Carmel-Fevia & Fevia (No. 3)
[2012] FamCA 631
FAMILY COURT OF AUSTRALIA
| CARMEL-FEVIA & FEVIA (NO. 3) | [2012] FamCA 631 |
| FAMILY LAW – PROPERTY – Property settlement. Significant wealth. Relationship of less than 7 years and contribution mainly as homemaker and parent and also to children of the other party. |
| Child Support (Assessment) Act 1989 (Cth) Family Law Act 1975 (Cth) Family Law Amendment Act 1984 (Cth) |
| Aroney and Aroney (1979) FLC 90-709 Figgins and Figgins (2002) FLC 93-122 Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 Hurst v Webber [2009] FamCAFC 137 Mallet (1984) FLC 91-507 Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513 Norman and Norman [2010] FamCAFC 66 R v Geddes [1996] 36 SR(NSW) 554 R v Williscroft and Oths [1975] VR 292 Robb and Robb (1995) FLC 92-555 Rolfe v Rolfe (1979) FLC 90-629 Steinbrenner [2008] FamCAFC 193 Wilson and Wilson (1989) FLC 92-033 |
| APPLICANT: | Ms Carmel-Fevia |
| RESPONDENT: | Mr Fevia |
| FILE NUMBER: | MLC | 4389 | of | 2008 |
| DATE DELIVERED: | 6 August 2012 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 4, 7, 8, 9, 28 November 2011; 10, 13, 14 & 15 February 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Bartfeld QC with Ms Vohra |
| SOLICITOR FOR THE APPLICANT: | Taussig Cherrie Fildes |
| COUNSEL FOR THE RESPONDENT: | Mr Kirkhan QC with Mr Thompson |
| SOLICITOR FOR THE RESPONDENT: | Saxbys Lawyers |
Orders
That the husband pay to the wife $19,500,000 on or before 4.00 pm on 28 September 2012.
That each party otherwise retain to the exclusion of the other, all other property in their possession as at the date of these orders.
That there be a departure from the administrative assessment of child support issued 30 May 2011 in respect of the children E born … December 2002 and N born … January 2006 and that the periodic rate of child support payable by the husband Mr Fevia from 1 September 2012 be set at the annual rate of child support of a total for both children of $39,000 and that such rate be increased on 1 September in each successive year hereafter by reference to any increase in the Consumer Price Index (Melbourne).
That by way of non-periodic child support for the said children, the husband pay or cause to be paid:
(a)all private education expenses including school fees, text books, computer/laptop, uniforms, excursions, camps, extra-curricular activities and tutoring services for the said children;
(b)private health insurance premiums at the top level of cover for the said children;
(c)all non-rebateable/gap hospital, medical, dental, orthodontic, prescribed pharmaceutical and optical expenses for the children;
(d) reasonable sports and activity expenses for the children; and
(e)reasonable mobile telephone expenses for the children from the age of 10 onwards
and that such payments be not credited against any assessment otherwise for child support.
That save as to any issues of costs, the application of the wife filed 9 September 2011 and the response thereto filed 2 November 2011 be otherwise dismissed.
IT IS CERTIFIED:
That pursuant to Order 19.50 of the Family Law Rules 2004 it was reasonable to engage counsel, including senior counsel and two counsel to attend.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Carmel-Fevia & Fevia has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 4389 of 2008
| Ms Carmel-Fevia |
Applicant
And
| Mr Fevia |
Respondent
REASONS FOR JUDGMENT
This financial dispute concerns division of property, spousal maintenance and child support. The unusual features are that the husband has control of large wealth and the parties’ relationship was of modest duration during which two children were born. The issue is how to assess the entitlements of both parties but predominantly the wife.
The parties’ relationship existed for a little over six years.
Financial agreement
Shortly prior to their marriage in 2001, the parties signed what purported to be a financial agreement under the Family Law Act 1975 (Cth) (“the Act”) to govern their future financial circumstances in the event of a breakdown of the marriage. In her evidence, the wife referred to the circumstances of the agreement which, subsequent to separation, was set aside by Murphy J after a contested hearing. There is therefore no jurisdictional impediment to the determination of this case.
The parties’ background
The wife is engaged in full-time home duties and is 53 years of age.
The husband is 60 years of age. He is the chairman of a commercial group of companies.
The parties began living together in July 2001 after committing themselves by an engagement in June 2001. At that time, the wife was expecting the parties’ child but she miscarried on 1 September 2001. As mentioned above, a financial agreement was signed on 14 September 2001 and in September 2001, the marriage took place. The parties separated in February 2008. They are now divorced.
The separation began in February 2008 when the parties began living separately under the one roof and some seven weeks later, the husband obtained an ex parte order under the State family violence legislation against the wife in the Melbourne Magistrates’ Court. The order named the husband and the children as aggrieved family members and on the husband’s complaint, the wife was immediately excluded from the home. The wife was served with the interim order by police who gave her almost no time to remove her belongings. Interestingly, the two children went with her.
There are two children of the marriage, E who was born in December 2002 and N who was born in January 2006. Both of the children are in a private school.
Under final parenting orders made in November 2008, the children spend five nights per fortnight with the husband and the balance with the wife save that school holidays, Jewish holidays and other special occasions are shared between the parties. The wife was critical in her evidence of the husband’s diligence in complying with those orders.
The documents relied upon
In addition to the outlines of arguments and written submissions at the conclusion of a case provided by all parties, each relied on affidavits of evidence in chief. Many sensible concessions were made about the evidence having regard to the nature of the determination.
The wife relied upon her two affidavits filed 16 September 2011 and 2 November 2011 respectively together with an affidavit of an actuary Mr P filed 16 September 2011. I shall later refer to the affidavit of the wife’s brother filed 8 February 2012 concerning her father’s estate. The evidence of the wife’s counsellor was filed on 12 December 2011 and was read but it was marginally relevant. I have considered it.
The husband’s evidence was contained in his affidavits of 14 October 2011 and 2 November 2011. He also relied on an affidavit of a Ms D filed 14 October 2011.
I dealt with objections to many of the issues in the affidavits but ultimately, most of those matters were as to form rather than substance and were of marginal importance to the determination.
In this case, I have taken a very “broad brush” approach and have made findings where it was necessary or it was submitted that I should.
Credit
There were very few factual issues in dispute in this case but where there were, I have made determinations on the balance of probabilities.
Both the husband and the wife gave their evidence in a calm and measured way bearing in mind each was subjected to careful and probing cross-examination by very experienced lawyers.
The wife was questioned about things that she had left out of her evidence in chief such as her problem with alcohol and arguments arising from it such that she might be seen as being evasive. However, she explained its absence as due to her understanding that she was required to talk about her contribution. When probed about her problems, she did not concede their extent as perceived by the husband but I did not find her evasive or untruthful. I found she made appropriate concessions.
The husband was pressed about his affluent lifestyle and the lack of detail that he could give about the cost of things such as his holidays. He was probed about the problems his children had had when the relationship began and how the wife contributed to their resolution. He seemed thoughtful and gave credit to the wife for her role. There was nothing about the husband’s evidence that made me think him to be untruthful.
A financial dilemma at separation?
In her affidavit of evidence in chief, the wife described the separation day and the traumas at being removed by the police. She said that she gathered essential items for the two children but not much more. Just prior to the departure from the home, she had withdrawn about $5000 from joint bank accounts. In addition to that money, as she left, the husband gave her $1000 cash in an envelope and told her that he had booked her a serviced apartment for two nights at his expense. The wife did not take up that offer but went back to the bank and withdrew a further $1000.
In her affidavit, the wife said that that was the only cash that she had. She claimed the husband then removed her name from all joint accounts and cancelled her access to credit cards. This she said, made it difficult to meet the costs of the children.
The parties were in heated disagreement about what happened around that time. The wife said that the husband had agreed to advance her some funds to refurbish where she was living but that was on condition that she obtained quotes to be approved by him. According to the wife, on occasions involving her use of cheques, the bank did not honour them. The husband showed that in the two months following separation, the wife withdrew over $70,000 from the joint National Australia Bank account and despite that, at no stage, did the balance of that account fall below $9500. The husband emphatically denied a problem existed about cheques. He said that he advised the wife to buy things on her credit card and for her to repay the credit card from the cheque account if personal cheques were not accepted by the stores. He conceded he asked the wife to obtain prior approval for what he described as “big ticket” items just so he could ensure there was sufficient money in the account. He maintained that he placed no restrictions on her furnishing her new home.
Between February 2008 and May 2008, the wife withdrew from the joint account and used her credit card usage significant amounts for herself and the children. From the joint account alone she spent just short of $300,000. It is clear from Exhibits H2 and H5 that the wife’s expenditure was significant and ultimately, she agreed in cross-examination that the husband did not leave her bereft of resources. That evidence also established that the wife did have access to funds in circumstances where there was no spousal maintenance order.
There could be no doubt from reading the wife’s affidavit material and hearing her evidence that she was complaining that the husband had cut off her line of credit, restricted her access to funds and denied her the means to acquire reasonable items having regard to the lifestyle that the parties had previously had. Senior counsel for the husband tested all of the wife’s propositions but she maintained vehemently that she tried to use the cheque book and it was not successful and cheques bounced. Curiously, when counsel put to her that she knew there was money available, her response was that she had many things to get. She seemed contrite when it was put to her that the impression she had conveyed was a very negative one about the husband. She could have and should have portrayed a different picture much earlier.
