Butt & Edwards
[2007] FamCA 399
•13 April 2007
FAMILY COURT OF AUSTRALIA
| BUTT & EDWARDS | [2007] FamCA 399 |
FAMILY LAW – APPEAL FROM DECISION OF FEDERAL MAGISTRATE – Appeal by the husband against all orders made in property settlement proceedings following the delivery of a second judgment for the purpose of correcting error in calculations contained in the first judgment – Whether Federal Magistrate erred in the assessment of the parties’ contributions to the property pool, in the assessment of the s 75(2) adjustments and in determining entitlements to superannuation – Whether orders were just and equitable – Appeal allowed – Discretion re-exercised.
FAMILY LAW - COSTS - COSTS OF APPEAL – Costs certificates granted to both parties.
| Family Law Act 1975 Chorn v Hopkins (2004) FLC 93-204 |
APPELLANT: Mr Butt
RESPONDENT: Ms Edwards
FILE NUMBER: EA 99 of 2005
APPEAL NUMBER: CAM 1377 of 2003
DATE DELIVERED: 13 April 2007
PLACE DELIVERED: Canberra
JUDGMENT OF: Finn J
HEARING DATE: 11 April 2006
LOWER COURT JURISDICTION: Federal Magistrates Court
LOWER COURT JUDGMENT DATE: 18 July 2005
COUNSEL FOR THE APPELLANT: Mr Hodgson
SOLICITOR FOR THE APPELLANT: Nicholl & Co.
COUNSEL FOR THE RESPONDENT: Mr Maddox
SOLICITOR FOR THE RESPONDENT: BL Crane & Associates
Orders
That the appeal be allowed.
That Order 1 of the orders of 18 July 2005 be set aside.
That Order 2 of the orders of 18 July 2005 be amended by the deletion of the words “upon payment of the sum” and the insertion in their place of the word “forthwith”.
That Order 5 of the orders of 18 July 2005 be amended by the substitution of the figure “30%” for the figure “40%” appearing in that order.
That both parties have liberty to apply to the Honourable Justice Finn in relation to the implementation or operation of Orders 4, 5, 6, 7, and 8 of the orders of 18 July 2005 in light of the making of Order 4 of these orders.
That the Court grants to the appellant husband a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant husband in respect of the costs incurred by the appellant husband in relation to the appeal.
That the Court grants to the respondent wife a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent wife in respect of the costs incurred by the respondent wife in relation to the appeal.
IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Full Court delivered this day will for all publication and reporting purposes be referred to as Butt and Edwards.
| FAMILY COURT OF AUSTRALIA AT CANBERRA |
APPEAL NUMBER: EA 99 of 2003
FILE NUMBER: CAM 1377 of 2003
| Mr Butt |
Appellant Husband
And
| Ms Edwards |
Respondent Wife
REASONS FOR JUDGMENT
Introduction
1.This is an appeal by the husband against all orders made by Brewster FM on 18 July 2005 in property settlement proceedings between the husband and the wife under the Family Law Act 1975 (“the Act”).
2.The appeal is being determined by me as a single judge pursuant to arrangements made under s 94AAA(3) of the Act.
3.It is necessary to explain at the outset the somewhat unusual course which the proceedings took before Brewster FM.
4.The proceedings between the parties (who had commenced cohabitation in 1986, married in 1992 and separated in December 2002) were initiated by an application filed by the husband on 2 October 2003.
5.There was a half day hearing of the parties’ cross applications for property settlement before his Honour on 24 November 2004, at which both parties were represented by Counsel, and at the conclusion of which his Honour reserved his judgment.
6.His Honour delivered his reserved judgment on 21 January 2005.
7.In summary his Honour concluded in that judgment that the parties had net property of $849,254 (paragraph 21). That figure included the husband’s superannuation of $500,551 and the wife’s superannuation of $54,803.
8.Later after having considered the parties’ contributions, his Honour divided the property pool into $500,551 being the husband’s superannuation and $348,703 being the balance of the parties’ assets. He then went on to make what he termed a ten percent adjustment in the husband’s favour with respect to superannuation “to reflect the post-separation component” and a five percent adjustment also in the husband’s favour with respect to other property “to reflect his post-separation contributions” (paragraphs 28 and 29).
9.Then following a thorough examination of the s 75(2) factors, his Honour concluded that he regarded “these factors as balancing out”, and thus made no adjustment on account of them (paragraph 37).
10.His Honour’s overall conclusion in paragraph 38 of this first judgment was that the wife should receive 40% of the value of the husband’s superannuation which his Honour calculated to be “a split” of $200,000 (rounded off) and 45% of the other property which his Honour calculated at $156,916. His Honour further calculated that on the basis that the wife had property in her possession to the value of $117,300, the husband would be required to pay her $39,616, rounded up to $40,000.
11.However his Honour did not immediately take out his orders. Rather he gave the parties fourteen days to present him with orders that could, apparently, reflect “a different mix”, although his Honour indicated that if orders were not forthcoming from the parties, he would make orders in the terms he had proposed.
12.It appears from the material available to me (notably the transcript of a brief hearing before his Honour on 23 February 2005), that when his Honour came to draft the orders (apparently having not been provided with alternative draft orders by the parties), he realised that in his final calculations in his judgment of 21 January 2005, of the value of the property (other than the husband’s superannuation), he had overlooked the wife’s superannuation of $54,803. The matter was therefore re-listed before his Honour on 23 February 2005 (apparently on his Honour’s initiative).
