Cleary and Cleary
[2007] FamCA 999
•31 August 2007
FAMILY COURT OF AUSTRALIA
| CLEARY & CLEARY | [2007] FamCA 999 |
| FAMILY LAW - PROPERTY SETTLEMENT - short relationship, two young children - superannuation splitting orders - defined benefit fund - husband now to commence receiving pension for life - valuation of defined benefit fund - small pool of assets – impact of initial contribution – land introduced by one party upon which house is built by both parties - disparity of earning capacity by virtue of husband’ security of future income and his capacity to earn extra income - adjustment because of s 75(2). |
| Evidence Act 1995 (Cth) Family Law Act 1975 (Cth) |
| Bilous and Mudaliar (2006) 35 Fam LR 55; (2006) 65 NSWLR 615 |
| APPLICANT: | MS CLEARY |
| RESPONDENT: | MR CLEARY |
| FILE NUMBER: | MLF | 51 | of | 2006 |
| DATE DELIVERED: | 31 AUGUST 2007 |
| PLACE DELIVERED: | ALBURY |
| PLACE HEARD: | ALBURY |
| JUDGMENT OF: | THE HONOURABLE JUSTICE CRONIN |
| HEARING DATE: | 29 AUGUST 2007 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | MR HARPER |
| SOLICITOR FOR THE APPLICANT: | ROBB & ASSOCAITES SOLICITORS PTY LTD |
| COUNSEL FOR THE RESPONDENT: | MR O'SHANNESSY |
| SOLICITOR FOR THE RESPONDENT: | CREAGHE LISLE SOLICITORS |
Orders
That BY CONSENT there be orders in accordance with the minutes of proposed orders marked Exhibit “A” and Exhibit “B” sealed and attached hereto AND IT IS DIRECTED that such minutes remain upon the Court file.
That the solicitor for the husband engross the minutes and deliver them by electronic transmission to my Associate within 7 days.
That on or before 4 pm on 1 November 2007 (“the due date”), the husband pay to the wife $60,000 (“the sum due”).
That contemporaneously with the payment of the sum due, the wife provide to the husband a withdrawal of caveat … and the husband do all things necessary to obtain for the wife either a discharge of the mortgage to St George Bank Limited registered in dealing numbered … or a release by the said St George Bank Limited of the wife in respect of the dealing encumbering the whole of the land at [a rural New South Wales city] (“the real property”) being the land described in Folio Identifier ….
That pursuant to s 90MT(1)(b) of the Family Law Act 1975 (Cth) whenever a splittable payment becomes payable in respect of the interest of the husband in the State Authorities Non-Contributory Superannuation Scheme in which the husband is registered as member number …, the wife is entitled to be paid 100 per cent calculated in accordance with the Family Law (Superannuation) Regulations 2001 and that there be a corresponding reduction in the entitlement that the husband would otherwise have in the State Authorities Non-Contributory Superannuation Scheme but for this order.
That paragraph 5 of these orders have effect from the operative time.
That the operative time for the purposes of these orders is the fourth business day after the date of service of the orders upon the trustee of the State Authorities Non-Contributory Superannuation Scheme.
That for the purposes of s 90MZD, these orders bind the trustee of the said fund, the Court being satisfied that the trustee has been accorded procedural fairness in relation to the orders.
That in default of payment of the sum due by the due date, the husband transfer to the wife any interest he may have in the real property at [a rural New South Wales city] (“the real property”) upon a trust for sale and the wife thereupon do all things required including signing any necessary document to sell the real property by public auction on terms and conditions to be agreed and in default of agreement, on such terms and conditions as an agreed real estate agent (“the agent”) shall determine.
If the parties do not agree on the agent, each of the parties shall provide to a registrar of the Melbourne Registry of this Court a list of three names for the registrar to nominate the agent using the provisions of Rule 15.46 of the Family Law Rules 2004.
Upon the sale of the real property, the proceeds of sale shall be applied as follows:
(a) first, to pay all costs, commissions and expenses of the said sale;
(b) secondly, to discharge any encumbrance affecting the real property;
(c) thirdly, to pay to the wife the sum due together with interest calculated pursuant to the Family Law Rules from the due date; and
(d) fourthly, to pay to the husband, the balance.
That pending the payment of the sum due, the husband pay and be responsible for all rates, taxes and outgoings of or with respect to the real property and that otherwise, the husband have exclusive occupancy of the real property until that time.
That by 4.00pm on 30 September 2007 each of the husband and the wife do all things required to place the Chinese lions on the market for sale and the net proceeds be divided equally between them.
That unless otherwise set out in these orders, the husband retain and the wife relinquish any interest in, any superannuation entitlements of the husband.
That unless otherwise set out in these orders, the wife retain and the husband relinquish any interest in any superannuation entitlements of the wife.
That save as to any issue as to costs as between the parties, the application of the wife filed 26 July 2007 and the response of the husband filed 9 October 2006 be dismissed.
That in the event that either party wishes to seek costs arising out of these orders, such application be made in writing to Justice Cronin by 4.00pm on 14 September 2007.
In the event that any application is so made by either party, the other party shall have until 4.00pm on 21 September 2007 to provide any submission in writing in response.
That any application for costs arising out of the said submissions shall be determined in chambers.
If no further application by either party is filed by the date referred to in paragraph 17, all applications shall be deemed to be dismissed.
That all proceedings be otherwise removed from the list of cases awaiting a hearing.
IT IS CERTIFIED
That pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel.
