Charlton and Charlton

FAMILY COURT OF AUSTRALIA

CHARLTON & CHARLTON

[2007] FamCA 212

FAMILY LAW - PROPERTY - Settlement in relation to marriage
FAMILY LAW - PROPERTY SETTLEMENT - Superannuation

APPLICANT:

Mrs Charlton

RESPONDENT:

Mr Charlton

FILE NUMBER:

TVF

463

2004

DATE DELIVERED:

16 March 2007

PLACE DELIVERED:

Townsville, Q.

JUDGMENT OF:

Monteith J

HEARING DATE:

2, 3 & 4 October 2006

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Ms Willis

COUNSEL FOR THE RESPONDENT:

Mrs Pack

FAMILY COURT OF AUSTRALIA AT

FILE NUMBER: TVF 463 of 2004

Mrs Charlton

Applicant

And

Mr Charlton

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

This matter came on for hearing before me in October 2006 and was heard on 2, 3 and 4 October.
On 4 October I ordered that:
“1. Judgment in this matter be reserved.
2.Leave is granted to the Applicant Wife and the Respondent Husband to file and serve a further amended Application and a further amended Response respectively within ten (10) days of this order.
3.The parties serve on the Trustees of the Commonwealth Superannuation Scheme within fourteen (14) days copy of the further amended Application and the further amended Response.
4.That each party file and serve within twenty-eight (28) days an affidavit exhibiting to it any response received from the Trustees of the said Scheme.
5.The Respondent Husband file and serve written submissions within twenty-eight (28) days.
6.The Applicant Wife file and serve written submissions within fourteen (14) days of having received the Respondent Husband’s written submissions.
7.The Applicant Wife have leave to file a further affidavit by [Mr B] by 4.00 pm on Monday 9 October 2006.”
It does not appear that any further affidavit by Mr B was filed.
The matter came before me again on 5 December 2006 at which time the applicant wife sought leave to reopen her case and file and read a further affidavit of Mr R sworn on 27 November 2006. I granted that application but Mrs Pack Senior Counsel for the respondent husband did not wish to cross-examine Mr R and I then gave leave to the parties to file further submissions.
The supplementary submissions on behalf of the applicant wife were filed in the Cairns Registry on 10 January 2007 and reply to the supplementary submissions on behalf of the applicant wife were filed in the Cairns Registry on 18 January 2007.
When the matter commenced before me, there was an Application for Final Orders by the wife which had been filed 1 December 2004 in which she sought 65 percent of the matrimonial property for herself and 35 percent to the husband. There was a response to that Application by the husband filed 31 March 2005 in which the husband sought that the matrimonial assets be divided equally between the parties.
The matter proceeded before me although it had been foreshadowed by both Counsel that there would be an amended Application and an amended Response. They were each filed on 4 October 2006, being the last day of the trial. However, they were filed prior to the evidence of Mr B which commenced at 10.24 am on Wednesday, 4 October 2006. By the conclusion of his evidence, it had become apparent to both Counsel that the amended Application and amended Response filed 4 October 2006 were no longer appropriate and that is why I gave leave on that date to the applicant wife and respondent husband to file and serve a further amended Application and a further amended Response within ten (10) days.
It is unnecessary therefore to deal further with the amended Application and the amended Response, but to turn to the further amended Application filed 13 October 2006 and the further amended Response filed 20 October 2006.
Apart from some drafting differences, the differences in substance are only three.
Firstly, the wife seeks 50 percent of any splittable payment in respect of the interest held by the husband in the Commonwealth Superannuation Scheme whereas the husband seeks an order that the wife be only entitled to 30 percent of any such splittable payment.
Secondly, the wife seeks that the operative time is 9 June 1999 whereas the husband seeks an order that it is 6 June 1999. I am certain that the operative time in the husband’s further amended Response is a typographical error because throughout the trial, 9 June 1999 was the date discussed and corresponds to the date of separation.
Thirdly, the wife seeks half of the funds currently held in the husband’s Westpac Cash Management Account whereas the husband seeks to retain all of that sum which is approximately $165,000.
As I have said, there are some minor drafting differences and it is convenient that I should deal with one of them now.
The wife in her further amended Application in paragraph six seeks an order “that it is declared that each of the parties hold a one half interest in the debt owed by [B] Pty Ltd and it is ordered that neither of the parties (in their capacity as shareholder or creditor) is to be paid in preference to the other.”
In the further amended Response, the husband seeks the following orders:
“6.That a declaration be made that the husband and the wife each hold a one half interest in moneys owing to the parties jointly by [B] Pty Ltd.
7.That in the event either of the husband or the wife is paid all or any sum of the said sum referred to in Order 6 herein, the party thereof receiving that sum or any part thereof shall forthwith account for and pay to the other party one half of the sum(s) so received.”
Although I think it is intended that they achieve the same result, no argument was put to me about the form of these orders. However, as a matter of drafting, I prefer Orders 6 and 7 as set out in the further amended Response to the more general in Paragraph 6 of the further amended Application.
Consequently, it can be seen that the dispute revolves around whether the wife receives 50 percent or 30 percent of any splittable payment under the husband’s Commonwealth Superannuation Scheme entitlements and whether she receives half or none of the funds currently held in the husband’s Westpac Cash Management Account, which funds are approximately $165,000 and represent the proceeds of sale of the investment property bought during the marriage at T.
Finally, in compliance with the order that I made on 4 October 2006, the further amended Application and the further amended Response were served on the Trustee of the Commonwealth Superannuation Scheme and an affidavit was filed by Ms H, the solicitor on behalf of the husband, on 1 November 2006 deposing to compliance with that order and exhibiting the responses from the Trustee. As I understand the responses, the Trustee has no objection to the orders being made in the terms of either the further amended Application or the further amended Response.