13.The matter was not able to proceed very far on 23 February 2005 and was therefore adjourned to 9 March 2005. On 9 March there were further submissions by the legal representatives of both parties, and at the conclusion of the hearing, his Honour reserved his decision.
14.On 18 July 2005 his Honour delivered a further judgment. Given its brief terms it will be convenient to set out the whole of that judgment:
In this matter I had proposed to make orders that the husband pay the wife the sum of $40,000. This was supposed to represent a result whereby the wife would receive forty five percent of the parties’ assets excluding superannuation. In fact when I made this calculation I overlooked, when adding up the property in the wife’s possession, her superannuation. I calculated correctly that she was to receive $156,916. I incorrectly calculated that she has assets to a value of $117,300. In fact when her superannuation valued at $54,803 is included she had assets to a value of $172,103. This would have resulted in her having to pay monies to the husband. This would not, in my opinion, have been a just and equitable result.
I have given a great deal of consideration to the most appropriate way of resolving this problem. One way would have been to reduce the wife’s share of the split of the husband’s superannuation in order to give her a greater share of utilisable property. However I have decided that this would involve a distortion of reality in so far as contributions and s 75 (2) factors are concerned. In the end I have decided that I should take to unusual course of altering the contribution based and s 75(2) based division under the fourth stage of the process I referred to paragraph 10 of my original judgment so as to avoid a result which is not just and equitable. I propose to quarantine the wife’s superannuation from the divisible pool. This leaves a pool of utilisable property of $263,900 [$293,900] being the property referred to in paragraph 11 of my original judgment less the liabilities referred to in paragraphs 12 and 20. The wife’s forty five per cent of this totals $132,225. She has property to a value of $117,300 which leaves her to be paid an amount of $14,955 which I round off to $15,000. I will take our Orders accordingly.
15.I mention at this point that I understood both parties to agree that the figure of $263,900 which appears in the fourth last sentence of the judgment should be $293,900 and thus, as will be seen, I have interposed it.
16.The orders which his Honour then made and which are the subject of this appeal provide that:
· the husband pay the wife the sum of $15,000 within 30 days (Order 1) and that thereafter any beneficial interest which either party had in the property of the other should be extinguished (Order 2);
· the husband indemnify the wife in relation to a debt owed by the husband to his father (Order 3);
· there be a splitting order in accordance with paragraph 90MT(1)(b) of the Act whereby the wife would receive 40% of each splittable payment made out of the husband’s interest in the Commonwealth Superannuation Scheme Plan (Orders 4 and 5) (with necessary machinery orders (Orders 6, 7 and 8) also being made).
17.The engrossed form of the orders of 18 July 2005 states that the orders are “Amended under the Slip Rule”. That would seem to be a misdescription since, as I understand it, his Honour had not made any previous orders to give effect to his judgments of 21 January or of 18 July 2005. But nothing, in my view, turns on that misdescription.
18.On 26 October 2005 I made an order granting the husband an extension of time until that day to file a notice of appeal against the orders of 18 July 2005.
The Scope of the Appeal
19.In addition to a general complaint, contained in Ground 1, that the result embodied in the orders was “plainly unreasonable and manifestly unjust”, the husband complains in his grounds of appeal that his Honour:
· failed to add back as a notional asset a proportion of the sum of $99,500 which the husband had provided to the wife at separation so she could purchase accommodation (Ground 2), or alternatively, failed in his assessment of the parties’ contributions to place sufficient weight on the husband’s borrowing of that amount (Ground 3);
· failed in his assessment of the parties’ contributions, to place sufficient weight on the husband’s sole responsibility since separation for the financial support of the child of the marriage (Ground 4), and the husband’s primary responsibility since separation for the welfare of the child (Ground 5);
· failed to make a s 75(2) adjustment in favour of the husband on account of his ongoing responsibility for the care and financial support of the child (Ground 6);
· failed to treat the wife’s superannuation as property by excluding it from the asset pool (Ground 7), or alternatively, failed to take into account the wife’s superannuation entitlement as a s 75(2) factor (Ground 8);
· failed to take into account the wife’s superannuation entitlement in determining the percentage of the splitting order made in the wife’s favour in respect of the husband’s superannuation entitlement (Ground 9);
· erred in “splitting” the husband’s superannuation entitlement in the proportion of 60% - 40% in favour of the husband where the evidence was that the entitlement had incurred 15% since separation (Ground 10);
· failed to provide adequate reasons for the 10% adjustment in the husband’s favour to reflect the post-separation component in “splitting” the husband’s superannuation entitlement (Ground 11);
· erred “in law in his approach of stating that he would take the unusual course of altering contribution based and Section 75(2) based division under the fourth stage of the process to avoid a result which was not just and equitable and thereafter failed in fact to alter this division and simply deducting the Wife’s superannuation entitlement from the divisible pool” (Ground 12).
20.In his oral submissions in support of the appeal, counsel for the husband addressed first the last five grounds of appeal all of which are directed to the parties’ superannuation entitlements. As I understood counsel’s submissions, his Honour’s treatment of the parties’ superannuation was at the heart of the appeal. This position is understandable given that it was his Honour’s oversight of the wife’s not insubstantial superannuation entitlement in his final calculations in his first judgment that led to the need for the second judgment, which, it was common ground before me, is not easy to follow.
