COTTER & EGGERS-COTTER

[2015] FamCA 879

FAMILY COURT OF AUSTRALIA

COTTER & EGGERS-COTTER [2015] FamCA 879

FAMILY LAW – Property settlement – Significant income but real position distorted by capital gains from the sale of shares – Adjustment in favour of the wife over and above the assets she has still justified.
FAMILY LAW – Treatment of legal fees of both parties despite a notation on orders that the responsibility would be taken by the wife for the repayment of any borrowings to give rise to the payment of those legal fees – Not just and equitable to have that occur.
FAMILY LAW – Adult child maintenance for an 18 year old daughter still in secondary school but wishing to go to university in 2016 and onwards – Evidence does not support the making of orders at this stage where the husband has a good relationship with the child and arrangements are already being made for her support and where the evidence does not support a conclusion that the husband alone should be paying for that support – Where the wife wanted the payments made to her to avoid the daughter becoming involved and the Court found that inappropriate.

Family Law Act 1975 (Cth)

Dickons and Dickons [2012] FamCAFC 154
In the Marriage of Tuck (1981) FLC 91-021
Mallet and Mallet (1984) FLC 91-507
Norbis and Norbis (1996) 161 CLR 513
Prince and Prince (1984) 54 ALR 465; (1984) FLC 91-501
R v Barbaro [2014] HCA 2
Stanford and Stanford (2012) 247 CLR 108; (2012) FLC 93-518
Steinbrenner and Steinbrenner [2008] FamCAFC 193
Waters and Jurek (1995) FLC 92-635

APPLICANT: Mr Cotter

RESPONDENT: Ms Eggers-Cotter

FILE NUMBER: MLC 7005 of 2014

DATE DELIVERED: 21 October 2015

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 30 September; 1 October 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Stoikovska

SOLICITOR FOR THE APPLICANT: Farrar Gesini Dunn

COUNSEL FOR THE RESPONDENT: Mr Sweeney

SOLICITOR FOR THE RESPONDENT: Ce Family Lawyers

Orders

1. That, unless otherwise agreed, by 4 pm on 19 December 2015, the husband pay to the wife $250,000.

2. To give effect to these orders (and the matters referred to in the notations below), each party shall, as soon as practicable, sign any necessary document.

3. The husband indemnify the wife against (and pay) all of the following liabilities:

   (a)      the Joint Westpac Rocket Investment Loan (…); and

   (b)      the joint credit card.

4. Save as to issues of costs, all extant applications of the parties are otherwise dismissed.

5. That should any party seek costs arising out of these orders, such application be made by written submission and filed and served by no later than 30 October 2015 with such submission being endorsed with the fact that it has been so served on the other party and any recipient of such submission have until 13 November 2015 to file and serve any response and such response be endorsed with the fact that it has been so served on the other party and upon receipt of any such application for costs, it or they be determined in chambers.

AND IT IS NOTED THAT (AND FOR THE AVOIDANCE OF DOUBT) THE PARTIES AGREE ON THE FOLLOWING:

A.       the wife shall retain and the husband shall relinquish any interest in:

(a)       the real property at B Street, Suburb C;

(b)      the contents of the Suburb C home;

(c)      the 4WD vehicle;

(d)      the shares in her name; and

(e)      the Macquarie Cash Management account ….

B.       the husband shall retain and the wife shall relinquish any interest in:

(a)      the real property at D Street, Suburb E;

(b)      the contents of the Suburb E home;

(c)      the German motor vehicle;

(d)      the shares in his name;

(e)the GMO Australia Ltd-GMO Systematic Global Macro Trust interest;

(f)       the bank account in his name;

(g)       the joint account with Westpac Bank;

(h)      The H Trust investment; and

(i)       the wine collection.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Cotter & Eggers-Cotter has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 7005  of 2014

Mr Cotter

Applicant

And

Ms Eggers-Cotter

Respondent

REASONS FOR JUDGMENT

1. The dispute between Mr Cotter and Ms Eggers-Cotter concerns the division of their property and a maintenance claim for their 18 year old daughter.