BACKGROUND

The husband who was born in March 1953 and the wife who was born in November 1955 married on 19 January 1977. They have two children, a daughter, who was born in April 1984 and a son, who was born in February 1986. The husband and wife separated in June 1999 and the wife commenced a de facto relationship with Mr R. The wife and Mr R have now resided in a de facto relationship for over seven (7) years. At separation, the children both remained living with the husband. At the beginning of 2000, the daughter resided with the wife and completed her High School in 2001 whereupon she studied science at University from 2002 until she completed her course at the end of 2004. The son and the husband relocated from W to L where the husband was posted by his employer, the Commonwealth Public Service. The husband’s next posting was to M at the end of 2000, then at the beginning of 2001, the son commenced school at the Y School where he was enrolled in Year 10. At the beginning of 2002, the husband was posted to I and the son boarded with a family whilst continuing to attend Y School. For his final year of education, the son was enrolled as a boarder at the Y School. At the beginning of 2004, the husband was posted to Brisbane and the son attended university until June 2005, when he obtained employment. In February, 2006, the husband was posted to B, where he presently resides. The son is employed and residing in Brisbane, and the daughter is employed and residing in W. The wife continues to reside with Mr R in W.

THE EVIDENCE

When the parties married, the wife was just 18 and the husband was 21. He was employed by the Commonwealth Public Service and obtained qualifications from the Public Service through his work. The wife primarily raised the children and was responsible for the day to day management of the family. The husband obtained through his work and training gradual promotions and seniority. He was the primary income earner and the superannuation contributions were made as part of his salary. Those contributions and the accompanying benefits provided by his employer grew during the period of the marriage of 22 years.
In 1999, upon separation, the parties divided up some of their assets. A Schedule of Assets as at 9 June 1999 was prepared by the parties and this schedule was put to the wife in cross-examination and the wife adopted the division of assets and the agreed values in accordance with that schedule which became Exhibit 1 in these proceedings.
Each Counsel put a somewhat different interpretation upon these figures.
Counsel for the wife submits that each of the parties received the following assets:
To the wife:
Ford Maverick  $20,000.00
Boat CJV with Yamaha outboard, trailer
and accessories  $12,000.00
Camping trailer  $1,000.00
Funds in U  $73.38
Funds in savings account U  $5,167.30
Funds in cheque account U  $27,179.95
Shares 462 @ $16.41  $7,851.42
Shares Telstra 1200 at $7.97  $9,564.00
Total  $82,834.00
To the husband:
Household furnishings  $3,000.00
Husband’s long service leave  $8,508.92
Funds in Westpac  $2,955.45
Funds in Credit Union Australia  $523.29
Funds in Credit Union Australia  $640.58
Shares with AMP 664 @ $16.41  $12,701.34
B Pty Ltd – interest in 25%  Unknown
Total  $28,327.00
Accounts requiring payment as at separation, according to the husband:
Electricity  $377.00
G Trip  $235.00
ASG  $407.00
Visa  $4,006.20
Total  $5,025.00
Assets remaining in the husband’s name, acquired jointly during the
marriage and not divided:
Home at T (purchase price in 1996)  $125,000
Mortgage on home  $90,000 (E)
Superannuation, built up during the marriage, and not divided:
Husband’s superannuation with C   $630,000.00
(as valued by Mr B)
Wife’s superannuation with Australian
Superannuation     $24,000.00 (E)