That pursuant to s.65DA(2) and s.62B, the particulars of the obligations these orders create and the particulars of the consequences that may follow if a person contravenes these orders and details of who can assist parties adjust to and comply with an order are set out in the Fact Sheet attached hereto and these particulars are included in these orders.
AND THE COURT NOTES
That all material produced pursuant to subpoenae may be returned to the recipient of the subpoena.
That all exhibits may be returned to the practitioner producing them after 1 October 2007.
IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice Cronin delivered this day will for all publication and reporting purposes be referred to as Cleary and Cleary
| FAMILY COURT OF AUSTRALIA AT ALBURY |
FILE NUMBER: MLF 51 of 2006
| MS CLEARY |
Applicant
And
| MR CLEARY |
Respondent
REASONS FOR JUDGMENT
The parties in this case lived together and were married, for a very short period of time but they now have two very young children. They commenced these proceedings with a whole raft of disputes but to their credit, they have resolved all but the property issue. I made orders with their consent in relation to all of the other issues.
Ironically, the property issue on its face, looked simple. The parties have about $200,000 in non-superannuation assets and each has superannuation. In a short marriage, one would have thought those issues easily resolvable. The intricacies in this case highlight the problem of dividing a “small pool” which in this case was exacerbated by a complex defined benefit superannuation entitlement. That entitlement is about to become an income stream for life because the husband has been declared “hurt on duty” and will not return to his position of employment.
The issues therefore were :
(a)what assets are in the pool for division;
(b)what liabilities should be borne by either or both parties;
(c)what weight I should give to the respective contributions of the parties;
(d)how to treat the defined benefit superannuation entitlements and whether there should be a splitting order; and
(e)whether any adjustment should be made for the factors set out in s 75(2) of the Family Law Act 1975 (Cth) (“the Act”).
Background
The husband is 42 years of age and is currently a New South Wales police officer. He is currently on leave having been declared “hurt on duty”.
The wife is 38 years of age and currently employed as a business manager on a contract.
This is the second marriage for the husband and the first for the wife.
There are two children from the husband’s first marriage. Both are now over 18 years of age. In November 2001 the husband’s first wife died. That left the husband caring for the two now adult children.
The parties met in December 2001. The precise details of the commencement of a formal cohabitation are vague but it matters little. It seems to me that they commenced to live together sometime around May 2002. The wife until that point in time had been living in Melbourne and the husband in rural New South Wales. It was the wife who moved away from Melbourne to live with the husband.
Soon after her arrival, the wife obtained employment.
On … 2003, the parties were married.
In August 2003, A was born. The wife took six months off from her employment and cared for A on a full-time basis. After that, the wife returned to work but stopped again upon the birth of J. J was born in November 2004.
When the wife moved from Melbourne to live with the husband, it was into a rented house whilst the home which is the subject of these proceedings was being built. It seems common ground that the parties moved into the new home around the time of the marriage.
During all of this time, the wife assisted the husband in the care of his two children who were then teenagers which meant that there were attendant problems.
The wife had the benefit of some assistance from her mother in relation to the care of the children of the marriage enabling her to return to work. The maternal grandmother came to the home early in the morning and assisted in delivering the children to day care.
In December 2005, the husband in his professional capacity, was sent overseas for three weeks. Upon his return, the marriage came to an end and the parties lived together for the following six months under the one roof.
The wife then moved to rental accommodation.
In November 2006, the husband commenced leave from his employment as a result of stress. His duties in the police force were as a … officer. I have been told and it appears to be common ground that he will not be returning to his employment. In that situation, upon making the formal application to be placed on “hurt on duty” he will received 72.75 per cent of his income on an invalidity basis. The evidence which I accept is that regardless of the income and employment status of the husband in future, he will continue to receive this 72.75 per cent of his “superable ‘salary’”. What I do not have and do not know are the taxation consequences if the husband obtains employment outside of the police force nor is it possible to determine at this stage, the taxation implications on this superable pension entitlement. Having said that, in my view, neither makes a significant difference.
The children
As I have indicated, A and J are still very young. The parties have been able to come to an agreement about the sharing of parental responsibility. The agreed position means that there is a rotating arrangement. The day time care of the children is about equal but the night time slightly favours the wife. In my view, whilst that may be significant for child support purposes, it matters little for the purposes of my determination.
In respect of child support, the husband is currently making a contribution but that will also change depending upon what income the husband ultimately receives upon the application for cessation of his current position as well as the impending changes to the legislation.
The law
The process that I intend to follow for the determination of the property issue was explained to the parties prior to the commencement of the hearing. In addition, each party was represented by experienced counsel. The process is that set out by the Full Court in Hickey and Hickey and the Attorney-General for the Commonwealth of Australia[1] where the Full Court said:
Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case.
[1] (2003) FLC 93-143 at 78,386
The provisions of s 79(4)(a), (b) and (c) of the Family Law Act 1975 (Cth) (“the Act”) are as follows:
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
b)he contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)he contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent;
After assessing the contributions and giving them weight, I shall turn to the examination of what is effectively the future for each party by reference to the factors set out in s 75(2) of the Act. Those factors are as follows:
a) the age and state of health of each of the parties;
(b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
(d)commitments of each of the parties that are necessary to enable the party to support:
(i)himself or herself; and
(ii)a child or another person that the party has a duty to maintain;
(e)the responsibilities of either party to support any other person;
(f)subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party;
(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
(h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income;
(ha)the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and
(j)the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
(k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
(l)the need to protect a party who wishes to continue that party's role as a parent;
(m)if either party is cohabiting with another person--the financial circumstances relating to the cohabitation;
(n)the terms of any order made or proposed to be made under section 79 in relation to:
(i)the property of the parties; or
(ii)vested bankruptcy property in relation to a bankrupt party;
(na)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p)the terms of any financial agreement that is binding on the parties.
