direct contribution of $59,469 in terms of discharge of the mortgage, improvements and her higher level of income during the course of the relationship. In respect of the Suburb C property it should be considered that the parties contributed equally.
Noting that there is a disparity in the superannuation interests of the parties, the wife concedes that there should be a superannuation split in favour of the husband of $50,000.
In that regard the parties tendered by consent reports of Mr J, Actuary, in terms of the valuation of the separate superannuation entitlements of the parties.
As ordered, each of the parties filed an advice as to their separate legal costs. The fees incurred by each of the parties are not dissimilar and I am satisfied that generally they have been paid from sources that would not be considered as matrimonial property. I proposal to ignore the legal costs of the parties.
It is conceded by the parties that the sale of the Suburb E property will incur capital gains tax. This will be levied against the wife and whilst not the subject of agreement, the only calculation of the likely capital gains has been prepared by the wife and received as Exhibit 1. The wife was not challenged in respect of her calculations and given her employment and the favourable view that I formed as to the veracity of each of the parties, I am satisfied to accept that the likely total tax owing to the public service in respect of the capital gain following the sale of the property is $18,502.96. The wife seeks $4,855 by way of PAYG instalment obligation arising out of rental income received by her for 2015 financial year. I do not propose to bring that amount to account. The wife has had the advantage of the surplus rental income.
LEGAL PRINCIPLES TO BE APPLIED
Section 79 of the Act provides:-
(1)In property settlement proceedings, the court may make such order as it considers appropriate:-
(a)in the case of proceedings with respect to the property of the parties to the marriage or either of them – altering the interests of the parties to the marriage in the property; or
(b)…
including;
(c)an order for a settlement of property in substitution for any interest in the property; and
(d)an order requiring:
(i) either or both of the parties to the marriage; or
(ii)the relevant bankruptcy trustee (if any);
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.
Section 79(2) provides:-
The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
“Property” is defined in s 4(1) of the Act as meaning:-
Property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.
In Stanford v Stanford (2012) 247 CLR 108 the majority held:-
[35]It will be recalled that s 79(2) provides that “[+] the court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
[36]The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds…
It is therefore not to be assumed that a party to a marriage has a right to an interest in property by reference to matters arising under s 79(4). In effect, a party cannot pull themselves up by their own boot straps by asserting contribution under s 79(4) and then using that position to satisfy the obligation created by s 79(2). To do so would be to “conflate” the relevant sections.
The High Court in Stanford sought to define its likely application to cases in the following manner:-
[42]In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of the choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It would be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of the property by the husband and the wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).
The parties cohabited for a period of nine years, being married in 2004 with a final separation occurring in December 2013.
Both parties seek that there should be an alteration of their respective property interests notwithstanding that ultimately the husband’s position is that there should be no adjustment.
Clearly the husband and wife are no longer living in a marital relationship and will not have the advantage or benefit of the “common use of property”.
I am satisfied that it is just and equitable in the circumstances of a mutual commitment made by each of the parties during a marriage of some significant duration and involving a child that the Court should embark upon a consideration of an adjustment to the property interests of each of them.
ASSETS AND LIABILITIES OF THE PARTIES
The following list of assets and liabilities appear to be agreed:-
Suburb E property (wife)
$370,247
Suburb C property (husband)
$550,000
Motor vehicle 1 (wife)
$ 2,000
Motor vehicle 2 (husband)
$ 2,000
Savings (wife)
$ 1,678
Savings (husband)
$ 3,040
Total
$928,965
Husband’s savings at separation
The wife alleges that at separation the husband had savings in a term deposit of $16,600. The husband’s evidence is as at the date of separation he had $6,400 in a Commonwealth Bank Account and $10,200 in a RAMS account. Those monies however were dispersed generally by the husband on living expenses. There is no evidence to suggest that the monies held by the husband at separation have been inappropriately dissipated. The Full Court in Chorn & Hopkins (2004) FLC 93-204 remarked as follows:-
It is well settled that save in exceptional circumstances a trial Judge should deal with the property as at the date of the hearing and make adjustments taking into account the various matters set out under s 79. However, the particular justice of the case may make it appropriate to notionally add back assets which have been demonstrated to have been dissipated either during the marriage or post separation. Normally it is necessary to demonstrate an appropriate basis for doing so, for example by wastage such as gambling or extravagant living. Additionally, because of the requirements of each party to bear their own costs, it is generally appropriate to add back to the pool of assets notionally any legal costs that have been spent on the litigation and to deal with the costs as a separate issue at the end of the litigation. (citations omitted)
See also Omacini & Omacini (2005) FLC 93-218.
