Challen & Challen
[2007] FamCA 1292
•5 November 2007
FAMILY COURT OF AUSTRALIA
| CHALLEN & CHALLEN | [2007] FamCA 1292 |
| FAMILY LAW - PROPERTY – Add backs – Contributions – Initial Contributions – Section 75(2) factors – Necessary expenses |
| Child Support Assessment Act 1989 (Cth) Family Law Act 1975 (Cth) |
| Bremner and Bremner (1995) FLC 92-560; (1994) 19 Fam LR 407 Browne v Green (1999) FLC 92-873 Coghlan and Coghlan (2005) FLC 93-220; (2005) 33 Fam LR 414 In the Marriage of Townsend (1995) FLC 92-569; (1994) 18 Fam LR 505. In the Marriage of Vick and Hartcher (1991) FLC92-262; (1991) 15 Fam LR 149 M v M [1998] FamCA 42 Pierce v Pierce (1999) FLC 92-844 |
| APPLICANT: | Ms CHALLEN |
| RESPONDENT: | Mr CHALLEN |
| FILE NUMBER: | MLF | 1126 | of | 2006 |
| DATE DELIVERED: | 5 November 2007 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | MURPHY J |
| HEARING DATE: | 15 - 17 October 2007 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Atkinson of Counsel |
| SOLICITOR FOR THE APPLICANT: | Susan Snyder |
| COUNSEL FOR THE RESPONDENT: | Ms Smallwood of Counsel |
| SOLICITOR FOR THE RESPONDENT: | Mason Sier Turnbull |
ORDERS
As and by way of settlement of property pursuant to s 79 of the FamilyLaw Act 1974 (as amended):
IT IS ORDERED BY CONSENT THAT
Within 28 days, the husband sign all documents and do all things to transfer the property at D Street (“the said property”) in the State of Victoria to the wife being the whole of the land more particularly described in Certificate of Title Volume … Folio … and that upon such transfer, the husband pay all monies due and owing in respect of the mortgage secured over the property and thereafter the wife indemnify the husband in respect of all outgoings relating to the said property.
The furniture in the property at D Street be retained by the wife save for the antique desk (originally belonging to the husband’s grandfather) which shall be collected by the husband within 28 days of the date of this Order.
The husband continue to make the monthly payments as and when they become due in respect of the ING Savings Bond Account and that upon maturity (estimated to be in approximately 4 years time) the proceeds of the said account be paid into an account in the name of the husband and wife to be applied towards educational expenses for the child of the marriage J for her education.
IT IS ORDERED THAT:
Contemporaneously with the transfer provided for in paragraph 1 of these orders and the release of the said mortgage therein referred to, the husband pay to the wife a lump sum payment of $100,000.
The husband and the wife shall each do all such things and sign all such documents as might be necessary so as to:
(a)Transfer to the husband, at the expense of the husband, all her right, title and interest in S Pty Ltd and resign any position she holds in the said company, and the husband shall indemnify and keep indemnified, the wife in respect of any liability, including taxation liability, of the said company;
(b)Abandon any right, title, claim or interest the wife has in the company Challen Nominees Pty Ltd and the business known as T Imports, such that the husband retain sole, right, title, claim or interest in the said company and the said business and the husband shall indemnify and keep indemnified, the wife in respect of all liabilities in relation to either the said company or the said business including, but not limited to, any taxation liabilities;
(c)Effect the husband being solely responsible for any Capital Gains Tax payable in respect of the sale of the property being the R Unit, and the husband shall indemnify and keep indemnified, the wife in respect of any such liability;
(d)Abandon any right, title, claim or interest that the husband has, or may have, in and to: the 2005 Audi A3 motor vehicle currently in possession of the wife; any shares in the name of the wife and any superannuation entitlements with the Hesta Superannuation Fund; any superannuation entitlement of the wife in the Challen Superannuation Fund; and
(e)Abandon any right, title, claim or interest that the wife may have in the member benefit entitlement of the husband in the Challen Superannuation Fund; the 2000 Holden Commodore Clubsport motor vehicle; the Honda VS75 motorbike and the antique desk referred to in paragraph 2 of these orders.
Save as otherwise provided in these Orders, each of the parties shall be entitled to all rights, titles and interests in and to all property in their name or possession as at the date of these Orders.
Save as otherwise provided in these Orders, each of the parties shall be responsible for, and shall indemnify the other in respect of, all liabilities in their respective names or for which they are respectively liable.
IT IS FURTHER ORDERED THAT
All extant applications be otherwise dismissed and removed from the list of cases awaiting finalisation.
All material produced pursuant to subpoenae issued for the production of documents be returned to their respective providers after the time for appeal has lapsed.
IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice Murphy delivered this day will for all publication and reporting purposes be referred to as Challen and Challen.
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLF1126/2006
| MS CHALLEN |
Applicant
And
| MR CHALLEN |
Respondent
REASONS FOR JUDGMENT
The parties’ only child J, (“[J]”) was born in 1999. Parenting arrangements have been agreed between the parties and are formalised in consent orders made by me at the outset of the hearing of this matter. Those orders, in essence, provide for J to live with the wife and spend time with the husband on alternate weekends and holiday time.
What remains unresolved is the financial consequences of the breakdown of their marriage, which was formalised in June 1999. The parties separated under the one roof in January 2006 and physically separated shortly before the commencement of this trial.
Two crucial matters informing the dispute between the parties are the effect, in s 79 terms, of an initial capital contribution by the wife which facilitated the purchase of the parties’ former matrimonial home and the receipt by the husband of distributions from a discretionary trust controlled by his father, from which additional sums were distributed during the relationship.
The opposing ultimate contentions of the parties reflect, in large measure, the parties’ views of the extent and importance of those differing contributions.
The husband contends for a result which would see the wife obtaining the former matrimonial home (rendered unencumbered by the husband) together with some shares, cash, a small amount of superannuation, a car and furniture. This amounts to approximately 35 per cent division to her.
It is argued on his behalf that contributions should be assessed in the proportion 85 per cent /15 per cent to him and that there should be no adjustment pursuant to s 79(4)(e), often referred to as a “s 75(2) adjustment”. His argument proceeds, however, that, despite this analysis, justice and equity would see the wife retain the property just described, including in particular, the unencumbered former matrimonial home.
The wife contends that there should be a 70 per cent division in her favour. It is argued on her behalf that this division is arrived at by reason of contributions being assessed as equal and a 20 per cent adjustment to her pursuant to s 79(4)(e).
The parties agree - whatever be the ultimate result arrived at by the Court - on the distribution of certain property. In particular, it is agreed that there should be a transfer to the wife of the former matrimonial home unencumbered. That agreement was embodied in signed minutes of consent which will be incorporated into the orders I make.
BACKGROUND
There is no precision in either parties’ evidence about the date the parties commenced cohabitation. The wife deposes to “about April 1996” and asserts in her tendered chronology “late 1995 / early 1996”. The husband deposes to cohabitation commencing “in 1995”. They agree that they separated under the one roof in January 2006 and physically in late September 2007. I will refer to the relationship being of about 11½ year’s duration to the date of trial.