The evidence
Each party filed an affidavit of evidence in chief and was cross-examined. Other affidavits were filed, they were not relied upon.
As the day unfolded, the issue of the superannuation become more complex as a result of which a telephone hook-up was made with a superannuation expert Ms K. She gave evidence by telephone and was cross-examined.
In respect of each party, evidence was given honestly and frankly.
The standard by which evidence is accepted is set out in the Evidence Act 1995 (Cth). That standard is the balance of probabilities. Wherever an issue has to be determined in this case between differing versions, I have determined it on the basis of what probably happened. The credit of each party made little difference to those issues.
Superannuation
Before turning to the pool of assets, it is important to indicate that I have proposed to separate the superannuation from the other assets.
In Coghlan [2] the Full Court discussed the manner in which a court should formulate the asset pool particularly when dealing with superannuation. The concept of two pools was created however in respect of the different approaches, the majority held:
61.Nothing we have said in this judgment would prevent a Court in the exercise of its discretion from including a superannuation interest as an item of property in the list of property which is drawn as “the first step” in the determination of proceedings under s 79, whether or not a splitting order is sought in those proceedings. This approach could be adopted where the parties agree that it should be adopted, or where the Court is satisfied that the superannuation interest is indeed property within the meaning of the definition of property contained in s 4(1), or if the interest is not within that definition, but is of relatively small value in the context of the value of the other assets in the case, or there are features about the interest which leads the Court to conclude that this would be an appropriate approach.
62.The parties’ contributions to all items on that list (including the superannuation interest) would then be assessed on either a global or an asset by asset basis. It might then be necessary in the s 75(2) context to have regard to the parties’ future superannuation entitlements (having regard of course to any division proposed on the basis of their contributions), with consideration then being given to the overall justice and equity of any proposed award or order (including any proposed splitting order). Indeed, this is the approach which the Full court has used on its re-exercise of the trial Judge’s discretion in Ilett and Ilett (which will be delivered contemporaneously with the decision in this case).
63.However, given the conclusions we have reached above, we consider that the preferred approach to the determination of property settlement cases must be to prepare in addition to the list of items of property (which would clearly fall within the definition of that term in s 4(1)), a separate list containing any superannuation interest or interests (valued according to the Regulations if a splitting order is sought in any application before the Court, or if no such order is sought, valued either according to the Regulations or otherwise). This of course is the approach which the trial Judge adopted in this case.
64.Then for the reasons we earlier gave, whether or not a splitting order is sought on either party’s application, the parties’ contributions to both the property (as defined in s 4(1)) and also to the superannuation interests should be assessed. The other factors in s 79(4)(d), (e), (f) and (g) would then need to be considered. Specifically in the context of s 79(4)(e), that is the s 75(2) factors, any division of the property (as defined in s 4(1)) and any “division” of any superannuation interest (in the sense of an allocation of the base amount) based respectively on the assessments of the parties’ contributions to the property and to any superannuation interest, would then be considered. Similarly, the parties’ future superannuation prospects (be they in capital or income form) would also need to be considered. The overall justice and equity of the ultimate award (including any proposed splitting order or the need for such an order) would then be considered.
[2] (2005) FLC 93-220; 33 Fam LR 414
Both parties agreed that the superannuation needed to be separated and I propose to treat it accordingly.
The wife’s superannuation causes little problem in terms of valuation. It was common ground that at the time that the parties commenced to live together, it was valued at just over $102,000. It is an accumulation fund. That fund has now grown to $175,780.
The husband’s superannuation however caused much more difficult problems. His case was prepared on the basis that he had the fund and that it needed to be valued according to the Family Law (Superannuation) Regulations 2001. There are two funds. One is the Police Superannuation Scheme and the other is the State Authorities Non-Contributory Superannuation Scheme.
Initially, both funds were valued on the basis of the Regulations as at the relevant date which was fixed by the parties as being 26 July 2007.
The State Authorities Non-Contributory Superannuation Scheme was shown to be valued as at 1 May 2002 at $14,441.91 and updated to 26 July 2007, at $26,959.64. The difficulty however is that as a result of the husband ceasing to be a working police officer, in other words, applying for the “hurt on duty” classification, it is possible for him to trigger the entitlement to roll out the SANCS fund entitlement. I was provided with helpful evidence by Ms K that even she was uncertain about a number of things one of which was the precise valuation and what was needed to effect the rolling out or rolling over, the SANCS. It was clear that the valuation according to the Family Law (Superannuation) Regulations meant that for the purposes of the pool, I should use the value of $26,959.64. However, if the husband goes on to the superable salary entitlement, a payment out to him may occur providing he is ultimately declared totally and permanently incapable of working. He is not in that position as I understand it at the moment and in any event, according to Ms K, there was a “window of opportunity” at the moment under which the husband could file two medical reports that would enable him to achieve that status. Whether that is so and whether in fact it can be done having regard to all of the assessments of the husband is unclear. However, it may be that the husband’s entitlement is something closer to $38,000 if those events are triggered. That is the real position rather than the regulation valuation. However, I am not at all comfortable about saying what will happen regardless of what orders I make and accordingly, the safest course is for me to adopt the regulation valuation of $26,959.64.
If that was split by an order, the husband would not have the benefit of it nor would he probably have the benefit of any of the lump sum considerations to which I have just referred and accordingly, my understanding is that the best that the wife could hope for would be a very modest pension entitlement actuarially calculated.
