Callen and Callen
[2008] FMCAfam 957
•11 September 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CALLEN & CALLEN | [2008] FMCAfam 957 |
| FAMILY LAW – Property settlement – post-separation inheritance – treatment of superannuation in the payment phase – whether it should be treated as a notional asset because the husband unilaterally opted to take it as a pension rather than a lump sum – treatment of a fine – add-backs – issues of credit – who should retain the family home – contributions – future needs – just and equitable order. |
| Family Law Act 1975 ss.75(2), 79, 90MT Family Law (Superannuation) Regulations2001 r.43A Property Stock and Business Agents Act 2002 (NSW) s.66(2)(b) |
| Bonnici (1992) FLC 92-272 C v C (2005) FLC 93-220 Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 Jarman (2006) FLC 93-289 Kowaliw (1991) FLC 91-092 Norbis v Norbis (1986) 161 CLR 513 Pye & Pye [2008] FMCAfam 716 T v T (2006) FLC 93-263 |
| Applicant: | MS CALLEN |
| Respondent: | MR CALLEN |
| File number: | SYC 1816 of 2007 |
| Judgment of: | Altobelli FM |
| Hearing dates: | 19-20 December 2007, 19 June 2008 |
| Date of last submission: | 19 June 2008 |
| Delivered at: | Sydney |
| Delivered on: | 11 September 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Batey |
| Solicitors for the Applicant: | Karras Partners Lawyers |
| Counsel for the Respondent: | Mr Jackson |
| Solicitors for the Respondent: | Anne Day & Associates |
ORDERS
Within 21 days of the date I publish my reasons in this matter the legal representatives of the parties are to jointly submit by email to my Associate the orders they propose to implement my decision in this case as set out in these reasons. If they are unable to jointly submit orders, they are to submit the orders they believe best reflect my reasons.
The time for filing an appeal does not run until I have made orders in this matter.
IT IS NOTED that publication of this judgment under the pseudonym Callen & Callen is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYC 1816 of 2007
| MS CALLEN |
Applicant
And
| MR CALLEN |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application for alteration of property interests, commonly known as a property settlement. The wife is the applicant. Her name is Ms Callen, and she is 52 years old. The husband is the respondent,
Mr Callen. He is 63 years old. In this judgment I will refer to them as wife and husband respectively. They have two adult children, [names omitted].
Background
The husband and the wife commenced cohabitation as at marriage in 1972. They separated on 30 July 2006 after a marriage of in excess of 33 years. Neither has remarried. They both continue to reside in the former matrimonial home in [S], a southern Sydney suburb. The wife commenced proceedings on 24 October 2006. The matter was initially heard by me on 19 and 20 December 2007. Because of the proximity of the hearing to the Christmas/New Year closure, written submissions were provided by each counsel. On 30 January 2008 the husband's second cousin died and the husband became executor of his estate as well as a beneficiary as to an 8 per cent share of the estate.
An application was made to reopen the case to take into account the husband's inheritance. This came before me on 19 June 2008. The issues arising out of the receipt by the husband after separation of this inheritance were canvassed on this date.
At the outset both the husband and the wife through their respective counsel conceded that, in broad terms, after a marriage of 33 years contribution should be treated as equal. The wife did not press for any adjustment in her favour under s.75(2) of the Family Law Act, but the husband argued for a minor adjustment in his favour arising solely out of the fact that he was eight years older than his wife.
The case was robustly contested by the parties. It is apparent that there is a high level of acrimony between them and I do not doubt for a moment that it must be difficult continuing to live under the same roof whilst nonetheless being separated. On 19 December 2007 the Local Court at [X] issued an Apprehended Violence Order against the husband in order to protect the wife.
Having regard to the concession made by the parties about contribution, I consider there to be no need to set out a detailed history of the marriage. However, the period November 2005 through to July 2006 (the date of separation) is a highly contentious one. It is now common ground that in November 2005 the husband retired from his employment with the [omitted] and elected to take an allocated pension from his superannuation, rather than a lump sum. He also received a termination payment in the sum of $63,587.26. The husband asserts that the wife was well aware of this. The wife denies that she became aware of these events until the date of separation at which time, she asserts, she discovered a letter from the husband's financial planner dated 12 October 2005 and a document from the husband's former employer setting out the details of his termination payment.
It is common ground that during the period November 2005 to July 2006 the husband and the wife had a four-day holiday in Melbourne, a two-week holiday in Queensland, undertook renovations to their home and went on a six-week overseas trip to Egypt and Italy.
The orders sought by the wife are contained in her case summary dated 13 December 2007. Her case proceeded on the basis that she wished to retain the former matrimonial home at [S] on payment to the husband of $61,054, by her taking over the mortgage, by dividing equally between them the furniture and contents of the former matrimonial home using "pick a pile" method, that the husband transfer to the wife the Mercedes Benz motor vehicle registered number [omitted], and that there be a split of the husband's First State superannuation so that the wife received $94,053 out of its value of $205,000. Inherent in the wife's case is the proposition that the husband would retain at its full notional value of $670,363 his interest in the State Authority Superannuation Scheme, even though it was in the payment phase with the husband receiving a superannuation pension of $898 per week.
The orders sought by the husband are contained in his counsel's case summary document dated 17 December 2007. The husband would like to retain the former matrimonial home on payment to the wife of a sum. He would take over the mortgage. He proposes that the wife transfer to him the Mercedes Benz motor vehicle. In relation to superannuation, he proposes that there be an equal split of his entitlement in the State Superannuation Scheme and that the SAS pension also be split.
