Brown & Brown
[2005] FMCAfam 14
•28 February 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| Brown & Brown | [2005] FMCAfam 14 |
| FAMILY LAW – Property – equality of contributions – section 75(2) factors. PRACTICE & PROCEDURE – Court must value superannuation in accordance with applicable formula – parties should provide the Court with valuations in accordance with formula. |
Family Law Act 1975 (Cth), ss.4, 75, 79 and 90MC
Family Law (Superannuation) Regulations 2001, R31
Lee Steere and Lee Steere (1985) FLC 91-626
Ferraro (1993) FLC 92-335
Clauson (1995) FLC 92-595
| Applicant: | CHERYL ELIZABETH BROWN |
| Respondent: | KEVIN THOMAS BROWN |
| File No: | LNM2343 of 2002 |
| Delivered on: | 28 February 2005 |
| Delivered at: | Launceston |
| Hearing dates: | 28 May 2004 with further submissions on 19 July 2004 |
| Judgment of: | Roberts FM |
REPRESENTATION
| Counsel for the Applicant: | Mr. P. McVeity |
| Solicitors for the Applicant: | McVeity & Associates |
| Counsel for the Respondent: | Mr. T. McGuire |
| Solicitors for the Respondent: | Temple-Smith Barclay |
ORDERS
That whenever a splittable payment is payable in respect of the superannuation interest of KEVIN THOMAS BROWN in the OAMPS Super Fund (“the superannuation fund”):
(a)CHERYL ELIZABETH BROWN is entitled to be paid an amount calculated in accordance with the Family Law (Superannuation) Regulations 2001, using a base amount in the sum of thirty-five thousand dollars ($35,000.00) at the operative time, being three business days after a sealed copy of this order is served upon the trustee of the superannuation fund:
(b)there is a corresponding reduction in the entitlement of KEVIN THOMAS BROWN but for this order: and
(c)this order binds the trustee or trustees from time to time of the superannuation fund.
That within sixty days KEVIN THOMAS BROWN is to pay to CHERYL ELIZABETH BROWN the sum of one hundred and four thousand dollars ($104,000.00).
That in the event that the said sum is not paid to CHERYL ELIZABETH BROWN within the said period of sixty days the property at 37 Jowetts Lane, Spreyton in Tasmania (“the property”) is to be sold upon the following terms:
(a)the parties must do all acts and execute all documents necessary to sell the property at market value by private treaty
(b)the parties must do all acts and execute all documents to cause the proceeds of sale of the property to be used as follows:
(i)to pay the reasonable expenses of the sale including agent’s commission and legal costs and disbursements;
(ii)to discharge the mortgage secured on the property
(iii)to pay any municipal rates
(iv)to pay 60% of the balance then remaining less the sum of $6,000.00 to CHERYL ELIZABETH BROWN
(v)to pay the remainder to KEVIN THOMAS BROWN.
That the parties each have liberty to apply in relation to the sale of the property and in relation to the implementation of these Orders.
That CHERYL ELIZABETH BROWN be solely responsible for and indemnify KEVIN THOMAS BROWN in relation to any unpaid balance of the Westpac MasterCard account in the name of KEVIN THOMAS BROWN as at the date of these Orders.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT LAUNCESTON |
LNM2343 of 2004
| CHERYL ELIZABETH BROWN |
Applicant
And
| KEVIN THOMAS BROWN |
Respondent
REASONS FOR JUDGMENT
In this matter the Applicant is CHERYL ELIZABETH BROWN (“the Wife”) and the Respondent is KEVIN THOMAS BROWN (“the Husband”).
The Wife filed her Application on 15th November 2002. In that document she seeks Orders as follows:
a)That the husband shall pay the wife a sum equivalent to 65% of the net matrimonial assets and resources of the parties.
b)That the husband transfer to the wife all his right, title and interest in the parties’ Mitsubishi Lancer motor vehicle, registered number DF3474
c)That the wife transfer to the husband all her right, title and interest in the parties’ Toyota Hilux ute, registered number CE7779.
At the hearing, the Wife’s counsel indicated that she was seeking orders that would give her 60% (not 65%) of the assets and resources.