Having been given an opportunity to consider that impression, she acknowledged that she could not really assert that the husband had been as mean as she had portrayed.
Having regard to the way in which the parties had lived, I am satisfied that the husband did curtail the wife’s activities but certainly not to the extent that I could find he was in any way mean or deprived her or the children of what was reasonably necessary in her circumstances. The evidence does not support a finding that cheques were not honoured and it is hard to imagine that happening having regard to the wealth of the husband. In the end, the wife made a sensible concession.
The wife’s position
The relevant application of the wife was filed 9 September 2011 and she sought orders that she retain the assets in her possession and from the husband, she sought:
By way of property settlement and/or lump (sic) spousal maintenance
that she be entitled to an amount equivalent to 12.5 per cent of the net assets of the parties.
As at September 2011, the net assets of the parties were said to be approximately $435 million. Thus, 12.5 per cent of $435 million is just over $54 million.
The wife also sought child support orders. She asked for $500 per week for each of the two children together with the CPI increases indexed annually together with the husband paying educational expenses, health insurance premiums, “gap” cover for expenses incurred that was not covered by health insurance as well as a variety of sports expenses.
The husband’s position
The husband’s response was filed on 2 November 2011 and he sought orders that the wife retain the various assets in her possession and that he pay her $6.35 million.
The husband also sought child support orders which indicated that he pay $250 per week for each child to be increased annually by the CPI together with various other expenses such as medical, insurance, education and sporting costs.
The basis of the husband’s submission was that:
(a)The wife’s contribution did not enhance the asset pool;
(b)he made a significant contribution as a homemaker and parent and the wife did not perform those roles solely; and
(c)the wife’s contribution as a homemaker and parent was diminished by virtue of her excessive drinking and angry outbursts directed to him and the children.
It remains therefore to be determined whether, if the husband is right, those things negate the wife’s contribution, reduce it in some way or indeed have any impact upon it at all.
The living arrangements during the marriage
In 2002, the husband acquired a property in which the parties lived during which time major renovations were carried out to the property that became their home in 2004. It was from that family home in 2008 that the parties separated.
Other children
The husband has children from his earlier marriages. The significance of that is that soon after the parties began living together, the wife not only took on a significant role for the care of three of those young children but also had to contend with their angry, aggressive and threatening mother. Her involvement also included substantial support for the husband in litigation in this Court surrounding those children. Those matters are referred to below.
The financial dispute
In this case, it is common ground that the wife’s contribution was confined predominantly to her role as a homemaker and parent. The husband’s assets and financial resources were agreed at $430 million. The husband’s financial position was not contentious.
At separation, the wife had $4.8 million worth of assets being an unencumbered home, $1.4 million in a fund from which the husband redeemed $1 million to acquire that home, $916,000 in superannuation, some shares and some cash.
By the time of the hearing, the wife’s asset pool had been reduced to $4.3 million but of that, she had paid her lawyers’ fees in excess of $1 million. That latter sum has obviously reduced what assets she now has.
The wife was therefore left with a home, some savings and shares, a vehicle, jewellery and chattels. She also had $755,000 worth of superannuation and although normally, consideration would be given to either including it along with other property or separating it out as another species of asset, in this case no-one suggested the latter. Having regard to the size of the parties’ respective wealth, such a consideration is immaterial because it cannot affect the just and equitable outcome overall. The funds have essentially come from the husband to the wife in any event during or shortly after the relationship. Importantly, the wife cannot access that superannuation for some years.
Bearing in mind what the wife now has, the approach I intend to take is to determine the wife’s entitlement over and above what she currently has because I am satisfied that it would be a just and equitable outcome that each party should have a house as a starting point having regard to the size of the overall pool.
It was controversial that the wife had left out of her pool $178,000 from what was described as H Fund redemptions. It had been submitted on behalf of the wife that I could reasonably assume that with her lifestyle, she had spent this sort of money on living expenses where there was no interim spousal maintenance order. There is a temptation to do that in circumstances where the wife’s expenditure on chattels came from payments by the husband on the credit card or from the joint account. Those however had been included in the wife’s list of assets. It is hard to conceive how the husband could expect the wife not to have a furnished home, reasonable clothing and access to a lifestyle at least somewhat consistent with that to which she had been accustomed. That is particularly so where she had been evicted from a lifestyle that was certainly almost uninhibited where and she had the responsibility to provide a reasonable and consistent lifestyle for the two children. The husband however submitted that the $178,000 should not be ignored as he had contributed towards her legal fees and the asset pool should be accurate. There is some sense in that too because it is all part of the minutiae of the calculations, particularly if an adjustment is made to the pool on a percentage basis. However, the ultimate objective is to ascertain an outcome which is just and equitable to both parties. I find $178,000 should be included as the husband submitted but I intend to simply add a sum to what the wife has over and above those sums and assets because in my view, it is likely that those monies either have been spent or are likely to be spent particularly in circumstances where on the capital sum to which I shall later refer, there will be some time before the wife can be self-sufficient. Accordingly, I remain conscious that the wife has a few assets but I am considering what should be given to her in addition to that to achieve a just and equitable outcome.
The pool of assets between the parties is therefore a combination of what is in the possession of the husband and the wife. It is therefore approximately $434,579,600. For my convenience, I shall call it $434.6 million.
It is made up as follows (and I have specifically rounded amounts):
Husband’s diverse assets $430,000,000
Wife’s assets:
House $2,000,000
Acknowledged savings 97,000
AMP Funds 43,000
Shares 7,600
C Fund 114,000
Car 40,000
House contents 50,000
Jewellery 300,000
Superannuation 756,000 3,407,600
Wife’s paid legal fees $1,024,000
Less paid by husband 130,000 994,000
H money 178,000
$434,579,600
The approach to the determination
The Family Law Act governs this determination and the parameters are set out in s 79. The spousal maintenance issue is dependent upon the determination of the wife’s property entitlement. The child support issue is governed by the Child Support (Assessment) Act 1989 (Cth).
Under s 79 of the Act, it is the legislative requirement that the Court take into account the matters there set out. There is no legislative prescription as to how that decision is to be made save that s 79(2) requires that the determination must be just and equitable and that the factors in s 79(4) are taken into account. An order must not be made unless it is just and equitable.
The parties differed about whether the determination on the agreed pool should be by way of lump sum or by percentage. Both argued that the issue was discretionary and there was reference to what was described as the “usual approach”. Ultimately they submitted, what was important was the reference to the relevant legislative factors.
In Clausen and Clausen (1995) FLC 92-595 and in Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 the Full Court made it clear that it was desirable to express the various adjustments in percentage terms.
It must be noted that that approach is not a statutory requirement. In this case, one percentage point amounts to $4.34 million. The use of percentages obscures what the Court is really asked to do which is to evaluate and give a dollar figure to what is an award or acknowledgement for the things done (rather than things achieved) by the contribution. Trying to apportion contribution on a percentage basis still requires the Court to look at the underlying value.
Counsel for the wife submitted that whilst there was a preferred approach as it was described in Hickey (supra) it and the division of property on a percentage basis, was not legislatively mandated. It was submitted that what was essential was that all factors were considered and properly evaluated. Counsel for the husband submitted that an approach based on percentage was unnecessary so long as the result could be seen to be just and equitable. Accordingly, both parties agreed that either approach is open.
It has been said that it is highly desirable to use percentages because they enable the conversion of qualitative factors into quantified entitlements (see Hurst v Webber [2009] FamCAFC 137 and Steinbrenner [2008] FamCAFC 193).
In Norman and Norman [2010] FamCAFC 66, the Full Court (Finn, May and Murphy JJ) said:
50.This court has made it clear that the court’s reasoning process and the ultimate result, giving effect to the clear legislative mandate, can be better illuminated by reference to the dollar value of a result which is, almost invariably, expressed in percentage terms.
Their Honours went on to say:
60.It is the mandatory legislative imperative (to reach a conclusion that is just and equitable) that drives the ultimate result. For all its usefulness and merit as a “disciplined approach” or a “structured process of reasoning” (per Fogarty, Lindenmayer, McCall JJ, N and N, unreported, 10 June 1992), the “three-step” or “four-step” approach merely illuminates the path to the ultimate result.
61.A structured approach is, of course, desirable and also provides to litigants and practitioners alike predictability in the manner in which cases will be dealt with and judgments delivered. But, that is not the same thing as a legal requirement, the failure to comply with which will result in appealable error. The words of Gibbs CJ in Mallett, (given in another context) are apposite:
… it is understandable that practitioners, desirous of finding rules, or even formulae, which may assist them in advising their clients as to the possible outcome of litigation, should treat the remarks of the court in… cases as expressing binding principles, and that judges, seeking certainty, or consistency, should sometimes do so. Decisions in particular cases of that kind can, however, do no more than provide a guide; they cannot put fetters on the discretionary power which the Parliament has left largely unfettered. It is necessary for the court, in each case, after having had regard to the matters which the Act requires it to consider, to do what is just and equitable in all the circumstances of the particular case. (at 608-9)
I see no reason to do other than endeavour to evaluate the wife’s contributions in dollar terms. The significance of the husband’s wealth is that the lifestyle enjoyed by both husband and wife creates certain expectations.
