Cavanagh and Cavanagh

[2007] FamCA 1215

FAMILY COURT OF AUSTRALIA

CAVANAGH & CAVANAGH [2007] FamCA 1215

FAMILY LAW – PROPERTY SETTLEMENT – agreement to divide 65/35 – decision relates to which assets the wife is to take as part of her entitlement, including superannuation split

Family Law Act 1975 (Cth)

APPLICANT: Mr Cavanagh

RESPONDENT: Mrs Cavanagh

INDEPENDENT CHILDREN’S LAWYER: Legal Aid Commission of NSW

FILE NUMBER: SYF 3623 of 2005

DATE DELIVERED: 10 October 2007

PLACE DELIVERED: Sydney

JUDGMENT OF: Moore J

HEARING DATE: 29, 30, 31 May and 1 June 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr de Dassel

SOLICITOR FOR THE APPLICANT: HAL Lawyers

COUNSEL FOR THE RESPONDENT: Mr Thomas

SOLICITOR FOR THE RESPONDENT: Lapaine Pomare & Forster

INDEPENDENT CHILDREN’S LAWYER: Ms Karagiannis

Orders

1. Draft orders are to be submitted by the parties within seven (7) days to give effect to the proposed orders as set out in the Reasons for Judgment. 

IT IS NOTED that publication of this judgment under the pseudonym Cavanagh & Cavanagh is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 3623 of 2005

MR CAVANAGH  

Applicant

And

MRS CAVANAGH  

Respondent

REASONS FOR JUDGMENT

Proceedings

1. There are pending proceedings for property settlement and parenting orders related to the future arrangements for the parties’ two children. These reasons relate only to the property proceedings. 

Orders sought

1. It is agreed the parties’ net assets are to be distributed in the proportions of 65% to the wife and 35% to the husband. 

2. The decision required here is about how those entitlements are to be met from the available assets which include not only the equity in the former family home at C which the wife wishes to retain and her interest with members of her family in a residential investment property, but also the husband’s superannuation entitlement. As a matter of practical reality, the decision is about whether and to what extent the wife should be obliged to take a split of the husband’s superannuation as part of her entitlement.  Given the ambit of the decision required, it is not necessary to give an elaborate account of the financial history, about which there is considerable common ground in any event, but some indication of past developments is appropriate to give context to the decision required. 

Relevant background

1. The husband (47) and the wife (45) were married in February 1991. They separated in March 2002 when the husband withdrew from the family home.  The wife and children have remained living there and he lives in relative proximity. They were divorced in February 2006.  He has formed a relationship with Ms F and, while they do not live together at this stage, they regard it as a committed relationship. 

2. When they married, the wife had qualifications for secretarial work and was in full time employment as a secretary. She continued to work until early 1993 and has not since returned to paid work. It is her intention to seek some form of part time employment during school hours once these proceedings have been completed, initially in reception work though it is her ambition in the longer term to obtain work as a teacher’s assistant. Calculations by Mr Thomas in closing put her possible income from employment between $16,500 and $20,900 gross depending on the hours she worked, provided she could find work. 

3. The husband was in full time employment in IT and he remained in full time employment throughout the marriage. His earnings varied from initially around $60,000 per annum to $104,000 per annum by the time of their separation. In February this year he was dismissed from his employment.  Prior to the dismissal he had consulted with Ms L, psychologist, about work related matters and after the dismissal he brought proceedings for unfair dismissal. As Ms L’s report noted, he alleged a history over the previous five 5 years of workplace harassment, bullying and discrimination which contributed to his psychological condition which included suffering symptoms of anxiety, stress and depression. The report supported a graded return to work with regular reviews.  A settlement was negotiated and the husband received a financial settlement. Since April he has returned to full time employment. His current earnings are in the vicinity of $83,000 per annum net after tax. 

4. Just prior to the marriage they purchased jointly a town house at E for $180,000. There is no common ground about how the deposit was raised but they do agree money was borrowed to complete the purchase. Otherwise, the husband brought to the marriage an interest in a property at H, subject to a mortgage.  He also had an entitlement to superannuation estimated to be worth $80,000 as well as a Toyota motor vehicle and household effects.  On the wife’s evidence she brought to the marriage savings of $20,000 [disputed], a Torana motor vehicle, and some household items. She also had an interest in two properties:

   (i)She owned a unit at P which she had purchased in March 1982 for $53,000. There is no common ground about whether or not it was encumbered at the time of marriage. 

   (ii)She also owned a one-third interest in a property at D with her brother and sister, a gift from their parents. It was rented.  Her brother lives there now with his wife and children. Some renovations were carried out over time and there was evidence from the husband of work he did on the property. 