The Husband filed his Response on 15th January 2003. It is not necessary to detail the Orders he sought in that document, because he filed an Amended Response on the date of the hearing in which he sought orders as follows:
a)That there be a distribution of property as between the parties as to 52.5% to the husband and 47.5% to the Wife
b)That there be a splitting of the Husband’s OAMPS Superannuation Entitlement in favour of the Wife with the base amount of $25,000.00.
c)That there be a consequent cash adjustment to the Wife of $81,805.00.
d)That the Wife pay the Husband’s costs of and incidental to these proceedings.
The matter came on before me in Launceston for hearing on 28th May 2004. However, because I required further information in relation to the Husband’s superannuation, the matter was mentioned in Devonport in June and I heard further submissions after receiving the requested superannuation information on 19th July 2004.
Background
The parties were married on 23rd March 1973 and they separated on 30th November 2000. They were divorced in mid 2002.
There were two children of the marriage. The parties’ older son left Australia in June 2003 and at the time of the hearing he was living and working overseas. Their younger son resided initially with the Wife for a period of approximately a year after the parties separated. He then lived with the father but approximately six months before the hearing, he returned to live with the Wife. At the time of the hearing he was engaged to be married and his fiancée was also living with the Wife.
The younger son was not earning a full-time income, however, his fiancée was employed full-time. Neither was paying the Wife any board.
The Husband was employed as a driver throughout the marriage. The Wife worked at times but there was a period of approximately ten years when she was not employed, because she was caring for the children.
The Wife vacated the former matrimonial home at separation and has been living in rented accommodation.
Agreed matters
At the hearing I was informed that some of the assets and values could be agreed but there was also some disagreement in relation to some assets.
The agreed list of assets is as follows:
The former matrimonial home
$195,000.00
Husband’s Toyota
$5,600.00
Wife’s Mitsubishi
$6,000.00
Joint Westpac account
$2,974.00
Wife’s Commonwealth Bank account
$445.00
Husband’s furniture
$3,100.00
Husband’s Westpac Superannuation (at separation)
$11,492.00
Wife’s Westpac Superannuation (at separation)
$4,594.00
Wife’s Hesta Superannuation
$154.00
The Husband claimed that the Wife has furniture worth $500.00 but that was not conceded.
In addition, the manner in which I should treat the Husband’s OAMPS Superannuation could not be agreed. I shall deal with that below in these Reasons.
The parties agreed that the mortgage outstanding on the former matrimonial home was $10,000.00 and there was a credit card liability of $1,400.00.
On 18th January 2005 the parties solicitors forwarded a joint memorandum to the Court indicating that it is agreed that the Wife is to be responsible for the payment of the credit card liability.
The Law
The Court’s approach to the determination of an application for the adjustment of property interests has been well established by authority. See Lee Steere and Lee Steere (1985) FLC 91-626, Ferraro (1993) FLC 92-335 and Clauson (1995) FLC 92-595. It is essentially a multi-step process: firstly, identifying the property, liabilities and financial resources of the parties at the time of the hearing; secondly, evaluating the contributions made by the parties as defined in section 79(4)(a) to (c) of the Family Law Act 1975 (“the Act”) and thirdly, evaluating the matters contained in section 75(2) of the Act if they are relevant.
In determining what Order the Court should make under section 79, the Court must also be satisfied that it is just and equitable in all the circumstances to do so – see Section 79(2) and Russell v Russell (1999) FLC 92-877. In that case the Full Court of the Family Court said, at paragraph 80:
Furthermore, it must be remembered in this regard that under
s 79(2) of the Act, the Court is required to be satisfied that it is the order to be made which is just and equitable, not just the underlying percentage division of the net value of the parties' assets. Indeed we take the opportunity to emphasise that in what his Honour has termed ''the fourth stage'', that is, the consideration of whether the result is just and equitable, it is the justice and equity of the actual orders not of the percentage distribution which must be considered.
Since 28th December 2002 courts have been required to treat a superannuation interest as property for the purposes of paragraph (ca) of the definition of matrimonial cause in Section 4 of the Act – see Section 90MC. The manner in which courts are to do that is set out in Part VIIIB of the Act.
The assets
As can be seen from above there was some agreement about some of the assets. However, there was also some disagreement.