Pool of Assets and Liabilities
At the commencement of this hearing I was presented with a joint document entitled Assets and Liabilities as at December 19 2007.
I reproduce this below. It does not represent agreement about assets and liabilities, though there is considerable common ground, but helps to identify the issues between the parties.
| ASSETS | Wife’s Valuation | Husband’s Valuation | ||
| 1 | [S] Home | J | $1,300,000 E | $1,300,000 E |
| 2 | Husband’s Mercedes | H | $14,000.00 E | $14,000 |
| 3 | Wife’s Nissan Car | W | $19,000 | $19,000 |
| 4 | Husband’s IAG Shares | H | $3,510 | $3,510 |
| 5 | Husband’s Savings | H | $32,061 | $32,061 |
| 6 | Household Contents | J | $20,000 | $10,000 |
| 7 | Proceeds of ING Account | W | $0.00 | $2,500.00 |
| ADD BACKS | ||||
| 8 | Wife’s legal fees paid | W | Not Known | Not Known |
| 9 | Husband’s legal fees paid | H | Not Known | Not Known |
| SUPERANNUATION | ||||
| 10 | STA Super | W | $32,551.00 | $32.551.00 |
| 11 | Husband’s First State Super | H | $206,846.25 | $205,000.00 |
| 12 | Husband’s SAS Super | H | $670,363.00 | $670,363.00 |
| TOTAL ASSETS | $2,298,331.25 | $2,230,046.00 | ||
| Less LIABILITIES | ||||
| 14 | CBA Mortgage | J | $119,000.00 | $116,298.00 |
| 15 | Viridian Loan No. [8] | J | $156,562.00 | $158,628.00 |
| 16 | Husband’s Mastercard Debt | H | Nil | $1,200.00 |
| 17 | Husband’s GR Capital Finance debt | H | Nil | Not Known |
| 18 | Wife’s car loan from A.A. | W | $14,000.00 | $14,000.00 |
| 19 | Wife’s car loan from J.C. | W | $11,620.00 | $11,620.00 |
| 20 | Husband’s Court Fine | H | Nil | $10,600.00 |
| TOTAL LIABILITIES | $301,182.00 | Not Known | ||
| NET ASSETS | $1,997,149.25 | |||
The issues
A number of issues arise on the facts of this case:
(1)Significant issues of credit arise on the evidence and I will need to make findings about the credibility of the husband and the wife, primarily.
(2)The treatment of the husband's post-separation inheritance.
(3)The treatment of the husband's State Authority Superannuation Scheme in the payment phase and, in particular, whether its notional value should be included in the asset pool even though it is in the payment phase. Another important issue raised by the wife is that the husband did, by electing to take his superannuation entitlement as a pension, commit an act of waste which depleted the asset pool.
(4)The treatment of a fine imposed on the husband by the Local Court at [X], following separation, as a result of neglect of pets.
(5)Whether amounts paid for legal fees should be added back to the asset pool.
(6)Whether the husband's MasterCard debt and GE Capital Finance debt should be treated as joint liabilities.
(7)Whether the wife's personal loans incurred in relation to the acquisition of her car were "real" liabilities of the wife.
(8)Whether the wife had undisclosed savings that should be added to the asset pool.
(9)Which of the husband and the wife should be able to retain the former matrimonial home at [S]?
Applicable law
The preferred approach to the determination of an application under s.79 of the Family Law Act is set out in a passage found in the Full Court’s decision in Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at 39.
The Full Court states that there are four inter-related steps:
a)Identify and value the property, liabilities and financial resources of the parties; and
b)Identify and assess the contributions of the parties and express them as a percentage of the net value of the property; and
c)Identify and assess the other facts relevant under s.79(4)(d)-(g) including s.75(2) and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
d)Consider the effect of the above and resolve what order is just and equitable in all the circumstances.
One of the legal issues that arises is whether I should adopt a global or asset-by-asset approach to contribution. The authority in this regard is, the High Court’s decision in Norbis v Norbis (1986) 161 CLR 513 per Wilson and Dawson JJ at 534-5. It is clear from this statement of the law that either approach is available to me, in part or in whole.
My discretion in this regard should be exercised having regard to the facts of this case.
Section 79 of the Family Law Act provides, relevantly:
(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) in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the marriage--altering the interests of the bankruptcy trustee in the vested bankruptcy property;
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.
(2) 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.
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
Credibility of evidence given by the husband and the wife
The case before me clearly raises important issues of credit. The husband and the wife provided significantly differently versions about important events alleged to have occurred during the period leading up to separation on 13 July 2006, and thereafter. For the reasons I set out below, I accept the evidence of the husband, over that of the wife, where their evidence conflicts. By way of summary, the wife's evidence was often inconsistent, many of her statements seemed inherently improbable, she was argumentative in cross-examination, seemed to have a very selective understanding of the questions she was asked, and my impression of her as a witness was undermined by what I find to be non-disclosure on her part. I expand on these reasons below.