I do not consider that there is evidence of wastage or inappropriate conduct by the husband in this regard and accordingly I bring to account the husband’s savings as agreed as at the date of the hearing.
Household effects and furniture
The parties have agreed to exclude the furniture and effects in their separate possession. Neither party seeks an adjustment against the other either by way of monetary sum or transfer to the other of specific items of property.
CGT on Suburb E property
Consequent upon the sale of the Suburb E property, both parties concede that there will be CGT assessed on the capital gain.
The wife has undertaken a capital gains tax calculation in the sum of $18,502.96 together with a further PAYG taxation instalment on rental income for 2015 in the sum of $4,855. Accordingly, the wife seeks to bring to account the total tax owing in respect of the Canberra property of $23,357.
The taxation calculation forms Exhibit 1 in the proceedings.
It is not suggested by the husband that capital gains tax will not be assessed against the wife. It is simply that he presents no evidence as to the calculation with the vague challenge the wife’s calculation.
Ideally there would have been a joint instruction to an appropriately qualified single expert thereby resolving the issue without contest.
The circumstances of this case however are unusual in that the wife has significant expertise arising out of her employment with the public service. The calculation presented on her behalf appears credible and perhaps of greater relevance is that the methodology adopted by her was unchallenged.
I am entitled to consider the method and manner by which the relevant legislation would cause capital gains tax to be assessed and levied and I am satisfied that the methodology adopted by the wife accords with the relevant legislation. The calculation is therefore one of arithmetic rather than the exercise of expertise.
I am prepared to accept the capital gains tax calculation as promoted by the wife in the sum of $18,502.96.
The PAYG tax instalment is more problematic. Again, I am prepared to accept the accuracy of the calculation in the sum of $4,855. The issue is whether it should be brought to account.
I am mindful of the history of rental income in respect of the Suburb E property for the financial years 2005 to 2014 inclusive. It is again uncontroversial that from 2009 there has been positive rental income gradually increasing to the level of $14,380 in 2014. Whilst I do not know the likely net rental income for the 2015 financial year (the year against which the wife asserts a PAYG taxation obligation), it is likely that the income will again be net of outgoings.
The wife has had the advantage of the income and it seems to be appropriate that she be responsible for taxation instalment that pertains directly to the rental income for the 2015 financial year. Accordingly, I propose to bring to account the tax on capital gain of $18,502 but to exclude from the property pool the further taxation component in respect of the rental income of $4,855. Each of the parties have incurred liabilities arising out of the exigencies of life and significantly they have each incurred and in part paid substantial legal fees.
As ordered, each of the parties filed a costs advice document with the wife’s costs forming Exhibit 2 and the husband’s costs Exhibit 6.
The costs incurred by each of the parties are similar and importantly I am satisfied that costs have been paid either from personal funds derived principally from post-separation income or in the wife’s case, substantial monies having been borrowed from the wife’s sister.
I do not propose to treat the legal fees of each of the parties either by way of an “add back” or as a consideration pursuant to s 75(2)(o) of the Act.
Accordingly, the net property of the parties is calculated as follows:-
Total Assets
$928,965
Less CGT liability
$18,503
Balance
$910,462
Superannuation
Public Service Superannuation Scheme (husband)
$126,528
Australian Super (husband)
$63,678
Public Service Superannuation Scheme (wife)
$351,207
Lost Member Register (wife)
$ 1,073
Balance
$542,486
Payment by wife of loans
The husband argues that the withdrawal by the wife of $61,580 (loans one and two) should be brought to account not necessarily as an “add back” but as an adjustment pursuant to s 75(2)(o) of the Act.
Not surprisingly, the wife opposes the husband’s contention and as such the resolution of the disputed position requires consideration of the circumstances by which monies were provided to the wife and then ultimately dispersed by her following separation.
The wife’s evidence is that at the time of purchase of the Suburb E property she was short of funds in the sum of $27,300. She had some money of her own and borrowed $24,000 from her mother which was directly used to assist in the payment of the purchase price and a further $2,500 for furniture and other effects. The total sum of $26,500 was the amount obtained by the wife from her mother, but it is her evidence that they agreed she would be repaid $30,000 at some undefined point into the future.
The second loan of $30,000 is more easily understood. The wife borrowed money from her mother to enable her to undertake post graduate studies. That study program did not eventuate and the monies provided by her mother were returned to her from an ING term deposit account.
It seems to me that there is little or no contention in respect of the money comprised in the second loan. It is a stand-alone amount and of recent provision. It was earmarked for a specific purpose and it is common ground that the wife did not ultimately undertake the particular course of study. It seems reasonable given the uncontested evidence of the wife’s mother that the funds should be returned to her mother in those circumstances.