2. The issues to be determined were:

   (a)The percentage each would receive or, more importantly, what cash adjustment should be made based on an otherwise agreed division or retention of their respective assets;

   (b)Whether there were funds or assets of the husband not disclosed which should be taken into account;

   (c)How to treat a liability which had been incurred to enable the wife to pay her legal fees;

   (d)How to treat the modest liabilities of the wife relating to credit cards and a loan to her mother;

   (e)Just what will be the husband’s taxation liability and whether it should be taken into account?; and

   (f)What (if any) financial orders should be put in place for the 18 year old daughter Ms F who is still at school and whose educational path remains unknown.

3. Parenting proceedings had been a contentious issue even up to the first day of the hearing but they were resolved. 

4. In many property proceedings, arguments arise about the parties’ respective contributions but here, after a long marriage, there was agreement that each party had contributed equally.  Thus, once the issues described above were sorted out, the dispute came down to what adjustment should be made as between the parties.  That was largely (but not entirely) about the parties’ disparate earning situations. 

5. The husband was the applicant.  He is 50 years of age and the general manager of a large retail organisation.  His earning capacity was not in dispute but just what he earned and what was available to him as disposable income, needs consideration.  He enjoys good health.

6. As a witness, the husband was responsive, thoughtful and helpful.  He relies heavily upon an accountant and a financial advisor.  I accept that his reliance upon his advisors could, on the face of it, give the appearance of his being evasive.  For the reasons to which I shall turn below, I do not accept that there was anything sinister about his approach to these proceedings.  As a witness, I found him truthful.

7. The wife was the respondent.  She is 49 years of age.  She is a senior specialist health professional who works on a casual basis.  Her earning capacity was closely scrutinised by counsel for the husband but as I shall set out below, whilst the exact amount might be open to debate, that amount is modest relative to the husband.  She enjoys good health. 

8. As a witness, the wife was inclined to raise suspicions where her knowledge was lacking.  There had been ample time subsequent to the parties’ separation to work out the financial situation that they had.  Notwithstanding the wife seemed to maintain she was excluded from the financial knowledge necessary to enable her to run her case, I am satisfied that she not only the opportunity to pursue discovery but also that nothing in the evidence suggested any impropriety or lack of candour on the part of the husband.  The wife answered questions in a forthright manner and nothing about her evidence indicated to me that she was being evasive or untruthful.  Accordingly, her evidence is as credible as is that of the husband. 

9. I also accept in this case that a large amount of the time of the parties had been spent on parenting issues and the flurry of activity at the end may have distracted them from pursuing financial issues.  Both parties have busy working and parenting lives and as such, both did the best they could to enable the Court to have the best evidence available.

Short background

1. In March 2014, the relationship that began in 1991, came to an end.  The parties had married in 1996.  The husband and the wife were therefore in a committed relationship for just under 33 years. 

2. From the relationship, there are three children aged 18, 14 and 13 years.  All children are in school and live predominantly with the wife although they spend quality time with the husband.  He provides significant financial support and the wife’s modest income supplements that.

Valuations

1. In an aide memoir provided to the Court, a number of items of property were described as having “nominal” value.  As their ownership and retention was not contentious, I propose to ignore them.  I also indicated that I would be taking a broadbrush approach to the determination.  Most valuations were not in dispute although the Suburb E property was described as “awaiting update valuation”.  As that was not mentioned again, I have used the figure of $1.8 million provided to the Court. 

The parties’ positions as to the outcome of property

1. As an overview, the husband sought the net property be divided so that the wife receive 55 per cent whilst the wife said the division should reflect 65 per cent to her.  Her counsel looked at other percentages including that of 62.5 per cent to show what that meant in dollar terms and the use to which assets could be put.  Each of those positions depends on what it is that is being divided.  In my view, a precise mathematical calculation is unnecessary such as for example in the inclusion of such modest items as furnishings.  Where the parties have included them, save for the matters I have set out below, I too have included them. 

Superannuation

1. The “net property” does not include superannuation.  Between them, the husband and wife have $860,000 in two superannuation funds.  Initially, this issue was contentious too but during the hearing, the parties compromised.  They have agreed to split those funds so that each has an equal amount.  Orders were necessary in respect of that.

Chattels

1. Although the proposed orders of the parties in their outline documents included a modest number of other issues, they too were resolved at least as to who would retain the items in specie such as chattels and wine. 