5. In September 1996 they sold the E town house for $209,500 and after discharge of the mortgage and costs of sale they retained about $60,700 on settlement.  The husband’s H property was sold subsequently as was the wife’s P unit. The sale proceeds of all three properties went towards the purchase of the family home at C for $325,000. 

6. They later obtained a mortgage for $170,000 to renovate and extend it.  Contractors were engaged for that purpose but they each did some work related directly or indirectly to the improvements. 

7. Throughout the marriage they received some assistance of one kind or another from their respective families. The wife was the primary carer for the children from the time of their birth and she was primarily responsible for the running of the household and the associated domestic chores. The husband worked throughout, including occasionally at weekends, but he assisted with the care of the children to the extent that he was available, he participated in family outings and they holidayed together as a family. As the wife contends, it is very likely they had different approaches to parenting issues, including discipline. 

8. After separation the husband paid the mortgage, school fees, and lease payments on a vehicle used by the wife for a time.  He also paid child support which varied over time from $330 per week to around $490 per week for a while in 2006 and was reduced to $5 per week when he was dismissed from his employment.  His current child support liability is $495 per week. 

Assets and liabilities

1. The agreed assets and liabilities are set out below. There was an issue about whether or not the husband owes to Ms F $9,000 but it was not pursued and can be disregarded as relatively insignificant in light of their agreement to apportion entitlements 65/35 in the wife’s favour. 

   A. Joint

   C property   830,000

   Less:

   AMP Bank   131,853

   St George Visa account                  664

   Coles Myer account  1,500        134,017

   695,983

   AMP   105         696,088

   B. Wife

   D property        246,700

   St George Bank a/c  418

   St George pensioner a/c               320

   IAG shares  5,618

   Superannuation   2,928

   Furniture & effects                   15,000

   Motor vehicle   20,000   290,984

   Less:

   Loan – M parties  20,000        270,984

   Total:   967,072

   C. Husband - superannuation

   Superannuation   337,279

   D. Husband – non-superannuation

   AMP credit union …       7,780

   Furniture & effects                   10,000

   Sale proceeds - Toyota              5,436

   Wrongful dismissal                   11,906

   Employment benefit                 10,000   45,122

   Less:

   NAB Visa  428            44,694

   Total:   381,973

   Total Net Assets:1,349,045

Entitlements as agreed

1. The wife’s agreed 65% entitlement would give her assets to the value of $876,879 and the husband’s 35% would give him $472,166. 

2. The wife wishes to retain the C home along with the other assets she now holds. In that event [also giving her the small miscellaneous joint debts and the other joint asset] that arrangement would see her retaining assets to the value of $967,072 which would mean she would have to pay to the husband $90,193.  Apart from that cash payment, the overwhelming majority of the husband’s entitlement would be taken up by his superannuation of $337,279. 

3. It is the husband’s case, however, that the wife should take half of his superannuation entitlement by a superannuation split, or alternatively some lesser proportion. It is argued that to satisfy the wife’s entitlement by giving her realisable assets and leave the husband with all of the superannuation forming a substantial part of his entitlement would be manifestly unjust. At 47 years of age he could not access the fund for many years to come. He needs funds to start his life again to get back on his feet, it is fair that he is able to do so, and the wife’s proposal is not sufficient to allow it.  This is supported by argument to the effect that the wife retains skills for employment to assist in her future prosperity and once she obtains work she could borrow so as to achieve what she wants. 

4. The counter argument put on her behalf is that it would constitute a huge burden on her to take a proportion of the husband’s superannuation, he has far more in the way of net income than she could earn by returning to the workforce in areas of her interest, and in any event account should be taken of the benefit he will derive from his relationship with Ms F who earns in the order of $50,000 - $60,000 per annum. Unlike the wife, he should not be seen as committed to acquiring a home in light of his interest in acquiring a business with Ms F. His superior financial position when compared with the wife’s means it would be an unfair imposition on her to have her take any part of his superannuation entitlement. 

5. There is no doubting his financially superior position where income earning capacity is concerned and at 47 years of age he still has a good many years of employment ahead when it is reasonable to expect he will be able to improve his financial position through earnings. Whether he goes into a business of some kind with Ms F is yet to be seen. Their views about a medical practice business were not particular congruent and it seems there is some reluctance on her part to be overcome before that came to fruition. It is also difficult to measure the extent to which Ms F will represent a financial resource for him in the future by her earnings coming into a shared household they may yet establish. Yet in all probability, there will be some advantage to him by that arrangement. 

6. In assessing the fine balance the submissions establish, there also has to be taken into account that each has additional obligations over and above those represented in the figures discussed. In particular, the wife will be obliged to pay to the Legal Aid Commission $4,500 as her contribution towards the independent children’s lawyer’s costs as well as legal costs of around $80,000.  The husband will pay the Legal Aid Commission a further $2,850 and he has legal costs of around $25,000.  In other words, she has further debt of $84,500 and he has further debt of $27,850. 