It is important to stress that the very fact that the wife could carry out the tasks she did, requires an acknowledgement that those satisfied one of the criteria in s 79(4) as a contribution. Whether that was made in a huge pool or in a small pool of assets, the contribution was just the same. The size of the pool cannot affect the fact that it was made. The importance of the contribution and its reach is what is being evaluated in circumstances of significant wealth.
It is important to recognize that the facts of this case take it out of the ordinary. Those facts are the large wealth and the modest duration of the relationship.
The “three-step” or “four-step” process referred to in Norman (supra) emanates from the legislative directive.
Section 79(4) requires the Court in considering what order should be made to 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.
It was common ground that when the relationship between the parties began, the husband was a very wealthy man and it was not seriously put that the wife had contributed in a direct way to the acquisition, conservation or improvement of the property of either of them. I say significantly because the wife did have superannuation and personal effects but relative to the size of the pool, those were not large and did not assist the parties during their relationship to extend their wealth.
An issue that arose during the hearing was the treatment of the wife’s entitlements in the estate of her late father. That arose from his death after the parties had separated. I specifically return to that below.
The wife’s case largely focussed on s 79(4)(c), that is, her contribution to the welfare of the family and secondly, upon s 79(4)(e). Section 79(4)(c) can only relate to the family constituted by the husband and the wife and the children of their marriage. There was extensive evidence about the contribution made by the wife in her role in caring for the children of the husband’s earlier marriage. That contribution falls to be considered under s 75(2)(o) which is incorporated by reference under s 79(4)(e) (see Robb and Robb (1995) FLC 92-555). It was a major facet of the wife’s case that she had fulfilled a very big role in the care of the husband’s children. The limited language of s 79(4)(c) probably needs to be reconsidered because even though s 75(2)(o) enables the Court to take into account that contribution, in this society, there are more and more blended families where roles of step-parents are significant to the welfare of the family that the parties choose to put together. In my view, it is also open to a party to argue that s 79(4)(c) does cover those types of contribution if, as here, the role is undertaken because both parties see it as important for the welfare and benefit of each other. As this was not argued here, I propose to rely upon s 75(2)(o) to help my consideration.
The outcome
For the reasons that follow, the determination involves the exercise of a very broad and almost unfettered discretion which is very subjective. That discretion takes into account the variety of contributions which are affected by degrees of effort. In this case, it was argued by the husband that the wife’s alcohol abuse and her behaviour linked to it, caused problems in the household and thus her contribution to be assessed must be seen to have been diminished or at least to have fluctuated at times. I also need to consider the husband’s contribution to the same tasks albeit in different degrees and different ways.
Contributions
The wife acknowledged that at the commencement of the relationship, the husband had substantial assets and was what she described as a man of vast wealth.
Because of the way in which the case was conducted, I propose to say very little about the husband’s contributions but will refer to them at various times. This case was really about the entitlement of the wife arising out of her role in the marriage but that is not to ignore a very substantial financial contribution as well as a physical contribution by the husband.
The husband’s unchallenged evidence was that he had assets valued at approximately $364 million when the parties began living together. That, he said, was reflected in the financial agreement they executed in 2011. The husband’s evidence on those matters was not challenged by the wife. She said that throughout the marriage neither she nor the husband received any windfalls or inheritances. She acknowledged the husband was also the principal income-earner and together, they enjoyed a luxurious standard of living.
The husband said he made all of the financial contributions during the marriage. I accept that. It was the husband’s evidence that there was a significant decline in his business profitability because of the “global financial crisis” but also because of bad decisions by an employee. At that time, the husband was “semi-retired” so in February 2009, he stepped back into the management role and reversed the damage. That affected his own homemaker and parent role to some degree.
The wife’s employment ceased in about November 2002 which was just prior to the birth of E.
It was the wife’s initial evidence that she, and not the husband, had the “hands-on” role with the various children. She said the husband spent a lot of time outside the home working but she also acknowledged he was involved in driving them to school and doing homework. In her evidence in chief, not just in cross-examination as submitted by the husband, the wife volunteered that she did not do all these tasks by herself. She acknowledged the husband was at his office for a part of the day although she did not see any identifiable change in the business during the last two years of the marriage. When the wife was questioned about this, she conceded that when the husband was absent, he was away from 11.00 am to 6.00 pm.
I find that in respect of these two roles, leaving aside the alcohol issue, the wife took on and fulfilled a very large task of homemaker and parent and whilst the husband helped, her role in contribution terms, was much greater than his.
It is also clear that the husband devoted his time to the business and the fruits are apparent. To do that however, he needed the assistance of the wife in running the home. True it is that there were employees to help but I am satisfied that right from the beginning of the relationship, both parties saw and expected that the wife would be the homemaker which included the role of household management.
The wife said that when the relationship began, she only had modest assets which she valued at $116,000. She was engaged in employment four days per week and negotiated flexible working arrangements to be available for the children of the husband’s earlier marriage. Those children were initially weekend visitors but soon became permanent residents in the parties’ home.
Although as I have indicated earlier, a contribution by the wife to the support of the husband’s children is more appropriately assessed under s 75(2)(o), it cannot be argued that the wife did not contribute to the support of the husband. She was concerned about his welfare including his standing in the community. She organised the household to ensure cultural and religious observances were undertaken. That must be something for which she should be given credit because her background was not so similarly committed. She did that not just for the husband but also for the children.
The husband’s other children
When the relationship began, the husband was engaged in court proceedings in this Court with his former wife concerning his three children S, R and J. The husband was moving towards a week-about arrangement for the care of those children. The husband gave evidence that his house was not in turmoil and he had been a single part-time parent with the assistance of paid staff. Those three children were all under the age of five years. However, there were also two other children of an earlier relationship who were grown up but they were part of the lives of the husband and wife.
For the first eighteen months of the relationship, the child G who was then an adult, lived with the parties and attended university. The uncontested evidence of the wife is that she assisted in with his studies and provided him with meals.
The sister of G was T. T was hostile towards the wife. T was estranged from the husband.
The wife said she endeavoured to arrange a reconciliation of the relationship early in the marriage between the husband and T. In 2002, she went to counselling with T and ultimately, an amicable relationship arose.
In 2001, the husband’s litigation in this Court relating to S, R and J had begun and did not conclude until late 2005 with orders. However, contravention proceedings then followed in 2007.
Initially, the children lived with the husband and wife on an alternate weekend basis and during holiday times. By 2004, the husband’s time with those children had increased to almost 80 per cent of the time.
There were constant problems including handover difficulties with the children. All of that culminated in the husband obtaining a residence order for his children in 2004 at which time, S was eight years old, R was seven years of age and J was five years of age. The wife was an integral witness in those proceedings.
The three children were described by the wife as wild, extremely disturbed and needy. They had problems at school and kindergarten and were undisciplined. The husband looked more kindly on that behaviour. He described it as bad “at times”. He understandably thought their behaviour was within normal bounds for their ages. For example, he described the eldest of the three as “rambunctious”. He thought that in conversation with adults, the older child was polite whereas the wife described her as “talking back”. In the end however, he agreed that in the care of their mother (with whom he was litigating) there was a bad effect on their behaviour and schooling.
There was a dispute between the parties about one incident involving S stabbing the husband. The husband described it as a “jab”. On any view of the evidence, I find that S at the age of five years was antisocial, aggressive and unruly. That was at the start of the marriage. The wife undertook a stepmother role from a dysfunctional base.
According to the wife, S felt responsible for her mother from whom she had been separated. She wanted to be with her mother. The allegations against the mother included drug usage and violence. The mother’s drug usage led to her hospitalisation. It is little wonder that S was distressed.
R at three years of age was described as being riddled with anxiety. The wife said she woke during the night to ensure that there was someone there and was constantly fearful of not being looked after properly arising from the fact that her mother had left her unattended. It was the wife’s evidence that the child had screaming tantrums about what she wore.
J who was less than two years old suffered from respiratory difficulties. When the wife first met him, his thumb had been crushed whilst unsupervised in his mother’s home. He had not been provided with all of the necessary immunisations and had whooping cough and spasms that led to him vomiting. He developed Rubella during the time that the wife fell pregnant with E. In the newly-formed husband’s household, at the dinner table, J burped and according to the husband as an indication of his view that the wife’s role was not as significant as she portrayed it, the wife screamed at J and sent him to his room. The wife objected to J’s play fighting and lost her temper with him. As J became older, the more he exhibited behavioural problems that required an assessment by a psychologist who diagnosed anxiety deficit disorder and learning difficulties including dyslexia. The wife was integral in that process.
It is easy on the evidence to look at this household clinically but it does not take much imagination to perceive the difficulties of managing a large group of rowdy young children who had had few boundaries particularly as in 2002 and 2006, the wife had E and N as well.