Counsel for the husband submits a different schedule:
Assets and Liabilities at the date of separation in June 1999
Husband
Bank Accounts
Westpac Classic …  $2,955.44
CUA …  523.29
CUA …  640.58          $4,119.31
Shares
AMP 774 @ $16.41  $12,701.34       $12,701.34
B Pty Ltd 12
Jewellery
Wedding Ring  $190.00             $190.00
Furniture and House Effects
Double bed  $100.00
Camera  400.00
Refrigerator  400.00
Freezer  400.00
Microwave  50.00
TV  150.00
VCR  450.00
Dining set  200.00          $2,150.00
Total Property  $19,160.65
Liabilities
Visa Credit Card  $4,006.29          $4,006.29
Nett Property  $15,154.00
Wife
Bank Accounts
U Cheque Account …  73.38
U Savings Account  5,167.30
U Term Deposit  $27,179.95       $32,420.63
Shares
AMP 462 @ $16.41  7,581.42
Telstra 1200 @ $7.97  9,564.00
B Pty Ltd 15  Nil       $17,145.42
Chattels
Ford Maverick  21,000.00
Boat  12,000.00
Camper Trailer  1,000.00
Jewellery  3,355.00       $37,355.00
Furniture
Lounge Suite – Leather  500.00
Entertainment Unit – Wood  950.00
Aviaries  100.00
Roasting Spit  250.00
Sony Mini Hi-Fi  500.00          $2,300.00
Total Property  $89,221.00
Liabilities
Electricity  377.00
Cytee Equipment  235.00
ASG  407.00          $1,019.00
Nett Property  $88,202.00
========
The Schedules prepared by Counsel for the husband seem to accord with Exhibit 1. However, they fail to acknowledge that Exhibit 1 shows the husband retaining his entitlements to superannuation under the Commonwealth Superannuation Scheme of accumulated contributions of $54,055.33 and productivity benefit and super guarantee of $29,280.65, being a total of $83,335.98. Nor do they show that the husband was to retain the investment property at T of $125,000 less an outstanding loan of $88,945, leaving a balance of $36,055, nor does it take into account the husband’s long service leave entitlements which are referred to in Exhibit 1 but not quantified but referred to in a statement which Counsel for the wife, in her schedule quantifies at $8,508.92.
Inexplicably, there is no reference in Exhibit 1 to the wife’s superannuation entitlements.
Mrs Willis, on behalf of the applicant wife, submits that these parties did, in 1999, what many other separating parties did at the time of separation and that was, they divided up some of the tangible assets at the time and decided to delay dealing or dividing up other assets that presented difficulties in their division. At the time of separation, the husband, who undisputedly had and still has, the greater income earning capacity being around $56,000 at the time as compared to the wife who earned $19,000 - $27,000 insisted that the wife take some assets (a car, a boat and its accessories, some contents, cash held in various accounts) whilst he retained his annual salary for his own use, all of his interest in the superannuation, most of the furniture and contents in the matrimonial home, all of the tools in his tool shed, and control of an investment home purchased during the marriage in the husband’s name so that the parties could have the benefit of any tax advantages through negative gearing.
Counsel for the wife goes on to submit that the Court is now faced with making a final order pursuant to s 79 of the Act, seven years after separation. Much has changed in that time. The wife seeks an order dividing the remaining assets and superannuation on a 50/50 basis. The husband seeks an order to divide up the superannuation fund by allocating to the wife a 30 percent interest in the C Fund, to be effective as at the date of separation, back in 1999. On the evidence of Mr B, the Court knows that the 2006 equivalent of 30 percent in 1999 is approximately 15 percent. In addition to the 30/70 percent split in his favour as at separation date (or 85/15 percent on current percentages) of the largest asset of the marriage, and the asset that was built up together by both husband and wife for 22 years, the husband also seeks to retain the entire cash proceeds of sale of the parties’ investment home, some $161,000 which is currently sitting in a Trust Account.
Both Counsel submit that contributions to the date of separation should be assessed as being equal. However, Mrs Willis, on behalf of the wife, submits that if the property settlement had occurred at the time of separation or shortly after, the wife would easily have been able to justify a property division of up to 60 percent in her favour. She bases that submission on a consideration of the relevant 75(2) factors including a significant disparity in the parties’ respective capacity for work, the effect upon the wife’s earning capacity of the long marriage, and regard to the standard of living that is reasonable in the circumstances. She submits that these factors together with the fact that the wife had one child for whom she was the primary carer, would have easily resulted in a 60/40 division in favour of the wife.
I do not accept that to be a correct approach. Certainly, I can accept, as both Counsel submit, that contributions to the date of separation should be assessed as being equal. However, as a matter of principle, I have to look at post separation contributions and s 75 (2) factors between separation and date of judgment to achieve a just and equitable result.