The second and more significant component of the superannuation of the husband is the Police Superannuation Scheme. As at 2001, the valuation was around $212,000. According to the regulations, the valuation as at 26 July 2007 was $387,304.04. However, that was predicated on the basis of no change to the husband’s salary or working life. That became a problem when there was consensus that the husband is intending to apply for the “hurt on duty” status which will ultimately give him his superable salary. Ms K was then asked to recalculate the entitlement.
The effect of the husband making the application for this new status is that he becomes entitled to his superannuation now in the form of a pension for life. There is some prospect according to the documents that I have read that he can commute the pension entitlement at the age of 60 but that is so far away in this case that I think it is dangerous to try and guess what might happen. I must deal with the circumstances as they are today.
When Ms K recalculated the valuation under the regulations taking into account that the husband is to get 72.75 per cent of his superable salary, the valuation completely skews the picture and it rises to $1,176,670.74.
The Court has looked at these sorts of cases on a number of occasions since 2001. It is clear that the superannuation value is determined actuarially. It is not cash in the hands of the husband but it is determined accordingly the philosophical concept that it would cost that sort of money to fund an income stream for the life of the recipient. On any mathematical view, that is probably a conservative value. The real benefit for the husband, however, is the fact that:
(a)this pension is payable for life; and
(b)this pension is payable regardless of whether the husband works and earns extra income or not.
The evidence of Ms K was also that if a splitting order was made in respect of the Police Superannuation Scheme, it would marginally affect the pension entitlement of the husband. It must do so because the capital split is taken from the notional capital value of that fund. Ms K was unable to tell me what the impact would be on the superable salary of the husband but as a guess, it would not make a significant difference. If the trustees adopted the pro-rata type concept, the reduction would be about 4 per cent. There are then questions of the taxation implications upon such a reduction as well.
In my view, it is appropriate to put in to the pool as separate property, the notional value $1.176 million but I reiterate what I said earlier about its true value.
In relation to that same fund, if a splitting order was made in favour of the wife, the rules of the fund at this stage require that she be declared a non-member and she would not be entitled to the benefit until the husband received his benefit. If the husband now achieves the status of “hurt on duty” and receives a pension, it is still unclear as to what the wife will receive. Ms K said that the wife would get a percentage actuarially determined of the husband’s pension but whether or not she would receive that pension now depended upon whether the husband filled in the relevant forms. All of this is unsatisfactory. This is also leaving aside any questions of contribution and equity to which I shall turn below. If for example, the wife was not able to effect access to any such splittable payment until the husband ultimately reached retirement age, any such entitlement would be modest and probably of little value factoring in taxation consequences for her. In addition, no-one seems to know whether the New South Wales legislation proposed to enable a roll-out or other benefits from such a splitting order will in fact be implemented.
All of those are matters that ultimately go to the question of what is just and equitable.
The approach to the division
I have two possible approaches to the entitlements of the parties. The first is the global approach and the second is the asset by asset approach. I have already indicated that I propose to separate the superannuation out from the other assets and that in itself is an asset by asset approach.
The global approach involves an overall division on a proportional basis. The asset by asset approach involves the determination of particular interests in individual items of property.
In Norbis[3], the High Court said that either approach was legitimate and that there was no principle of law that bound me to exercise my discretion in any particular way. Normally one would take a global approach but in cases such as this where the marriage is short and the contributions are identifiable, an asset by asset approach is more sensible and that is the approach I intend to adopt.
[3] (1986) FLC 91-712; (1986) 10 Fam LR 819
In McMahon and McMahon[4] the Court talked about giving back the parties their respective initial contributions and then dividing the balance on some joint venture basis. That has attractions but ultimately it matters little because I have to make a determination in the end which is just and equitable to both parties “taking into account” contributions. As I explained to the parties, this was not a simple “mathematical” exercise.
[4] (1995) FLC 92-606; 19 Fam LR 99
The same problem arises in superannuation cases and in McKinnon and McKinnon[5], Coleman J preferred the asset by asset approach in respect of the superannuation because the husband had in that case, a pension in the payment phase. I do not have that situation yet but it is probable that the husband will begin receiving his superable salary within the foreseeable future.
[5] (2005) FLC 93-242
In this case, I propose to treat the matrimonial home and the wife’s car as assets to be divided on an asset by asset basis and to lump together the household effects and the wife’s jewellery. There are two Chinese lions in this case which were purchased by the wife for the husband and although there was some initial argument about them and their value, neither party indicated any particular attachment to them as a result of which, I propose that they be sold and the proceeds be divided on an equal basis for reasons which I shall turn to shortly.
I also have to deal with liabilities and that is also a problem in the asset by asset approach because the liabilities do not necessarily attach themselves to individual assets. I shall deal with them separately.
The pool
The parties agreed on a number of values. Before setting out the pool, I shall deal with the issues about which the parties do not agree.
The wife sought to add back to the pool $10,700 which was taken by the husband on 3 January 2006 from the mortgage account thereby increasing the debt.
The wife’s evidence was that she did not accept the explanation that the husband had given for the use of the money.