The wife was frequently inclined to give evidence in very absolute and emphatic terms, even though what she was saying was inherently improbable, or was later contradicted by her own evidence. One of the important issues in this case was whether (as the husband asserts) she was aware of his retirement and election to take a pension, or whether (as the wife asserts) she was not. The wife's evidence is that the husband would "never consult with me on anything" (transcript page 19, lines 41-42) and "[Mr Callen] never tells me anything. [Mr Callen] take decision by himself" [sic] (transcript page 27, lines 7-8) and yet her other evidence clearly indicates that there were discussions about the husband's financial status, eg, transcript page 26, lines 33-38.
When cross-examined about whether expenses incurred by the husband on his credit card were in fact joint expenses the wife was, again, emphatic "that's not our at all - it's not our expenses at all" [sic] (transcript page 20, line 13). Not only is this inherently improbable in all the circumstances of this case given that the expenses were incurred before separation, but the wife concedes later in cross-examination that the husband used his card for petrol, for holidays, meals, etc, all before separation. Finally she concedes that the credit card was used for joint purposes and joint expenses (transcript page 23, line 18).
The wife insisted that the husband never discussed his superannuation with her (transcript page 20, line 24; page 25, lines 24-25) and yet, the wife's case is that she knew, as a result of having conversations with the husband, that he was going to take a lump sum (transcript page 25, lines 18-20; page 26, lines 35-39), thus indicating that they did discuss his superannuation.
In relation to decision-making and communication generally, the wife's evidence was that "[Mr Callen] never tells me anything" (transcript page 27, line 8) and that "we never have communication at all between us two" [sic] (transcript page 30, line 39). Again, this is inherently improbable for a couple who travelled extensively during the last eight or nine months of their marriage, as well as effected renovations to their property. Moreover, the wife's evidence about the extent of these problems was that "I've been always having problem with [Mr Callen] all my life" [sic] (transcript page 30, lines 43-44). And yet, she agrees that they discussed the renovations and they discussed their overseas travel and other holidays (transcript page 32, lines 5-29). Indeed, the wife even describes it as "normal discussion" (transcript page 31, line 29).
It was put to the wife that she used to go through the husband's credit card statements during the period when they were together. She denied this (transcript page 32, line 26). Within a few questions of stating that, however, the wife agreed that she did in fact check her usage of the husband's credit card. Indeed, she was able to identify her markings on the husband's Commonwealth Bank Premium MasterCard statement (exhibit H1). Interestingly, this document, which covers the period 15 December 2004 to 10 January 2005, presents a picture of matrimonial normalcy during this period. It is obvious that the wife had the use of the husband's MasterCard, used it to purchase a variety of household and personal items which would normally be characterised as joint expenditure, and then checked her expenditure against the MasterCard statement when it came in each month. It is hardly the picture of arbitrary decision-making, and non-communication or consultation that the wife tries to paint of the husband.
The wife was argumentative and times, and simply refused to make sensible concessions. When it was put to her that in 2005 she would have been aware that her husband was in his 60s she responded "No way in the world. I wasn't aware on that at all" [sic] (transcript page 24, lines 21-22).
The wife often indicated a lack of understanding of relatively simple questions asked of her in cross-examination. There were times when I was genuinely concerned about the wife's ability to understand the questions that she was being asked e.g. because of a poor command of the English language. For example, she was specifically asked whether the expenses incurred in relation to the renovations of the property in March and April of 2006 were "a joint expense". Her answer, "Yes, we did the renovation from the GIO money," (transcript page 23, lines 40-42) was only partly responsive. When asked, shortly thereafter, whether she remembered seeing the husband use his credit card on their overseas holiday her evidence was, "I didn't see him spending with the credit card, but because we have cash money with us," [sic] again only partly responsive. I was concerned whether the wife understood the questions, but, on balance, I now conclude that she was avoiding the question. She clearly understood complex questions when it suited her. For example, when cross-examined about her financial statement and the surplus of her income over declared expenses, she had no difficulty whatsoever refuting the assertion put to her in cross-examination that she was saving about $500 a week. Her answer, which is found at transcript page 51, lines 26-36, indicates that the wife had a clear understanding of the question and provided a detailed explanation in seemingly credible terms.
The wife's evidence about the dogs who lived at the former matrimonial home was highly improbable. The evidence found in transcript pages 48-49 indicates that the two dogs, a German Shepherd and a Maltese Terrier, had obviously been family pets for many years. However, on the wife's evidence she "never looked after the dogs" and that even though they were household dogs they did not belong to her. Indeed, her evidence was "even I don't go to hang my clothes outside in the backyard. I don't step to the backyard because of these two dogs" [sic] (transcript page 49, lines 18-19). Her evidence is simply improbable. The wife's attempts, in very emphatic terms, to distance herself from the dogs in order to distance herself from the liability associated with the neglect of the dogs simply does not ring true.
Finally, the wife left a poor impression with me about her credibility in relation to financial disclosure. On her sworn financial statements there is a clear surplus of income over expenditure which could not be explained to my satisfaction. Whilst, as I indicate below, I am not able to make a finding that the wife has an account, or even a sum of cash, which represents the accumulation of the surplus of her income over her expenses, her financial non-disclosure, when coupled with all of the matters referred to above in this section of my judgment, lead me to conclude that the wife lacked credibility. Insofar as her evidence conflicts with that of the husband and is not corroborated by written independent documentation, I prefer the evidence of the husband.
It should be noted that the husband's evidence was not entirely free of inconsistency, particularly in relation to his cross-examination about whether his name was on the title to a property at [B] which was part of the estate in respect of which he was the executor and part beneficiary. There were also some minor inconsistencies between the evidence of the husband, and his brother about conversations which allegedly took place in the presence of the wife. None of these matters ultimately detracted from the credibility of the husband in evidence.