The husband’s income

1. The husband exclaimed in his evidence that he had provided whatever it was that was requested and required of him. 

2. The importance of full and frank disclosure in financial proceedings cannot be underestimated. Chapter 13, rule 13.01 of the court’s rules makes clear that not only must information be provided but it must be in a timely way. One could add to that the importance of accurate detail. The very purpose of that is to ensure negotiation can occur, costs are contained, the Court’s time is not wasted and a just result is achieved as contemplated by s 79 of the Family Law Act 1975 (Cth) (“the Act”).

3. The rules impose responsibility for those purposes on the lawyers as well as the parties.  In this case, as I have already indicated, there appeared to be some distraction from the financial issues and sadly, that may have cost the parties money. 

4. In his trial affidavit, the husband said that for the financial year ended 2015 he received “a net income of $290,560”.  Mathematically, the figures in the financial statement when analysed, all balanced but they were misleading.

5. The husband’s income under the heading of Total Average Weekly Income in his financial statement sworn only days before the hearing, showed $11,226.  That sum is $583,752 per year of which the husband estimated (as distinct from the unambiguous statement in his trial affidavit) his total salary before tax to be $563,108.  He said his total tax was $4715 per week or $245,180 per annum.

6. Thus, the husband’s net income (from all sources) was said to be $338,572 per annum.  The reference to his net income from his employment was therefore a distraction because it was not a comprehensive picture. 

7. To make things a little more confusing, the husband’s income tax return for 2015 had not been done, the 2014 return was only in draft form and, the husband had not complied with the wife’s request for access to the taxation portal. 

8. The printout from the taxation portal was provided during the hearing but it did not provide any information that would have clarified the husband’s tax obligation; it did show what he had paid and it was noticeable that the last payment to the Australian Taxation Office was in July 2014.  In the following examination of the information provided to the Court, one can see a plausible explanation for all of that.

9. When cross-examined, the husband maintained that in respect of the tax returns, he followed his financial advisor’s advice.  There was initially confusion about whether he had provided all of his tax returns but as they are now in evidence, I am satisfied that he had. 

Tax returns

1. The husband relied upon an affidavit filed as late as the second day of the hearing sworn by his accountant.  Its admission into evidence was not disputed. 

2. When cross-examined, the wife acknowledged that the same accountant had completed her returns in the past but that hers were also not up to date.  She acknowledged having confidence in the accountant and had never alleged that the accountant had done anything to cause her concern. 

3. The wife also acknowledged that in 2014, she (and the husband) signed an authority for both solicitors to communicate with the financial planner (Exhibit H5).  She was critical of the financial advisor and had therefore pursued information from the accountant.  She was not critical of the accountant.  She also confirmed that she had never approached the accountant with any concerns about the husband’s conduct.  It was disconcerting not to see cooperation from the advisor and no explanation as to why that was so.

4. The husband’s accountant said that he was still finalising the 2014 return and was “about to start finalising” the 2015 return.  Counsel for the wife criticised the husband for the latter’s non-completion of his 2015 return notwithstanding there was an arrangement in place obviously to the satisfaction of the Australian Taxation Office.  It is clearly a vexed question as to whether a return should be prepared by a litigant where it is not necessarily required by the Australian Taxation Office.  The duty to the Taxation Office is as important as the duty of financial disclosure to the Court.  As in this case, a failure to complete the return (notwithstanding that it may be out of the usual sequence) creates problems.  Taxation returns should therefore be prepared so that the Court and all litigants have up to date information as close as possible to the hearing date.

5. In this case, what I found from the documents, ameliorates the position.  That is because of the authority that I earlier mentioned (H5).  The wife could have had access to at least the husband’s materials in the possession of the accountant if the accountant was about to “finalise” the 2015 return.

6. The husband’s accountant went on to say that the husband had a liability of $312,000 (or thereabouts) for the 2014 year.  Counsel for the wife cross-examined the husband about why, with his high income, there was a liability but it would seem that the parties have been accustomed to the husband depositing his income into banking accounts and paying tax as and when he needed to.  Most importantly, regular deductions of tax were made from the employment part of his income.  A similar situation did not occur with his investment income and to understand that, a careful examination of his returns was necessary.

7. I am satisfied that the husband has a tax liability for 2014 of $312,000 and the reasoning can be gleaned from what now follows.