When the parties commenced cohabitation, the husband was in the process of finalising, through a hearing in this court, financial arrangements with his previous wife. Her Honour Justice Brown made orders, and gave Reasons for Judgment on 10 October 1996. Facts found by her Honour were accepted by the husband in the witness box in these proceedings and are summarised in a tendered extract from her Honour’s reasons: Exhibit W7.
The husband entered the instant relationship with superannuation to which Brown J attributed an amount of $238,000 and which, for the purposes of this trial, the parties accepted as its then “value”. The husband was, as he accepted in the witness box, “cash strapped”. In addition to the superannuation interest, the husband also had – he agreed in cross-examination – shares which were not included in the list of assets outlined by Brown J as, he said, he forgot to include them in his list of assets in the trial before Her Honour. He was unable now to place an accurate value on those shares, but “guesses” that they may have been worth somewhere between $5,000 and $10,000.
The wife was, at the time cohabitation commenced, living in a home which she owned subject to a mortgage with a debt of about $23,000. That home was sold and the net proceeds used to acquire the former matrimonial home. She also had a motor vehicle. She came to the relationship with net assets totalling approximately $100,000.
The husband is aged 59. He has a daughter, A, from an earlier relationship, who is now 25 years old. During the course of the parties’ relationship, A spent a few weekends and holidays with the parties, otherwise living with her mother. She resided in Sydney.
The wife is aged 48. She also has a child from a previous relationship, L H, who is known as “[L Challen]”. L is currently 15. She was a toddler at the commencement of the parties’ cohabitation and resided with the parties throughout. She has no contact with her father.
The wife accepts that L had, and has, a good relationship with the father. The parties share a wish that L continue to enjoy a relationship with the husband. It is accepted that L can, and it is hoped mutually will, accompany J when she spends time with the father as she (L) might wish.
It is common ground that L’s father was violent and that this had significant adverse emotional/psychological ramifications for L.
During the course of the parties’ relationship, L commenced in the mainstream school system, but subsequently shifted to what was described as a “special school”, before returning to mainstream education. It is again common ground that L has progressed from being a child in need of significant special assistance to a child who is, on all accounts, progressing well.
The wife says that an extremely important consideration in L’s continuing good progress – now and into the future – is her continued schooling at X School which, I am informed by agreement, is a private school of good reputation and high fees.
The wife made it clear during the course of the trial that she is passionate about J also attending that school. If that is to take place, it will be, it is agreed, to begin her secondary education in four years time.
L’s father pays, and has paid, negligible child support for L.
There is no child support assessment for J by reason of the parties’ erstwhile living and financial arrangements. There is no application in respect of child support before me, but the issue of private schooling and X School fees in particular, was significant to each of the parties during the course of the trial. I shall return to it later in these reasons.
At the commencement of the parties’ cohabitation, the wife was working at a retail store. She continued working there until L commenced prep. She remained out of the paid workforce until 2002 when, having previously completed a course in health care, she commenced employment at a health care facility in a south eastern suburb.
That employment required her to work each Thursday, Friday, Saturday and Sunday night from 10.00 pm until 7.00 am. She gave evidence that on occasions (for example when a fellow employee was ill or the like) she also worked on a Wednesday night. She left home at about 9.30 pm each work night and returned home at about 7.30 am the following morning. L was about ten and J about three when the wife’s employment commenced.
The wife ceased that employment when the husband vacated the home shortly before trial. That event brought with it the consequence that the husband was no longer present in the home when the wife was working nights. It is for that reason, she says, that she voluntarily left that employment.
At the commencement of the relationship, the husband was employed in a family business, P Limited (“[P Company]”). P Company is a publicly-listed company in which the majority (53 per cent) of the shares were held by a company PS (or “[PC]” as it is spelt in Exhibit W7) Pty Ltd. The shares in that company are held by two family trusts. Those trusts are effectively controlled by, respectively, the husband’s father and the husband’s uncle.
Evidence about the structure of P Company just described, and the nature of the husband’s position within that structure, emerged predominantly during the husband’s cross-examination in these proceedings. He accepted that his position was accurately described by Brown J in her Honour’s 10 October 1996 reasons. Again, that position is summarised in Exhibit W7.
The husband, together with his father and siblings, were beneficiaries of the family trust controlled effectively by his father, the Challen Family Trust (“the family trust”). Brown J found that the husband’s interest was “a potential financial resource.” I infer that the husband was the beneficiary of a discretionary trust with no vested interest in the trust fund, save in any distributions that might be made to him from time to time at the discretion of the trustee.
Her Honour also found that the husband’s financial resource was “… one likely to deliver to him the benefits he has enjoyed for some time”. In the 11 years since that judgment, the husband has continued to receive distributions, generally twice-yearly, from that trust. The husband (and his siblings) received regular distributions from the trust until about 2001. Those distributions were in addition to the husband’s salary paid by P Company.
The evidence about the amounts of those distributions (and his P Company income) is imprecise. The husband deposes in his trial affidavit that:
“… during most of my years of employment with [P Company], I earned between approximately $80,000 to $100,000 gross per annum. However, in the last couple of years of my employment with [P Company], my salary increased significantly and I earned approximately $180,000 per annum.”
By the end of the trial, I understood his evidence to be that the total income, including trust distributions, was about $180,000 per annum during the course of the relationship.
The following findings can be made: distributions from the trust were made to the husband during the course of the cohabitation; they were generally made twice-yearly; and the amounts varied but were up to $70,000 in a year.
For reasons which will become important later in these Reasons, I also find that there is no evidence before me by which I can find that the distributions made to the husband were connected to his employment, his performance in that employment or, indeed, the performance of P Company.
Mr Atkinson argued on behalf of the wife that I could draw inferences to those effects. I disagree.
The only evidence before me is the acceptance as fact of a finding made by Brown J in 1996 that:
“… the income of the Challen Family Trust has been apportioned over some decades as to 40 per cent to Mr Challen Senior, 20 per cent to the husband and 20 per cent to each of his brother and sister”[1].
I have no evidence at all of where the income of that trust was derived or its amount.
[1] Exhibit W7 – p 14 - 15 Reasons 10 October 1996, Brown J.
As a result of Brown J’s orders, the husband also incurred a maintenance liability of $1,200 per week for slightly more than 12 months which approximately coincided with the first year of the parties’ cohabitation.
The wife, too, has been previously married. She sold the home where she and L were residing and used the net proceeds of sale to provide the initial equity in the former matrimonial home. That property was purchased in joint names for about $185,000. About $130,000 was borrowed. The balance, plus stamp duty and incidental costs, was paid by the wife from the net proceeds of sale of her former residence.
The husband’s employment with P Company continued throughout the bulk of the relationship. During 2002 and 2003, P Company sold what is described by the husband as “the operations part” of its business interests. Litigation ensued between the purchasers and P Company in the Supreme Court of Victoria, which was not finally resolved until early 2007.
At that time the husband received what he describes as being a “return of capital distribution from my father’s family trust” in the sum of $485,251. Those funds were placed in an interest bearing account. They have been described in the proceedings as “the [P Company] moneys”, which is how I will refer to them as the need arises. About $456,000 remains and forms part of the property available for distribution to the parties.