21.Notwithstanding the order in which counsel for the appellant husband made his submissions, I propose to address the grounds of appeal largely in the sequence in which they appear in the notice of appeal. The sequence of the matters raised in the grounds reflect the course or structure of his Honour’s judgment. Thus the approach which I propose to adopt in considering the grounds of appeal, will also permit an examination of his Honour’s judgment in a sequential way.
22.The case is somewhat complicated by his Honour’s statement in his second judgment that he proposed to alter “the contribution based and s 75(2) based division under the fourth stage of the process… to avoid a result which is not just and equitable”. This statement might be interpreted as meaning that the original contribution assessment and conclusion in relation to the s 75(2) factors were in some way superseded by the second judgment, thus making it unnecessary to consider grounds of appeal which are directed to those matters in the first judgment. But however that may be, I consider it necessary to address all grounds of appeal as it is through that course that his Honour’s ultimate decision and the challenges to it will be best understood.
The Factual Background as Found by the Federal Magistrate
23.His Honour commenced his first judgment by setting out the factual background to the dispute before him. In summary he found as follows.
24.The husband (then aged 41) and the wife (43) commenced to live together in June 1986 and married on 2 May 1992. They separated on 12 December 2002. There is one child of the marriage, who was born in October 1993 and who remained with the husband on separation. On 1 October 2004 orders were made formalising this arrangement.
25.In June 1989 the parties had purchased a home at K.
26.Around the time of separation the parties reached and put into effect the following agreement:
a)That an amount of $99,500 would be borrowed by extending the mortgage on the home.
b) That the wife would use a part of these monies to buy a unit for herself.
c) That the wife would transfer her interest in the home to the husband.
27.The wife purchased a unit at L for $195,000. She applied part of the proceeds of the $99,500 for this purpose and borrowed the rest.
28.After a brief period the wife sold the L unit for $205,000 and bought another property in northern New South Wales. This property cost $200,000, financed by a mortgage of $153,000 and $65,000 cash, being in part monies received from the sale of the L unit and in part monies left over from the $99,500.
29.When the parties commenced their relationship the husband was employed in the Commonwealth Public Service, where he has remained ever since.
30.At the commencement of the relationship the wife was employed as a sales representative. In June 1998 she obtained employment as a nurse. She took some time off after the birth of the child, but later obtained part time work at the hospital. She resigned in June 2000. She thereafter did some casual work with the [a university] as a technical support officer. She resumed full time work at the hospital in May 2001. She resigned this position in November 2002. She was then unemployed until July 2003 when she obtained employment at a northern New South Wales hospital. Initially this was casual work, but she obtained full time permanent employment at that hospital about September 2003.
The Pool of Property as Found by the Federal Magistrate
31.Having explained briefly the principles and process to be applied by a court in the determination of property settlement proceedings, his Honour set out the following list of agreed assets and values:
· The home $320,000
· The wife’s New South Wales property $236,500
· The husband’s motor vehicle $ 2,000
· The wife’s motor vehicle $ 6,100
· The husband’s contents $ 15,000
· The wife’s contents $ 15,000
· TOTAL: $594,600
32.His Honour then set out the following list of agreed liabilities:
· Mortgage on the home $155,000
· Mortgage on the New South Wales property $140,300
· Husband’s Mastercard $ 3,000
· TOTAL: $298,300
33.Although his Honour did not say so, the net pool on the basis of these agreed assets and liabilities would be valued at $296,300.
34.However as his Honour did go on to point out, the husband had superannuation entitlements under a defined benefits superannuation scheme which had been valued under the relevant regulations at $500,551, and the wife had superannuation entitlements under an accumulation fund of $54,803.
The Husband’s Case at Trial and on Appeal for “Add-Backs” of Notional Property
35.It was the husband’s case before his Honour that certain monies should be notionally included in the pool of property. His Honour explained the husband’s case in this regard in this way:
15. The first of these relates to part of the $99,500 given to the wife around the time of separation. She applied $45,000 of these monies to buy her [L] unit. When she sold that unit she cleared $50,000. She applied this, together with an additional $15,000 of the original $99,500, towards the purchase of her [New South Wales] property. The amount the husband maintains should be added to the pool of notional property is the difference between the $65,000 applied to the [New South Wales] property and the $99,500 taken by the wife.
16. The second amount the husband maintains should be added to the pool is the sum of $3,200 being IAG shares sold by the wife after separation.
17. The husband appropriately concedes that if these amounts are to be added to the pool there should be further notional amounts added to his side of the ledger. The first of these is an amount of $15,266. This represents an amount held with the Australian Scholarship Group which the husband cashed in after separation. In addition he sold some IAG shares for $930 after separation.
36.His Honour refused to add any of these monies notionally back into the appeal and he explained his reasons as follows:
18. I do not propose to add these monies back into the pool. The Full Court of the Family Court has recently pointed out that, when parties separate, their finances do not go into a state of suspended animation and that they are entitled to incur reasonable expenses for their support. The Full Court has also indicated that adding monies back into the pool as notional property should be the exception rather than the rule. See Chorn v Hopkins (unreported 9 July 2004).
19. As will be later explained however I will take these monies into account when considering the parties' contributions.