It transpires that at the time of separation, the wife also took money from the mortgage account. In her case it was the sum of $7000. She did not include it as an add-back because in her view, the money had been spent and paid on bills. Some of those bills related to a plasma television and a sum of $3000 went towards the credit card in both names. It was put to the wife that as she was not being asked to add-back that money then neither should it occur for the husband in respect of the $10,700. The wife conceded that if the husband had spent that sum on debts then it fell into the same category. The husband said that he had spent the money on outstanding bills predominately associated with the completion of the landscaping of the house. He tendered a bunch of documents[6] which when totalled, amount to $10,192.65. These were the only documents that corroborated the expenditure of the money presupposing that I accept that they were in fact paid from the $10,700. The husband was cross-examined about the exhibit and it was put to him that they were not receipts but rather statements or invoices most of which related to the period of 2005. The husband conceded that as at 17 October 2005, the statement in respect of one nursery supplier was zero. It was also put to the husband that the last of the documents that was tendered was a sales receipt from W Pty Ltd for $7853. Rather disconcertingly, the date on the invoice which appears as 16/03/2006 looks odd because the figure “6” in the “2006” appears to have been changed by hand. Counsel for the wife put to the husband that all of these accounts had been paid prior to the $10,700 being drawn and he denied it. Furthermore, in respect of the altered sales receipt, counsel asked whether the husband had changed it and he said that he had not.
[6] Exhibit H7
It seems to me that this issue has been alive for a long time and could have been sorted out by discovery. That may not have been economically sensible but I can only deal with the evidence that I have before me. As I have already pointed out, both parties appeared honest and truthful and there is little dispute that there was significant work done on the outside of the house including towards the time that the parties separated.
In the circumstances, I have no reason to disbelieve the husband that the money was spent as he said even though I have some disquiet about the usefulness of the exhibit H7. In the circumstances therefore, I propose not to take that $10,700 into account. I do not propose to add it back to the pool.
I then turn to the liabilities. Each party provided me with various details about what was still outstanding. The husband in my view fairly, conceded that there were some bills in the hands of the wife that were still to be paid and that they had to be taken into account. In the wife’s initial statement of financial circumstances, she included a liability for a loan which had in fact been used for the part payment of legal fees. That was also conceded as being a liability of the wife rather than of the parties.
Although the wife’s liabilities as set out in the financial statement even adjusted for the purposes of the costs issue to which I have just referred, I prefer the version updated as set out in the wife’s counsel’s outline of case document. There was no challenge to the wife’s evidence in respect of those issues and accordingly, I propose to treat as liabilities in the hands of the wife the sum of $7626.
The husband was in a similar position. He had a number of liabilities set out in his financial statement including a debt to his father. It was clear that the husband’s father will not be pulling in the debt and as such, I propose to treat that as a contribution by or on behalf of the husband in a general sense. There was no challenge to the husband’s evidence in respect of the debt position and accordingly I accept for the purposes of the pool of assets and liabilities that his liability is $14,380.
As I will turn to later, I propose to treat all of those liabilities as joint liabilities to which each party should pay half having regard to the problems associated with the asset by asset approach.
Before leaving the question of liabilities however, there is a liability of the wife which needs to be mentioned. In paragraph 144 of the wife’s affidavit, she refers to the fact that she has a debt to the Victorian State Revenue Office which will take many years to repay. This debt was shown in her financial statement as $14,500. It apparently relates to the first home buyer grant. Counsel for the wife conceded that she had brought that liability in at the start of the relationship and that nothing had changed in respect of it. It is clearly a liability of the wife but not one in any way associated with the husband and I propose to simply ignore it from the pool of assets and liabilities but will take into account the fact that the wife has that liability to pay in the future.
In saying that I am also conscious of the fact that each of the parties has a significant costs liability to their respective lawyers as a result of this litigation. In the case of the husband, his legal fees are something in the vicinity of $25,000 and the wife’s something in the vicinity of $35,000. Some of the wife’s fees have been paid as indicated by the personal loan which I have excluded from the liabilities list but I am told by counsel for the husband that the bulk of the costs to be paid by him are still outstanding. Those are both matters that need to be considered in the just and equitable adjustment.
Part of the value of the matrimonial home includes what is described as an “elevated childs (sic) playhouse”. The wife in her affidavit said that it was unlikely she would ever have the capacity to purchase this sort of cubby house again. She said she designed it and painted it but acknowledged that work was done by the husband with the assistance of her father and that accordingly, she wanted it back. The husband’s version was that it was integral to the garden design. There was some argument about whether it was moveable or not but I propose to leave it where it is having regard to the fact that it is part of the garden setting and the children will clearly use it there. That is important having regard to the fact that the children will spend almost half of their living time with the husband. I also appreciate that the wife may have some attachment to it but the value is also included in the equity in the home.
Accordingly, I find the pool to be as follows:
ASSETS
Non-Superannuation
1. [Matrimonial home] $510,000
less mortgage 318,000
Equity $192,000
2.Household effects:
Husband $5,000
Wife 5,000 $10,000
3.Wife’s jewellery $5,000
4.The Lions (To be sold)
5.Wife’s car $19,000
Sub-total$226,000
LIABILITIES
Wife’s debt$7,626
Husband’s debts $14,380
Sub-total$22,006
EQUITY$203,994
I propose for the purposes of this exercise to treat the pool as $204,000. SUPERANNUATION ASSETS
Husband’s Police Superannuation
Scheme$1,176,670.74
Husband’s SANCS entitlement $26,969.64
Total:$1,203,630.38
Wife’s superannuation $172,286.00
Contribution
As was pointed out in Coghlan[7], notwithstanding the two pools, it is still important to follow the same four step process.
[7] op.cit.
In respect of the former matrimonial home, I find the contributions as to 25 per cent to the wife and 75 per cent to the husband. In respect of the household effects, the jewellery and the lions, I see no distinction between the parties and propose to find that their contributions have been equal. In respect of the wife’s motor car, I find that the contributions favour the wife as to 75 per cent and the husband 25 per cent.