In relation to the Wife’s furniture, she did not agree with the Husband’s estimate that the furniture taken by her was worth $500.00. She was cross-examined about this and it appears that she took a freezer and an outdoor setting. It appears that the Wife insisted that the Husband have the furniture in his possession valued. Yet the Husband did not similarly insist that the Wife have her furniture valued. In my view, if the Husband does not see fit to insist that assets are properly valued, he cannot then expect me to attribute some “guesstimate” in relation to the value of second-hand furniture. There is no evidence that the freezer and outdoor setting are of any significant value. Consequently, I conclude that they have no value and I do not take them into account.
The Husband’s OAMPS Superannuation is in a very different category because the law requires the Court to value superannuation. While that obligation is imposed upon the Court, it is my clear view that there is a duty upon litigants, especially those who are represented by lawyers, to provide the relevant information to the Court, and to assist the Court to value superannuation.
I pause to note that I have witnessed an unfortunate trend of legal practitioners not providing the Court with what it needs. In this regard, shortly before the superannuation amendments to the Family Law Act became operative on 28th December 2002, the Family Court of Australia published out a notice to legal practitioners which stated that in matters likely to conclude after that date where a flagging or splitting order was sought “the parties should ensure that the following steps have at least been taken……”. Those steps included obtaining a valuation of the superannuation interest.
In my view, that notice was equally applicable to proceedings in the Federal Magistrates Court of Australia and the situation has not changed with the passage of time. Indeed, practitioners should now be even more aware of what should be provided to the Court in matters where orders in relation to superannuation interests are sought.
In this matter, the Husband’s counsel urged me to adopt a particular method of “valuing” the Husband’s OAMPS Superannuation interest at the date of separation. However, it is not possible for the Court to adopt that method. This is because specific formulae are provided in the legislation. At times, those formulae can be exceedingly complicated but, because the Court is required by law to value superannuation in accordance with them, they cannot simply be ignored in favour of some other more simple valuation method.
I am also of the opinion that if the Husband wanted me to take his OAMPS superannuation interest into account at its value on the date of separation, the onus was upon him to provide me with a valuation in accordance with the appropriate formula as at that date. However, I was not provided with sufficient information to enable me to conduct the proper valuation calculations. Consequently, it was necessary to re-list the matter to obtain further information about the Husband’s OAMPS superannuation interest. This is referred to at paragraph 5 above.
The Husband’s OAMPS Superannuation interest is an accumulation interest in the growth phase. The trustee of that superannuation fund has not provided a statement which shows its value as at the date of separation, (being 30th November 2000) so it is necessary to use statements showing the values of the interest before and after that date in order to calculate the value of the interest in accordance with Regulation 31 of the Family Law (Superannuation) Regulations 2001.
The relevant formula is:
There have been no rollovers, transfers, partial payments or similar changes that could affect the value, so under the formula provided for in Regulation 31 the following applies:
V1= value of the interest at the first valuation date.
V2= the value of the interest of the second valuation date.
X= the number of days between the first valuation date and the relevant date (excluding both dates).
D= the number of days in the period beginning on the day after the first valuation date and ending at the end of the second valuation date.
From the statements provided to me, the valuation of the Husband’s OAMPS Superannuation on 30th June 2000 was $29,491.00 and on 1st July 2001 it was $36,954.00 (with both values rounded to the nearest dollar). There were one hundred and fifty two days between the first valuation date and the date of separation and there were clearly three hundred and sixty five days between the first valuation and the second valuation. Applying the formula at paragraph 28 above, I calculate that the Husband’s OAMPS Superannuation interest had a value of $32,599.00 at the date of separation.
This means that the assets and liabilities to be taken into account are as follows:
The former matrimonial home
$195,000.00
Husband’s Toyota
$5,600.00
Wife’s Mitsubishi
$6,000.00
Joint Westpac account
$2,974.00
Wife’s Commonwealth Bank account
$445.00
Husband’s furniture
$3,100.00
Husband’ OAMPS Superannuation
$32,599.00
Husband’s Westpac Superannuation
$11,492.00
Wife’s Westpac Superannuation
$4,594.00
Wife’s Hesta Superannuation
$154.00
Sub-total
$261,958.00
Less Liabilities
$11,400.00
Net Total
$250,558.00
Contributions
The Wife says that neither party had any assets of significant value at the start of the marriage. However, the Husband says that he owned two blocks of land which were unencumbered and they were sold after his marriage to the Wife.