37.By his second ground of appeal the husband asserts that his Honour
“…was in error in his determination of the net asset pool available for division between the parties in failing to add back as a notional asset, a proportion of the amount of $99,500.00, being the monies which the Husband has provided to the Wife at the time of separation, which she had used in part to purchase a unit at [L].”
38.I understood from the submissions of Counsel in support of this ground that this complaint was directed only to his Honour’s failure to notionally add back into the pool that part of the sum of $99,500 which had not been used by the wife in the purchases of the L and New South Wales properties, and which was calculated to be $39,500. (The proceeds of the L property had been used to purchase the New South Wales property, and the value of that latter property was of course included in the pool).
39.However it was submitted that in failing to add back the amount of $39,500 which the wife had used on living expenses in apparent reliance on the Full Court decision in Chorn v Hopkins (2004 FLC 93-204), his Honour had misapplied that decision, with it being further submitted that that decision related primarily to the inclusion of pre-paid legal fees in the pool.
40.While it is true that the Full Court decision in Chorn v Hopkins was primarily concerned with the adding back of legal fees, it should not, in my view, be seen as limited to that issue. In fact in Chorn v Hopkins an issue arose concerning the inclusion in the pool as a notional asset of a ring worth $28,000, which the husband had given to a new fiancé after separation, although not using funds that had existed at the time of the separation of the husband and the wife in that case. In concluding that the Trial Judge had wrongly included the value of this ring in the pool as a notional asset, the Full Court cited (at paragraph 24) the following passages from earlier Full Court decisions:
“2.11There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support. Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial Judge. (Marker [1998] FamCA 42, 1 May 1998, per Baker, Kay and Chisholm JJ).
…
46.Whilst not seeking to place a fetter upon the exercise of discretion of a trial Judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post separation in a manner that is consistent with properly getting on with their lives. Cerini [1998] FamCA 143, 8 October 1998, per Nicholson CJ, Ellis & Kay JJ).”
41.It will be seen from these two passages, that his Honour’s reasons for refusing to include notionally in the pool that part of the sum of $99,500 used by the wife on living expenses was entirely in accord with Full Court authority. Accordingly Ground 2 has not been established.
The Contribution Assessment in the Federal Magistrate’s First Judgment
42.His Honour recorded in paragraph 25 of his first judgment that “(n)either party contended that any initial contributions or contributions during the relationship justified any adjustment in his or her favour”. In other words, his Honour was able to proceed on the basis that the parties were agreed that up until their separation, their contributions should be regarded as equal.
43.So far as their post separation contributions were concerned, his Honour made the following important findings in paragraph 26 of his first judgment:
(i) At all times [the child] has lived with the husband and he has had the responsibility for her care. He did not seek, and the wife did not pay, child support. He has thus made the major contributions as a parent both financially and non financially.
(ii) The husband has continued to make the mortgage repayments on the home. These total $300 a week. About $200 of this relates to the money borrowed to enable the wife to purchase her [L] unit so, in effect, the husband has been paying a part of the wife's mortgage. I do not overlook the fact that he has had the benefit of occupying the home in the meantime.
(iii) The husband has spent the amounts referred to in paragraph 17 and the wife the monies referred to in paragraphs 15 and 16. I take into account the fact that the husband used $5,000 of his monies to reduce the debt to his father and that part of the monies used by the wife were used to buy furniture and white goods that are in the pool.
(iv) Each party’s superannuation would have grown post-separation. This is particularly significant in the case of the husband who has the most valuable superannuation. He joined his scheme shortly before the parties commenced their relationship so on a pro rata basis about one eighth would be referable to the period since separation. In fact however its increase after separation would be somewhat greater than this. The husband had Mr Stephen Bourke calculate the value of his interest as at 30 June 2003, some six months after separation. Mr Bourke states that its value at this date was $422,715, about fifteen percent less than its value at the date of the hearing.
44.His Honour then went on to explain (in paragraph 27) why he proposed to make separate assessments for the parties’ contributions to the husband’s superannuation entitlements on the one hand and to the remainder of their property on the other, saying:
27. I consider the most appropriate way to proceed is on an asset by asset basis and treat the husband’s superannuation in a separate category to the other property. There are two reasons for this. The first is the fact that ascribing a lump sum value to the husband’s superannuation is rather artificial given that it cannot be converted into a lump sum. Comparing it to the other property is rather like comparing apples and oranges. The second related reason is that recognition of the post separation component of his superannuation involves a greater adjustment in his favour than is appropriate when making an adjustment of other property. To lump superannuation and other assets together in these circumstances would distort the position. I will use a simple illustration to indicate what I mean. Suppose we were dividing a hundred apples and a hundred pears. Suppose the evidence justified the husband receiving four more apples and eight more pears than the wife. It would distort the position were there to be a global approach taken and an order made that he receive six more of each.
45.His Honour then concluded (in paragraphs 28 and 29) that he would make “an adjustment” of 10% (in other words, a 60 – 40% division) in favour of the husband on account of the husband’s post-separation contributions to his superannuation entitlements (valued at $500,551) and “an adjustment” of 5% (in other words, a 55 – 45% division) in favour of the husband on account of his contributions to the balance of the property (valued at $348,703).