It is clear there was a subjective element to this area of the dispute as the problem was perceived differently by both the husband and the wife. I am convinced that the wife set very high standards of discipline and behaviour and was very child-focussed whereas the husband was much more laissez faire. I accept the wife’s version about the state of the children to which I have earlier referred. The wife’s evidence which was largely unchallenged on a number of issues was that after the children came to live in the household, it was she who organised much of the daily management including setting up areas for them to play and be creative. I find she ran a very child-friendly home. That is not a criticism of the husband but rather an indication that he was content for the wife to throw herself into that role.
The extent of the wife’s involvement in the lives of these children and more particularly, in the litigation between the husband and his former wife can be seen from the judgment of Carter J delivered on 22 April 2008. This judgment arose out of a contravention hearing which the husband initiated against his former wife and which began some six months before. Her Honour had dealt with the husband’s previous marriage dispute in 2006 and noted in the 2006 proceedings, there was evidence of a “negative legacy” of the lifestyle that the three children had lived but by the time the matter came before her Honour in 2007, the children had “blossomed”. In her reasons for judgment, Carter J found that both the husband and the wife fostered the children’s relationship with their mother and accepted the wife’s description of the lifestyle in the husband’s household which the former wife seemed intent on disrupting. It is interesting to note that Carter J was impressed by the wife as a witness and in particular, the evidence came from the wife about those household activities.
Carter J described the wife as a “warm, concerned and loving step-parent” who had a great deal of insight into the three children despite the problems that the household had. That evidence simply corroborates the wife’s version of the degree of difficulty that the three children provided to the husband and wife, the roles that the wife had and the support she provided for the husband.
The role of the wife included responsibility for changing, bathing, dressing, feeding and putting the children to bed. The wife also undertook responsibilities of shopping for clothes for S. There is no doubt there was nanny assistance but I take into account the ages of the children and the dysfunctional lifestyle they had led to the point at which a very particular and child-focussed wife took charge. Again, that is not a criticism of the husband whom I am satisfied, on the wife’s evidence, helped. The wife attended appointments with the children for doctors and dentists because that was the role that both parties accepted was expected of her .
The wife assisted the children with homework and was involved in parent/teacher nights and undertook all of the duties that one would normally expect of a parent notwithstanding S, R and J were not her biological children. In addition to parental duties, the wife involved herself in the activities of the children of an extra-curricular nature.
Both husband and wife share the Jewish faith. The wife involved herself in the activities associated with that faith particularly as they related to the children.
The wife played a significant role hosting events that were important to the husband.
It was the wife’s evidence which was largely unchallenged by the husband, that she altered the lifestyle of the children as a result of her discipline.
In the litigation proceedings between the husband and his former wife, he credited the wife as having contributed to those changes and no doubt relied upon her to convince the Court and his former wife that the children were much better off in his care.
I am satisfied that the wife was not a passive bystander but was an integral part of the husband’s push to remove his children from an unsavoury situation to one which was clearly in their best interests. Without the wife at his side, that may not have happened.
Apart from the matters to which I have referred about the positive role that the wife undertook in those years, I find it is important to also recognise the circumstances under which that role was fulfilled. During the period of time that the husband’s litigation was ongoing including the contravention proceedings, the wife was the target of abuse by the husband’s former wife. That woman threatened the wife directly but also indirectly through the children. The wife suffered the ignominy of putting up with drunken and abusive calls including from the former wife’s contacts. She said she was frightened and I accept her evidence. Even with the assistance of the husband and support staff, those complexities would not have made the wife’s role as a homemaker and parent any easier. There was certainly foundation for her fear as the children’s mother had involved herself with a person who was in prison.
In respect of the litigation, it was the wife’s evidence that she was involved in assisting the husband with his affidavit material and attending court events. She attended the expert who was to give evidence in relation to the parenting matters. I accept that was an important and perhaps understandable role for a new wife in relation to the husband’s welfare but important nonetheless when considering the wife’s contribution.
The disruptive nature of the former wife’s behaviour was recorded by Carter J in the reasons for judgment to which I have earlier referred. That can be seen in paragraph 384 of the judgment. It simply corroborates what the wife said in evidence.
The role concerning the children of the marriage
After the birth of E and N, many of the duties of caring for the babies fell to the wife. The wife involved herself as a mother on a full-time basis.
In respect of domestic duties, there is little doubt that the affluence of the parties enabled them to enjoy the benefits of hired help. It was the wife’s evidence however that she assisted with domestic duties. The role the wife undertook subsequent to the birth of the two children must have been significant even with the assistance of hired help because there were five young children in the family at that time. Particularly having regard to the difficulties to which I have just referred and two babies, I find that the homemaker and parent role of the wife was significant.
It was the wife’s evidence unchallenged by the husband that she did grocery shopping, shopped for clothing and toys and arranged all of the usual things that parents undertake when their children interact with peers. Dinners were conducted in the house with friends and relatives as well as children who were the friends of the children.
Post-separation contributions of the wife
The parties separated but the wife’s role with the children E and N continued. Final parenting orders were made on 21 November 2008. There was a dispute between the parties as to whether or not the husband was fulfilling his obligations under the order and I am satisfied that there have been occasions when he has not been able to fulfil his obligations. That is not a criticism but rather an observation that it otherwise meant that the responsibility fell to the wife. I do not find that the husband did not see E and N as a priority which seemed to be the assertion of the wife.
The wife asserted and it was not disputed by the husband that she still does shopping for the children but in turn, those purchases are reimbursed by the husband. Such things as school requisites seem to be the province of the wife and she does it happily.
The focus of the husband’s cross-examination of the wife concerned not so much the extent of the contributions referred to above but the fact that the wife had highlighted her good points and had ignored the important failings as the husband saw them.
In cross-examination of the wife, she conceded that the husband did fulfil various roles. I am satisfied however that the wife fulfilled the greater role, she being at the home most of the time.
The negative side of the wife’s role
It was the husband’s case that it was axiomatic that he made significant contributions as a parent and homemaker because in the last two years of the marriage, the wife’s conduct minimized or reduced her contribution and he took on a variety of roles.
The wife attended a psychologist Dr B as well as other health professionals. The husband said that her attendance upon Dr B which he conceded included himself for counselling, was for the wife to be assisted with cognitive behaviour therapy and anger management. The wife described it as attending to deal with emotional issues.
In their final submissions, counsel for the husband pointed to the fact that during the adjournment period of November 2011 to February 2012, the wife had consulted Dr B and also her solicitors at a point in time where she had been cross-examined about her behaviour and drunkenness on the basis of Dr B’s notes. I noted at the time that the solicitors had not acted improperly on what I was told. It was clear that the wife wanted to call Dr B for the purposes of showing that she had made her contribution as a homemaker and parent in a difficult environment. I ruled that that was not relevant. As such, I am not convinced that whatever was going on between Dr B and the wife during that period of time, it did not alter her case in any way.
The husband said that after the wife drank alcohol, she became more anxious and stressed. In the context of the last two years of the marriage, he said the wife regularly drank alcohol until she passed out. He said she was then abusive. Towards the end of the marriage, the problems occurred in the presence of the children including occasional verbal abuse to them. Whilst there was also evidence of substance abuse by the wife, in the sense of inappropriate use of prescribed medication, the husband acknowledged that the wife had since resolved that problem.
The husband relied upon an affidavit by an employee who set out the role she fulfilled in the household both as a nanny and as a support person generally undertaking tasks in the household. She commented on various aspects of the wife’s behaviour but there was little of probative value in those comments insofar as they may have affected the wife’s contributions. I am not prepared to draw an inference that the behaviour which was largely accepted by the wife, diminished her role in the household. That same affidavit was complimentary of the role the husband played but that is exactly the impression I had from hearing his evidence.
Although not mentioned in her affidavit, the wife in cross-examination was candid and forthright about the problems as she perceived them. She said in late 2006, she drank too much alcohol to the extent that she conceded it was partially correct to say that she abused it. There was even a dispute about whether the husband had done enough to assist with the drinking problem. The wife claimed she requested the husband not to bring alcohol into the home. His response was that his expensive cognac kept disappearing so he refused to buy that or other spirits. He said that despite that, alcohol kept disappearing. He conceded that the wife did not touch the expensive wine cellar but added that she had alcohol in cans which she drank whilst cooking. Ironically, I perceive that despite the wife’s consistent drinking, he acknowledged that she was still involved in home duties such as cooking. He was sufficiently concerned about this period because he filmed and photographed the wife in conditions such as when she was drunk but when she found out about it, she took and hid the cameras and deleted the films. He said that if he downloaded these pictures, she deleted them. All of this points to a house in turmoil. The wife conceded anger towards the husband but denied involving the children. She noted that this was a time when the marriage was deteriorating.
There was a dispute between the parties about the purpose of counselling as each party saw it and as I have described it above. The wife’s evidence was that she was attending because of low self-esteem but part of it was to moderate her own behaviour. I have previously found that the wife’s self-esteem was not a product of the marriage. She acknowledged she was verbally abusive and as the marriage ended, she was mixing alcohol and prescription drugs. She did not accept the extent of the husband’s recollection of that particular unedifying period. The objective evidence really comes for the wife’s own admissions to the psychologist she attended.
In June 2007, the wife described her drinking and the house being like a war zone. She acknowledged earlier having expressed shame in September 2006 for behaving badly including its effect upon the children. Later, in 2007, she acknowledged drinking in the mornings to take away her stress as well as drinking to cope. She told the psychologist that she had no control over herself.