8. It has not been suggested to me that I need to factor in any liability for 2015 (noting as I did earlier that no payment other than by employment deduction has been made since July 2014). 

9. When the 2011 to 2014 returns (including the draft) are examined, they paint a more complete picture to that set out in the husband’s court material.  Because the earning disparity issue is a major one, each year needs consideration.  I have rounded figures for my own convenience.

2011

1. In 2011, the husband received $630,000 gross from his employment.  He also received more than $290,000 in share dividends.  It transpired that he (along with other executives) had shares allocated to them when a company restructure occurred in 2006 and over time, these were sold on the open market.  That in turn gave the husband a taxable capital gain. 

2. In 2011, the husband’s capital gain was $542,000 or for tax purposes, a net gain of $271,000.

3. The husband’s real income therefore in 2011 was his salary and his dividends which combined, were in the vicinity of $900,000 but he also had a large sum of money from the sale of shares.  After tax, his disposable income was shown as about $545,000.  He had a modest tax debt of $68,000 because tax had been withheld by his employer and the share dividends had franking credits. 

4. Thus, in 2011, the parties not only had a high disposable income but they also had significant available capital.   

2012

1. In 2012, the husband received $619,000 gross from his employment.  He also received in excess of $440,000 in share dividends.

2. Notwithstanding the disposal of a significant portion of his group’s shares in the previous year, he had also purchased other shares which provided dividends in 2012.  Money was borrowed to fund some of this so there was also a modest tax deduction.

3. In 2012, there was no declared capital gain.  Again in 2012, the husband had a modest tax liability because of the tax withheld from his salary and the franking credits. 

4. 2012 therefore, showed the husband had a disposable income of about $550,000.

2013

1. In 2013, the husband received $445,000 gross from his employment.  He also received about $255,000 in share dividends.  The husband’s return showed the wife’s taxable income as $35,000.

2. There were capital gains received in this year in excess of $500,000 which added $183,000 to the husband’s taxable income.  His return showed however that he was entitled to a deduction of $171,000 for interest paid on borrowings.  That blurs the picture of disposable income but on any view, in 2013, the husband’s disposable income (as distinct from disposable capital) was about $390,000.

3. Thus, in both the 2012 and 2013 years, the drop in the husband’s income mostly reflects a drop in salary.

4. In 2013, the capital gains worksheet showed a significant disposal of shares on 5 July 2012 from which $1.8 million in receipts was received.  That (and other later but less significant disposals) was what gave rise to a capital gain of about $360,000 for which $180,000 was added to the husband’s income. 

2014

1. In 2014, the draft return showed salary of $471,000 or slightly more than the previous year and about $110,000 in share dividends.  But in this year, the capital gain from the disposal of shares was about $1.3 million, or taxable $652,000.  It was this amount that gave rise to the tax bill to which the husband’s accountant referred and explains why with a high income, payments were not made into the Australian Taxation Office.  This also highlights the question of what happened to the proceeds of the gains from sales in December 2013 which exceeded $1 million.  Exhibit H4 was a bundle of financial statements tendered in evidence to show that the husband had been cooperative with the provision of financial documents.  Disclosed was a number of Macquarie Cash Management Accounts one of which showed a balance at 31 December 2013 of $1.3 million (which seems consistent with a disposal of shares) and in early January 2014, loans of almost that amount being repaid.  All of this was available to the wife through the joint authority (H5).  It also enables a reasonable picture to be drawn as to what the husband generally earns.

The capital position

1. It was agreed the husband’s investment and share portfolio at trial was about $660,000.  Thus if the husband retained that or any portion of it, his disposable income position must be viewed in the light of the net income from those investments in addition to his salary.

The missing GMO Account money

1. One critical dispute related to money which counsel for the wife put to the husband as having “disappeared”.  The GMO account had $529,508 at some point in the past and counsel asserted that about $140,000-$150,000 was “missing”.

2. The wife’s evidence was that the account was reduced to $162,148 as at August 2015.  She also said no explanation had been given for a deposit of $350,000 in April 2015.