As a result of the P Company sale, the husband was made redundant in July 2004. He received a redundancy payment of about $360,000.
About $226,000 of that sum was used, together with other funds, to acquire the husband’s current business T Imports (“[T Imports]”). T Imports was purchased in October 2004 by the husband for $635,000, including $285,000 in respect of goodwill.
In addition to the moneys from his redundancy just mentioned, the husband used $300,000 from the unrestricted, non-preserved component of his superannuation and borrowings of $100,000 to fund the purchase.
Mr L, the single expert, who valued the business for the purpose of these proceedings, bases his valuation on completed financial accounts to the end of the 2006 financial year and management accounts up to 31 May 2007. His value of the business (less than three years after its purchase for $635,000) is agreed at $90,000.
At the time of swearing his trial affidavit on 8 August 2007, the husband deposed to his belief that the business’s financing bank would move to wind up T Imports. In that same affidavit, the husband deposed that he would be “unemployed from 31 August 2007”. Neither event had come to pass by the time of trial.
The husband’s evidence was that the bank had extended his temporary accommodation until this trial was heard and determined. He told the Court that he hoped to continue the business after the trial.
In the period since January 2006, T Imports has continued to pay the wife a wage, despite the fact that the wife was not working within the business. The husband also continued to pay, from his after-tax T Imports salary, about $1,100 per month for ordinary household expenses as well as paying for gas and electricity.
He also continued to meet the loan repayments on the Audi A3 motor vehicle used by the wife and which she will, by agreement, retain after these proceedings. Those repayments paid out the loan on that car on 17 September 2007.
All of these payments just referred to will, the husband accepts, cease after I make orders. That will have the effect (as he accepts) of easing T Import’s cashflow problems. It will also have the concomitant effect of reducing the money erstwhile available to the wife to meet her needs and the needs of L and J.
It is common ground that the overwhelming bulk of the wife’s income from her health care employment was used to pay the significant fees, and other costs, associated with L attending X School.
The wife is currently unemployed. She has applied for Job Search Allowance and is currently seeking employment. Her determination in that respect, particularly in respect of obtaining the funding to continue L’s education at X School and to commence J’s future education there in four years time, was clearly manifest in the witness box.
The husband hopes to derive an income from the continuation of T Imports. The unchallenged evidence of the single expert Mr L is that: “… this business has not operated profitably since its purchase and it is unlikely to trade its way into profitability in the foreseeable future”.
The figures used by Mr L in arriving at that conclusion[2] adjust the actual salaries received by the husband and wife shown in the books of account and adopt instead a salary (plus superannuation) for the husband alone based on the AIM Small Business Salary. Allowing for that salary (of $70,000) he still sees the business making a loss on the 2006 figures.
[2] Schedule to Mr L’s Report 18 August, 2007.
RELEVANT GENERAL PRINCIPLES
The statutory mandate is to not make an order pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”), unless satisfied, in all of the circumstances of this particular relationship, that it is just and equitable to do so.
Whether to make an order, and, if so, the terms of that order, depends on a consideration of the matters outlined in s 79 of the Act: the respective contributions of the parties as described in paragraphs (a), (b) and (c) of s 79(4); the effect of any proposed order upon the earning capacity of the parties; the matters referred to in s 75(2) insofar as they are relevant; any other order made under the Act effecting the party or the child; and any child support payable under the Child Support Assessment Act 1989 (Cth).
The path to compliance with that statutory regime has been described as either a three-step or four-step approach. It is well established by authority.[3]
[3]Earlier decisions of the Full Court, include In the Marriage of Lee Steere (1985) FLC 91-626; (1985) 10 Fam LR 431; In the Marriage of Ferraro (1993) FLC 92-335; (1992) 16 Fam LR 1; In the Marriage of Clauson (1995) FLC 92-595; (1995) 18 Fam LR 693. More recently, see, eg. Coghlan and Coghlan (2005) FLC 93-220; (2005) 33 Fam LR 414.
PROPERTY, LIABILITIES AND FINANCIAL RESOURCES
The property, liabilities and financial resources of the parties, or either of them individually, is largely agreed.
That agreement was incorporated into a list of Assets and Liabilities which became Exhibit 2. That exhibit provides as follows:
ASSETS
Former matrimonial home
Value: 510,000
Loan: (227,000)
Equity: 283,000
S Pty Ltd shares 54,000
Proceeds at CBA Challen
Pty Ltd shares (husband) current balance 456,000
Shareholdings of wife (approximately) 6,000
Value of business known as T Imports 90,000
Timeshare, estimated value 0.00
Shareholding of husband (approximately) 13,000
TOTAL $902,000
SUPERANNUATION ENTITLEMENTS
Challen Superannuation Fund 658,104
Hesta Superannuation Fund (wife) 8,000
$1,568,104
LIABILITIES
CGT on sale of property – the R Unit $10,000
NET ASSETS $1,558,104
EXCLUDES:
ING Bond $32,000
It was agreed at the commencement of the trial that the parties would each keep their motor vehicles and certain other chattels and, as such, neither party sought to include those items in the property for division or to put evidence of their value before the Court.
During their relationship, the parties invested in an “education bond” with ING. Approximately $300 per month is paid to ING and invested by it. The nature of the investment is such that maturity is contemplated upon (I gather) a nominated child commencing secondary education. If the bond is surrendered (or, I gather, if regular payments are not made) penalties apply.
The current value of the bond is agreed at $32,000. Assuming payments continue to be made, whilst it is of course impossible to predict the value of the bond at maturity, the parties agree that a conservative likely future value is in the region of $50,000 and that, all else being equal, it will mature in about four years time.
As earlier indicated, minutes of consent in respect of some items of the above property were tendered at the end of the trial. As a result:
(a)The former matrimonial home will be transferred to the wife unencumbered;
(b)The wife will retain all of the furniture apart from an antique desk (the value of all of which was, by agreement excluded from the pool); and
(c)The husband will continue to meet the monthly payments (about $300) in respect of the ING Bond and upon maturity, in about four years time, the proceeds will be paid into a joint account to be used for J’s educational expenses.
During the parties’ separation under the one roof, the parties agreed to sell an investment property in R, retire some debt and distribute the net proceeds between them. It is agreed that a capital gains tax liability of about $10,000 arises as a result of that sale. The distributed net sums were, by agreement, not included in “the pool”.
ISSUES RELATING TO THE PROPERTY POOL
Add Backs
The husband contends that certain cash amounts should be added to the agreed pool of property just described. The amounts sought to be added back fall into three categories.
First, there is a sum of $21,100 comprising $19,000 removed by the wife from the Challen Superannuation Fund. Her actions in withdrawing the money triggered consequences, because, as a result, the fund became non-complying. The husband replaced those funds, accessing the P Company monies in order to do so. The consequences of non-compliance of the fund were penalties totalling $2,100 which the husband also paid. Those monies comprised the balance of the $21,100 sought to be added back by the husband.