The first loan is more problematic.
The provision of those monies were without substantive condition. It is not suggested that there was any predetermined time when the monies would be repaid and at best the evidence supports the position that if the Suburb E property was ever sold then that might be an appropriate time to consider the return of those funds. It was not even suggested that the monies would necessarily be repaid upon a demand by the wife’s mother.
It is likely that such a claim would in any event been statute barred under the Limitations Act 1936 (SA) applicable to an alleged loan arrangement greater than six years with no demand for payment. See Ogilvie v Adams (1981) VR 1041 at [1049] and [1052]. I consider that the limitation period during which the loan could in theory have been called in has expired.
The wife was cross examined in respect of the alleged obligation to repay monies to her mother and her evidence is such that I am able to find the primary purpose of monies being paid back to her mother by the wife was not because of any demand for repayment or even an obligation to do so but rather, the catalyst for the repayment was the separation of the parties.
The wife tendered email communication with her sister in respect of the repayment of alleged “debts owing” to the mother in the sum of $60,000. Those emails form Exhibit 3. I consider that the documents were self-serving and of little forensic weight.
Counsel for the husband concedes that I should be cautious in adding back property which is no longer in existence. I am referred to the decision of the High Court in Stanford (supra) and Bateman & Bowe [2013] FamCA 143 and Watson & Ling (2013) FLC 93-528.
There are however circumstances where it may be appropriate to add property back into the interests of the parties and in particular that may well be a possibility where it can be argued that the property could potentially be retrieved.
I have given careful consideration to that proposition. I have not heard evidence as to the manner in which the wife’s mother has dealt with monies returned to her and that topic was not the subject of cross examination either of the wife but perhaps more relevantly, her mother.
With some reluctance, I propose to accede to the approach promoted on behalf of the husband and that is to treat the first loan money pursuant to s 75(2)(o) of the Act rather than the notional return of it to the property pool under consideration. It must be brought to account that whilst the payment of the sum notionally represented by Loan 1 to the wife’s mother diminished the value of the property pool, if it had not been paid would represents an enhanced contribution made by the wife in terms of the value of her interest in property at the commencement of cohabitation.
METHODOLOGY
At an early stage in the proceedings the parties identified a difference in their considered approach to the determination of property settlement. The husband urges that I adopt a global approach to the property interests of the parties rather than an asset by asset approach which is promoted by the wife.
The focus of the argument on behalf of the husband is that the Court should not consider the relationship between the parties to fall into the category of “short marriage”. The wife relies upon the decision of McMahon & McMahon (1999) FLC 92-606 where an asset by asset approach was applied.
The circumstances in McMahon (supra) were somewhat unusual. The parties had cohabited for a period of about six years and other than some joint investments made towards the end of the relationship, the parties had steadfastly kept their financial affairs separate.
The appeal arose from the findings of the trial Judge that the parties had made an equal contribution. It appears that this was a mistake arising from a misunderstanding of counsel’s submissions.
The Full Court considered that in this particular case where there had been attention given by the parties to a “strict division of assets”, an asset by asset approach was preferable to a global analysis of their circumstances.
The Court did not rule out the application of a global approach and considered that if it was justified it was difficult to reconcile a finding that the parties had each made an equal contribution.
In Quinn & Quinn (1979) FLC 90-677 the Full Court said:-
[11]The fact that the marriage was of short duration, in the circumstances of this case…does give added weight to the capital contribution which the wife made to the acquisition of this home, as against the contributions which the husband made from his income and earnings during the marriage. That is, because the marriage was of such short duration, the asset in question to a large extent could be seen not as an asset accumulated from the efforts of the parties during the marriage but still largely an asset brought into the marriage by the wife.
In the Marriage of Goodwin (1991) FLC 92-192 the Court was faced with a four year marriage with no children of the relationship, although the wife had teenage children from a previous relationship. Whilst the decision of the trial Judge to award only a modest adjustment to the wife totalling 10 per cent was the subject of an appeal, whist the methodology of the trial Judge was found to be in error, the outcome was upheld.
Accordingly, whilst I do not consider that there is a category of cases that can be described as “short marriages” in the sense that such a delineation would require an asset by asset approach to be undertaken, the issue is really to focus on the respective contributions of the parties and the effect of their property introduced at the commencement of cohabitation is able to be better considered given that their financial affairs have not become inextricably intermingled.
Whilst it is obvious that the principal assets of the parties relate to their separate interests in property introduced at the commencement of cohabitation, the fact that those interests (or the net proceeds of the sale of the wife’s interest) are still present within the pool are as a result of joint decision to better maximise their property interests for the financial advantage of the family.