Into 2008, the situation did not improve and she was drinking excessively as well as bad mouthing the husband. These concessions all came from cross-examination which arose from the counselling notes of the psychologist Dr B. The dates certainly show a pattern but just how bad it was in between visits is hard to tell. The husband would have the Court accept that this was a regular problem but there is not enough evidence for me to make that finding. Whether the wife was drinking excessively and to oblivion, I am unable to say and in my view, it does not matter; she was drunk. Just how often, I am not sure.
The wife became defensive when cross-examined about the impact of all of this on what she otherwise claimed she did in the household. She maintained that she still got up and was available for the children. She conceded the husband’s children from his earlier marriage were upset and withdrew from her.
Much of the focus was on what was a very unfortunate and unpleasant time in the marriage but it worsened towards its end. Importantly however, it is difficult to assess the impact of this behaviour on the wife’s contribution. She conceded it impacted but having regard to the duration of the relationship and the role of homemaker and parent in relation to the two children of the marriage, I do not find her conduct had a major impact on her contribution. It certainly has some impact on her claim under s 75(2) of the Act relating to the children of the husband’s earlier relationship but again, I find her role to the point where the relationship was disintegrating far outweighed the final throes of the period. There is little evidence of any regression in the husband’s children such that they reverted to the emotional, physical and psychological state that they were in at the time that the husband and wife began to rebuild their lives after they came to live with them. As such, I find the wife’s early efforts in dealing with those problems outweigh her subsequent failures insofar as they affect the question of contribution.
The assessment of the parties’ contributions
In Rolfe v Rolfe (1979) FLC 90-629, Evatt CJ said that where one party was earning an income and the other fulfilling responsibility at home, there was no reason to attach greater value to the contribution of one of them to that of the other because that was the way the parties arranged their affairs. Her Honour said that the contribution of each should be given equal value. In Mallet (1984) FLC 91-507 Wilson J referred to Rolfe (supra) and agreed with Evatt CJ’s exposition subject to one reservation. His Honour said that the Act required that the contribution of the wife as a homemaker and parent be seen as an indirect contribution to the acquisition, conservation or improvement of the property of the parties regardless of whether legal ownership resided. His Honour then said:
The contribution must be assessed, not in any merely token way, but in terms of its true worth to the building up of the assets.
That statement and similar ones made by other justices of the High Court in Mallet have to be also read in the context of s 79(4) as it then read. Section 79(4)(b) referred to the contribution made by a party in the capacity of homemaker and parent but it was not a stand-alone contribution factor. That position was altered by the amendment to s 79 by the Family Law Amendment Act 1984 (Cth) which introduced the current homemaker and parent provision. In the explanatory memorandum, it was said that the purpose of the revised subsection was to remove the possibility of an interpretation that there had to be a nexus between the spouse’s contribution and the specific item of property in s 79.
The inclusion of the specific provision might be said to mean that the importance of the worth of the contribution to the building up of the assets was no longer as important because it was a stand-alone contribution that had nothing to do with assets.
None of this assists in the question of how one works out the value of that contribution. In Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513 the High Court reinforced the discretionary nature of the determination arising from s 79 of the Act. Brennan J observed that guidelines in relation to the exercise of discretion had to be very general and detailed guidelines were unsuitable in circumstances which were quite diverse. His Honour said:
Typically a court draws on the standards and values of the community when it supervises the exercise of a discretion and develops guidelines affecting its exercise, but the Family Court is faced with a problem of peculiar difficulty: whence to derive the standards and values by reference to which the just and equitable result in a particular case or in a class of cases can be determined. However desirable the development of guidelines may be, any attempt to structure the discretion by judicial decision is likely to fail if these difficulties are understated or, worse, ignored. If there is a problem of unevenness in the exercise of the property jurisdiction of the Family Court, it arises because the Act confers a jurisdiction governed by discretion, not by legal rules, and because the relevant standards and values of the community are not uniform.
Counsel for the husband referred to the processes known as intuitive synthesis and instinctive synthesis and it was acknowledged by both parties that the subjective judgment was largely unfettered provided the requirements of the Act were fulfilled. Counsel for the husband referred me to R v Williscroft and Oths [1975] VR 292 in relation to criminal law sentencing. There, the Full Court (Adam, Starke and Crockett JJ) referred to the instinctive synthesis process and said that in subjectively assessing what was an appropriate sentence, the aims of punishment had to be considered. Their Honours referred to the statement of Sir Frederick Jordan CJ in R v Geddes [1996] 36 SR(NSW) 554 where the learned Chief Justice observed “the only golden rule is that there is no golden rule”.
Their Honours went on to say that in addition to considering all of the relevant elements there had to be some recognition of and accord with, the moral sense of the community in respect of the selection of the appropriate penalty. In this case, the relevant factors for consideration are those set out in s 79 of the Act. How much one can factor in community views is hard to say but in a case involving substantial wealth which in my view is the exception rather than the rule, community attitudes may very well be wide and varied. That is supported by the fact that neither party submitted that there was any authority of this Court on how to approach cases involving substantial wealth and my researches have not been able to find anything to guide me either. What follows is the best approach I can find but more importantly, with which I am comfortable.
In Figgins and Figgins (2002) FLC 93-122, the Full Court of this Court went back to the issue of marriage being regarded as a genuine partnership into which each party brought different gifts. Nicholson CJ and Buckley J said that the fact that one contribution by a party which was productive of money in large quantities was not a reason to disadvantage the other non-financial contributor. In that case, both parties would have had modest assets but for the death of the husband’s wealthy parents which resulted in him receiving a substantive inheritance. The inheritance was really in the form of a business to which neither made any significant direct contribution. The issue was about what amount satisfied the wife’s entitlement from an agreed pool of $22.5 million. Their relationship was described as a sporadic seven years. The trial judge awarded the wife $1.1 million. Having found the determination of the trial judge was unfair and allowing the appeal, their Honours then re-exercised the discretion. They said that senior counsel for the wife did not wish to argue that in a pool of $22 million, she should receive more than $2.5 million. Their Honours thought that the wife was clearly entitled to receive more than that but having regard to the wife setting the parameter, it should be the benchmark. Ellis J approached the matter differently but said that the more significant matters within the context of s 79(4) were the short total period of cohabitation, the significant financial contributions made by the husband which exceeded those of the wife and the significant contribution made by the wife to the welfare of the family including her contributions as a homemaker and parent which exceeded similar contributions made by the husband. His Honour then said:
In my view, it is somewhat artificial to approach the assessment of the respective contributions of the parties on the basis of a percentage of the net worth of the husband. It is more appropriate to award a monetary figure, an approach which is consistent with the submissions of counsel.
His Honour thought that $1.75 million was the appropriate assessment for contributions. That was a subjective assessment by his Honour taking into account the matters to which I have just referred. One wonders what might have happened had the Court’s attention not been focussed on the parameters seemingly being fixed by what the wife was said to be pursuing.
It is relevant to ask what the community expectation would be where there is less of a clear-cut dichotomy along gender lines as in generations past. I suspect modern-thinking people entering into relationships, as did the parties in this case, see it as fair for a sharing of the fruits of their efforts regardless of whether the contribution was direct or indirect. There is less emphasis on the discrete roles each plays and that is evident from the cases this Court sees regularly where the parties share parenting roles during their time together much more than in previous generations and I think there is less concern with disparate earning capacities; each does what is possible for the good of the family.
The parties themselves had executed a document setting out what was to occur in the event of the cessation of their relationship but that was an overall settlement which had no specific breakdown of the various factors that a court is obliged to consider because of s 79 of the Act. Generally, the parties immediately prior to the marriage talked of a fund into which $250,000 per annum was to be paid for the benefit of the wife and to which the sum of $1 million was to be added for each child and the $250,000 to be then reduced to $200,000. That would have reflected an outcome in this case of about $3.4 million.
In their written submission, counsel for the wife said that the contribution assessment had to bear some relationship to the value of the assets in the pool. In that same submission, counsel candidly argued that they had no reference point and that was the reason they were encouraging the Court to use a percentage methodology. However, using a percentage does nothing to guide the intuitive synthesis process nor does any methodological mathematical approach either. It was said that the pool provided a reference point against which the “leap” from words to figures could be judged. I do not find that is the case here because of the extreme wealth.
For their part, counsel for the husband said there was “no connection” between the wife’s contribution and the value of the asset pool to which the wife had made no contribution. The submission highlighted that the wife conceded she made no such financial contribution.
The wife’s written submission in reply saw her counsel submitting that the wife was not arguing an entitlement anywhere near that of the husband. Rather, it was said, the issue was the measure of the contribution being “relative” to the available assets. I again reject that as an appropriate yardstick because of the size of the wealth. It is again important to emphasize that one percentage point is a huge amount of money.
It was submitted that a judgment reflects contemporary values applied in the evaluation process. I think that is correct having regard to my earlier comment about current day relationships.