Secondly, the husband seeks to add back $11,500. As earlier indicated, the continued regular repayments by the husband of the Audi A3 loan in the post-separation period paid out that loan. The wife’s Form 13 indicated an indebtedness of about $11,500 shortly after the parties separated under the one roof. In these circumstances, where it is common ground that the wife will retain that motor vehicle, the husband seeks to recover the $11,500 which paid out its loan.
Thirdly, the husband seeks to recover $30,000 being legal fees paid by the wife from monies accumulated by her post-separation. As previously indicated, the husband was continuing to pay the wife a wage from T Imports, despite her not working there. He, in addition, paid other amounts to the wife. Those amounts, together with the net wage received by her from her employment, saw her receiving about $82,000 net per year after separation whilst all of the payments referred to above (including the car loan) were being paid by the husband. Despite the overwhelming bulk of the wife’s net income from paid employment being used to fund X School, the wife accepted that, from the remaining monies, she was able to save sufficient monies from which to pay about $30,000 in legal fees in respect of these proceedings.
In resisting those claims, Mr Atkinson, who appeared for the wife, argues that it is not just and equitable to add back any or all of those sums in circumstances where, for whatever reason, the value of T Imports apparently has diminished dramatically in what is a relatively short period of time. He argues that, independent of any question of “waste”, the diminution of that value, and thus, the property available for distribution, militates against any add backs as a matter of justice and equity.
Further, he argues, legal fees ought not be added back because the wife sourced those fees from a “financial package” provided to her by the husband with no restrictions imposed as to how she might manage it.
He argues, in effect, that the position of the wife is no different to anyone else meeting legal fees from post-separation income and, in particular, no different from the husband who met about $43,000 in legal fees from his post-separation net income[4].
[4]Pursuant to the Court’s Practice Direction, costs letters were filed by each of the parties. Those letters revealed spent legal costs of about $30,000 and $43,000 by the wife and husband respectively. Neither party sought to depart from those respective figures. It is not suggested by either party that legal fees were met other than from income, including, in the wife’s case, the monies paid by the husband as earlier referred to.
Further, Mr Atkinson points to the fact that the husband withdrew $49,000 from the P Company monies and, if the amounts just described, are added back and put on the wife’s side of the ledger, then he contends $49,000 should be added back and put on the husband’s side of the ledger.
The evidence revealed that $30,000 withdrawn from the P Company monies was put into T Imports to alleviate its financial difficulties. It seems clear to me on the evidence of the husband, which I accept, and the evidence of Mr L, which is unchallenged, that T Import’s viability was on a knife-edge and that funds were needed to maintain its viability.
The husband swore in the witness box that he cannot account for how the wife spent the $19,000 removed by her from the superannuation fund. He does not accept at face value her assertion that it was used on X School fees and expenses, but says he does not know how it was applied. The wife swears that this was in fact how it was spent.
I accept the evidence of the wife that it was applied towards X School fees and/or expenses.
Add Backs – Principles
The decision whether to add back to the pool of assets property disposed of or money spent occurs against a legal framework where the general principle is that the court takes the property of the parties or either of them as it finds it at date of trial.
Financial losses incurred by the parties or either of them during the course of the marriage should be shared by them, although not necessarily equally[5]. Adding back to the pool is the exception, not the rule.
[5] In the Marriage of Kowaliw (1981) FLC 91-092 at 76,643 – 76,644 per Baker J.
An exception can exist where one party has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets; or where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the effect of which has reduced or minimised their value or the pool of assets[6].
[6] Ibid.
However, the Full Court has rejected the notion that add backs only arise where “waste” can be established.[7] The issue of “add backs” is but part of the overall s 79 exercise, and is, accordingly, governed by principles of justice and equity.
[7] In the Marriage of Townsend (1995) FLC 92-569; (1994) 18 Fam LR 505.
Specifically, the matters referred to by Baker J in In the Marriage of Kowaliw[8] have been held not to constitute any form of fixed code and are no more than a guideline for use in the exercise of the s 79 discretion[9].
[8] In the Marriage of Kowaliw (1981) FLC 91-092 at 76,643 – 76,644 per Baker J.
[9] See Browne v Green (1999) FLC 92-873.
The Full Court in Omacini and Omacini[10] noted that circumstances in which it is appropriate to notionally add back to the pool of assets fall into “three clear categories”: where the parties have expended money on legal fees; where there has been a premature distribution of matrimonial assets; and in the circumstances outlined in Kowaliw referred to above.
[10] (2005) FLC 93-218; (2005) 33 Fam LR 134 at paragraph 30.
Furthermore, that Court rejected the notion that “the mere fact that a party has expended money realised from the disposition of assets that existed as at the date of separation, will result in that expenditure being added back …” as being unduly simplistic[11].
[11] Ibid at paragraph 39.
What is crucial, is an assessment of the reasonableness or otherwise of the expenditure:
There seems to be no appropriate basis for notionally adding back moneys that existed at separation, but which have been subsequently spent on meeting reasonably incurred, necessary living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support. Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial judge[12].
[12] M v M [1998] FamCA 42 at paragraph 2.11.
That add backs are exceptional has also been emphasised by the Full Court in C v C:
Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post separation in a manner that is consistent with properly getting on with their lives[13].
[13] C v C [1998] FamCA 143 at paragraph 46.
In respect of the treatment of legal fees, as a particular category of “add back”, the authorities are conveniently collected in the decision of the Full Court in Chorn and Hopkins[14]. The treatment of funds used to pay legal fees is ultimately a matter for the trial judge’s discretion. Suggesting principles that might affect the exercise of that discretion, the Full Court held:
57.If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions) then such funds should be added back as a notional asset of the party, who has had the benefit of them.
58.If funds used to pay legal fees had been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset; … Funds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.
59.Outstanding legal fees themselves are generally not taken into account as a liability.
60.If in the exercise of discretion, it is determined that legal fees already paid should be taken into account as a notional asset, then normally any liability associated with the acquisition of the monies used to pay the legal fees should also be taken into account.”
[14] (2004) FLC 93-204; (2004) 32 Fam LR 518.
Add Backs – Conclusions
In the immediate aftermath of a marital separation, the arrangements that might be described as parties “properly getting on with their lives” are, in many cases, attended with significant emotional difficulty for each of them and, frequently, are in a state of flux.
I find that to be the case here. The parties resided in the matrimonial home, but each accepts that they did so in circumstances where they had separated; where there were financial difficulties with T Imports and where, it seems clear, the pre-separation financial arrangements carried on largely as they had done pre-separation.
So, too, what is “reasonable” in that situation may, in my view, differ from what is reasonable when, for example, some years separate the parties physical separation and a trial.
Considerable debate arose in the hearing with respect to the payment of X School fees. It is clear that it is a major concern to each of the parties. They clearly have divergent philosophical views about the benefit or need for, or desirability of, private school education.
In that respect, the wife’s passionate commitment to it was obvious to the point of causing her distress in the witness box. I have no doubts about the genuineness of her feelings and beliefs in that regard.
I will deal later in these reasons with this issue in so far as it might be relevant to s 75(2). For present purposes, the issue is if, as I have found, the mother spent the $19,000 on X School, is that expenditure reasonable? An associated issue is whether the withdrawal from the superannuation fund and the subsequent financial penalty was reasonable.