Treatment of post-separation inheritance
The husband's evidence about the inheritance is contained in his affidavit filed 14 March 2008. His second cousin Mr G died on
30 January 2008. He was 81 years old, but his death was unexpected. The husband had known Mr G for all of his life. The last will and testament of the deceased appointed the husband as his executor and also gave him 8 per cent of the estate. The grant of probate, which was in evidence (exhibit H6), was dated 14 April 2008 and it provides that the gross value of the estate was $823,260. The husband gave evidence that as executor he had incurred, or would incur, legal costs associated with the probate in the vicinity of $6500-$7000. This was not challenged. Accordingly, I take the net value of the estate to be $823,260.36, less $7000, namely $816,260.36. The husband's 8 per cent share of this amount to $65,300.82. I find that that amount should be added to the pool of assets. I do not accept the submission of counsel for the husband that it was open to me not to treat it as part of the asset pool, having regard to the Full Court's decision in Bonnici (1992) FLC 92-272. In a recent decision of Pye & Pye [2008] FMCAfam 716, I had occasion to consider a similar issue. It may be helpful to the parties if I extract paragraphs 15-19 of that judgment so that they understand why an inheritance received so long after separation should nonetheless be included in the pool of assets:
15. On July 29 2006 the husband’s grandmother died and he received an inheritance of about $150,000. The husband asserts that this inheritance is reflected in the cash funds held by him in bank accounts. This is not challenged by the wife. By the time the husband received the inheritance they had been separated for two and a half years. The husband argues that as it could not be said that the wife had contributed in any way to this inheritance it should, both as a matter of law and practicality, be excluded from the pool of assets. The husband relied on the Full Court’s decision in Bonnici (1992) FLC 92-272 as authority for his argument. Even though not cited by the husband, the Full Court’s decision in Burke (1993) FLC 92-356 is probably another case that could be used to support the husband’s argument.
16. I believe this submission is misconceived. Whether or not an asset (whether property or financial resource) is included in the asset pool is a question that is considered at step 1 of the approach referred to by the Court in Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener). This is, for all practical purposes, a question of characterisation of the nature of the asset in question. How an asset is then treated for the purposes of assessing contribution i.e. the weight to be attributed to it, is for all practical purposes a question of quantification. Thus to submit that a post-separation inheritance is not an asset to be included in the pool of assets is to confuse quantification with characterisation. A close reading of the Full Court’s decision in Bonnici reveals that it was concerned with quantification and not characterisation. Thus at p.79020 of the judgment the Full Court states:
The more difficult issue in this case is as to whether the same should be treated differently from other types of property in which the parties clearly have an interest.
The answer, we consider, must depend upon the circumstances of individual cases. If, for example, in the present case, there had been no other assets than the husband’s inheritance, but the wife had, as his Honour found, clearly carried the main financial burden in the support of the family and also performed a more substantial role as a homemaker and parent than the husband, then it would clearly be open and indeed incumbent upon a Court to make a property settlement in her favour from such an inheritance.
A property does not fall into a protected category merely because it is an inheritance. On the other hand, if there are ample funds from which an appropriate property settlement can be made and a just result arrived at, then the fact of a recently acquired inheritance would normally be treated as an entitlement of the party in question.
The other party cannot be regarded as contributing significantly to an inheritance received very late in the relationship and certainly not after it has terminated, except in very unusual circumstances.
17. It is true, however, that Fogarty J in Burke suggested there was an alternative approach. His Honour states at p.79762:
There are two ways of dealing with the wife’s post-separation inheritance. One is to take it out of the pool of property to which the equal contribution otherwise applies. The alternative is to increase the wife’s percentage contribution to the total pool of property in the proportion that the $66,000 bears to the total figure and reduce the husband’s overall contribution accordingly. In this case I think it more convenient to adopt the former of those approaches and that largely accords with the approach adopted by counsel.
18. On my reading of the judgment Fogarty J did take the post-separation inheritance out of the pool of property as a matter of convenience. He was not propounding a rule of general application. In any event the facts in Burke did not give rise to a claim by one spouse for post-separation contribution to the welfare of the family, whereas the present case clearly does. The distinction is a significant one. To exclude an asset from the property pool has the tendency to make it immune from a claim for post-separation contribution such as that referred to in Farmer & Bramley (2000) FLC 93-060. As counsel for the wife submitted, the Full Court’s decision in this case clearly points to a post-separation inheritance being treated as an issue of quantification of a contribution made.
19. The July 2006 inheritance of $150,000 received by the husband should thus remain part of the joint balance sheet referred to in paragraph 5 above.
Thus, the husband's interest in the inheritance is an asset which is to be included in the pool of assets. I will deal with the question of what impact this asset has on the assessment of contribution and s.75(2) considerations later in my judgment.
Treatment of the husband's State Superannuation Scheme superannuation
It was agreed between the parties that the value of the husband's interest in the State Superannuation Scheme, a defined benefit interest, was $618,424. The wife asserts that this figure should be included in the asset pool, whereas the husband asserts that it is a notional value only, as the superannuation entitlement is in the payment phase. Related to this issue, of course, is the wife's assertion that the husband retired and made the election to take this superannuation entitlement as a pension without consulting her and without her knowledge, and thus acted to her detriment.