3. I do not know the precise answers but:

   (a)The husband’s documents showed that at 20 April 2015, there were units in the account to a value of $567,000 which on that day, were reduced by $350,000 bringing the value down to $217,000.  The discovered documents showed a further reduction of units in July 2015 of $34,000 bringing the value down to the figure that the wife was using.  It is most likely (and a proposition I accept on the balance of probabilities) that as the dates of the withdrawal and the deposit of $350,000 in April 2015 coincide, the husband simply shifted one investment into another; and

   (b)As the amount of the $350,000 increased rather than decreased the position of the account and may decrease an investment portfolio to which the wife had discovery, it is hard to be concerned.

4. The history of the husband’s dealings showed that he disposed of large tranches of shares all of which were transparently dealt with in tax returns.  It is likely therefore that absent some other explanation, the husband disposed of shares and that would (on his history) most likely create a tax debt in 2015.  As I have said, I have not been asked by the husband to consider that and it is difficult therefore to see how the wife is disadvantaged.

5. I am satisfied that $140,000-$150,000 is not missing.

The husband’s other account

1. Albeit a minor matter, the issue of the husband’s personal bank account took on a life of its own.

2. It was apparently drawn to the wife’s attention that the husband had opened a personal bank account but no details have been provided to her.  When the husband was cross-examined about this account, he looked perplexed and indicated that he had provided all that had been requested of him.  This account came to life in late September immediately prior to trial.

3. Subsequent discussions between the lawyers gave rise to a concession that the solicitor had received the relevant documents from the husband in August 2015.  It was disconcerting to see that the husband’s financial statement sworn in September 2015 made no reference to this account.

4. The account was simply a working account and nothing in the evidence indicated that there was much more in it than $20,000.  Nothing indicated that even if the discovery had been sloppy, there was anything sinister in relation to this account.

Other employment benefits

1. In her affidavit, the wife referred to benefits such as long service leave to which the husband would have been entitled.  This was under the heading of information for which she was still waiting or about which “clarification” was needed.  It was not mentioned in the outline of case document but counsel for the wife called for the incentive plan document of the husband’s employer during cross-examination. 

2. The husband conceded that the benefits of this plan had not been mentioned in his trial affidavit.  He conceded that there were long term incentives assessed by reference to his performance judged against comparable companies.  I remain unsure whether that was accurate.  He agreed that it was a matter for the Board but one possibility was that he was remunerated by the allocation of company shares. 

3. During cross-examination, counsel for the wife took the husband to various tax assessments which (it would seem) reflected these performance rights.

4. The executive plan itself sets out the possible offers by the company but importantly, conditions that had to be met.  The plan covered a performance period of three years commencing July 2013 so on any view, much of the husband’s efforts so examined by the Board will relate to the period after the date of separation.  As to what sort of bonuses and emoluments the husband received prior to that time, I remain unsure. 

5. The conditions set by the Board include that performance rights can only be exercised if the company met a “hurdle” that the Board itself created.  This hurdle was based on a formula set out in the document.  Counsel for the wife was sufficiently versed in the husband’s financial situation to put to him that no performance bonuses were awarded in 2013 which is the first year of the performance period.  The matter was not thereafter revisited.

6. On the evidence, the husband seems to have declared to the Australian Taxation Office all of his employment benefits.  The question that remained hanging was just what information the wife had.  As I set out earlier, she claimed she was still waiting, or at least waiting for, clarification.  I have presumed that nothing in the husband’s evidence under cross-examination warrants any adverse conclusion that he has not adequately explained his financial position in respect of those employment benefits. 

7. I am satisfied that the husband’s income from his employment all of which is subject to PAYG tax considerations is as I have set it out above.  Additional income depends upon his retention of shares.

The wife’s earning capacity

1. The wife is a specialist health professional who works for a company where her value is obviously extremely high.  She appears to have autonomy.  She has retained her qualifications and registration and her employer has recently taken on some new facilities which will give the wife more responsibility.

2. As I have indicated, the wife fulfils a specialist role and I accept her evidence that she is not qualified to go back into a more general setting because she has not been in that situation for some ten years.  For her to do so, she would need to retrain over a series of months but that would require her to resign her current position.

3. The wife is currently working between three and four days per week.  She is paid $42 per hour.  She was not able to tell me what income she would receive if she began general nursing again on a full time basis because, and I accept, much depends on where she worked and what shifts were involved.