7. This requires the wife’s proposal to retain the C home as well as meet her other financial obligations – even without taking any portion of her entitlement as a superannuation split – to be examined for realistic practicality:

   ·If there is no superannuation split, to discharge the mortgage debt of $131,853, the joint debts of $2,164 used in these calculations and her $20,000 debt as well as pay the husband $90,193 she would have to raise $244,210. Then the payment of her costs would bring her commitments to $328,710. 

   ·The only readily realisable assets she would have are the D property and the shares which would raise $252,318. Assuming that occurred, that would leave her needing to borrow $76,392.  She gave evidence to the effect that if she were to earn between $20,000 and $30,000 gross per annum she could borrow $250,000.  That said, there was no indication of what, if any, other criteria were considered necessary to finance approval; for example, her asset base. In any event, apart from loan repayments from her modest earnings she would also have to meet her own living expenses and her share of the financial support for the children’s needs. She does not presently have the employment on which the scenario is based, nor sought it, and so practicality it difficult to gauge though it is not outside the realms of possibility. 

   ·If she were required to take a proportion of her entitlement by a superannuation split, the scenario would be rendered that much more difficult and would possibly be impracticable. 

8. Favouring the wife taking her entitlement without a superannuation split is her weaker income earning potential when compared with the husband’s, the uncertainty attaching to her ability to re-enter the paid workforce despite her stated ambitions, and the responsibilities she will have for the children who are still of relatively young age with many years to go before they become independent. They are important and weighty considerations pointing in the direction of giving her realisable property now to make the most of what is available to secure the more immediate needs of housing herself and the children. On the other side of the scales, despite his much better income earning abilities, the wife will be in a much better asset position than he is by an extra 30% of the agreed net assets, and he would not have much in the way of ready assets if he were to be left with the whole of his superannuation entitlement. Certainly he could use whatever capital he retains after meeting his other obligations to re-position himself for the future and his post child support income could also serve as the catalyst for an improved capital base. His wish to re-establish himself at this stage of his life and improve his financial position, whether that is by acquiring a business or investing in a home, is understandable and not unreasonable. He will have a regular involvement in the children’s upbringing and it is reasonable that he be able to provide an appropriate environment for them over and above the child support he will pay from his earnings. 

9. The balance is never an easy one where there are insufficient funds to satisfy both sides. But, all things considered, in my opinion a just and equitable outcome would be for the husband to receive a further $75,000 in cash as part of his entitlement. This would give him a cash component of $165,193.  Payment of his legal costs of around $25,000 would see him retain around $140,000 with which to pursue such financial goals as he might choose. Of course that imposes a commensurate obligation on the wife to raise that further capital now if she is to retain the C home. That goal is by no means certain even without a superannuation split and it is acknowledged that possibility is diminished by her having to raise those further funds.  Even so, there are two sides to be considered. Of course the superannuation split will give her a fund from which she will benefit in the future. 

Form of orders

1. That said, the amount the wife will have to pay to the husband is $165,193 to retain all the assets referred to earlier, including the C home. The question of time for payment was not addressed but it seems reasonable to conclude that she ought to know within one month whether it can be achieved or not.  If not, then the C home will be sold and the sale proceeds dealt with according to their entitlements.  If sold, it is almost inevitable that figures other than those used in calculations discussed will be relevant and the orders should provide for that contingency.  It will be appropriate therefore to allow the opportunity for some input into the form of orders before they issue in final form.  A direction will be made, therefore, for draft orders to be submitted upon the delivery of judgment. 

2. The orders will provide as follows:

   ·Subject to paying to the husband the sum of $165,193 on or before one (1) month from the date of the orders, the wife will be entitled to:

   o   The C home and the joint AMP account, subject to her being responsible for payment out of the mortgage, the St George Visa account and the Coles Myer account in the amounts discussed;

   o   The assets listed per B. above including her interest in the D property;

   o   A splitting order related to the husband’s superannuation entitlement using a base amount of $75,000

   giving her assets totalling $876,879. 

   ·If the money is not paid to the husband within the time allowed or agreed then the C home is to be sold and the parties’ entitlements calculated according to the net sale proceeds actually received on settlement.

3. The husband will be entitled to:

   ·The cash payment of $165,200 [or his share of the sale proceeds of the C home if sold];

   ·The assets referred to in D. above; and

   ·The balance of his superannuation entitlement worth $262,279. 

   giving him assets totalling $472,166. 

4. There being no dispute about the claims for payments to be made to the Legal Aid Commission, the orders should also include provision for payment of $2,850 by the husband and $4,500 by the wife. 

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Moore

Associate

Date:  10 October 2007