I am grateful to Mr Batey, counsel for the wife, and Mr Jackson, counsel for the husband, for their very helpful written submissions on this particular issue.
It is common ground that the figure of $670,363 is a value determined in accordance with reg.43A of the Family Law (Superannuation) Regulations2001, and provided by a single joint expert.
For the wife, it was asserted that, having regard to the length of the marriage, and the non-consultation with her prior to the husband's election to take his entitlements as a fortnightly pension, that the Court should not now permit the husband to assert that this superannuation entitlement should be assessed in a different form to that provided by the regulations, and be considered only as to the wife's entitlement to the fortnightly pension.
On behalf of the husband, however, it is asserted that the wife was consulted in a general sense prior to his election to take the entitlements as a fortnightly pension and that in the absence of any objection from her she should not now be permitted to claim that his entitlement be considered as a lump sum when it has, in fact, been taken as a fortnightly pension. For the husband, it was asserted that it would be inequitable for the Court to maintain an artificial value of the entitlement, particularly having regard to the size of the notional lump sum compared to the overall asset pool. The husband asserted that the notional value should be excluded from the pool, but that an order should be made splitting the pension entitlements as to 50 per cent to each of the parties.
For the reasons I have set out above, under the heading dealing with the credibility of the parties, I do not accept the wife's evidence that she was not aware that the husband had taken his superannuation entitlement as a pension, rather than a lump sum. In making this finding I specifically acknowledge the very careful submissions made by Mr Batey, counsel for the wife, at paragraphs 23-29 of his written submissions. As I have indicated, I do not find the wife to be a credible witness where her evidence conflicts with that of the husband.
I acknowledge that there were some deficiencies in the husband's evidence, but I still prefer his evidence. His evidence was, at the very least, corroborated in part by that of his brother, and other corroborating evidence such as his time sheets, but I wish to make it very clear in these reasons that even in the absence of such corroborating evidence I would have preferred the evidence of the husband over that of the wife, for the reasons that I detail above. On balance I find that, at the very least, the wife was present at several conversations between the husband and third parties at which he clearly communicated his intention to take his superannuation as a pension because of the long term benefits this provided to both the husband and the wife.
At paragraph 30 of his submissions, Mr Batey asserts that the wife has been prejudiced by the husband's actions in that should the wife no longer be the husband's spouse within the meaning of the terms and conditions of the relevant superannuation deed, then upon the husband's death, if the wife was receiving a percentage of the husband's regular fortnightly pension entitlements, her entitlements would cease. The document on which he relies in support of this submission (the superannuation information form, being annexure B to the wife's affidavit 7 December 2007) does support what is asserted.
Section 90MT of the Family Law Act provides:
(1) A court, in accordance with section 90MS, may make the following orders in relation to a superannuation interest (other than an unsplittable interest):
(a) if the interest is not a percentage‑only interest--an order to the effect that, whenever a splittable payment becomes payable in respect of the interest:
(i) the non‑member spouse is entitled to be paid the amount (if any) calculated in accordance with the regulations; and
(ii) there is a corresponding reduction in the entitlement of the person to whom the splittable payment would have been made but for the order;
(b) an order to the effect that, whenever a splittable payment becomes payable in respect of the interest:
(i) the non‑member spouse is entitled to be paid a specified percentage of the splittable payment; and
(ii) there is a corresponding reduction in the entitlement of the person to whom the splittable payment would have been made but for the order;
(c) if the interest is a percentage‑only interest--an order to the effect that, whenever a splittable payment becomes payable in respect of the interest:
(i) the non‑member spouse is entitled to be paid the amount (if any) calculated in accordance with the regulations by reference to the percentage specified in the order;
(ii) there is a corresponding reduction in the entitlement of the person to whom the splittable payment would have been made but for the order;
(d) such other orders as the court thinks necessary for the enforcement of an order under paragraph (a), (b) or (c).
On behalf of the husband Mr Jackson submits that s.90MT prevails in this case, and binds the trustee of the fund. He submits that it is inconceivable that the terms of the trust can override the statutory provision. I am not sure that the situation is as clear as Mr Jackson submits. The trust deed establishing a superannuation fund can determine, for example, what reversionary rights attach to a pension entitlement. The fund determines what benefits its members and their spouses receive. What s.90MT does is empower the Court to make certain types of orders in relation to those benefits. Thus the trust deed defines what the benefits are, and a s.90MT order can divide those benefits as between spouses. However the s.90MT order cannot change or redefine those benefits conferred on members. Thus, on the facts of this case, Mr Batey is correct in asserting that if the husband dies, the parties’ having already divorced, the wife’s share or split of his benefit ceases.
However he is incorrect in asserting that the wife is in any way prejudiced by his actions in electing to take a pension. As Mr Batey so eloquently states the husband has little “control on his mortality”. She is only prejudiced if the husband dies before his life expectancy, a factor that was no doubt taken into account in valuing his superannuation entitlement under the Regulations. According to the most current life expectancy tables (Australia Life Tables 2000-2002, Australian Government Actuary 2004), the husband who is 63 years old, has a life expectancy of 19.24 years and, indeed, each year that passes sees his life expectancy increase. I take judicial notice of this information. It means that on the best evidence I have the wife will continue to receive the benefit of a share of the husband’s pension benefits for 19 years. I do not see prejudice to the wife here. Indeed the value to her could be, depending on the percentage I adopt, far greater than whatever share she might have derived from a lump sum of $670,363.