4. There is no impediment to the wife taking on that general nursing role as the children are now of an age where they do not need her constant monitoring and care even if she provides it.

5. The important factor however remains the reality namely that even if she did go back to general nursing or increase her hours in some way, her income would still be nowhere near that of the husband.

6. I am satisfied that the wife’s declared income is a true reflection of what she is earning and what she will continue to earn into the future.

Lifestyle  

1. There can be no doubt that the parties have led an affluent lifestyle.  Notwithstanding the cross-examination of the husband, I am satisfied that he has been generous and generally enabled the continuation of the lifestyle that the parties and the children had led prior to separation.  Both parties have expensive real estate.  The children attend private schools.  The children have enjoyed such activities as winter skiing.

2. The wife’s modest income has been banked in an account in her own name whereas the bulk of the husband’s income had gone into joint facilities.  It could not be said however that the wife squirreled away her income.  She used it for the benefit of the family as part of the system of the parents providing for the children’s needs.  This becomes relevant on the question of how to treat the claim for maintenance for the 18 year old daughter.

The wife’s access to funds  

1. For reasons which remain somewhat obscure, the parties had a dispute shortly prior to trial about access to funds by the wife that unashamedly were to go towards her legal fees.  She wanted $200,000 but agreement was reached that a bank redraw facility should be used to provide up to $100,000 and that the wife would be responsible for the borrowed funds.  Both parties agreed to that order and it did not involve court intervention.

2. As can be seen from the list of assets and liabilities below, the draw down facility is either a joint liability in which case the sum paid by the wife for her legal fees needs to be somehow added back or if it is solely her responsibility, a necessary balancing needs to be made.  One way or the other, the “ledger” must balance.

3. In the order made on 17 September 2015, the parties agreed that although the borrowing was against property that would be retained by the husband, the wife had to ultimately secure release of that encumbrance for the husband. Both parties sought a notation on the orders that the redraw was not to be treated as a liability for the purposes of the orders nor taken into account pursuant to s 75(2) of the Act. In my view, all of that can be accommodated by the adjustment to the list of assets and liabilities to which I shall turn below.

Credit cards

1. In Prince and Prince (1984) 54 ALR 465; (1984) FLC 91-501 the Full Court held that assessment of debts (like assets) is not necessarily arrived at by a strict mathematical approach in all cases. Various approaches were permissible and one such was to conclude that because of the circumstances under which the liability was incurred, justice and equity required the debt to be dealt with in a s 79 order including that one person pay it. The wife’s argument was that it should be a joint liability and the husband’s argument was that the debt should not be included in the calculations but solely the responsibility of the wife.

2. In the list of liabilities, the wife said that she had $25,000 of credit cards and $15,000 of money that had been lent to her by her mother.  Counsel for the wife submitted that it was unfair for the wife to have to pay those sums (as distinct from them being joint liabilities) because she had to come to court to get money and the husband on the other hand, had unfettered access to funds.  The wife had used those funds for purposes that could have been avoided had the husband paid the sort of money that the wife had been seeking.

3. In that context, the unchallenged evidence of the wife is that the husband’s income was deposited into the joint account and she had access to some of it.  There were significant costs of the parties to the various real properties as well as their upkeep.

4. The wife set out in some detail what she saw as the husband’s expenditure presumably for the purposes of having the Court draw an inference that he was extravagant.  Counsel for the husband then resorted to cross-examination of the wife on the basis that she too had been extravagant by the acquisition of such things as a trip overseas and custom plates for her motor car. 

5. I find that there is nothing in the evidence of either party to show that either was unreasonable in what they were spending having regard to their past lifestyle nor that the husband was in some way, limiting the wife’s access to funds.  More particularly, as can be seen below, the parties have significant capital resources both in terms of real estate, superannuation, shares and in both cases, cash.  In my view, this is not a precise mathematical exercise and it is artificial to look at the discrete period from separation to trial and try and isolate expenses that will in the future be the individual responsibility of each of the parties.  There are going to be expenses associated with not just the support of the children but also some counselling to sort out the husband’s relationship with them.  There was even a debate at one stage about the payment of that and ultimately, the husband agreed that he would pay. 