Unfortunately, I have no more evidence than that. Further, there is no evidence before me of any value to be attributed to the two blocks of land that he claims to have owned. I must conclude that he did not consider those blocks to be particularly valuable, otherwise he would have brought more evidence to the Court.
I do not find it difficult to come to the conclusion that during the marriage the parties contributed on an equal basis. This is because the Husband says in his affidavit:
I worked full-time as a driver throughout the marriage. I worked long hours including weekends for extra income for the family. I say that (the Wife) was an excellent wife, mother and homemaker. I say, however, that our contributions overall were equal.
The Husband claims to have made greater contributions after separation because he was making greater payments off the mortgage than the minimum payments required by the mortgagee. He says that as a result he has reduced the mortgage liability by a sum exceeding $10,000.00 and he is therefore claiming that as an extra contribution. His counsel submitted that this was not contributed to in any way by the Wife and that I should “make a loading of 2.5% in favour of the Husband…… for that contribution”.
On the other hand, the Wife’s counsel submitted that there was an equality of contribution. In this regard, it is the Wife’s evidence that she had been paying approximately $130.00 per week in rent and that at the date of swearing her affidavit she had paid approximately $18,720.00 towards such rent.
In my view any additional reduction in the mortgage by the Husband is offset by the fact that the Wife has had to pay a landlord for her accommodation.
I am therefore of the view that the parties’ contributions overall should be seen as being equal and there should be no adjustment in favour of the Husband on the basis of contributions.
Section 75(2) factors
The Husband is aged 56 years and the Wife is aged 50 years.
In an earlier affidavit, the Wife stated that she may have difficulty working because of a severe arthritic condition in her hands and her lower spine. In her trial affidavit, she stated that her arthritic condition had escalated to the stage where she had to resign from her employment as a cleaner. However, she continued her work as a bakery assistant. In her oral evidence she indicated that she was averaging twenty six hours per week and that her gross income was $386.00 per week (approximately $20,000 per annum)
In his trial affidavit, the Husband conceded that the Wife suffered from an arthritic condition in her hands, but was not aware of any other ailment or arthritic conditions. He stated that she had always been a willing and hard worker and did not believe that her health had previously caused any hindrance to her employment.
When she was cross-examined, the Wife conceded that she had left her commercial cleaning job at the same time as two other women and that she had made an Industrial Relations Claim against the employer. When asked why she left her response was:
Because we no longer wanted to – all of us – we did not want to work for the company any more because it had changed all its plans and things and there wasn’t enough work there anyway.
I must therefore conclude that the Wife did not terminate her commercial cleaning employment as a result of any arthritic condition. It is also relevant that the Wife did not bring any medical evidence to the Court to support her claim that a medical condition reduces her capacity for employment.
However, I conclude that at age 50 years, with no formal qualifications, the Wife would have difficulty increasing her employment beyond that which she now enjoys. Consequently, I find that her earning capacity is unlikely to be much greater than $20,000 per annum.
The Husband admitted that he is currently earning $54,000 per annum. In the past he has earned more than that, but his evidence is that his hours have reduced. Notwithstanding this, it is clear that the Husband has an earning capacity that is more than twice that of the Wife.
Although the younger child appears to have moved between the residences of each of his parents, it is clear that I should not take his care into account. At the time of the hearing he was engaged to be married to a woman who was employed full-time, he was in receipt of a reasonable part-time income and counsel for the Wife agreed with counsel for the Husband that the younger child was “of little moment in this particular scenario”.
The parties’ marriage lasted for more than twenty seven years. That is clearly a long marriage, but there is no evidence that it has caused any reduction in the Wife’s earning capacity. I have referred to her earning capacity above.
Discussion
The Wife is seeking a division of the assets on the basis of 60% to herself and forty per cent to the Husband. On the other hand, the Husband is seeking a division of 52.5% to himself and 47.5% to the Wife.