Mr Batey further submits that this uncertainty attaching to the wife’s splittable payments from the husband’s superannuation should result in a more generous allocation in her favour, by way of a s.75(2) adjustment of approximately 10 percent. But I find that there is no uncertainty that justifies an adjustment in her favour. If I allow for the possibility that the husband dies before his life expectancy, should I also allow for the possibility that she predeceases him? Of course not. Courts act on the basis of the best evidence available, and on the facts of this case it is that the husband has a life expectancy of 19.24 years. The Court cannot act on the possibility that the husband might predecease the wife.
In the submissions made on behalf of the husband by Mr Jackson, he emphasised that the husband's election to take his superannuation entitlements as a pension was made well before separation and, in any event, is irreversible, apart from the Court's power under s.106B of the Family Law Act (in respect of which there is no application). Mr Jackson's carefully written submissions at paragraphs 79 to 100 refers to the Full Court's decisions in C v C (2005) FLC 93-220 and Jarman (2006) FLC 93-289, as well as a very useful decision of Watts J in T v T (2006) FLC 93-263. The decisions in T v T and Jarman in particular convince me that it would be inappropriate in the extreme to treat the value of the husband's superannuation at $670,363 in a case where it is in the payment phase as a pension, and where the superannuation entitlement bears such a significant proportion (possibly as much as 67 per cent) of the husband's potential entitlement in the property pool. To treat the notional value as an actual value would be artificial in the extreme and I am not prepared to do so. Given the concession by both parties that contribution is equal, it is almost irresistible to conclude that the pension entitlement should be split equally between the husband and the wife. In this way, the wife shares equally in the notional value of the husband's superannuation and has a guaranteed income stream for the rest of her husband’s life.
Add-backs of legal fees paid
The issue of add-backs of legal fees paid was only faintly raised by both parties in this case. It was clearly not the main issue, or even a significant issue in this litigation, and I am not satisfied that what little evidence there is that goes to this issue leads me to make any findings. Accordingly, there will be no add-backs for legal fees paid. If litigants wish to argue add-backs in property settlement cases it is incumbent upon them to adduce the evidence necessary for the Court to make the requisite findings.
Treatment of the husband's MasterCard and GE Capital Finance debt
The applicant wife's case is that the husband's MasterCard and GE Capital Finance debts were not joint debts and should not be included in the property settlement. The husband's case is that his MasterCard debt of $1,200, and GE Capital Finance debt of $1,700, should be included as joint liabilities. There is no evidence that establishes, to my satisfaction, the existence of the GE Capital Finance debt or its characterisation as a joint debt. Accordingly, I will exclude it from consideration. However, I am satisfied that the MasterCard debt of $1,200 is a debt that existed at separation and its character was joint. It will be taken into account.
Treatment of the wife's car loans
The wife asserts that she purchased her current Nissan motor vehicle (agreed value $19,000) with loans from her mother and sister totalling $25,620. I am satisfied that these are genuine loans which will need to be repaid in due course. This means, for all practical purposes, that the wife in fact owes more on her motor vehicle than it is worth and in order to avoid unnecessary complexity in the final adjustment between the parties, as well as unfairness to the husband arising from a negative equity in the car, I propose to leave the car with the wife as well as the responsibility for the loans, and not include them in the pool of assets for adjustment purposes.
Wife's undisclosed savings
On behalf of the husband it was asserted that I could make a finding about the wife's undisclosed savings having regard to calculations of the accumulation of the difference between income and expenditure over a period of time, having regard to two financial statements. I do not accept that the evidence enables me to reach this conclusion.
I accept, however, that the wife probably did have surplus moneys available to her from her income, but I am unable to quantify it. Indeed, on the facts of this case even if it I did quantify it, it would have a negligible impact on the final assessment for s.79 purposes. As I indicated above, however, her non-disclosure is a factor that I take into account in making my overall findings about the wife's credibility.
The fine imposed on the husband by [X] Local Court
It is common ground that the husband received a fine of $10,600 from the Local Court at [X] arising out of charges associated with the neglect and/or cruelty to the family pets, two dogs. It is possible, though it is not clear, that some part of this fine has already been paid. The wife asserts that this is a post-separation debt that is entirely attributable to the husband, and should not be shared with her. The only evidence I had about this debt is a newspaper clipping from the [X] Shire Leader, for Thursday, November 2 2006. It appears to be a report of a matter that occurred in court shortly before the report in November. It does not indicate when, precisely, the events the subject of the complaint actually took place. The inference is that it was after separation. In Mr Batey's written submissions he submits that the Court should exclude the whole of the fine from the calculation of the property pool on the basis the debt arose as a result of actions by the husband that were reckless and/or negligent, in accordance with the well-known authorities such as Kowaliw (1991) FLC 91-092. However, he agrees that this result only flows "if the Court accepts the wife's evidence that she had neither involvement or knowledge of the husband's treatment of the dogs, and the Court is satisfied, on the civil standard of proof, that she had no responsibility for the care of the dogs" (paragraph 14 wife's submissions).
In Mr Jackson's written submissions on behalf of the husband he submits that the wife conceded in cross-examination that the dogs in question were household pets. He submits that the wife has not established a waste argument in accordance with Kowaliw, that common sense indicates that these were family pets and that even though the husband bore the brunt of the prosecution and concedes that he should share in the financial burden of the debt, it would be just and equitable for the wife to likewise share in the same.