In respect of the liabilities to which I have referred in the pool above, I see no distinction between the parties and propose to divide them equally.
In respect of the superannuation, some adjustment is needed to be made in favour of the wife because of the contributions to which I shall turn. Conservative adjustment is necessary and appropriate. I think it should be approximately $25,000 but I propose to round that up to the sum equivalent to the SANCS Fund and to make a splitting order accordingly.
My contributions assessments are based on the following findings.
Facts
Unless I state otherwise, the following statements are findings of fact.
At the time of the commencement of the relationship, the wife had a motor vehicle, superannuation to which I have already referred and some jewellery and household effects. She had a property in Melbourne which she had only acquired in the preceding 12 months to the cohabitation and against which she had borrowed a substantial portion of the equity. Accordingly, I find that at the time of the commencement of cohabitation, the wife’s non-superannuation assets were approximately $35,000 and her superannuation was as I have indicated earlier.
The husband had acquired the block of land upon which the home now stands. Apart from his significant superannuation entitlement to which I have already referred, he had the usual chattels. The building of the home on the land was in the preparation stage. Fundamentally, the contribution that the husband made to the land and the building of the home was the money he had received from his former home which had netted $96,320 and he also received approximately $22,000 from benefits received from his employment as a result of his first wife’s death as well as the money arising from her estate. He also had a motor car which was later sold and the proceeds went towards things used in the house construction. His contribution therefore into the relationship was somewhere around the $140,000 mark.
Both parties worked and earned an income during the time they were together. I am not prepared to distinguish between their financial contributions in respect of their earnings when both were working. When the wife was not working because of the birth of the children or afterwards because of her involvement in their care, it seems to me that the wife’s non-financial contribution is at least equivalent to the husband’s financial contributions as a wage earner.
Both parties had assistance from family with various forms of labour. I have taken into account the husband’s father’s contribution in the same way that I have taken into account that the wife’s mother provided both parties assistance in the care of the children so that they could attend their workplaces.
The wife’s father also assisted for example by delivering tiles for the home.
The wife also assisted the husband during the difficult teenage years of his two children albeit for a short period of the relationship. The wife set out in some detail her involvement in the lives of the children including the usual domestic assistance but also things like attending parent teacher evenings. Albeit that the husband’s daughter had an understandable conflictual relationship with the wife, I have little doubt that the wife made a contribution in those trying circumstances as she had set out in paragraph 38 of her affidavit. In the same way, she assisted the husband’s son who seemed to be more comfortable with the wife. Even though it was only for a short period of time when the husband was overseas on duty, the wife was still there to assist in roles that would normally be expected of a parent. It seems to me that had the wife not been there, the husband would have had to have found some other person to undertake those tasks whilst he continued his work. In my view, that is a contribution but one that I still have to put into context of a very short relationship.
In respect of non-financial contributions generally, the evidence of both parties was that each fulfilled their own roles and there was some dispute about what they each did. In my view, it matters little in this case having regard to the relatively short period of time that they were together. However, having regard to the fact that the wife was clearly not working after the birth of the two children, I accept that her non-financial role was greater than that of the husband. By the same token as I have already pointed out however, during that period of time the husband was making a significant financial contribution for the support of the family. In respect of the home, I find that the husband and the wife were both involved in the development, construction and maintenance of it. They undertook different roles and notwithstanding that the husband had a grand plan which had been prepared prior to cohabitation commencing, it would be difficult for me on the evidence to quantify the distinction between their roles once cohabitation commenced. I find that the initial contribution was greater by the husband than that of the wife because of the initial amount. I find that it created a “springboard” effect to what is in the pool now.
Subsequent to separation, both parties have contributed to the financial support of the children as well as their physical care and that will be ongoing into the future.
As I pointed out to the parties, this is not a precise mathematical exercise. It is very subjective. It is also one where there are contributions that have flow-on effects which are impossible to quantify in precise dollar or even mathematical terms. For example, it was urged upon me that I should find as a significant contribution by the wife, the fact that she had left the workforce in Melbourne where her income would have been much higher than it could be in regional Australia, the selling of her home and thereby losing the benefit of property increases as well as the wife’s significant burden of taking on the birth of the two children. These must all be factored into the exercise of assessing and giving weight to the parties’ respective contributions. They are all meaningful and significant.
The wife bought two lion statues as a gift for the husband but took them with her at separation. The funds for the lions came out of the marriage partnership pooled earnings.
The husband was cross-examined that his behaviour in the latter stages of the marriage made him “harder to deal with”. That was not seriously pursued but in any event, it did not seem to me to be conduct which could be raised to the level discussed by the Full Court in Kennon[8].
[8] (1997) FLC 92-757; 22 Fam LR 1
In a very general way, those are the contributions as I find them.
I then turn to the question of giving weight to those contributions.
The obvious dilemma here is the fact that the block of land acquired by the husband at or around the time of cohabitation from his own resources has now, as a result of the building of the home, risen to a property worth $510,000. In that increase however is a substantial portion of debt which gave rise to the building of the home.
Counsel for the husband pointed to direct financial contributions saying that that was the best way to assess the difference between the parties and that the husband had contributed $139,320 and the wife about $35,000. Mathematically therefore, the wife had contributed 20 per cent. Counsel for the wife however said that I should adjust for the increased value of the home between cohabitation and now and divide that by two. That mathematical exercise showed that the house had gone up by $140,000 over the relatively short period of the relationship. Factoring in the initial contribution by the husband, the wife was entitled to somewhere more than one-third but less than 50%.