The parties had a differing income potential and their affairs were structured with a view to future security rather than a focus on keeping their property interests separate and distinct.
There is no suggestion that the wife’s income or any part thereof was quarantined notwithstanding that if the raw calculation was undertaken, the total after tax income of the wife for the period 2005 to 2014 exceeded that of the husband by about $200,000.
The wife’s income was used in part to reduce the mortgage over the Suburb C property and at paragraph 27 of her affidavit she sets out a summary for the period August 2004 to November 2013 of expenditure by her on household expenses totalling $105,094. In addition, monies were transferred to the husband’s account totalling $29,929 (paragraph 29) and there was a pattern of regular transfers of money by both the husband and the wife to a joint CBA bank account commenced in April 2014.
The husband recognises that the wife had a significantly greater salary than him.
He says however that all of his salary was deposited directly into the Adelaide/Bendigo Bank Line of Credit Account linked to the Suburb C mortgage. He acknowledges that the wife made some lump sum payments to the Suburb C Line of Credit and it is clearly as a result of their joint efforts that the mortgage was discharged in September 2006.
There is some dispute as to the extent of the contributions made by each of the parties to the general household expenses and whilst the husband asserts that he paid some $30,000 more than the wife towards the expenses during the period, I think it is an important observation that at the end of the relationship the property of the parties was relatively modest and there was no allegation made by one against the other of any non-disclosure of property interests held by the parties.
The husband also considered that the Suburb E property was part of their overall financial strategy and that by living in the Suburb C property the family were able to build upon the equity in the Suburb E property on the basis that it would be tenanted and therefore an investment.
Each of the parties made significant non-financial contribution towards the marriage and it seems to me in all the circumstances and taking into account that there is a child of this relationship, the most appropriate approach is to consider the property interests of the parties globally but to give weight to the separate contributions of the parties at the commencement of cohabitation, during cohabitation and after separation.
Whilst I have assessed the pool of property at $910,462 net of liabilities including capital gains tax on the ACT property, I am required to consider the appropriate treatment of the superannuation entitlements of each of the parties. The total superannuation interests are calculated at $560,586. This is a significant sum when considered against the total value of the property held by the parties and I consider that there is no basis to treat the parties superannuation entitlements other than as a separate pool. See Coghlan (2005) FLC 93-220.
Accordingly, I propose to adopt a two pool approach and am mindful that considerations in respect of the superannuation interests of the parties should not be intermingled with the considerations as to contribution and s 75(2) factors that are to be applied to the property interests.
CONTRIBUTIONS
The husband’s position is that at the commencement of cohabitation the husband had net property of about $264,683 principally comprising the net value of the Suburb C property.
For her part, the wife had property of about $150,000 principally arising from the net value of the Suburb E property noting my finding not to allow the monies initially provided by the wife’s mother as a loan.
Accordingly, the difference in value of property introduced into the relationship between the parties is about $100,000.
It is conceded that the husband had about $100,000 more value in the assets he brought to the marriage than did the wife.
The wife argues that notwithstanding this disparity at the outset of the marital relationship, the contributions of the parties should be considered now to be equal.
In Pierce & Pierce (1999) FLC 92-844 at page 85,811 the Full Court said as follows:-
In our opinion it is not so much a matter of erosion of contribution but a question of what weight should be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all 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.
It is a matter of assessing the contributions of all relevant kinds in each case to arrive at an outcome, which is both appropriate and just and equitable. In some cases particular contributions may be outweighed or equalled by other ones. In other cases particular contributions may be so disproportionate to other contributions as to merit special recognition.
During this marriage the parties worked hard. They adopted a cooperative approach and it could be said that they willingly entered into a marital partnership. They had as their clear focus the goal of achieving financial security for the family noting their particular focus on their daughter.
Each of them brought their own separate and special skills to the relationship and it was recognised (seemingly without complaint) that the wife had the capacity to generate greater income than the husband.
I think it is reasonable to find that as at the date of separation some weight needs to be given to the introduction of a higher asset base at the commencement of cohabitation, but the weight should be offset to some degree by the net income generated by the Suburb E property and to some extent the greater income capacity of the wife.
Noting that in a pool of about $900,000, each one per cent represents $9,000, I consider it appropriate to adjust the contribution in favour of the husband by four per cent.