It is, in my determination, highly relevant that these parties so organised their economic partnership, that the wife’s income – or the vast majority of it – was used to meet X School fees and expenses throughout the relationship and this continued into the period between separation and trial. I find that it was reasonable for the wife to seek to continue to meet that expenditure in the immediate aftermath of the breakdown of the marriage.
The wife swore, and I accept, that she knew little about the operations of T Imports and, more generally, the family’s financial affairs which were, essentially, managed by the husband. She swore, and I accept, that the husband was uncommunicative generally but, more specifically, about financial matters in general. I find she knew little about the superannuation fund of which the husband was trustee. It seems, though, she knew the husband had been able to have access to it.[15] I do not consider her withdrawal from it – although a unilateral decision – was reckless or wanton or designed to cause loss or broader harm to the husband.
[15]Properly – to the unpreserved, unrestricted component.
I consider that it would be unjust and inequitable, in the broad context of the s 79 discretion, to add back as against the wife, on a dollar for dollar basis, monies spent by her essentially in furtherance of the same economic partnership that had existed up until that time, including the payment of fees and expenses which had been paid from joint endeavours up until that time.
An analysis, carried out now with hindsight, shows the wife to have had the capacity to have sufficient monies to meet approximately $30,000 in legal fees from the net income paid to her from all sources – much of which, of course, came from the husband, in turn from either T Imports or trust distributions.
Again, though, whatever be the mathematics of it now, this was a continuation of the economic partnership that had previously existed. It was an economic partnership attended by the fact that the parties had separated, but they remained living in the same home with J and L.
From that economic partnership, and the roles performed within it when the parties were separated but living under the same roof, the wife was able to meet about $30,000 in legal fees and the husband was able to meet about $43,000 in legal fees. Some, at least, of each of those fees were met from T Imports, a business to which the wife had made (an indirect) contribution.
Again, I am not persuaded that I should add back as against the wife the $30,000 expended by the wife on legal fees. Again, I consider that it would be unjust and inequitable, in the broad context of the s 79 discretion, to do so.
I consider that the same considerations as those just described govern the exercise of my discretion with respect to the $11,500 balance on the Audi A3 car loan. Again, I will not add back this sum as against the wife.
It will be obvious, but I record for the sake of completion, that I propose to reject, for similar reasons, the contention on behalf of the wife to add back as against the husband the $49,000 claimed.
APPROACH
It is clearly established that the court can either adopt a “global approach” (that is including the amount of any superannuation interests in the list of assets, liabilities, and financial resources); or alternatively, adopt what has been described as a “two-pools approach”[16] by which superannuation falls into a separate “pool”.
[16] See Coghlan and Coghlan, (2005) FLC 93-220; (2005) 33 Fam LR 414.
By reason of the introduction of Part VIIIB of the Act, a superannuation interest is to be “treated as property for the purposes of paragraph (ca) of definition of matrimonial cause in section 4 [of the Act]”[17].
[17] Section 90MC.
It has been held that superannuation is “to be treated as property even though it is not”[18]. A later Full Court has held, by majority, that superannuation interests are “… another species of asset which is different from property as defined in s. 4(1), and in relation to which orders can also be made in proceedings for property settlement under s 79”.[19]
[18]See Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143; (2003) 30 Fam LR 355 at paragraph 75;
[19]Coghlan and Coghlan, (2005) FLC 93-220; (2005) 33 Fam LR 414 @ para 40. Justices O’Ryan and Warnick dissented.
Whichever be correct, it is clear that either the “global” or “two pools” approach remains valid[20], but it is necessary for the Court to consider the particular nature, form and characteristics of the superannuation interests in arriving at a s 79 conclusion.
[20] Ibid; In the Marriage of Norbis (1984) FLC 91-543; (1983) 9 Fam LR 385.
Both counsel ultimately adopted that approach. The husband’s superannuation interest significantly predates the relationship, he having commenced contributions to a fund in 1981[21]. The husband is the trustee of the private superannuation fund, the Challen Superannuation Fund. He is aged 59 and significantly closer to a potential vesting event, namely retirement, than the wife. The lump sum received by the husband by way of redundancy is directly referable to his employment with P Company[22]. This employment also commenced a significant time prior to the relationship. Cash funds received by way of distribution from the husband’s father’s family trust were in respect of an interest as a discretionary beneficiary which interest also predates the relationship.
[21] See Annexure RTC6 to the affidavit of the husband.
[22]Counsel for the wife conceded that, whilst she sought to draw a distinction between salary received from P Company and the periodic distributions from the family trusts also received by way of income, the ultimate distribution from that trust upon sale of the P Company business could be seen as an incident of the husband’s employment with P Company.
Bearing those matters in mind, I intend to adopt the global approach.
I expressed some concerns during the trial about the extent of the evidence with respect to the nature, form and characteristics of the superannuation interests and the evidence about the terms of the relevant trust deed providing for the receipt of benefits.
Ultimately, Exhibits H5 and W8 were introduced into evidence, being correspondence from Y Accountants. Exhibit H5 indicates that:
“… should [the husband] be gainfully employed for more than 10 hours per week beyond age 60, then it is unlikely he would fall within the condition of release definition and therefore he is unlikely to be able to access his superannuation funds.
In the event that the trustees of his superannuation fund form the view that he has ended his arrangement under which he was gainfully employed, after turning age 60, then he would have satisfied a condition of release and then be able to access his superannuation.”
The meaning, in real terms, of those statements remains somewhat elusive.
Annexure RTC7 to the affidavit of the husband[23], makes provision[24] for a “normal retirement date” of … 2008, being the day that the husband turns 60.
[23]Document headed “[Challen] Retirement and Assurance Plan”
[24] Second page of the document
The husband, pointing to his past employment, his age, the age of J and a need to earn income, says, and I accept, that he intends attempting to earn income from T Imports and will need to earn income into the immdediate future.
Whilst accepting the husband’s current plans for the future and whatever be the precise position which respect to the husband’s entitlement to take his superannuation benefits, it is clear that, aged 59, he is in a position to bring about receipt of that benefit at a time earlier than the wife who is aged 48 and who plans to devote such of her income as might be needed to sending J to X School in the future.
CONTRIBUTIONS
The specific matters that assumed particular importance in the context of the evidence and arguments in this case are: the importance to be attached to contributions to the welfare of the family which should be taken into account in a substantial and not token way[25]; the importance of the use to which initial contributions (and indeed all contributions) are put[26]; and the fact that contributions are to be assessed in a broad way within the context of the wide-ranging discretion, as distinct from formulation by mathematical calculation[27].
[25] See In the Marriage of Mallet (1984) 156 CLR 605; (1984) FLC 91-507; (1984) 9 Fam LR 449.
[26] See Pierce v Pierce (1999) FLC 92-844.
[27]See Macgregor v Macgregor (1996) FLC 92-710; (1996) 21 Fam LR 57: “We do not think that the adoption of the mathematical approach advocated by Mr Broun is supported by authority and indeed we think that it is likely to be misleading and to lead to the discounting of a person’s role as a homemaker and parent, particularly in cases such as this one where the parties have lived in a traditional and complementary relationship as her Honour found in this case.” per Nicholson CJ; Barblett DCJ; Finn J.