In respect of superannuation, counsel for the husband used the same mathematical approach to indicate that if one looked at what each party brought in in dollar terms, they each had similar proportional entitlements in their current funds now and that therefore there was no basis for any adjustment.
Counsel for the wife said that if I took the superannuation pool as the starting point and looked at the difference now, I should divide the increase equally because of the joint endeavours of the parties but still acknowledging that the husband brought in the special superannuation entitlement and had made post-separation contributions. His logic was that 44 per cent of the increase is the net value increase and that meant that I was justified in giving the wife $50,000 by way of a splitting order from the husband’s entitlement.
Interestingly, the assessment of contributions has been examined in cases involving the New South Wales de facto relationship legislation and in the recent Full Court decision of this Court in Williams and Williams[9].
[9] [2007] FamCA 313
In Karod and Sarbutt[10], the Court of Appeal (NSW) said it was appropriate to recognise that capital gains are often the product of the initial introduction of property rather than the ongoing contributions. Particularly, it was said that increments in capital value of an asset held outside the relationship were not part of the fruits of the relationship but arose as a result of the asset having been held by one of the parties at the commencement of the relationship rather than the joint efforts of the types to which I have just referred.
[10] (2006) 34 Fam LR 550
In a later decision by a differently constituted Court of Appeal in Bilous and Mudaliar[11] Ipp JA with whom Giles and McColl JJA agreed limited the effect of what Brereton J had said as a member of the Court of Appeal in Kardos and Sarbut[12]t. What Brereton J had said was:
If one party has a house worth $250,000 at the outset and it appreciates during the relationship to be worth $750,000, the contribution is of a house which at separation is worth $750,000 – not of money worth $250,000.
[11] (2006) 35 Fam LR 55
[12] op. cit
In Bilous and Mudaliar[13] Ipp JA said of what Brereton J had said:
… His Honour appears to have stated a rule to the effect that, for the purposes of determining what order should be made under s 20(1) of the Property Relationships Act, any increase in value in assets initially contributed should be regarded, in all circumstances, as entirely a contribution by the party who contributed those assets. If that’s what his Honour intended, I do not agree.
[13] op. cit
Both of these decisions were considered by the Full Court in Williams and Williams[14]. That Court said:
26.We think that there is force in the proposition that a reference to the value of an item as at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution towards the parties. Thus where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing or the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in so doing it is equally as important to give recognition to the myriad of other contributions that each of the parties has made during the course of their relationship.
[14] op. cit.
What needs to be carefully considered in this case however is the fact that both parties contributed to the development of the home and I have pointed to the “myriad of other contributions” that each party has made. It is impossible therefore in my view to do justice and equity to the parties by simply taking a mathematical approach of the type proffered by either party.
In Pierce and Pierce[15] the Full Court said:
It is necessary to weight the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.
[15] (1999) FLC 92-844; 24 Fam LR 377
Clearly, both parties have altered the initial asset by the development jointly of the home but on any view, the value of that property could not be what it is today without the initial land being contributed as well as the money from the husband’s resources at the time of cohabitation that went towards the building.
The same logic applies in respect of the wife’s motor car. What the wife brought in to the relationship is now reflected in the pool of assets by the motor car. She brought in a home with limited equity and her own motor vehicle. Those funds when the assets were liquidated could have been used to reduce the parties’ mortgage but the parties would then have had the dilemma of having to acquire a motor car. They would have presumably borrowed the funds or increased the mortgage. Whichever way one looks at it, the contribution of the initial assets of the wife must be seen as a quite significant springboard in the same way as the husband introducing the land.. However, I am not forgetting the fact that during the first part of the cohabitation and marriage, the wife had to make up a shortfall in respect of the mortgage payments on her Melbourne property. Although I accept that those funds came from her banking resources which came in turn from her income, that must be seen as a joint contribution of the parties having regard to the fact that those resources would have otherwise been used in some way within the family. I do not have evidence about the taxation implications of the negative gearing but it still seems to me that that gives rise to a contribution by the husband of some significance towards the wife’s initial assets as well.
What one has to be careful about however is the fact that whilst the building of the home has created a significantly greater value than that of the initial land value, I am dividing up the equity which in this case is modest. Having regard to the contribution in dollar terms that the husband put into that equity, it seems to me to be significantly greater than that of the wife. It is not just a marginal difference. It needs to be recognised in a significant way and on that basis, I say that the contributions to that equity in the home amount to 75 per cent to the husband and 25 per cent to the wife.
The same logic applies in respect of the motor car which has come from the resources to which I have just referred. The wife made a very significant contribution towards the acquisition of that motor car which again for equity purposes cannot simply be recognised in a nominal way. The parties could not have had what they now have were it not for that significant contribution. On that basis, I say that I have given weight to the contribution by an assessment of 75 per cent to the wife and 25 per cent to the husband.
On the evidence before me however, I am unable to distinguish between the contributions in respect of the various personal effects, jewellery and the lions. It seems to me that these were either brought into the relationship by either party without dollar quantification or they have been acquired during the period of the time that the parties have been together and in those circumstances, I find that their contributions to those assets have been equal.