The Husband’s Challenges to the Contribution Assessments in the First Judgment
46.As an alternative to Ground 2 (which I have already determined has not been established), the husband asserts in Ground 3 that his honour was in error
“in his determination of the parties’ contributions in failing to place any or any sufficient weight upon the provision by the Husband to the Wife of the amount of $99,500.00, these monies being obtained as a consequence of an extension of the mortgage secured upon the former matrimonial home at K in regard to which the Husband has been meeting mortgage repayments since separation”.
47.It will have been seen from sub-paragraph (ii) of paragraph 26 of his first judgment, that his Honour specifically identified the $200 mortgage payment made each week on account of the amount of $99,500 borrowed to enable to wife to purchase the L unit. It is true that his Honour did not refer expressly to the sum of $99,500 actually borrowed. But it is clear from what he had said in sub-paragraph (ii) of paragraph 26 that he recognised that $200 of the $300 paid each week would relate to the borrowing undertaken to enable the wife to purchase the L unit and in relation to which, the husband was making the payments. I will return shortly to the issue of the weight attached by his Honour to this contribution by the husband.
48.By Grounds 4 and 5 the husband asserts that his Honour erred in his assessment of the parties’ contributions by failing to place sufficient weight upon the facts that the husband had been:
“… solely responsible for the financial support of the child of the marriage, since the time of separation” (Ground 4); and
“… primarily responsible for contributing to the welfare of the child, in his capacity as a parent and homemaker since the parties’ separation, particularly in circumstances where the Wife was residing in [northern New South Wales] and had comparatively little physical contact and involvement with the said child”. (Ground 5).
49.Again it will have been seen that in sub-paragraph (i) of paragraph 26 of his first judgment, his Honour expressly identified that the husband had made “the major contributions as a parent both financially and non financially”.
50.However, it is the weight which his Honour attached to these contributions by the husband to the child of the marriage that is challenged by Grounds 4 and 5.
51.By reference to paragraphs 26 and 29 of his Honour’s first judgment, it can be seen that his Honour made what he termed a 5% adjustment in favour of the husband in relation to all assets of the parties other than the husband’s superannuation interest (with such assets having a net value of $348,703) on account of the husband’s financial and non financial contributions as a parent of the child of the marriage, of the husband’s mortgage repayments which included a substantial component for the loan of $99,500 taken out to re-house the wife, and also for the use of monies by the parties referred to in sub-paragraph (iii) of paragraph 24 of his first judgment.
52.The difficulties faced by any challenge to a discretionary judgment based only on matters of weight are well known and understood within this jurisdiction particularly in light of the judgment of Stephen J in Gronow & Gronow 1979 FLC 90-716. In the present case it must be remembered that while the matters which supported the 5% adjustment were no doubt significant from the husband’s perspective, the 5% adjustment was made on account of contributions made only in the two year separation period – a period which followed a ten year cohabitation period during which the contributions of each party were conceded to be equal. Against this background, his Honour’s assessment that there should be an adjustment of 5% in favour of the husband for his post separation contributions was, in my view, well within the range of a proper exercise of the discretion.
53.Accordingly Grounds 3, 4, and 5 have not been established.
54.There were also challenges in Grounds 10 and 11 to his Honour’s contribution assessment in relation to the husband’s superannuation entitlement and to the splitting order which he made as a consequence, with these grounds asserting that his Honour was in error:
“…in his determination as to the appropriate splitting order in respect of the Husband’s superannuation entitlement, namely in proportions as to 60% to the Husband and as to 40% to the Wife in circumstances where the uncontroverted evidence was that the Husband’s superannuation entitlement had increased by some 15% since the date of separation” (Ground 10);
“…in failing to provide any adequate reasons for his determination that there should be an adjustment of 10% in the Husband’s favour to reflect the post-separation component in determining the splitting order in respect of the Husband’s superannuation entitlement” (Ground 11).
55.As his Honour did not in his orders alter the 60-40% “split” of the husband’s superannuation which he had proposed in his first judgement, it is appropriate to also consider Grounds 10 and 11 in the context of my examination of his first judgment.
56.In relation to Ground 10, it will have been seen from paragraph 26(iv) of his Honour’s first judgment that he was well aware of the evidence that the husband’s superannuation had increased by about fifteen percent since separation. However it has long been recognised that the assessment of contributions cannot be a strictly mathematical exercise, and thus his Honour cannot be said to have been in error in making the ten percent adjustment in favour of the husband rather than a fifteen percent adjustment. Moreover in my opinion, the adjustment which his Honour made was well within an acceptable range of the exercise of discretion.
57.As to the complaint contained in Ground 11 that his Honour did not give adequate reasons for the ten percent adjustment in favour of the husband on account of his post-separation contributions to his superannuation, it is clear to me (sitting as an appellate Court) from what his Honour said in paragraph 27 of his judgment that he made the ten percent adjustment in relation to the husband’s superannuation as a “recognition of the post separation component” of the husband’s superannuation. (See the test for adequacy of reasons propounded in Sun Alliance Insurance Ltd v Massoud (1989) VR8 adopted for this Court in Bennett & Bennett (1991) FLC 92-191 at 78,266). It is difficult, in my view, to see what further his Honour needed to say or could have said. As I said in connection with Ground 10, there cannot be complete mathematical precision in the contribution exercise. In this regard I refer to the following comments which I made in Farmer and Bramley (2000) FLC 93-060 and with which Nicholson CJ & Buckely J agreed in Figgins and Figgins (2002) FLC 93-122:
“It has to be said, that it is not generally possible in the exercise of the discretion under s 79 to say or to ascertain why a particular award is ultimately arrived at. Given that awards under s 79 are virtually never calculated with a mathematical precision, no amount of enumeration of, or indeed of evaluation of, contributions, or of the s 75(2) matters, or indeed of any of the matters listed in s 79(4), can ever explain exactly why a particular figure, or more usually a percentage, is eventually arrived at (other than that it is within the recognised ‘range’)”.