When the relationship commenced, the wife was residing in a home with a small mortgage (about $23,000). She had a car. Her home was sold and the equity used to purchase the former matrimonial home. She had about $100,000 in assets at the commencement of the relationship.
The home acquired with her initial equity provided a home for both parties, L, and subsequently J. It also provided a home for A, on her relatively infrequent visits.
As observed earlier, the husband was in the process of finalising the financial arrangements in relation to his previous marriage at the commencement of this relationship. He had employment with P Company earning a comfortable income and the financial resource of his interest as discretionary beneficiary in his father’s family trust. He had $238,000 in superannuation.
Each of the parties were working remuneratively at the commencement of the relationship. The wife was earning modest income; the husband was earning a comfortable income. Both incomes provided for the benefit of the parties economic partnership. The husband was providing $300 per month in support of A.
The wife contends, and it seems clear to me she is correct, that, without her initial capital, the former matrimonial home could not have been acquired when it was. The husband contends, and it seems clear to me he is correct, that, without his income, the parties would have been unable to obtain the borrowings sufficient to purchase the former matrimonial home when it was. At an unspecified time, but which I gather was shortly after cohabitation, the husband contends, and I accept, he paid $15,000 toward the wife’s legal costs associated with her former relationship.
As is clear from the background given earlier in these reasons, the parties needed to deal with significant difficulties with respect to L who is, of course, not the husband’s natural child. I consider this to be a matter of some significance. Section 79(4)(c) refers to a contribution by a party to the welfare of the family. But, the “family” for the purposes of that sub-paragraph is, in terms, “constituted by the parties of the marriage and any children of the marriage”. In my view, consistent with what I understand to be the law as espoused in Robb[28], I propose to take into account the husband’s “contribution” to L pursuant to s 75(2)(o).
[28]In the Marriage of Robb (1995) FLC 92-555 at 81,547; (1994) 18 Fam LR 489 at 500: “Accordingly, in contributing to the support of these children [who were not children of the marriage] the wife was merely honouring a legal obligation which she owed to the children, whilst the husband, in making his contribution, was acting essentially as a volunteer, assisting the wife in the discharge of her legal obligations. Upon that basis, whilst we consider the justice of the case clearly required the husband’s contribution to be taken into account under s 75(2)(o), the same cannot be said of the wife’s contribution. In making that contribution, the wife was in no way discharging or assisting to discharge any legal obligation of the husband.”
When L commenced prep and J was born, the wife ceased remunerative employment and was engaged full-time as a home-maker and parent. The difficulties inherent in that task, the clearly commendable performance of which permitted the husband to earn income, is taken into account by me in a substantial way.
The wife’s task in that respect was made more onerous in this case by the necessity to care for the parties’ own child in the context of considerable difficulties being experience by L as a result of her unfortunate start to life.
It seems to me that both parties deserve significant recognition of these efforts, in particular in allowing L to become, on all accounts, a happy and stable young woman. Having said that, I have no doubt, having read the material and listened to the evidence of both parties, that the primary contribution to the welfare of the family as defined (and to L), was made by the wife.
That this situation will continue is reflected in the orders made by consent at the outset of this trial.
There is no suggestion that the husband did anything other than work hard in his role with P Company, which provided a comfortable income for the family. As indicated earlier, that income was supplemented by distributions from the family trust.
Ms Smallwood, who appears for the husband, seeks to draw a distinction between those distributions and the amounts received by salary, arguing that the distributions from the trust are more akin to an inheritance (or perhaps a gift) than to an incident of employment.
I think there is merit in that argument.
As a discretionary beneficiary, the husband merely had the right to have his father’s trust administered properly and appropriately. He was dependent upon his father exercising a discretion to pay money to him, had no guarantee of that money being paid and could do nothing about it if no money was paid.
I have already referred to the fact that, in my opinion, there is insufficient evidence from which I could draw the conclusion that the distributions received periodically were connected with the activities and/or profitability of P Company and, therefore, indirectly, the efforts of the husband to which, in turn, the wife could be said to have an indirect contribution.
Clearly enough, then, I need to take account of those trust distributions by the husband – which were received between the commencement of the relationship and 2001 – as a matter of some significance.
The use made of those contributions is also, in my opinion, a significant matter. The monies were, on any view of the evidence, put together with the salary earned by the husband and the combined monies used as household income from which the expenses of the household were met.
In that respect, I accept that, but for the husband’s employment and income, the parties would have been unable to borrow the funds by which the former matrimonial home was purchased. So too, the renovations undertaken to the former matrimonial home (which, apart from a modest cash sum spent on a new kitchen, were financed with additional borrowings) would not have been able to be undertaken without the husband’s “overall” earnings, including the distributions from the trust.
The superannuation interest of the husband grew from $238,000 at the commencement of the cohabitation, to its present $658,104. The wife has negligible superannuation interests.
The wife contributed indirectly, in the manner earlier described, to the growth in that fund. Obviously, the husband contributed in a direct financial sense to that fund and, equally clearly, part of the growth of the fund during the course of the relationship is attributable to its capital starting point at the commencement of the relationship.
It was properly conceded on behalf of the husband that the redundancy of $360,000 received as a lump sum, is connected to the husband’s employment with P Company and, thus, something to which the wife has made an indirect contribution. That employment spanned some 23 years from 1981 until about 2004. The cohabitation coincided with about nine of those years.
The payment comprised some $80,000 in net long service and annual leave and about $280,000 net redundancy calculated as two years gross salary less tax[29]. I have no details of how the entitlement to two years salary as the method of calculation of that redundancy was connected to years of employment or if, indeed, it was.
[29] Exhibit RTC5 to Husband’s Affidavit.
As earlier mentioned, a cash sum was ultimately distributed as a lump sum from the husband’s father’s family trust once the P Company business was sold and litigation associated with it finalised earlier this year. It is argued that, on the evidence before me, this should be seen differently in terms of contribution as there is no evidence linking that sum with the husband’s employment by, or performance within P Company.
The wife through her counsel seeks that I infer such a connection. On the facts established before me, I am not prepared to draw that inference.
I reiterate the findings made earlier in respect of what is established in respect of the trust and its nature.
The capital sum available on sale was, in so far as the evidence reveals, a distribution made at the discretion of the husband’s father from the net proceeds of sale of P Company (I assume the sale of shares in it). As such, the proceeds were paid to the trust. It was open to the husband’s father to not make any such distribution to the husband.
Further, there is no evidence to suggest whether any other distributions were made to any other beneficiaries of that trust or the husband’s uncle’s trust. Nor is there any evidence as to what connection, if any, they had with P Company, including whether any or all of them were employed with P Company.
In those circumstances the husband, through his counsel, argues that the lump sum distribution – i.e. the “[P Company] monies” – should be seen more in the nature of an inheritance or, perhaps, a gift and a gift received late in the relationship. I agree.
Significant cash resources (and some superannuation) were used to initially acquire the T Imports business and some funds have been used in an attempt to maintain its liquidity. Nevertheless, the proceeds from P Company currently existing within the property pool to be distributed between the parties, represent some 30 per cent of the net pool of assets and superannuation.