SUPERANNUATION

The wife has superannuation with the R Fund in the sum of $23,398. No claim is made against that by the husband.
The husband has a superannuation interest in the C Scheme and pursuant to the Joint Statement of Experts filed on 9 October 2006 was valued at 9 June 1999 at $288,724 and as at 27 September 2006 at $630,720.
One of the Joint Experts, Mr B, gave evidence before me on the trial. I had a transcript of his evidence prepared and I propose to now set out in my Judgment some sections of his evidence.
“HIS HONOUR: … And the evidence, I am not sure whether you have been made aware of this, but [the husband] has given evidence that it is his intention to work until 65?---I was not aware of that, your Honour.
Well, that is the evidence. That is correct, is it not, Mrs Willis?
MRS WILLIS: Yes that was his answer, your Honour.
HIS HONOUR: Yes?---And if [the husband] were proposed to work to 65 then he would be entitled to his lump sun and indexed pension without reduction.
Yes, but not until 65?---But not until 65 and the - - -
…
Assuming that he fulfils his intention and does not retire until 65 does that mean that any order that I might make in favour of the wife will not have any effect until he retires?---No, it will not. One of the relating questions seeks information about whether there has been an amendment to the governing rules and there has been an amendment but that amendment would mean that the order that he has made would, in effect, be implemented at the time it was made rather than waiting until the husband met his own condition of release.
…
An amendment was made to the governing rules by the Superannuation Legislation Amendment (Family Law and Other Matters) Act of 2004 and the associates reference is Act No. 58 of 2004.
…
And in that Act, in schedule 1, there is an amendment at item 22 which amends the governing rules of the CSS and provides a set of obligations on the part of the trustee that where he is served with an order made in accordance with part 8B of the Family Law Act that those obligations require the trustee to establish what is called an associate deferred benefit in the name of the non-member spouse. The associate deferred benefit is payable according to the conditions of release of the non-member spouse or now the associate deferred beneficiary. That person is able to give written notice to the board which specifies a date for release of their superannuation but it cannot be before their 55^th birthday so, upon reaching their 55^th birthday, the non-member spouse is then able to access their associate deferred benefit but they must have also satisfied the conditions of release under the Superannuation Industries Supervision Act and associated regulations and the requirements under the Superannuation Industries Supervision Act and associated regulations are that the member should have withdrawn from the workforce. If that person has withdrawn from the workforce and reached their 55^th birthday they would be able to access their associate deferred benefit regardless of whether the member had, in fact, moved into the payment phase. So access to the benefits then becomes quite independent each accessing the benefits according to their own circumstances and conditions of release.
…
For me sitting here as a Judge when after you have gone and I have got your evidence, obviously, but then I will have submissions and your evidence to use, but for me to understand when I come to make an order, what affect it is likely to have if I use a percentage, I will have a much better feel for what affect it is going to have than if I use a base amount. Isn’t that right?---Yes you do. It is easier to understand the percentage order than the base amount order.
…
If I make an order in the form of order 2 of the amended application, is it going to make any difference what he does?---No it will not make any difference what he does.
Because it will be in effect an independent benefit to the non-member?---That is right it will be. It will be the non-member becomes the associate deferred beneficiary.
And it will turn on what she does?---And yes the two entitlements become quite independent.
…
HIS HONOUR: Just so that I understand this, in the event that he dies, what – - -
MS WILLIS: Before your Honour makes the order - - -
HIS HONOUR: What happens to the benefit, [Mr B]?---Well if the husband died before your Honour made an order, the husband is no longer entitled to the indexed pension so the unfunded amount in effect evaporates.
I see?---The funded amount - - -
It does not fall into his estate?---No it does not. No the unfunded amount is just simply – in superannuation terms it is described as not having a guarantee period, a living no guarantee period. Which means that it lasts as long as the husband is alive. If he lives until 100 the guarantee lasts until that long. So it is paid until then, but if he dies at one day after retirement, that is it.
If I make an order in the form of order 2 in the amended application and he then dies, the associated beneficiary, is that the word that you use?---Yes the associate deferred beneficiary.
- - -retains her interest in the unfunded part?---That is correct. The provision is in the governing rules is section 140MB(1)(c), which says:
“That the members spouse and the non-member spouse are both alive at the operative time”.
Yes, which is the operative date in the order?---Well in effect it is just the operative time, your Honour. The operative time can be a date prior to the order but the governing rules just simply say that they both have to be alive at the operative time.
So can I cure this by making an order in a month’s time, for instance, with an operative time today?---In effect, yes. That set of circumstances has not arisen where - - -
They are both alive today, so if I were to make an order in a month’s time making the operative time today and in the meantime the husband died, would the interest still pass to the wife?---On my interpretation of the governing rules, yes. But as I say that has not been – that set of circumstances has not arisen to be forwarded for consideration, but I cannot see any reason why it would not, your Honour.
…
HIS HONOUR: I think what Ms Willis is asking or if she is not, what I want to know. Let me ask this question, I am not sure that it has actually been asked in this set of questions but, assume that I had made an order in the form of order 2 in the amended application, that when these parties separated, that is 1999, and assume that I make the same order today, in terms of percent, what difference, if any? Can you answer that, or that impossible?---No I just need to understand the question, I think your Honour - - -