The Wife bases her argument for the ten per cent adjustment in her favour on the Section 75(2) factors. Her counsel submitted that the Husband has a proven income earning capacity that is much greater than that of the Wife. While the Husband’s income may have reduced recently, it is still approximately 2.5 times that of the Wife, so that submission is clearly correct.
The Husband’s counsel clearly conceded that the Husband had a greater earning capacity. However, he referred to the fact that the Husband is of “retireable age”. He submitted that the Wife has six more years in the work force than her Husband, so these were matters that “should even out, should balance each other”.
That argument may hold true if both parties retire at age sixty years. However, if they both continue to work until they are sixty five years the Husband would on projections of current income earn more than one and a half times what the Wife will earn.
I do not have a crystal ball to tell me how long these parties will continue to work. However, it is clear that at this time the Husband has a significantly greater earning capacity than the Wife. For that reason, there must be some adjustment in the Wife’s favour because of Section 75(2) of the Act.
I have already indicated that there should be no adjustment in favour of the Husband on the basis of contributions, so it is clear that there should be an overall increase in the percentage that the Wife should receive, based solely upon the Section 75(2) factors in this matter.
In this regard, I am of the view that she should receive a ten per cent adjustment in her favour. In short, she should receive sixty per cent of the net value of the asset pool.
Calculations
Sixty per cent of the total net asset pool of $250,558.00 is $150,335.00.
The Wife retains, or has had the benefit of the following:
Her Mitsubishi
$6,000.00
Her Commonwealth Bank Account
$445.00
Her Westpac Superannuation
$4,594.00
Her Hestia Superannuation
$154.00
In addition, I conclude that she has had some benefit from the Westpac Account that existed at the time of separation. That Westpac Account had an approximate balance of $3,000.00 and the Wife was able to obtain benefit from that account for the payment of airfares, rent and bond. While there is no exact reckoning of who drew what from that account, I conclude that the parties used that account jointly so I attribute $1,500.00 to the Wife.
On that basis, the Wife has received, or had the benefit of $12,693.00. However, the parties agree that she is to be liable for the credit card debt of $1,400.00. Consequently, the net value to her is $11,293.00.
In order for the Wife to receive sixty per cent of the net total, she must receive a further $139,042.00.
Conclusions
The Husband is confident of his ability to retain the former matrimonial home and borrow an additional sum of approximately $81,000.00 to pay to the Wife.
In this matter the only superannuation fund that has been afforded procedural fairness is the OAMPS fund. Consequently, it would be inappropriate for me to make Orders splitting the Husband’s entitlement in any other superannuation fund. Further, it is my view that it would not be appropriate to attribute a base amount to the Wife in the OAMPS fund exceeding $35,000.00. That means that the Husband would need to find a sum slightly in excess of $104,000.00 if he is to pay the Wife her 60% entitlement.
Given that the Husband is fifty six years old and that he says that his income has been reduced, I have some concerns that he may not be able to raise $104,000.00. If he is not able to do so, the former matrimonial home will have to be sold.
If one notionally excludes the former matrimonial home, a splitting order allocating a base amount of $35,000.00 to the Wife will give her approximately $6,000.00 more than 60% of the other net assets. It is clear therefore that if the former matrimonial home is to be sold, it would be unfair for her to simply receive 60% of the net proceeds. The appropriate sum that she should receive is 60% less $6,000.00.
Consequently, I will make orders in this matter that provide for the following:
a)A splitting order in relation to the OAMPS Superannuation with a base amount attributable to the Wife in the sum of $35,000.
b)The Husband is to pay to the Wife the sum of $104,000.00 within sixty days.
c)In the event that the Husband does not pay the sum of $104,000.00 to the Wife within sixty days, the former matrimonial home is to be sold and the Wife receive sixty per cent of the net proceeds of sale less the sum of $6,000.00.
d)The regulation of the sale but with liberty to the parties to apply in relation to the sale.
e)The Wife to be responsible for and indemnify The Husband in relation to any unpaid balance of the credit card debt (in accordance with the agreement reached by the parties.
I certify that the preceding sixty-four (64) paragraphs are a true copy of the reasons for judgment of Roberts FM
Associate:
Date:
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