In terms of the superannuation, the difficulty is the completely distorted value now of the husband’s entitlement by virtue of the fact that he is about to become entitled to the superable salary. Accordingly, it is difficult to see how I can compare all of the funds let alone the respective contributions of the parties. I find however that the contributions to which I have referred do justify an adjustment in favour of the wife having regard to the fact that the entitlement of the husband arises primarily by virtue of it being a defined benefit fund and he has worked during the period of time that the parties were together. The wife does not have an identical superannuation fund based on length of service but rather by virtue of her income. The distinction between the parties in that respect is the fact that the wife went out of the workforce and therefore no contributions would have been made on her behalf by virtue of her homemaker and parent role. That must to some extent have reduced the growth of her entitlement in the fund during that period. The husband had no such disability. By virtue of that reason alone, the wife needs to have an opportunity to “catch up” in contribution terms having regard to her non-financial contributions as I have found them. I do not therefore accept that it is simply a case of looking at the values and comparing them. To do that would not be just and equitable to the wife.
In the circumstances, some adjustment needs to be made for the modest period of time that the parties were together and it seems to me that something in the vicinity of $25,000 is appropriate without having any precise mathematical basis. On that basis, I propose as part of the fourth step to make an adjustment as between the parties in respect of one of the specific components of the husband’s superannuation fund.
Section 75(2)
The wife argued that there should be an adjustment. The parties have similar responsibilities for children but the husband is in a superior earning capacity position by virtue of his guaranteed income. The evidence is quite clear that regardless of what work the husband does if he takes on the superable salary, he will continue to receive for the rest of his life that salary. The wife can never reach that position. However, I also have to take into account the fact that I have built in to the contribution assessment the value of that superannuation entitlement and it would be wrong to then make a further adjustment having regard to the factors set out in s 75(2) other than for some adjustment having regard to the disparity of earning capacity. As Mr O’Shannessy pointed out, the superannuation is in fact the husband’s income but once he reaches retirement age, is will then become superannuation in the true sense again. All of these concepts are so vague that it is simply a matter that I am obliged to take into account.
I am also very conscious of the fact that each of the parties has significant costs as a result of this dispute and more importantly, that the wife still has the outstanding debt to the State of Victoria in respect of the first home buyer’s grant. Notwithstanding the fact that that is a debt that she brought into the relationship, I am obliged to look at the respective financial positions of the parties as at today and I cannot ignore the fact that that will have to be paid in due course and over a long period of time.
Counsel for the wife urged me therefore having regard to the disparity of the economic positions of the parties to make a further adjustment of 10 per cent in favour of the wife.
Counsel for the husband pointed to the fact that there was little distinction between the parties’ parenting responsibilities and even so, the husband will be paying child support. He pointed to the fact that the wife has always been in employment and although the husband’s income at the moment is higher than that which the wife is earning or could earn, having regard to his superable salary, that will change. Off set against that however is the fact that the husband has the capacity to obtain further employment. His evidence was and I accept, he will have employment of some description in due course.
Mr O’Shannessy urged me to say that having regard to the shared care arrangement as well as the duration of the relationship, there was little if any justification for any adjustment under s 75(2).
As I pointed out to the parties in discussion, one of the troubling features of s 75(2) is that a percentage adjustment can be meaningless. That is particularly so in a case like this where the pool of assets is approximately $200,000. The major argument by the wife which I accept is that the husband’s economic circumstance are stronger than hers and with her responsibilities for the children, her potential to earn income is limited. The husband does not have that disadvantage. I pointed out that 10 per cent of the pool of assets could be less than the disparity between the parties’ incomes in a space of one year. In a small pool, a percentage adjustment does not necessarily achieve fairness. There is no reason why the adjustment should not be in real dollar terms.
I do not intend to set out all of the factors detailed in section 75(2) but rather to indicate that I have considered each one that is or could possibly be relevant as they apply to each party. The distinction between the parties is only significant in my view in respect of the income and earning capacity consideration. I am not aware of any pension or government benefits issues that would justify any adjustment. I have detailed the parenting responsibilities and the fact the husband is currently paying child support.
I find that it is appropriate to make some adjustment in favour of the wife because of the economic factor and I do so. I propose to make an adjustment of 10 per cent of the non-superannuation pool in favour of the wife but to round the 10% upwards so that the adjustment as between the parties is a clear cash sum.
I propose to make no significant adjustment for s 75(2) in respect of the superannuation assets other than to adjust the figure that I have determined for the purposes of contribution such that it equates with the value of the SNACS Fund in the name of the husband.
The fourth step
Ultimately, notwithstanding all of the calculations I have done, the outcome of this case must be one which I am satisfied is just and equitable. The percentage value is not what must be just and equitable but the underlying value.
Giving the wife 25 per cent of the equity in the home, 75 per cent of the equity in the car and half of each of the other assets (leaving aside the question of the sale of the lions) means that the wife is to receive $69,750. Half of the debts of approximately $22,000 means that she should bear $11,000 worth of liabilities whereas in fact she only has $7600. There needs to be an adjustment in favour of the husband by the sum of about $3000.
The wife is also retaining the motor car worth $19,000 as a result of which she owes the husband $4750 being his 25%. That then means her entitlement is $62,000 but she has already taken in specie her chattels and jewellery which total $10,000. The adjustment of approximately 10 per cent of the pool to which I have referred earlier for the purposes of s 75(2) should be rounded up to $22,650 and as a consequence, I direct that the husband pay to the wife a total of $60,000.
I am satisfied that in respect of the superannuation splitting order to which I referred that the adjustment is just and equitable. I make a similar finding in respect of the non-superannuation pool. Combined, I am satisfied that the overall adjustment is just and equitable.
I propose to make orders that the wife retain her chattels and jewellery, the lions be sold and the proceeds be divided equally between the parties and that the husband pay to the wife $60,000 within 60 days.
I certify that the preceding One Hundred and Fourteen (114) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin
Associate:
Date: 31 August 2007
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