Perhaps I should make it clearer. What I am really exploring – what we have got here as I am sure you understand, is a case where these parties separated back in 1999 and divided up the assets they had at the time between themselves and that is something that you do not need to bother about, but the superannuation was unaffected by any order then made. The parties now come to Court and ask me to make an order in terms of either order 2 of the amended application or order 3 of the amended response. In a sense what I would like to know and one of the things I am sure Mrs Pack will be saying to me is that since 1999 the fund has grown substantially and the husband has been making contributions to the fund and they’re post separation contributions and I should make some allowance for that in terms of any order that I make so that it is a just and equitable division the available superannuation. Are you with me so far?---Yes, I understand that yes.
What I am trying to get is some idea of what difference, if any it would have made if I had made an order in terms of order 2 of the amended application back in ’99, I could not have, but assume that I could, if I made it today?---If your Honour made an order in terms of order 2 today, postulating that 45 percent was to operate on the amount in 1999, which is I think your Honour is getting at, then the critical point would be what is the operative time. If the operative time is set at the date of service of the order or seven days from the date of service of the order the 45 percent would operate on the amount today. However, if the operative time is set at 6 June 1999 then the calculations would have to be done at that operative time and the 45 percent would operate on that amount. That would then, and I think our amount in 1999 was - - -
It is about 300 is it not?---Yes just short of 280,000 I think.
I had a feeling that it was nearly 300, I cannot remember off the top of my head but something like that/---288,000. So the 45 percent would in affect operate on the 288,000 that would then create a statutory deferred benefit and would be adjusted in the same way from 1999 through to retirement, until the non-member spouse had signed the condition of release. The difference in effect between 1999 and today is that the funded component has grown not only by virtue of investment earnings but also by virtue of financial contributions. That is the 5 percent. Once the operative time is set, then the financial contributions are being in effect sized, so they do not find their way to any amount that the non-member spouse would ultimately be entitled to so that the operative time is an important time to make the division of the superannuation.
I just want to make sure that I am understanding this. If I was to try to do justice between these parties by excluding from the fund, the contributions that the husband has made since separation, they being post separation contributions by him alone, how would I do that?---There are two ways to do it your Honour. The first way is to make the order in the terms of either order 2 or the immediate response of order 3 but set the operative time of 6 June 1999 that would then in effect excise the husband’s financial contributions to his funded component. The only difficulty there is that the trustee would have to go back and make the calculations themselves.
Okay but if I did that on the other hand would that not disadvantage the wife in relation to that amount. Leave out the husband’s contributions, the capital sum has grown by reason of investment, has it not?---Yes, it does disadvantage the wife in a sense that the interest which is earned by the trustee on investments would still then apply to the associate deferred benefits.
So I would not disadvantage her if I made an order having an operative date of the 6 June 1999?---I am not sure whether I could answer it in terms of advantage and disadvantage but I could say - - -
I am sorry what I am trying to understand is this. If I wanted to excise his contributions, so therefore not to disadvantage him in the sense that he has put back money in himself from his own resources to which she has made no contributions whatsoever, they having been separated since 1999, but on the other hand, not disadvantage her on the basis that there was a capital sum back in 1999 that has earned income in this scheme from 1999 to today and with respect to which she has had, if you like a beneficial interest by reason of the 22 year marriage, or whatever it is, how do I do that? That is really what I am trying to ask?---Yes. You do it in the way you described it. You would take the amount of $288,000.00, identify either the percentage or the base amount and set the operative time of 6 June 1999. That would then mean that the wife – the amount allocated to the wife in 1999 would attract core interests from then through to now but it would not attract the capital amount that the husband had contributed from his earnings.
All right so what I need to do, on your evidence, is set the operative date as 6 June 1999?---That that is right, your Honour. The one note of caution I would add is that the trustee might object to an operative time going back to 1999 because they may not be able – and I think that they do have the records but they may say they do not have the records to make the necessary adjustment. I have - - -
I suppose all we can do is see. I am not going to make an order until the form of orders sought has been served on the trustee and response has been obtained. So we can find that out fairly simply I would have thought?---I think that would be right. I cannot see anything in the governing rules to prevent an operative time being made at the 6 June 1999.
…
HIS HONOUR: Mr B, there is something that occurs to me. If I set the operative date of 6 June 1999 or somewhere around that, does that, in your opinion, overcome the problem that we were talking about a little earlier that is, the husband dying between now and when I make the orders?---Yes, it would, your Honour.
…
HIS HONOUR: I just want to ask one question and counsel might want to ask something arising out of that, then, we will let Mr B go. I just want to make sure that I understand this. Assuming that I am trying to identify the asset pool at the date that they separated and assuming that I am trying to identify the valuation of his superannuation then and assuming that I want to exclude his contributions post separation from the calculation but on the other hand, make sure that the wife gets the growth in the capital fund since that date in so far as either I decide that the fund should be distributed in part to her, then am I right in these assumptions, 1, The superannuation as at date of separation had a value of $288,742.38 and if I set the operative date at the 6 June 1999 I will achieve that result?---Yes you would your Honour.”