I find the wife’s contribution as a homemaker and parent was significant. Significant does not mean large but rather, important or of consequence. The wife should share in the growth of the capital of the parties during the relationship. In that exercise, recognition still has to be given to the introduction of the large capital sum and the off-setting benefits that the wife has during the relationship from sharing in the affluence. I accept there would be a variety of factors giving rise to the financial increase which went from $364 million to about $430 million. I am not able to find more than that the husband who was semi-retired, returned to the business to straighten out its problems and that occurred when the wife managed the household and supported him. The parties should share in their good fortunes in the same way as they should share in any losses.
Reflecting the overwhelming contribution of the husband to that increase but acknowledging the significance of the wife’s homemaker and parent role, I would assess the wife’s contribution to the increase of about $66 million at about 15 per cent. That is almost $10 million and taking into account what the wife already has retained which I shall determine she should also keep, I assess her contribution at $10 million over and above what she has kept. That reflects the fact that the husband introduced the wealth, has nurtured it and fulfilled his role in the factors required of him for the assessment process in s 79.
At the hearing in February 2012, an order was made that the husband make a part-payment to the wife and $500,000 was then paid. I propose therefore to take that from the $10 million.
A Section 75(2) adjustment
Section 75(2) is not simply a mandatory consideration for the purposes of working out the wife’s entitlement. Justice and equity must be done to both parties. However, because of the way the litigation was conducted, I propose to focus mostly on the economic disparity of the parties and the way in which the wife seeks an adjustment in her favour.
Of the relevant factors, the husband is 60 years of age and the wife 53 and each has reasonable health at least to the extent that it does not affect their economic positions in the future.
Each of the parties has (or will have) income (from investment), property (in the sense of at least a house) and financial resources of some magnitude.
It was always the case here that the wife would not have to return to the paid workforce. Prior to the birth of the children, the wife was employed but that ceased in November 2002. It is therefore about 10 years since she was in that situation and she is now 53 years of age. Having regard to the economic circumstances of both parties, employment is not something that I need to consider seriously.
In respect of the two children of the marriage, the parenting orders have defined the time each parent will be responsible for the care of the children. It was the wife’s evidence that there were signs that the delineation under the order was becoming blurred because of the husband not maintaining his part of the responsibility. However I refer to my earlier remarks about that and find that that should not affect any adjustment having regard to the size of the wealth involved.
The commitments of each party and in the case of the husband, the people for whom he has taken responsibility, are normally things that would require consider before any adjustment. But here, the high wealth and affluent lifestyle obviates that necessity.
Does the wife have other resources that should be taken into account?
The wife’s father’s estate
In December 2011, the wife’s father died and she became a beneficiary of his estate as set out below. The question is whether there is an entitlement of the wife which must be added to the pool of assets for division or whether her entitlement (if any) affects the determination here.
In their final submission, counsel for the husband argued that it was likely that the wife would receive some $2.5 million by way of inheritance and that it was just and equitable to take that into account. The difficulty with this case is that the evidence does not support a finding that the wife is likely to receive anything significant from her father’s estate. In addition, although her mother is alive, the evidence does not support a conclusion that there is any likelihood of a substantial fund from that source either.
Property is defined in s 4 of the Act to mean property to which a person is entitled whether in possession or reversion. If the property of the parties is definable, it would normally be added to the pool for division between them. There is the amorphous concept described as a financial resource as well. Financial resource is referred to in s 75(2)(b) as something the Court must take into account.
In their submission, counsel for the wife described (as having no significance) the wife having a resource as a beneficiary of her late father’s testamentary trust upon the death of her mother.
In their submission, counsel for the husband submitted that it was internally inconsistent to argue that the estate and trust existed and therefore should be taken into account but that it be given no value and have no effect.
The evidence about the wife’s interest in her father’s estate came from her brother who was not required for cross-examination. Objection was raised about the capacity of the brother to give the evidence but ultimately, I have determined this issue on the basis of the interpretation I have made of the documents provided. I have not been influenced by the brother’s views.
The wife’s father died in December 2011 and her mother is the sole executrix of the will.
The father’s assets seemed to be approximately $7 million.
By his will, the father established four discretionary testamentary trusts with one trustee company of which the wife’s mother, the wife and her three siblings are directors. The wife’s mother is the sole appointor of each of the relevant four trusts.
The father’s will also determined the specified beneficiaries of the trusts. They include his wife and his four children.
The trusts so created are discretionary and operate from the day of the father’s death. The trustee was empowered to either distribute income or to accumulate it. The vesting day for the trust is described as the 79th anniversary of the father’s death or such earlier day as the trustees appoint.
The capital of the trust on the vesting day as well as undistributed income is to be held according to the trustee’s wishes and if not distributed, then to be held and distributed according to a regime involving specified beneficiaries and their next of kin.
Thus, there is little doubt that the wife does not have any absolute right to a one-quarter share of the father’s estate. Further, she is not in the position of having any absolute control over the distribution of the income and capital of the trust created by the will and is very much dependent upon her mother and siblings.
All of that position is a little blurred by a precatory letter signed by the wife’s mother and father at the same time as the will was executed. The precatory letter provided that the wife’s parents hoped to leave assets which would afford opportunity, security and comfort for their children and their families. It was seen that these trusts would have a long term benefit for the family. It pointed out that each of the children would be directors of the trustee with a “voice and a vote” in the affairs of the trusts but it was intended that the funds be provided prudently for the needs of a very large family. The letter unashamedly was designed to be a guide to decision-making.
The precatory letter said the trusts should be administered for the benefit of the families of the four children according to the letter. It was expected that upon the death of the mother as the survivor, the trust would be notionally split equally between the four families making allowance for advances made previously. Those advances were recorded in the family’s financial records and had been indexed. They included advances to enable two of the sons to acquire a home.
Whilst clearly dictating what was to happen, the precatory letter made clear that the trustee always had a discretion as to how the income and capital was to be applied within the trusts. But in a crisis, the parents expected that notional divisions and shares would be disregarded if particular individuals had critical needs.
In respect of the families, the letter made personal observations which are not relevant here. Of the wife however, the letter indicated that she was a member of a very successful and wealthy couple despite which, the parents did not ask or desire that she renounce her family’s rights to be considered in respect of distributions.
Looking at the other members of the family, it seemed clear that the parents were trying to protect the futures of their families.
Importantly, there is a clear acknowledgement by the parents that the letter was to be no more than a guide and that indicates that the trusts under the control of a company in which the wife was only one of the directors, must prevail. I am unable to say whether this family generally finds consensus easily.
Accordingly, I find that the notional sum that one might expect to fall into the hands of the wife is in reality, part of the testamentary trust over which the wife has limited control because of the requirement that she have the consent of her siblings and mother to receive a benefit.
To the extent that this entitlement could be seen as a financial resource, I am uncertain what conclusion I can draw about whether the directors of the trustee would follow the precatory letter and even provide the wife with income on the earnings of the trust. As I pointed out, the trustee has a power to accumulate income.
To the extent that the wife fell on straightened times, I would presume that the precatory letter would be followed but having regard to the totality of the father’s estate and thereby the potential distribution of capital at best to the testamentary trust involving the wife, I find it would have little impact because of its size and more importantly, it is a very modest sum in comparison to the totality of the wealth of the husband.
Accordingly, the power of the wife being limited, I propose not to treat the interest in the trust as having any significant weight in this determination.
The wife’s future standard of living
Section 75(2)(g) is an important aspect of the adjustment process. It provides that in determining a just and equitable outcome, the Court must take into account the parties’ past lifestyle for the purposes of endeavouring to achieve a standard of living for both of them that in all of their particular circumstances, is reasonable. In Aroney and Aroney (1979) FLC 90-709 Nygh J grappled with the problem and said:
That is a relevant concept that must be judged in the light of the standard of living to which the parties were accustomed during marriage. The evidence shows that Mrs Aroney was used to a very high standard of living and that her husband still enjoys to a considerable extent such a standard of living. It would be unrealistic of course, to make provision to enable her to continue the lifestyle of the wife of a prominent Sydney businessman even though she no longer has the social duties of such a position. Like any high official who has retired, she is entitled to live in quiet comfort at a pension which is somewhat less than the prerequisites of office.
I earlier mentioned social change. I expect the concepts to which Nygh J was referring are now outmoded if not unacceptable. That case concerned a time when wives of that ilk were not often involved in business and their roles related more to attending social functions and hosting parties. The yardstick contemplated by Nygh J was the need to be involved in that role on an ongoing basis. If there was no businessman-husband any longer, there was no social commitment. In my view, that is not an appropriate yardstick any longer.
Counsel for the husband referred me to the Full Court decision of Wilson and Wilson (1989) FLC 92-033. That case however was an appeal against an order for interim spousal maintenance. Strauss J said that a standard of living that in all the circumstances was reasonable for the party claiming maintenance was not necessarily the same standard as that enjoyed by the party who was ordered to pay maintenance. His Honour said:
Normally, as in this case, the party who is ordered to pay maintenance is the party who generates the means and income out of which the maintenance is to be paid. Similarly, the standard of living that in all the circumstances is reasonable for the wife in this case, is not necessarily the same standard as that enjoyed during cohabitation.
Care needs to be taken not to confuse spousal maintenance with property entitlement. Section 79(4)(e) requires as part of the assessment of the entitlement of the wife to take into account all of the matters set out in s 75(2). The determination in Wilson (supra) was looking at maintenance. That decision did not set a principle that a person who leaves a marriage cannot have the same standard of living as that enjoyed during cohabitation. Each case has to be determined on its peculiar merits.