Thus neither Grounds 10 nor 11 have been established.
The s 75(2) Factors as identified by the Federal Magistrate
59.As I earlier observed his Honour carried out a thorough analysis of the s75 (2) factors as they applied in this case. Despite the length of that analysis, I think it important to set it out in full:
30. Each party is now in employment. The husband's income exceeds that of the wife. He earns about $91,000 per annum and the wife about $70,000. Of course the difference in their incomes is about half this differential when tax and Medicare are factored in.
31. Whilst both parties will accumulate further superannuation it is likely that the husband will accumulate greater superannuation than the wife.
32. It is claimed that there is some uncertainty about the wife's continued employment. During the marriage she suffered from a breakdown which forced her to quit her job at [a Canberra Hospital]. She was subsequently diagnosed with bipolar disorder which is controlled by medication. The triggering factors in this breakdown were the stress of the failing relationship and the difficulties involved in working night shift. The wife has arranged, in her present job, that she not work night shift. These two stressors having been removed there is no evidence to indicate that her future employment capacity is in any way compromised at present. However she does suffer from bipolar disorder and appears vulnerable when under stress. I do not believe that I can ignore the possibility that stressors might in the future impact on her earning capacity. I believe that I am justified in concluding that her future employment capacity is not as secure as that of the husband.
33. The husband has the continued responsibility for caring for [the child]. It will be another seven years before she turns eighteen. To date he has not sought child support but could do so if he wished. I propose to proceed on the basis that he is able to claim child support and that, if he continues to decline to do so, it is a matter which should be ignored for the purpose of this exercise. If he sought child support an amount of about $106 a week would be payable by the wife. I do not however overlook the fact that it is not only the financial aspects of the care of a child that can justify an adjustment under s.75(2).
34. The wife has contact with [the child] during holidays and there are air fares payable in relation to this. To date she has been paying the whole of those air fares notwithstanding that the consent orders of 1 October 2004 provide for the parties to share them. I will apply the same principle as I did in relation to child support and ignore the fact that the wife may continue to pay all airfares.
35. The husband has re-partnered. His wife is not in paid employment and has a child to support. She is looking for paid employment and, if she succeeds in doing so, would become a financial resource to the husband as there would be two incomes coming into the household and a sharing of certain expenses. However at present she is a financial burden to him. I would normally not have regard to this fact as the husband has no legal responsibility to support his partner or her child but when I am asked, as I have been, to treat his partner as a potential financial resource and a factor favouring an adjustment in favour of the wife I cannot ignore it. In the end I regard the present burden and the future potential benefits as cancelling each other out.
36. Part of the assets the wife will receive in the division will be her superannuation. I take account of the fact that this is not an asset that is accessible to her at present and will be of no benefit to her for at least twelve years.
37. In the short term s.75 (2) factors favour the husband in that for the next seven years he will have the care of [the child]. Long term they favour the wife as it is likely that she will continue to have a lower earning capacity than the husband and is unlikely to be able to acquire further superannuation to the same extent as the husband. Also in the longer term her earning capacity is not as secure as his. I also factor in the less significant matter of the wife’s superannuation. In the end I regard these factors as balancing out and make no adjustment by reason of section 75(2) factors.
60.Apart from issues concerning the parties’ superannuation entitlements, the husband’s challenge to his Honour’s decision to make no adjustment on account of the s 75(2) matters is based on the fact that the husband would have the ongoing responsibility (including financial responsibility) for the care of the child for a further seven years. This challenge is contained in Ground 6 and it asserts an error on the part of his Honour:
“in failing to make any adjustment in favour of the Husband, having regard to Section 75(2) factors and in particular, that the Husband would have the ongoing responsibility to care for the child of the marriage … for a further seven (7) years and in all likelihood would be solely responsible for her future financial support”.
61.Although the word “weight” does not appear in Ground 6 as drafted, the complaint contained in this ground must be in essence one of weight. This is because his Honour certainly gave consideration in paragraphs 33 and 34 of his judgment to the roles that each parent plays in the child’s life and in particular to the husband’s continued responsibility for the child for a further seven years. Importantly his Honour then concluded in paragraph 37 that in “the short term” the s75(2) factors favoured the husband because he had the care of the child. However given that the parties were only in their early forties, his Honour clearly had to also take into account their likely positions beyond those initial seven years. In so doing he concluded that in the long term the wife’s prospects were less favourable than those of the husband, and that the parties’ respective short and long term prospects could be regarded as “balancing out”.
62.I have earlier referred to the difficulties any challenge to a discretionary judgment based on matters of weight must face. I am not persuaded that my interference with his Honour’s judgment on the basis of the weight which his Honour attached to the husband’s virtual sole responsibility for the child for the next seven years when balanced against the wife’s long term financial prospects, would be justified. Ground 6 has therefore not been established.