Although the date appearing in the transcript is 6 June, it should have been 9 June which is, of course, the date of separation, and the date on which the Joint Experts made their valuation. Further it is clear enough that I can achieve the result that I postulated to Mr B in my final question by setting the operative time at 9 June 1999. That achieves the result of equitably splitting the husband’s superannuation entitlements between the husband and wife as at the date of separation and excludes any post-separation contributions by the husband but gives the wife the interest on her equitable share between the date of separation and when she becomes eligible under the scheme.

THE INVESTMENT PROPERTY

As can be seen from Exhibit 1, the parties gave the investment property a value of $125,000 at the date of separation less an outstanding loan of $88,945 giving a net equity of $36,055.
The investment property was purchased during the marriage in the husband’s name so that the parties could have the benefit of any tax advantages through negative gearing. The property was sold and according to the husband’s financial statement filed 29 September 2006 the proceeds of sale are in a Westpac account number … standing in the amount of $164,763.56. This accords roughly with the amount referred to in the further amended Response which refers to an amount of approximately $165,000.
Mrs Pack Senior Counsel on behalf of the husband submits that from separation to the date of sale, the husband was solely responsible for the management of this property and for paying the difference between income and expenses. She submits that at the date of separation, the mortgage was just under $90,000. In fact, it was $88,945 but when it was sold on 28 October 2003, the mortgage was reduced to $73,000. She submits the husband alone was responsible for paying for the capital reduction in the mortgage liability with no negative gearing benefit.
She refers to the husband’s tax returns which are Exhibit 13 showing in 1998/1999 a net rental of $3,755 with a tax refund of $4,454; 1990/2000 a net rental of $4,571 with a tax refund of $5,680 and 2000/2001 a net rental of $2,056 with a taxation refund unknown.
She submits that since the sale of the property, the husband has been required to declare his income interest earned on the proceeds of sale of the investment property and to pay additional tax thereon and has also had the tax on the capital gain on the sale of the property. For the three-quarters of a year between 28 October 2003 and 30 June 2004, there was interest of $2,804 and additional tax of $25,491 and for the year 2004/05, interest of $9,900 and additional tax of $3,591.05.
The husband gave evidence that he would be liable to pay a comparable amount of additional tax for the year 2005/06 by reason of interest being declared as part of his income, whereas the interest has been credited to the account holding the proceeds of sale of the investment property.
Mrs Willis of Counsel on behalf of the wife submits that the husband seeks to diminish the contributions of the wife by his claim to have solely reduced the mortgage on the T rental property and to have solely managed the property. She submits that the husband is overstating the position. She submits the facts are the rental property was purchased in the husband’s name during the marriage purposefully in his name so that the husband could have the benefit, him being the income earner, of any tax losses. The husband, post separation, told the wife it was not a good time to sell the property and so the property remained rented out to tenants. The husband gave evidence that the property was rented out for the entire time between separation and sale save for two weeks. The wife received no benefit of the rental property during this time.
During this time, the parties engaged a rental agent to assist in the letting. The rental agent managed the property and was paid to do so.
Mrs Willis submits, and the tax returns show, that the agent organised and charged the owner with all the normal costs of rental including repairs. Also evident is that set costs associated with the ownership accumulated each year and that by deducting the costs of maintenance and the cost of the agent and other associated costs including the costs of the husband travelling once a year to inspect the property, which Mrs Willis submits served as a holiday for the husband as his parents lived in the same location, the property was run at a loss each year. She submits it is not the case that the husband paid mortgage repayments from his salary for the four years prior to it selling. She submits the mortgage repayments were paid by the tenant. It is clear from the documents attached to the husband’s tax returns that he alone lodge and kept the amount of tax refund each year. In addition, he requested the wife to refund to him, from the sale proceeds, amounts that he had to pay in capital gains tax.
So, Mrs Willis submits, the husband has had the benefit of using for himself the tax refunds for four years post-separation, a total of some $20,000, whilst at the same time getting the wife’s agreement to pay from their joint funds the costs of his capital gains tax. The husband’s evidence was that he did not share the tax refund with the wife. The husband also admitted to removing funds from the sale proceeds of $1,000 to pay his accountant’s fees.
Mrs Willis submits with respect to the rental property that after properly considering the issues, that in the overall consideration of the parties respective contributions, the husband has benefited himself from ownership of the rental property and the wife has not. She therefore submits that it is just and equitable that no particular contribution of the husband should be accorded any further weighting in the husband’s favour in terms of contributions post-separation. I agree with that submission.
Counsel for the husband submits I should find that the assets and liabilities at the date of trial are as follows:
Wife
D1 (1/2 interest)  $70,000.00
D2 (1/2 interest)  $112,500.00
G (1/2 interest)  $120,000.00
E (1/2 interest)  $200,000.00
Liability encumbering the above U
(22/9/06)  ($295,236.00)
¼ Interest A  $17,260.00
F Company  $160,368.00
Shares
Telstra 1600  $5,904.00
AMP 552  $4,901.00
Other
2000 Toyota Rav 4  $15,000.00
Furnishings  $2,500.00
Liabilities
Westpac Visa  ($2,500.00)
Nett Assets  $431,888.00
Husband
Shares
AMP 1092, Telstra 400, Unitab 530  $19,065.22
Motor Vehicle
92 Toyota Celica  $6,800.00
Contents  $7,320.00
Bank Accounts
CUA …  $4,559.78
Westpac …  $29,116.00
Liabilities
Westpac Visa  ($4,414.00)
Assets in his possession  $62,447.00
Proceeds of Sale of T  $160,000.00
78.71% of $630,719  $496,438.00
$718,885.00
Counsel for the wife contends that the property at date of trial is as follows:
Property:-
In relation to the first step, the property and other assets of either or both the parties is:
Both parties.
·Sale proceeds of home at T acquired during the marriage and sold after separation - $164,000.00;
Husband – current:
·Share portfolio owned by the husband                $19,065.22
·1992 Toyota Celica owned by the husband             6,800.00
·Funds in bank accounts in name of husband          33,675.78
Total  $59,541.00
Less Liabilities: Westpac Visa  $4,314.00
TOTAL  $44,127.00
Wife – current:
·Telstra shares 1600 -  $5,904.00
·AMP 552 -  4,901.00
·Toyota Rav 4  15,000.00
·Furnishings  2,500.00
·Westpac Credit card debt  2,500.00
TOTAL  $25,805.00
Property in which the wife holds a legal interest with her current de facto Mr R:
·D1 – full value at trial at $140,000.00 (wife holds half interest = $70,000.00)
·D2 – full value at trial at $225,000.00 (wife holds half interest = $112,500.00)