Post separation, the circumstances of the parties are a little more complicated. The care of their daughter is shared between them and I am satisfied that each provides appropriately in that regard. The wife continues to earn a significantly higher income than the husband but the significant difference arises from the advantage of the husband in being able to remain in the Suburb C property in circumstances where the wife has had to rely upon rental accommodation at the rate of $380 per week for approximately 80 weeks. The wife argues that there should be an adjustment to take into account the rent paid by the wife notionally in excess of the expenses likely to have been incurred by the husband in terms of the maintenance of the former matrimonial home in the sum of about $13,600.
Whilst I consider it appropriate to have regard to the raw figure in order to gain an understanding of magnitude of scale, I do not consider that a strict arithmetical approach appropriate. Whilst an adjustment to take into account a rental obligation can be considered either as a contribution between the parties or a s 75(2) factor adjustment, I prefer to bring it to account as a contribution given that it is encapsulated within the period up to the date of trial. See Lalor & Lalor (1990) FLC 92-164.
I propose to adjust the contribution as between the parties to reflect 53 per cent/47 per cent in favour of the husband.
SECTION 75 (2) FACTORS
The position of the husband is that there should be no adjustment for s 75(2) factors notwithstanding that it would be open to argue that the income disparity of the parties in favour of the wife is a relevant factor. See Waters & Jurek (1995) FLC 92-635.
For her part, the wife argues also that there should not be any s 75(2) adjustment notwithstanding the income disparity because the husband is nine years older than the wife, each of the parties have the capacity to work fulltime and they share the care of the child equally.
I am not able to necessarily understand the wife’s argument in that regard given that the income disparity and the fact that the husband is older than the wife would ordinarily lend itself to a consideration of an adjustment.
The parties however do not seek that there be any adjust pursuant to s 75(2) in circumstances where I have not found it appropriate to bring back into account the legal fees paid by each of the parties or the repayment of the first loan.
The overall adjustment remains at 53/47 per cent in favour of the husband. The total property of the parties is $910,462. At 53 per cent the husband is entitled to retain property to the value of $482,544 but he retains property to the value of $555,040 thereby requiring an adjustment to the wife of $72,496.
SUPERANNUATION
The husband does not seek any adjustment in respect of the superannuation entitlements of the parties. Equally, the wife argues that she presently has about $162,074 more superannuation than the husband but that this is a reasonable reflection of the extent of her superannuation interests of about $95,970 at the commencement of the relationship compared to the value of the husband’s superannuation interest at the time of about $18,099. She concedes that there should be a superannuation split in favour of the husband of about $50,000.
The uncontested evidence of Mr J as contained in the superannuation valuation documents, would suggest that the superannuation interests of the parties are largely as a result of the benefit of their respective superannuation schemes. Put simply, the wife’s PSS scheme is more generous than that of the husband. The accumulation of value is a function of the years of contribution as represented by the accrued benefit multiple and the average salary.
In the circumstances of this relationship it could not be said that either party contributed to the superannuation entitlements of the other in the sense that they shared the duties within the home and the care of the child.
I do consider it to be appropriate to adjust the contribution to superannuation in favour of the wife to reflect her greater initial contribution of about $70,000. The adjustment is 60/40 in her favour.
It is however reasonable to consider s 75(2) factors in respect of the disparity in superannuation and in this regard the greater potential for the wife’s financial security arising out of her more generous superannuation entitlement and the likely exponential growth arising out of greater income and higher accrued multiple is such that would warrant an adjustment of 5 per cent in the husband’s favour with an overall outcome of 55/45 per cent.
The total value of the parties superannuation interests is $542,486. At 45 percent the husband is entitled to $244,118, but he has $190,206, thereby requiring an adjustment by way of a superannuation split from the splittable interest of the wife of $53,912.
Correspondence has been received from the trustee of the PSS Scheme confirming that procedural fairness has been given and that the trustee can give effect to the orders. The trustee’s letter is Exhibit 8 in the proceedings.
CONCLUSION
The position of the husband is that there should be no adjustment of property or superannuation interest as between the parties. For her part, the wife sought an adjustment of property by way of a settlement sum from the husband of $133,086 but she concedes that there should be a superannuation split from her PSS Superannuation interest of a base amount of $50,000.
I have determined that in all the circumstances it is just and equitable that the interests of the parties in property be adjusted by the payment of the settlement sum to the wife of $72,496 but that there be a superannuation split in favour of the husband of $53,912. I have given consideration as to whether one should be offset against the other. Whilst the amounts are not large and there is arithmetically an initial attraction to the concept, I consider to do so would be to inappropriately conflate the property interests of the parties with their superannuation entitlements that each of the parties will not satisfy a condition of release for a number of years.
I make orders as set out at the commencement of these reasons.
I certify that the preceding one hundred and fifty six (156) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 5 August 2015.
Associate:
Date: 5 August 2015
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