63.The precise terms of the calculations then made by his Honour at the conclusion of his first judgment were as follows:
38. The end result is that the wife will receive forty percent of the value of the husband’s superannuation and forty five percent of the other property. This translates to a split whereby she receives a part of the husband’s superannuation valued at $200,200 which I round off to $200,000 and other property to a value of $156,916. She has property to a value of $117,300 which leaves an amount to be paid to her of $39,616 which I round off to $40,000.
The Second Judgment
64.As I mentioned at the commencement of these reasons, his Honour subsequently realised that in calculating the property which the wife had in her possession, he had omitted to include her own superannuation entitlement of some $54,000. It was therefore necessary for him to amend his reasons and proposed orders to correct this oversight (as he was entitled to do – see authorities referred to in the decisions of the High Court and the Full Court of this Court in DJL v the Central Authority (2000) FLC 93-015 and Laing v The Central Authority (1999) FLC 92-849.
65.Accordingly having heard further submissions on behalf of both parties, his Honour delivered a further judgment and made orders on 18 July 2005. I have earlier set out his Honour’s brief judgment of 18 July 2005, but for convenience here repeat it:
In this matter I had proposed to make orders that the husband pay the wife the sum of $40,000. This was supposed to represent a result whereby the wife would receive forty five percent of the parties’ assets excluding superannuation. In fact when I made this calculation I overlooked, when adding up the property in the wife’s possession, her superannuation. I calculated correctly that she was to receive $156,916. I incorrectly calculated that she has assets to a value of $117,300. In fact when her superannuation valued at $54,803 is included she had assets to a value of $172,103. This would have resulted in her having to pay monies to the husband. This would not, in my opinion, have been a just and equitable result.
I have given a great deal of consideration to the most appropriate way of resolving this problem. One way would have been to reduce the wife’s share of the split of the husband’s superannuation in order to give her a greater share of utilisable property. However I have decided that this would involve a distortion of reality in so far as contributions and s 75 (2) factors are concerned. In the end I have decided that I should take to unusual course of altering the contribution based and s 75(2) based division under the fourth stage of the process I referred to paragraph 10 of my original judgment so as to avoid a result which is not just and equitable. I propose to quarantine the wife’s superannuation from the divisible pool. This leaves a pool of utilisable property of $263,900 [$293,900] being the property referred to in paragraph 11 of my original judgment less the liabilities referred to in paragraphs 12 and 20. The wife’s forty five per cent of this totals $132,225. She has property to a value of $117,300 which leaves her to be paid an amount of $14,955 which I round off to $15,000. I will take our Orders accordingly.
66.The remaining grounds of appeal can all be seen as directed either to his Honour’s error in overlooking the wife’s superannuation entitlement in his first set of calculations (which oversight he of course endeavoured to correct in his second judgment) or to the reasoning or result embodied in his second judgment. Those grounds are as follows:
7.That the Federal Magistrate was in error in law in failing to treat the Wife’s superannuation entitlement as property by his approach of quarantining this superannuation entitlement, thereby excluding it from the asset pool.
8.That in the alternative Ground 7 herein, that the Federal Magistrate was in error in failing to take into account as a Section 75(2) factor, the benefit to the Wife of her superannuation entitlement in circumstances where he had quarantined it from the divisible asset pool.
9.That the Federal Magistrate was in error in failing to take into account the Wife’s superannuation entitlement in his determination as to the percentage of the splitting order which he made in the Wife’s favour in respect of the Husband’s superannuation entitlement.
…
12.That the Federal Magistrate was in error in law in his approach of stating that he would take the “unusual course of altering contribution based and Section 75(2) based division under the fourth stage of the process” to avoid a result which was not just and equitable and thereafter failing in fact to alter this division and simply deducting the Wife’s superannuation entitlement from the divisible pool.
67.I understood it to be common ground before me that his Honour’s reasoning in his second judgment for the orders which he ultimately made, is not easy to follow – although counsel for the respondent wife contended that the orders were just and equitable and should not be interfered with.
68.It is not entirely clear to me why his Honour considered that it would not have been a just and equitable outcome for the wife to have to pay monies to the husband. The amount which the wife would have to have paid to the husband on his Honour’s original calculations, if he had not overlooked the wife’s superannuation entitlement, would have been $15,187 (being ($117,300 + $54,803) - $156,916). I can only assume having regard to the assets and liabilities which were agreed before his Honour that the wife had no cash reserves and no further borrowing capacity given her significant existing mortgage. But in any event, I did not understand it to be suggested before me on behalf of the husband, that in the event of a re-exercise of the discretion by me, that the wife should have to pay him any sum of money.
69.It will be seen that having said that it would not be just and equitable for the wife to have to pay the husband any money, his Honour went on to consider the “most appropriate way of resolving” the problem.
70.The first way which he considered was a reduction in the wife’s share of the split of the husband’s superannuation “in order to give her a greater share of utilisable property”. However his Honour concluded that this would involve “a distortion of reality in so far as contributions and s.75(2) factors are concerned”. I am uncertain exactly what his Honour meant by that comment.
71.Ultimately his Honour decided on what he described as the “unusual course of altering the contribution based and s.75(2) based division under the fourth stage of the process… so as to avoid a result which is not just and equitable”. His Honour then said he proposed “to quarantine” the wife’s superannuation from the divisible pool, which would leave (for division) only the “utilisable property”, in fact valued at $293,000. His Honour then divided that sum in the proportions of 55%-45% in favour of the husband; and that division required the husband to pay the wife the rounded off sum of $15,000.