The P Company monies should, then, in my view, be seen as a direct financial contribution of real significance by the husband.
The post-separation contribution picture is somewhat clouded by the fact that, effectively, for the whole of the post-separation period, the parties lived under the one roof. Although changed in nature, the cohabitation in the sense of an economic partnership remained essentially that which it was whilst the relationship subsisted.
That said, the parties agree that there was a separation at that time, and it seems to me that the husband has continued to make significant contributions in that post-separation period. He has continued to provide a salary from T Imports to the wife despite her not working in the business. He has continued to meet household expenditure in the sum of about $1,100 per month from his post-tax income. He has continued to meet car payments in respect of the car driven by the wife.
The total net sum available to the wife in that post-separation period (including the net income earned by her from her employment at the health care facility) is about $82,000 net per annum. As has been observed, the wife has been able to meet her legal expenses from monies received by her.
As against that, it is, it seems to me, axiomatic that the breakdown of the relationship is a difficult time and I have determined that the wife has made the overwhelming contribution in the role of homemaker and parent and to the welfare of the family (as defined), including during the difficult post-separation period.
Moreover, the monies paid by the husband were paid to a household which he shared and, of course, had the effect that no child support, as such, was assessed or paid.
Clearly enough, the husband’s availability in the home, meant that the wife could continue to work nightshift, earn income, and as a result, pay the fees and expenses for X School incurred in respect of L.
Weighing up each and all of the matters about which findings have been made in these reasons, I consider that contributions ought be assessed in the proportion 70 per cent to the husband and 30 per cent to the wife.
SECTION 79(4)(e) – THE “SECTION 75(2) FACTORS”
Age and state of health of the parties
The husband is aged 59 and the wife 48.
The evidence does not reveal any health factors that need to be taken into account in respect of either party.
Income, property and financial resources
The mooted contribution assessment and the consent minutes earlier referred to, would result in a division whereby the wife retained the former matrimonial home and a modest mortgage of about $50,000, a small parcel of shares and negligible superannuation. By reason of the additional agreement between the parties, she would retain, outside of the “pool” of assets, an unencumbered A3 motor vehicle and all but one item of the furniture in the home.
The husband would retain cash of about $268,000; the S Pty Ltd shares worth $54,000; T Imports, valued at $90,000; and his individual share holding of $13,000; together with $658,104 in superannuation. He will meet the CGT liability of $10,000.
The husband would also retain the capacity to realise significant superannuation. His current plans are to keep working. However, as Exhibit 8 reveals:
“Either [the husband or the wife] as members of the [Challen] Superannuation Fund, upon attaining the age of 55, may avail themselves of the transition to retirement strategy. This strategy may enable them to restructure salary, wage or other income as deductible super contributions (subject to the appropriate limits). In return they may then establish a transition to retirement pension from their superannuation fund.”
Capacity for gainful employment
Clearly the husband has the capacity to continue to operate T Imports. That is his desire.
He will have at his disposal a reasonably significant amount of cash, by which he can reduce the indebtedness in the business, and the significant payments made from the business to the wife will cease.
It is obviously impossible to predict what might happen in the future with respect to T Imports, but the matters just described give cause for more optimism than what might otherwise be evident from the report by Mr L and/or the diminution in the value of the business since its purchase.
Ms Smallwood submitted that the schedule to Mr L’s report indicates an assumption of $58,000 by way of projected future income to the husband once salaries were adjusted. I read that schedule as indicating a salary of $70,000. In either event, the evidence thus points to a modest likely future income, assuming the optimistic scenario for T Imports plays out as the husband seeks.
As trustee of the superannuation fund, and as the husband approaches 60, there is open to him the opportunity to structure his income and to avail himself of superannuation entitlements. He would have available to him $658,000 in respect of which Exhibit W8 provides:
The deed provides for income streams via a pension and/or annuity and/or in such lump sum manner/s as the relevant law shall provide, and is referenced by clauses 27, 28, 29 and 30.
The husband is currently residing in rental accommodation and does not own real property. The parties’ investment property was sold by consent during the post-separation period.
The wife returned to remunerative employment after a break of approximately six or seven years and after completing a course in health care. I have no evidence about the availability or otherwise of future employment positions for the wife in that area.
She ceased her night-shift work when the parties physically separated and the husband vacated the home. She has, as I have found, adopted the predominant role for caring for J and L and clearly places that as a priority in the future. The consent orders made by me reflect that.
L is 15; J is 8 and currently in grade 2. Currently, the wife is receiving job search allowance from Centrelink. That brings with it, as she said, the requirement to search for employment.
During the course of her evidence, the wife indicated that she would “work two jobs” if necessary in order to send the children to X School. I find that she is both clearly extremely passionate and determined about that desire. I assess her as being a very determined woman, who will, if she possibly can, bring about that eventuality.
To the extent that the future can be predicted, I think it is likely that at some point in the future she will obtain that employment, but if the past is a predictor of the future, as I think is likely here, her income by reason of the work that she has undertaken in the past, her age, and her desire to maintain a primary child-rearing role, will in all likelihood be very modest.
Care and control of a child of the marriage
It is both clear, and consistent with authority, that, when considering the care and control of a child of the marriage as a relevant consideration, account must be taken of the fact that :
“… the payment of child support in no way compensates the custodial parent for the loss of career opportunity, lack of employment mobility, and the restriction of an independent lifestyle, which the obligation to care for children usually entails …” [30].
[30] In the Marriage of Clauson, (1995) FLC 92-595 at 81,911; (1995) 18 Fam LR 693 at 711.
J has virtually the whole of her education ahead of her and there is another ten years (by which time the wife will be 58 and the husband 69) before she turns 18.
Child support has, as yet, not been assessed. It is accepted by the parties that it will be once orders are made in these proceedings. I have referred to the evidence from Mr L about a standardised potential future salary from the business. The best that can be said, at the moment, is that the husband will, all else being equal, have a relatively modest salary from which child support will be assessed by the Child Support Agency.
By consent, the husband will continue to meet the ING Bond in the sum of $300 per month which, given its prospective purpose, is directly relevant to child support for J. The proceeds, which are estimated to be in the region of $50,000 as a minimum, will be used to pay educational expenses for J (whether, as the wife desires, at X School, or otherwise). The maintenance of that bond by that payment by the husband, which will facilitate a cash sum available for J’s educational benefit when the husband is aged 63, is a matter of significance[31].
[31] See also section 75(2)(n).
Commitments necessary to enable support
Sub-paragraph (d) of s 75(2) requires me to consider the commitments of the parties that are “necessary” to enable a party to support “a child or another person that the party has a duty to maintain”.
In my view, the reference to a “duty to maintain” in s 75(2)(d) refers to a legal duty as distinct from a moral duty[32].
[32]In the Marriage of Vick and Hartcher (1991) FLC92-262; (1991) 15 Fam LR 149 –a case dealing with s 66B and 66E of the Act. I consider the principles discussed there applicable to the paragraph under discussion. Although it is arguable that, in a s 79 context, different considerations should apply, I consider that uniformity of that principle is preferable, particularly when, in my view, “moral” obligations to a child can be picked up elsewhere within s 75(2).