If, as part of an agreed marriage relationship, a certain lifestyle is the norm, then subject to financial capacity to continue it, there is no reason to terminate it. The commitment was made to the relationship and the lifestyle came with it. The use of the word “reasonable” is intended to make clear that if the continuation of that lifestyle can no longer be afforded, it is only reasonable to make an adjustment. How then should it be assessed?
The wife relied upon an actuary Mr P. His evidence was that he was instructed to work out the present day value of a lump sum required to invest and subsequently draw upon, to meet the estimated future expenses for the rest of the wife’s life. He made an assessment as to the longevity of her life.
The actuary did his calculations based on an estimate prepared by a forensic accountant who was instructed by the wife’s solicitor. The accountant broke the task down into three schedules. They were:
(a)the anticipated future expenses after settlement based upon a reasonable standard of living commensurate with that which the wife enjoyed during the marriage;
(b)the anticipated children’s expenses on the same basis; and
(c)an estimate of non-recurring capital or other costs that the wife expected to incur to benefit herself and the children.
The actuary’s calculations showed a capital cost between $23.6 and $23.7 million based on a three per cent discount rate and an assumed longevity of life of 88.4 years.
Each of these schedules needs to be examined in the light of the wife’s evidence.
In relation to the wife’s expenses, that is, maintaining her lifestyle, she sought $4.9 million.
In respect of the children’s expenses, these should be seen differently. They are expenses concerning a lifestyle but also an education. If education is excluded because the husband will pay for that, what the wife is seeking is recreational costs which need to be capitalised. I see no reason to do that on the basis that I am being asked by the wife to fix child support by way of a departure order. In that application, the wife seeks $500 per week per child whilst the husband offers $250 per week per child. Leaving aside mobile telephones and gym memberships which in my view are not only not necessary but on the evidence, also not part of the existing standard of living of these children, the wife’s estimates come out at about $470 per week per child.
Non-recurring costs for each child relate to anticipated expenses that the wife will incur and it was her desire to ensure that she has money to pay for them so that the children avoided the “rich Daddy-poor Mummy” syndrome. In respect of that, the wife sought to cover the Bat Mitzvah, school excursions, houses, cars, university expenses and a wedding. Some of these such as the weddings and even university are entirely speculative and could not possibly be affected by the “rich Daddy-poor Mummy” problem because the children will be adults and hopefully of sufficient knowledge and understanding to love their parents not for their largesse but for the emotional and psychological support.
These expenses look like the wife feeling good about being in a position to provide for the children for several if not many years from now. In my view, it would not be appropriate to approach the capitalisation of those expenses in the hope that these events will occur. Whilst this is clearly a wish list, there is no yardstick that I can otherwise use. I am conscious of the fact that the evidence shows that the husband’s other children enjoy the benefits of their father’s largesse now but I see no reason to doubt that the children of this marriage will not be similarly well off. The fact that the wife may not be able to afford to be as extravagant as the husband is not to the point. What the parents give their children does not need to be just judged in material terms because on any view, each of the parents will bring their own concepts and values to the upbringing of these children. In other words, for me to try and achieve a level playing field so that the wife can provide what the husband currently gives is pure guess work. It is also important to recognise the boundary between children’s living expenses which is child support and parental costs for providing the children with a lifestyle that the parents want them to have. In my view, the boundary is blurred but the matter is better dealt with as a child support issue became that legislative program looks at the obligations of both not just one parent.
In respect of the wife’s recurring capital expenses other than those which might be described as maintaining herself, the expenses claimed mostly related to household item replacement. These costs included the upgrading of a house which, factoring in the current value of the wife’s house, would mean that she would need to spend approximately $1.43 million in addition to the proceeds of the sale of the one that she has. The wife sought a holiday home because the children currently enjoy the benefits of a very elaborate holiday home with their father. The wife also sought personal items such as jewellery, clothing and cosmetic surgery and this had been calculated at about $780,000 as an outlay. Of a non-recurring nature, the wife’s expert thought that she would need $5.9 million costs, the new house, a holiday home and artwork. All of that was predicated on the basis of acquiring new items where in fact, some of the items currently exist. In other cases, the wife unashamedly had a desire to change things such as décor not only because of taste changes and necessity but also simply because she could. The husband took a more pragmatic approach in saying that he had kept certain practical items for many years and did not see the benefit of making change for change sake.
I am satisfied that the evidence of the expert based upon the forensic accountant’s determination was undertaken to try and give some indication of what sort of costs would be incurred if the wife continued to live the lifestyle to which she had become accustomed within the marriage relationship. The difficulty is whether that calculation should be done on a precise basis requiring the Court to descend into the finite detail. Senior counsel for the husband skilfully cross-examined the wife about why she needed things and what she currently had.
The wife was asked about her estimated expenses for holidays in which she had calculated additional costs for another adult. Her explanation was that the husband did this by taking nannies and personal trainers on his holidays. I do not accept that that is an explanation or a reason for such an additional expense. It may be acceptable in certain social contexts within an affluent society but these costs associated with living have to be reasonable. There is no evidence to guide me on this issue and whilst I can see no reason why the wife should not have company on a holiday, I can find no logical reason why she should pay for someone else. In my view, most reasonable minded people in this community would expect each person to contribute their own costs particularly if they are of the same social setting as the wife.
The wife was also asked about a pet. On the evidence, I am satisfied that there is no pet at the moment and the wife conceded that there had been a discussion in which she had promised the children that when they were older, they could have a dog. Along with the outlay for the dogs, came such expenses as a mobile dog wash. The cost of those sorts of expenses presumably are affected by the size of the animal. If the pet is purchased for the purposes of some parenting concept to teach children responsibility, it would be more associated with child expenses rather than those of the wife. There was nothing about the evidence of the wife that indicated to me that money should be set aside for that purpose.
Amongst the anticipated future expenses were a number of television sets. The wife conceded in cross-examination that there were more factored into the calculations than was really needed. I presume in this throw away society, television sets will need to be changed over far more regularly than in the past but I suspect I can take judicial notice of the fact that television sets have also come down in price substantially as the technology has improved and the market place has increased. Nothing in the evidence indicated that there was a particular lifestyle to which the wife and children would be accustomed that required a substantial number of televisions.
The cross-examination of the wife descended into issues such as replacement of coffee tables and cutlery but also garden tools in circumstances where the wife claimed the need for and the expense of, a gardener. The question of whether or not the gardener would bring his or her own tools of trade was a matter of conjecture. The question of whether or not items such as dining tables and cutlery needed to be replaced all pointed to the fact that this was a wish list and that the evidence was highly speculative.
Another expense claimed by the wife and which was highlighted as an example of the unreasonable nature of the calculations was cutlery. When asked about why there was such a necessity to make those calculations, the wife responded that she might want to update what she had for a more contemporary style. Similar arguments apply to the changing of furniture and the renovation of such things as bathrooms. The husband conceded in cross-examination that this was possibly a gender driven thing because he had used the same chattels for many years and saw no reason to update them. On the other hand however, the wife saw merit in making those changes for the sake of the change rather than out of necessity because of the functionality. Whilst lifestyle brings its own peculiar traits in people this particular provision in s 75(2) requires an element of subjectivity. In my view it is intended to refer to necessary replacements rather than changes because of whim or style.
When pressed on many of these items, and whether she had over-calculated, the wife conceded she may not have paid proper attention to some of the items and when asked whether or not it was reasonable to acquire these things, her response quite sensibly was that “give or take”, she would not disagree.
This exercise undertaken by the forensic accountant was intended to give a picture of the sort of expenses that someone with an affluent background might conceivably spend over their remaining years of life. However, apart from the issue of reasonableness to which I have referred above, there is also the fact that these items will all not necessarily be acquired at one time and it was sheer speculation as to how often things would have to be changed. It is not appropriate for the Court to descend into minute detail but rather to take a broad brush approach guided by the way in which the parties lived together in the circumstances that created the entitlement to a continued affluent life. In her evidence, the wife made clear that she did not agree with irresponsible spending and she gave examples. She made clear she did not want the children to be simply given everything because they could. She impressed as being a person who was responsible with money as well as careful. What she was seeking was an opportunity to enjoy some but not all of the benefits that the husband would be enjoying. In this very affluent household, it may be appropriate for a swimming pool to be built or a new house to be acquired with a swimming pool if that is a luxury that the children enjoy in not only their father’s house but also at the houses of their peers. The provision of a swimming pool or an upgraded house is not a child expense but part of a way of life that both adults expected would be their future life together had the marriage not failed. Those sorts of expenses are different from the replacement items which were so carefully set out by the accountant.
I see no reason why the wife should not have the benefit of a standard of living judged by the benchmarks set by the husband during the marriage.
Counsel for the husband submitted that the wife’s demands were unreasonable and made reference to a $2 million holiday house as not a “relatively modest” holiday house judged by ordinary or community standards. This case cannot be judged by reference to community standards having regard to the lifestyle to which the parties were and are accustomed but what the wife does with her money is a matter for her. I do not think owning a property as distinct from enjoying a lifestyle is the point. If the wife wanted to spend her leisure time at a holiday destination, she could rent a property and the lifestyle would be much the same.