I have previously commented on the wife's evidence in relation to the dogs and the prosecution. Her cross-examination is found at pages 49-50 of the transcript. I found the wife's evidence that the dogs did not belong to her and that because of them she could not even go out to hang her clothes in the backyard and, in fact, did not step into the backyard because of these dogs, thoroughly unconvincing. The maltreatment of the dogs, as is reported in the newspaper report (exhibit W3) is appalling and the report of the husband's defence of the charges indicates that his defence was quite feeble. The learned Local Court Magistrate, Mr Kevin Maughan, described the dogs as being "emaciated". Be that as it may, I accept that the dogs were family pets and that whatever they suffered they appeared to have suffered during the time that both the husband and the wife were living in the home. The wife's attempts to distance herself from responsibility for this pecuniary liability are unconvincing. She may well have escaped any criminal liability arising out of the prosecution, but she has not established that this liability should be borne by the husband himself. The wife has not established that this liability should be treated as a Kowaliw type liability and I accept Mr Jackson's submission that the Full Court's decision in Browne v Green (1999) FLC 92-873 indicates that it would be manifestly unjust to place upon the husband the full burden of the losses, merely on the basis, as is asserted by the wife, that he was the party who initiated and had control of the venture that led to financial loss.
Accordingly, it will be necessary for the husband to establish the precise amount of the current liability to [X] Local Court including whatever may have already been paid. This loss should be borne equally between the parties and if there is to be any adjustment for moneys already paid, being moneys paid out of the husband's post-separation earnings, a further adjustment should be made in this regard.
The pool of assets
Accordingly, having regard to the findings that I have made above, the pool of assets in this case will be as follows:
Non-Superannuation Assets:
a)[S] home $1,300,000
b)Mercedes $14,000
c)Husband’s IAG Shares $3,510
d)Husband’s savings $32,061
e)Husband’s inheritance $65,300
Total Non-Superannuation Assets: $1,414,871
Liabilities
f)CBA Mortgage $119,000
g)Viridian Loan $156,562
h)Husband’s Mastercard $1,200
Total Liabilites: $276,762
Net Non-Superannuation Assets: $1,138,109
Superannuation Assets
Wife’s superannuation $32,551.00
Husband’s superannuation $206,846.00
Total Superannuation: $239,397
Total All Assets: $1,377,506
Assessment of contribution
At the commencement of the case it was conceded that contribution should be assessed equally, but of course the husband received an inheritance after separation, which I have found to have a value of $65,300. It was not asserted on behalf of the wife that she had made a contribution to that amount. On behalf of the wife it was submitted that this sum is added to the metaphorical ledger and that a global approach to contribution should be adopted. For the husband it was asserted that if the inheritance was part of the asset pool (as I have already found) it is a contribution that was made solely by the husband and therefore displaces the agreement in principle as to equal contribution so that it should be 52.5 per cent in favour of the husband, and 47.5 per cent to the wife. Mr Jackson also conceded that the post-separation inheritance would reduce the husband's claim to a s.75(2) adjustment if one were allowed. He stressed that it would be unjust and inequitable to the husband if the wife received, on any scenario, more than 50 per cent of the value to the husband of the inheritance.
But for the $65,300, and prior to consideration of s.75(2) factors, having regard to the length of the marriage, clearly contribution should be equal. The amount of the inheritance represents five per cent of the combined pool of the superannuation and non-superannuation assets once the notional value of the husband’s superannuation in the payment phase is removed. As it cannot be said that the wife has made any contribution towards this inheritance, it is appropriate to reflect that post-separation contribution by the husband in the final percentage split. Mr Jackson has submitted it should result in 52.5 percent assessment of contribution in favour of the husband, I agree that that is a just and equitable result, and should be applied across all assets except the superannuation pension payments.
Section 75(2) considerations
On behalf of the husband, Mr Jackson submitted that there should be an adjustment in the husband's favour of 2.5 per cent reflecting the fact that he is eight years older than the wife and that his earning capacity may be less than the wife's as a result of this. He conceded, however, that in view of the husband's post-separation inheritance the s.75(2) factor would abate to 2 per cent. I do not accept that a s.75(2) adjustment should be made in favour of the husband. Despite his age, his evidence indicates that he continues to work as an [omitted]. Indeed it seems as if part of the reason for taking the pension is that it enables him to continue to work. There are no disclosed issues of any serious nature about his health. Whilst the outcome of this case will be that his superannuation pension is split and his weekly income thereby reduced, I have little doubt that the husband, if he so desires, will be able to continue to work as an [omitted] and possibly even increase his hours. Overall, the financial circumstances of the husband and the wife are not such that a s.75(2) adjustment is warranted in favour of the husband, and none was pressed on behalf of the wife.
Conclusion
As there is no s.75(2) adjustment, the result is that the combined assets of the parties ought to be divided as to the husband 52.5 per cent and the wife 47.5 per cent, based on the pool of assets referred to in paragraph 45 above. This means the husband receives 52.5 percent of $1,377,506 = $723,190 and the wife receives $654,315, based on total assets.