The wife has a duty to maintain L. The husband has no such legal obligation. Equally, it is clear that L will, in all likelihood, receive no (or negligible) support from her father, the other person who owes her a duty to support her.
A matter of considerable importance to each of the parties during the course of the trial was the position of the future payment of X School fees and expenses. It has particular resonance with respect to the sub-paragraph under discussion.
There is no doubt that the wife considers the payment of X School fees and expenses for L to be “necessary” in any sense of the word. The husband has the opposite view. The importance and thus, to a certain extent, the necessity of private school education might, at least in part, be described as philosophical debate. Clearly the parties here have different philosophical views about that topic.
The issue for me, is, in short, is it a “necessary” commitment for the purposes of the sub-paragraph when it is called in to relevance in a s 79 claim by s 79(4)(e)?
The wording used in the sub-paragraph is reflected in the wording of s 117(3)(2)(b) of the Child Support (Assessment) Act 1989 (Cth). In that context, whether a commitment is necessary “is a matter of judgment and degree in the individual case, bearing in mind in particular that, ultimately, it is a matter of competing priorities”[33].
[33]In the Marriage of Gyselman (1992) FLC 92-279 at 79,075; (1991) 15 Fam LR 219 at 237.
In a maintenance or child support context, commitments are calculated with a view to arriving at a relatively precise dollar calculation for the purpose of assessing need and capacity to pay a specific (usually periodic) dollar amount. In my opinion, the subparagraph has slightly different work to do in the context of a s 79 application.
Section 79 is concerned with arriving at a just and equitable result, reflective of the particular marriage formed by the parties[34]. In that context, what is “necessary” for one marriage may be completely unnecessary for another. Similarly, even within a marriage, what is necessary for one marriage partner may not be considered necessary by the other.
[34]See, eg. Waters and Jurek (1995) 20 FamLR 190 per Fogarty J: “The Court can only apply one or more of the paragraphs of [s 75(2) where it is satisfied that that step is relevant to arriving at a just and equitable [s 79] result”.
In that context, it seems to me that a good (but not necessarily the only) determinant of commitments which are “necessary” in the s 79 context will primarily be determined by reference to those matters, not on their surface extravagant, wasteful or capricious, to which the parties have committed whilst their relationship was ongoing.
Seen in that way, I consider that the financial costs associated with sending L to X School to which the wife is passionately committed are a matter which ought be taken into account as a “necessary” commitment of her to L, being a child she has a duty to maintain.
I am mindful that the husband gave evidence that his attitude towards L’s schooling at that particular school was that if the wife wished to obtain employment for the purposes of meeting that expense, he would not, as it were, stand in the way, but he did not acquiesce in that expenditure. The wife asserts that he effectively did acquiesce. I accept the evidence of the husband in that respect.
Nevertheless, I do not consider that that is the end of the matter. Marriage accommodates both joint decisions and decisions taken by one or other of the parties to the marriage with which the other party does not agree. Such is the nature of the miscellany of different decisions and compromises made by the parties to a marriage.
My acceptance of the husband’s evidence with respect of the issue of L attending X School does not alter my view about the application of s 75(2)(d).
Other matters
The wife is currently receiving job search allowance from Centrelink[35].
[35] Relevant to s 75(2)(f).
I take into account the fact that the parties’ marriage subsisted for some ten years and their relationship subsisted for some 11 ½ years, and, as earlier referred to in these reasons, the effect that the relationship had on the earning capacity on each of the parties[36].
[36] Section 75(2)(k).
The extent to which the parties have each contributed to the income, earning capacity, property and financial resources of the other, has also been discussed earlier in these reasons[37].
[37] Section 75(2)(j).
In a similar vein, I have also referred earlier to the need to protect the wife’s desire to continue her primary role as the parent to the child of the marriage and also L[38].
[38] Section 75(2)(l).
I have already alluded to the fact that I consider the contribution made by the husband to the significant progress made by L from difficult beginnings is a significant matter[39].
[39] Section 75(2)(o).
In that respect he was the primary, and for about six or seven years the only, income earner for the family and, of course, L’s needs were met from that household income. By permitting, as it were, effectively the whole of the wife’s income when she re-entered the workforce in about 2004, to be used for L’s X School fees and expenses, he made a contribution to same. So, too, as the wife conceded, the emotional support rendered to L was also of significance.
SecTION 75(2) Factors - Conclusion
A consideration and weighing of all of the factors just described, sound, in my opinion, in an adjustment in favour of the wife of 10 per cent.
In arriving at that conclusion I am mindful of what the Full Court said in Clauson[40] and I have considered the fact that such an adjustment has a “value” of about $150,000.
[40] In the Marriage of Clauson, (1995) FLC 92-595; (1995) 18 Fam LR 693.
I consider such an amount appropriate in the context of this marriage and in the context of the pool of assets and superannuation available for distribution.
OVERALL JUSTICE AND EQUITY
The conclusions arrived at by me in respect of contributions and s 79(4)(e) result in the property and superannuation being divided in the proportion 60 per cent to the husband and 40 per cent to the wife.
Receipt by the wife of 40 per cent of the pool of property and superannuation of $1,558,104 has a dollar value of $623,241.60 which I will round to $625,000.
It is accepted that the wife will retain the former matrimonial home unencumbered and will retain her superannuation and small shareholding, a total amount of $524,000. My judgment would see her needing to receive $101,000, say $100,000, in cash and/or superannuation in order to bring about the overall result.
Assuming the husband releases the mortgage and pays the outstanding CGT from the P Company monies, he will retain T Imports valued at $90,000, a remaining cash sum of approximately $219,000; shares in S Pty Ltd valued at $54,000; a personal shareholding of $13,000; and superannuation of approximately $658,000.
An important aspect of the overall justice and equity of the orders made in this case is how the wife’s “balancing entitlement” of approximately $100,000 ought be made up.
I have considered whether to order a superannuation split, so as to give the wife a mixture of cash and superannuation. This has the obvious result, and I assume advantage, of maximising the amount of cash available to the husband.
However, even if the whole of the $100,000 was ordered by way of superannuation split to the wife, it would see her, at age 48, with modest superannuation and the husband’s predominant “nest egg” would reduce accordingly. Further, the wife will have primary care of the two children and has given clear evidence of how she will spend a significant capital sum – on what she regards as a clear necessity for the children. Accordingly, a superannuation split, even of $100,000, seems to me to not achieve justice and equity in this case. A split with any smaller base amount, it seems to me, only exacerbates the issues just described and therefore also would not in my view achieve justice and equity.
As a result of such an order the husband’s cash reserves will reduce to approximately $119,000.
I should note for the sake of completeness that the wife will also retain the furniture in the former matrimonial home save for one item and a car and the husband will, in addition, retain a motor vehicle and motor cycle.
I consider the total property and superannuation to be received by each of the parties as a result of my determination to be a just and equitable outcome in this case.
I certify that the preceding one hundred and ninety-nine (199) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Murphy.
Associate:
Date: 5 November 2007
12
3
2