In their submission, counsel for the wife said there was no precise answer to what was a reasonable standard because it differed from marriage to marriage. It was submitted that in this case, the wife placed herself and her future lifestyle differently to many wives. She was not seeking the “untrammelled luxury” of the husband’s life. I accept that. It was also submitted that it was important to take into account the contact time difference of the parties in respect of the care of the children.
Thus, much about the wife’s future economic circumstances is speculative. The evidence of the actuary in this case however provides the foundation for a confident view that if the wife had unlimited resources, she could continue into the future to have untrammelled expenditure. I do not think that that is what s 75(2)(g) is intended to do. Sad as the breakdown of the relationship may be, it is not intended as redistributive justice but rather to ensure that a fair outcome is achieved having regard to the commitment that the parties made together when they commenced their relationship. The unusual feature of this case is the fact that there are two children for whom the wife will be largely responsible and she is entitled as a result of her commitment to the relationship in 2002 to be able to provide a standard for them reasonably and sensibly. It is not an opportunity to simply replicate the lifestyle to which they would become accustomed if living with their father. I do not propose therefore to simply endeavour to do that but rather make an adjustment so that there is a fair outcome which enables the wife to re-establish her financial security in the future with some confidence.
Section 75(2) makes reference to spousal maintenance but having regard to the orders I propose to make, there is no basis for any adjustment because of any claim for or entitlement to, maintenance. Nor could it here be said that spousal maintenance would assist the wife’s earning capacity through education, training or business. It would certainly assist her income situation but she cannot qualify for maintenance unless she is unable to adequately support herself because of the matters set out in s 72. It is not suggested that is the case here.
Another specific factor in s 75(2) relates to the terms of any proposed order. An adjustment against the husband of that which I propose will have little impact on his wealth. Conversely, the wife will have sufficient wealth to live a very comfortable lifestyle based on her own evidence. She will be able to provide herself and the children with a reasonable residence and the capacity to maintain it together with a good income for her future which will enable her to enjoy holidays beyond the average standard of most people should she so wish. The financial obligations for the children being undertaken by the husband will significantly reduce any financial drain on the wife.
Having taken into account all of the other matters in s 75(2) and my reference specifically to those matters under the hearing of s 75(2)(o), it is appropriate that I exercise the discretion and make a further adjustment in favour of the wife. That adjustment is guided by the mathematical calculations some of which I have accepted, the ongoing role as a parent in a wealthy environment and her past contribution towards the husband’s children. I assess that adjustment at a further $10 million.
A fourth step?
The adjustment I have made provides that the wife will receive $20 million plus retain the assets that she has in her possession but less the $500,000 that she already received. Section 79(2) of the Act requires that no order should be made unless the Court is satisfied that it is just and equitable. Having regard to all of the factors that I have canvassed, I am satisfied that this is a just and equitable outcome for both parties.
Child Support
The law relating to the child support dispute is governed by the Child Support (Assessment) Act 1989 (Cth) (“CSAA”).
The wife’s application is known as a departure order because she seeks to depart from the administrative calculation which applies a legislative formula. In this case, the assessment was issued on 30 May 2011 for $1296 per month in total, that is, $21 per child per day. The husband is currently paying $250 per week per child or $35 per child per day and the wife seeks double that for each child. The assessment which was tendered in evidence shows the wife as having a taxable income of $33,178 and the husband as $172,991 (provisionally). Whilst technically those amounts come from the taxation returns lodged, they do not reflect the financial position of either party. The husband’s income is blurred with the corporate profit and I have already referred to that. The wife’s financial statement filed 9 September 2011 shows her as having an income of about $53,000 per year but half of that comes from the support of the husband. Neither of the assessment calculations therefore reflects the true position.
It is the duty of parents to maintain their children (s 3 of CSAA) and that duty takes priority over other commitments. In this case, the husband and wife have sufficient wealth to be able to maintain their two children as a priority over other obligations. The CSAA however uses a formula to ensure consistency of obligation and payment but it is also an object of the Act that the children sharing changes in standards of living of both their parents which in this case, includes sharing in the good and bad times as fortunes fluctuate. In the case of these children, there are unlikely to see bad financial times ahead.
It is also an important object of the Act and consistent with children sharing in the changes of standards of living of their parents that the level of support should be determined in accordance with the costs of those children.
It was not disputed by either parent that the CSAA applied to them. The husband’s position however was that the wife was proceeding on the basis that he would not pay extras such as private education expenses and that these would become her responsibility. It was submitted by the husband therefore that the wife’s case was simply one in which she was asserting that because of that, child support should be increased from $250 to $500 per week. In his counsel’s written submission, it was put that $500 per week being $250 for each child, was sufficient for the wife to support the children having regard to the shared care arrangement. In my view, that is not the approach required of the Court according to law.
Part 5 of the CSAA determines how the parents obligation is calculated. It is that applicable assessment from which the husband and wife both wish to depart. It is also not disputed that the Court has jurisdiction and power conferred by s 116(1)(b) of the CSAA.
Section 117 however requires the Court to be satisfied that in the special circumstances of the case:
(a)a ground for departure exists;
(b)it would be just and equitable as regards both parents and children to make an order; and
(c)it is otherwise proper to make such an order.
In contemplating each of those issues, it is important to be guided by the objects of the legislation and in particular, those just mentioned.
The significance of the use of the words “special circumstances of the case” also cannot be overstated. Special circumstances refers to something quite unusual but that must be measured against and in the context of, the administrative formula otherwise applying. An administrative formula here is not appropriate where there is large wealth and the taxable income of the parties upon which the formula was based, does not really represent their true financial positions. I am satisfied here that the circumstances are special.
Is there a ground? Section 117(2) sets out the grounds and includes (c) that the assessment results in an unjust and equitable determination of the level of support because of the income, property and financial resources of either parent. No other specific ground was pleaded by the wife or for that matter by the husband.
It was the husband’s case that there were no special circumstances that would justify even looking at a ground in s 117(2). That was because the husband was voluntarily supporting towards his children and there were no special needs or high costs.
Reference was made to the published tables but I take into account that those tables relate to families who presumably do not set up lifestyles in which they have holidays on chartered boats accompanied by paid staff or in which there is also business class air travel. In this case, the relevant published material does not seem to me to be as good a guide as the actual costs provided by the parties. Because of the concession about the husband’s wealth, there was no financial statement filed by him and as such, I am uncertain as to what he spends on the children but it cannot be less than that spent by the wife. Her costs are therefore reliable.
The assessment in this case is $1296 per month for the period 26 May 2011 to 25 August 2012. The inequity depends on two things. First, what is that meant to cover and secondly, what is the annual cost of maintaining these children in respect of those costs?
The formula uses the “Costs of Children Table” (“CCT”) published annually and for the children of the ages of E and N, in 2011, the costs were expected to be $29,346 and that sum was to be apportioned between the parents. The wife’s evidence on this subject which was not challenged, concerning what it costs her (as distinct from what it costs both parents) was that it was over $50,000 per annum. That reflects the lifestyle of the parents into which they have brought their children.
I can therefore be satisfied that if the assessment was all that the husband paid to the wife, it would be an unjust and inequitable determination because the wife spends much more than the assessed amount and as such, she would bear the additional costs personally. But would that be unjust and inequitable as against the husband because he bears a far greater portion of the burden when the education and health type costs are considered? The answer to that must be “yes” if it is an object of the CSAA that the children share in the changes of the living standards of their parents because on both income and capital terms, the husband is far more able to carry the greater burden. It is therefore just and equitable for all concerned for an order to be made departing from the assessment because it bears no resemblance to the reality of the lives of these children.
Is it proper to make an order? The answer to that must be in the affirmative as well because the standard by which that is judged is the community standard. That is, the community would expect that neither E nor N would be dependent upon taxpayer support but equally that the burden of support was shared according to the respective capital and income capacities of their parents.
It is not appropriate however to simply ignore the amounts for education and health and the like which the husband carries but on any view, he can afford to do that in far greater proportions than the wife.
It is also not appropriate for the wife not to contribute. She has significant if not substantial wealth as well, despite having very modest income. That will presumably change after the property orders. Based on her capacity, she can and should contribute. It is an imprecise science but I consider the daily as distinct from education and health-like expenses in the wife’s house, should be shared three-quarters to the husband and one-quarter to the wife which means that of the whole of the recurring expenses, factoring in the time the children spend with each parent, the husband would bear over 85 per cent of those recurring costs. That percentage is obviously much greater when the education and health-like expenses are considered. Having regard to his much greater income and vastly greater wealth, that proportion is fair. Three-quarters of $1000 or thereabouts is $375 per week per child. On the basis of an order of that magnitude, both parents would be fairly contributing to the costs of these children consistent with the philosophy and objects of the CSAA.
It is also an object of the CSAA that resorting to courts be avoided if at all possible. The solution here is for an annual increase determined by the CPI. Hopefully, both parents would see the benefit of ensuring that children share in their lifestyle without resorting to litigation in the future.
I certify that the preceding Two Hundred and Five (205) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 6 August 2012.
Associate:
Date: 6 August 2012
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