A number of issues still remain for determination, however. The wife seeks a splitting order in relation to the husband's First State superannuation fund which has an agreed value of $205,000. She seeks a split in her favour of $94,053. Her evidence and the submissions made on her behalf did not result in me understanding how that figure was calculated. I note that it is just under 46 per cent. The percentage that the wife would be entitled to, based on my assessment above, is 47.5 per cent. Accordingly, I propose to split this fund as to 47.5 per cent in favour of the wife. This gives the wife 47.5 percent of 206,846 = $98,252. The difference between the amount she sought, and the figure I award, is negligible in the overall scheme of things. It will provide a capital sum for her retirement, and will be a lump sum supplement to the half-share of the husband’s pension that she will receive. She also has her own superannuation entitlement, albeit a modest one.
The wife concedes at paragraph 46 of her affidavit that the husband should retain the Mercedes motor vehicle. The remaining issue, therefore, is who gets to keep the former matrimonial home at [S]. It is clear that both the husband and the wife wish to retain it. Both say they have the financial capacity to buy the other out as a result of support available to them through their respective families. In their respective written submissions both counsel submit that their client has the capacity to buy the other out, and both submit that notwithstanding the submissions made by the other, the other does not have the capacity to buy the other out. It is a reflection of the high level of conflict that exists between the husband and the wife that they both want to try to retain the home and are prepared to go to such great lengths in order to achieve this result. It is quite possible that neither the husband nor the wife has the capacity to retain the home, even if they do in fact receive the generous financial support that is promised to them by members of their family.
If the wife’s entitlement is 47.5 percent and she takes a super-split on the sum of $98,252, her entitlement will be:
Wife’s superannuation: $32,551
Super split : $98,252
Balance: $523,512
TOTAL: $654,315
If the husband’s entitlement is 52.5 percent then this will consist of:
Mercedes: $14,080
IAG Shares: $3,510
Savings: $32,061
Inheritance: $65,300
Split super: $108,594
Balance: $499,725
TOTAL: $723,190
It follows that for the wife to retain the house she would need to pay the husband $499,725 as well as refinance in the sum of $276,762, thus a total commitment of $776,487.
For the husband to retain the home, he would need to pay the wife $523,512 as well as refinance or otherwise assume responsibility for liabilities of $276,762, thus a total commitment of $800,274.
Having regard to these figures, as I indicated above, I consider it quite possible that neither has the capacity to buy the other out, and there is no evidence before me that enables me to decide who should have this right.
If the parties cannot agree as to who should buy the other out, having regard to the final orders that I make, then the property will be sold at auction and both parties will have the opportunity to bid to purchase the same. Mr Batey, on behalf of the wife, submits that this course would be fraught with difficulty, particularly having regard to s.66(2)(b) of the Property Stock and Business Agents Act 2002 (NSW) which provides:
(1) At a sale by auction of residential property or rural land:
(a) the seller must not make a bid, and
(b) a person must not make a bid on behalf of the seller unless the person is the auctioneer and makes only one bid on behalf of the seller
Mr Batey submits that this legislation permits the vendor to make only one bid. The order that I make, of course, is made under Commonwealth law and I would be very surprised if that which is specifically facilitated by the Family Law Act would be specifically prohibited by the above legislation, particularly in a context where I propose to ensure in my orders that members of the public are given clear notice in the contract for sale that the husband and wife may be bidding to purchase the property. In any event, one wonders whether the husband and the wife would be bidding as “sellers". The interest of the husband and the wife at an auction of the property would be no different to that of any other prospective purchaser, i.e. to acquire the property at the lowest possible price. One would have thought that the mischief to be remedied by the state legislation referred to above is the making of bids by a vendor who has no interest in purchasing the property, but who wishes to inflate the price as a result of the vendor bid. The state legislation is no doubt intended to protect purchases from unscrupulous vendors who make bids with no interest in actually purchasing the property. Here of course the situation is completely different. The evidence before me satisfies that both the husband and the wife have a genuine interest in purchasing the property. That is an interest that all purchasers of property share with one another. Accordingly, I do not accept that the state legislation referred to above precludes me from ordering the property to be sold by auction with each of the husband and the wife having the right to bid as purchasers, in a situation where they themselves cannot agree as to what should be done. One would hope that common sense would prevail in this case, but the high level of tension between the husband and the wife indicates that, in this case, it is a forlorn hope.
Conclusion
I am satisfied that the outcome of the orders that I make is as just and equitable as the circumstances allow. Viewed from any perspective the husband and the wife should be comfortable in a financial sense unless they borrow heavily in order to buy the other out from the family home. They both enjoy good health and will come out of the marriage with a reasonable income, with good earning capacities, with superannuation entitlements for when they cease work, and with cash to re-accommodate themselves.
The orders needed will be necessarily complex. For one thing the precise outstanding amount of the fine imposed by [X] Local Court will need to be established, and then paid as to a one-half share by each party. The Mastercard debt will need to be either paid out of the state proceeds, or an adjustment made by way of contribution by the wife. If there is to be a sale of the family home at which one or both parties wishes to bid, this must be clearly notified to members of the public in the contract for sale. The furniture and contents of the home will need to be divided using the pick-a-pile method, as agreed between the parties. As there are so many potential variables in this case I propose to grant leave to relist this matter before me as regards the implementation of these orders.
Moreover in the unusual circumstances of this case I will not attempt to make orders to reflect my reasons, but will direct the legal representatives for the parties to do so within 21 days. If they cannot agreed on a form of order to reflect these reasons they should each submit the form they prefer but which nonetheless reflects these reasons.
I certify that the preceding sixty-three (63) paragraphs are a true copy of the reasons for judgment of Altobelli FM
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