·House in E– full value at trial at $400,000.00 (wife did not contribute to the land valued at $40,000, house is not in her name, but she is a joint borrower – agreed between de facto and wife that she has a half interest - $200,000.00)
·G – wife’s full drive-by valuation (February 2005) $155,000 - $159,000 – wife owns half with her de facto husband $78,000.00)
·One quarter interest in A, held with husband and sister - $17,260 wife’s net interest)
·The total of the property owned by the de facto husband is $477,760.00.
The wife’s claim to these properties is notional and subject to contribution arguments between her and Mr R should the parties separate.
Liabilities of the wife, her de facto and on one property, her sister.
·Total liability with U is $590,000.00 for the wife and her de facto husband.
·As well, the wife and her de facto have a loan with the sister J, which totals $160,959.0-0 in relation to a house at A.
·The total debt is therefore $750,959.00 with $160,959.00 of that amount being a debt of three parties namely, the wife the de facto and the sister.
·The total debt for the wife and her de facto is $590,000.00 plus their share of the debt of $160,959.00
·Notionally a debt of $80,000.00 is put forward being one half of the debt. The sister owns 50 percent of the house, and the wife and her de facto own 25 percent each. Adding $80,000.00 to $590,000, the joint debt of the wife and her de facto, the total is $670,000.00.
·The wife’s notional amount of debt is therefore $335,000.00.
·There is no evidence as to whether the major debt of $590,000.00, or the debt of $160,959.00 is, as far as the wife is concerned, joint and several. It may well be that the wife’s debt position is much higher if it transpires that she alone can be liable for all the debts.
·In relation to the properties held with the de facto husband, the wife along has liabilities totalling $335,000.00.
·The net assets total $519,760.00, one half being $259,880.00.
·The net position of the wife in relation to the assets in which she holds a legal interest, is therefore that her debts exceed the value of the assets by $75,120.
·Superannuation Interests:
·C defined benefit fund in the name of the husband - $630,000.00
·Superannuation in the name of the wife R Fund - $23,398.00.
A comparison of the figures contended for by each Counsel show that one additional item has been added as a current asset of the wife, being F Company $160,368.
This it seems is related to a contention by Counsel for the husband that the wife is entitled to an interest in a claim brought by a company called X Pty Ltd with respect to what are alleged to be commissions owed to X relating to F Company
It was with respect to this claim that the wife sought leave to reopen her case and filed a further affidavit with leave of the Court by Mr R on 5 December in relation to these proceedings. He deposes in his affidavit in paragraph 4 to 8 as follows:
“4.My company has now received a defence from [Z] Pty Ltd in litigation between [X] Pty Ltd and [Z] Pty Ltd. Annexed hereto and marked with the letter “RR1” is a copy of the defence. My understanding of the defence is that it claims there was no agreement between the defendant and [X] Pty Ltd by which [X] Pty Ltd were appointed agents of the defendant and further that between February 2003 and the commencement of the proceedings by [X] Pty Ltd the parties were negotiating the appointment of myself and [the wife] as agents of the defendant and during the course of the negotiations myself and [the wife] were permitted to operate the [W] outlet and that [Z Pty Ltd] would pay outgoings and expenses of the [W] outlet and made one ex gratia payment as well as transfer a motor vehicle but otherwise were not liable to pay any amount by way of commission or otherwise to myself, [the wife] or [X] Pty Ltd.
5.A change has occurred since giving my evidence at the trial in relation to the business relationship between [X] Pty Ltd and [Z] Pty Ltd.
6.Since giving of the evidence, and as at the 3^rd day of November 2006 the arrangements between [X] Pty Ltd and [Z] Pty Ltd ceased and since that date [X] Pty Ltd has had no further connection with [F Company].
7.On or about 30 October 2006 we instructed our solicitors [S] Barristers and Solicitors of Melbourne to write to [L] solicitors for [Z] Pty Ltd and also direct to [F Company] advising that, among other things, as we were not receiving any payment we were not prepared to continue working and earning money for [Z] Pty Ltd. Annexed hereto and marked with the letter “RR2” is a copy of [S] Barristers & Solicitors letter to [L] of 30 October 2006 giving them notice that as at the 3 November 2006 we would not do any further work for them.
8.At that time, [Z] Pty Ltd also assumed control of their vehicles which were the vehicles rented out from [F Company].”
As I have earlier indicated, both parties were given leave to file further submissions in relation to this matter and having read the further submissions, I find that the litigation between [X] Pty Ltd and [Z] Pty Ltd is entirely speculative. I am unable, on the evidence before me, to form any view as to its prospects of success. It is impossible for me to even value under the common law principles of loss of a chance. Further, the wife has no legal entitlement to the proceeds of any litigation as she is not a director or a shareholder of [X] Pty Ltd, it being a company owned exclusively by her de facto partner for many years prior to the commencement of their de facto relationship. Consequently, the contention on behalf of the husband that I should value an asset in the hands of the wife with respect to F Company in an amount of $160,368 completely fails.
In a document entitled Reply to the Supplementary Submissions on behalf of the applicant wife filed 18 January 2007 and signed by Mrs Pack of Senior Counsel, it appears in fact to be a Reply to the original submissions on behalf of the applicant wife. She directs my attention to the Submissions on behalf of the wife in relation to property currently in the hands of the husband, which I have set out earlier in this Judgment, and submits that there is no explanation for the omission of the husband’s contents $7,320 and further that the total of $44,127 is a mathematical error. She appears to be correct on both counts. On the figures provided by Mrs Willis, instead of $44,127, it should be $55,227 but if you add in the $7,320 for the contents contended for by Mrs Pack, you get a total of $62,547. That appears to be the correct sum.
Mrs Pack also points out that the value of G of $155,000 - $159,000, giving the wife a half interest with her de facto of $78,000 is incorrect. She points out that the Unit was revalued at $240,000 which is to be found in Exhibit 8, which would give the wife a half interest of $120,000, an addition of $42,000.
Further, Mrs Pack submits that the additional liability of $160,959 is a double counting. This is in relation to the house at A where Mrs Willis attributes to the wife a one-quarter interest of $17,260. Consequently, it would seem that the $160,959 referred to, and for which, in effect, Mrs Willis claims $40,000 is attributable to the wife.
Consequently, if one takes the $42,000 being the additional amount relating to the increased value of G, attributable to the wife, together with a reduction in the debt attributable to the wife of $40,000, it means that the submission by Mrs Willis that the net position of the wife in relation to the assets in which she holds a legal interest is therefore that her debt exceeds the value of the assets by $75,120 is incorrect. It would seem, on these figures, that she is possibly $7,000 or so in front.
That does not seem to me to make much difference in the circumstances of this case.