72.I do not consider it necessary for present purposes to express a view on the question of whether, if having decided that the result reached on the basis of an assessment of the parties’ contributions and a consideration of the s.75(2) matters was not just and equitable, his Honour was then entitled simply to adjust the result to one which he considered just and equitable, or whether it was necessary for him to re-consider and re-assess both the contributions and s.75(2) matters to arrive at a more just and equitable result.
73.I say this because it would seem from the words “altering the contribution based and s.75(2) based division” that his Honour intended to alter his contribution assessment and s.75(2) determination and yet, as Ground 12 alleges, he then failed to do so – although I acknowledge that those words could be read as meaning that his Honour only intended to alter the ultimate division which he had arrived at. Given this uncertainly as to which of the two possible approaches his Honour was actually adopting, I see little value in attempting to determine whether he made an “error of law” as asserted by Ground 12.
74.Rather his appeal can be determined, and in fact has to be allowed on the basis of the matters raised in Grounds 7, 8, and 9, and indeed in Ground 1. The essential complaint in those grounds being that it could not be just and equitable, but rather was “manifestly unjust” to the husband, having regard in particular to the contribution findings made in the first judgment, to provide for the wife to receive a very substantial portion of the husband’s superannuation entitlement, but then to totally “quarantine” the wife’s not insubstantial superannuation entitlement and not even (apparently) take it into account as a s.75(2) matter. It may well be that had his Honour explained more fully his reasons for the result arrived at in his second judgment, that that result might be seen to be just and equitable. But in the absence of such fuller reasoning, I cannot be satisfied that justice has been done (again see the test got the adequacy of reasons adopted in Bennett supra).
Re-exercise of the discretion
75.It was the position of both parties that if I considered that there was substance in the appeal, I should re-exercise the discretion on the basis of the material before his Honour. I propose to do this.
76.Given my earlier analysis of his Honour’s first judgment and my determination that there was no substance in any challenge to the findings and conclusions in that judgment, save of course for the final calculations, and having regard to his Honour’s advantage as “the trial Judge”, I propose to proceed on the basis of his Honour’s finding as to the pool of property and as to the contributions of the parties and in that context also the separate assessments of contributions to the husband’s superannuation (60-40%) and to all other assets.
77.However on a re-exercise of the discretion, I would then at that stage consider what a division of the two categories of assets on the basis of the respective contribution assessments would mean in practice.
78.So far as the husband’s superannuation is concerned, there would be an order for a 40% split in the wife’s favour.
79.So far as all the other assets are concerned, their value of $348,703 (which of course includes the value of the wife’s superannuation) when divided in the proportions of 55-45% in the husband’s favour, would mean that the wife would be entitled to assets to the value of $156,916. Thus a division of the assets other than the husband’s superannuation on the basis of contributions alone, would lead to a situation whereby because the wife already has assets to the value of $172,103, she would be required to pay the husband the sum of $15,187.
80.Then in considering whether any adjustment was required on account of the s.75(2) matters, to the contribution based divisions of both the husband’s superannuation and all other assets, I would “balance out”, as did his Honour, the husband’s responsibility, financial and non-financial, for the child of the marriage until she is 18 against the wife’s less secure and less significant long-term income earning capacity. I would therefore make no adjustment either way on account of those matters.
81.However, I would also take into account the fact that while on the basis of the contribution divisions, the wife is to receive a 40% split of the husband’s superannuation entitlement (currently valued at some $500,000), she is also to retain her own superannuation worth just over $50,000 (s.75(2)(f)) and that also on the basis of the contribution assessments she would have to pay the husband the sum of $15,127, which, it seems common ground, it would be difficult for her to do (s.75(2)(b)). Taking into account these matters, I would, and do, consider that an overall just and equitable settlement would be for the wife to receive a 30% split of the husband’s superannuation interest, and otherwise for each party to keep the assets which each currently has without any payment to the other. I propose to vary his Honour’s order to achieve such an outcome. I consider that the approach I have adopted is open to me in light of the majority decision in Coghlan v Coghlan (2005) FLC 93-220 paragraphs 61-68.
82.The amendments which I propose to make to his Honour’s orders of 18 July 2005 are:
·to set aside Order 1 which requires the husband to pay the wife the sum of $15,000;
·to amend Order 2 which provides for each party to retain his or her own property, to give it immediate application;
·to amend Order 5 to decrease the specified percentage for purposes of the superannuation split from 40% to 30%.
83.Because I am uncertain whether any further machinery orders are necessary in relation to the splitting order on account of my amendment to the specified percentage, I will give liberty to apply in relation to the implementation or operation of the splitting order and the machinery orders relating to it.
Costs of the Appeal
84.In the event that the appeal was to succeed, as it has, both parties sought certificates under the Federal Proceedings Costs Act 1981.
85.In my view this is certainly a case where the grant of certificates is appropriate, and I will therefore grant them.
I certify that the preceding eighty-five (85) paragraphs are a true copy of the reasons for judgment of this Honourable Full Court
Associate:
Date:
Key Legal Topics
Areas of Law
-
Civil Procedure
-
Family Law
Legal Concepts
-
Appeal
-
Costs
-
Remedies
0
2
11