SECTION 75(2) FACTORS

The husband is far more qualified and experienced in his field of work than is the wife. He has a far greater earning capacity.
She gave evidence that she is employed by Q and that the F business was run from the same office. The premises are owned by a large firm and she got paid $20,000 - $25,000 per annum working 20 – 25 hours per week doing administrative work. She was doing 20 – 25 hours per week for F Company although it is now fairly clear that business has ceased. She gave evidence that there is not a great deal of employment in W. She gave evidence that she lived financially independent from her partner. They had private banking in their own names and that she had no interest in her partner’s renovation company or in his Family Trust.
Conversely, the husband’s taxable income in 2005 was $70,000 and he gave evidence that he intended to work to 65.
It is true that the wife is in a de facto relationship with Mr R which has existed for some seven years and it is further true that he gave evidence that he would financially support her. However, it being a de facto relationship, its security and tenure is unknown.
Further, the wife’s suffers from spinal problems and Exhibit C in these proceedings is a Medical Report from Dr A. It sets out her past medical history and her current medications which are predominantly analgesics. It states “[The wife] has been experiencing severe, agonising pain due to her ongoing problem of spine and is having sleepless nights which increases the functional disability next day. She was involved in a MVA in 2002 and sustained an injury to her spine which was diagnosed as Brown Sequard syndrome and since then, she has been experiencing this LBP with severe stiffness and radiates to the right leg associated with numbness. She has been to Pain Clinic in Brisbane and has been prescribed medication. Her problem is getting worse with increasing age. This is a permanent disability. I do not believe there is any cure for her problem. She has to learn to live with her problem.”
It is clear that the wife kept more of the assets than the husband at the time of separation but since then, the husband has consistently earned a higher income than the wife and has kept that higher income for himself save for child support that he was obliged to pay. The evidence also establishes that he has been able to maintain substantial savings out of his income.
I find that the husband’s position in the future is well secured.

CONCLUSION

After consideration of all the facts in this matter it is my opinion that it is just and equitable in the circumstances that I should make an order splitting the superannuation of the husband on a 50/50 basis as at separation and similarly, splitting the sale proceeds held on trust on a 50/50 basis.

ORDERS

1.That pursuant to s 90MT(1)(b) of the Family Law Act 1975, whenever a splittable payment becomes payable in respect of the interest held by the Husband in the C Scheme (whether by way of lump sum or pension) the Wife shall be entitled to be paid 50 percent of that splittable payment and that there be a corresponding reduction to the entitlement the Husband would have received in the C Scheme but for this order.
2.That the trustee of the C Scheme do all such acts and things and have signed all such documents as may be necessary to:
(a)calculate, in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001, the entitlement created for the wife in Order 1 of this Order; and
(b)pay the entitlement whenever the trustee makes a splittable payment out of the Husband’s interest in the C Scheme.

3.That Order 1 has effect from the operative time.
4.The operative time for the purpose of these orders is 9 June 1999.
5.That the funds currently held in the Husband’s Westpac Cash Management Account, being the sale proceeds of the T home, be divided between the parties equally and the Husband do all acts and things to transfer to the Wife’s nominated account one half of the current proceeds.

6.That a declaration be made that the Husband and Wife each hold a one half interest in moneys owing to the parties jointly by B Pty. Ltd.
7.That in the event either the Husband or the Wife is paid all or any part of the said sum referred to in Order 6 herein the party thereof receiving that sum or any part thereof shall forthwith account for and pay to the other party one half of the sum(s) so received.
8.That save as provided for in these orders, each party be solely entitled to the exclusion of the other to all the property and chattels of whatsoever nature and kind in the possession of such party as at the date of the making of these orders and for that purpose bank accounts are deemed to be in possession of the person whose name appears on the bank records thereof, insurance policies are deemed to be in the possession of the beneficiary thereof, any motor vehicles are deemed to be in the possession of the registered owners thereof.
9.Costs received.
10.Liberty to apply.

I certify that the preceding sixty-four (64) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Monteith.

Associate:

Date:

IT IS NOTED that this judgment for all publication and reporting purposes be referred to as CHARLTON & CHARLTON

[2007] FamCA 212

16 March 2007

Key Legal Topics

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Family Law

Property Law

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