6. There is little doubt also that the substantial cost of supporting the children over the ensuing years into their adult life will be borne largely by the husband on the basis that the wife’s income is not likely to significantly increase.  Whilst the husband can clearly afford a much greater contribution towards all of those expenses than can the wife, a line has to be drawn so that each can get on with life. 

7. As I indicated, the expenses claimed by the wife as a liability are modest in the scheme of the total assets whilst at the same time they are very modest by comparison to the amount of money that had been spent on legal fees by both of the parties.  In my view therefore, it is fair that the wife should bear the responsibility of finalising the repayment of those modest expenses.   She will have funds to pay them without prejudicing her lifestyle.

Adult support for Ms F

1. The wife’s response (as amended) filed 28 September 2015 sought orders that the husband pay maintenance for Ms F on condition she was both living with the wife and enrolled in full-time study and pay:

   ·$2045 per month;

   ·(institutional) fees not covered by government funding;

   ·University books “and associated expenses”;

   ·Private health insurance and health professional expenses not covered by insurance; and

   ·Ms F’s car registration, insurance and service costs.

2. The husband’s position was simply that it was premature and in any event, all of this was uncertain.  He submitted the issue could be sorted out between he and Ms F.

3. When pressed, the wife’s position was that she wanted the order made so that the husband would be obligated to pay her rather than Ms F because she did not want Ms F involved in having to deal with her father over these sorts of issues.

4. The evidence upon which the wife relied can be summarised as follows:

   ·   Ms F is intending to go to university next year and will be living with the wife and the wife does not foresee any change in living arrangements next year;

   ·   The financial statement encapsulates the costs of day to day living expenses for Ms F except her education etc;

   ·   The wife earned a modest income and was unable to support Ms F without the assistance of the husband who she said, had the capacity and means to provide the financial support for Ms F.

5. Section 66L of the Act begins with a prohibition that a court must not make a maintenance order (of this type) unless satisfied that the provision is necessary (relevantly) to enable a child to complete her education.

6. There are two immediate and obvious difficulties here.  First, how can the Court be satisfied that the proposed provision (or any other) will enable Ms F to complete her education.  More importantly, how is it said that this order is necessary, that is, absent it, the education process could not be undertaken?

7. What is the proposed education when at this stage, Ms F has not completed her secondary education?

8. In respect of the first of the two difficulties, apart from the bald assertion by the wife, she relied upon the expenses laid out in her financial statement to indicate the quantum (as distinct from the necessity) of Ms F’s need).  The flaw in that approach is that it presumes that household expenses such as utilities, entertainment, holidays, gardening, cleaning and furniture repairs can all be divided on a per capita basis to come up with a weekly expense figure.  The approach also presumes that necessity includes ski passes, entertainment, holidays and gifts.

9. The wife sought $2045 per month or $472 per week which is how the wife broke down her expenses and they clearly included Ms F.  What is missing is the evidence that this money is necessary but it is also important to observe that the claim is premised on the basis that the husband should pay all of it.

10. “Necessary” is not some stringent standard but rather, that maintenance is needed by the child and it is reasonable that (having regard to all the circumstances of both parents and the child) maintenance should be provided (see In the Marriage of Tuck (1981) FLC 91-021).

11. If the basic premise in s 66L is met, the Court needs to turn to s 66J. Section 66J(1)(c) contains the mandatory requirement that the Court take into account the income, earning capacity, etc of the child (expanded upon in s 66J(3)). It also requires the Court to have regard to the manner in which the parents expected Ms F to be educated. Whilst both parents want Ms F to be given every opportunity in life, the evidence shows that the proposed course would be time-demanding and hence, Ms F’s earning capacity might be limited. Even so, I have no evidence to show what Ms F would be capable of earning outside of the core study hours.

12. I have also no evidence about what the wife could contribute. There is a very strong inference from the wife’s case that as the husband’s income is high, he should provide the support. Section 66K requires the Court in considering what financial contribution should be made, to take into account (in addition to income) the property and financial resources of each of the parents. On any view, the husband will be income-strong but the wife will also have significant property and financial resources by virtue of the property orders that I am asked to make. That issue was not canvassed and thus, even if I could make a finding in line with s 66L, nothing in the evidence suggests that the wife was contemplating any form of sharing arrangement under which she would make a contribution other than provide a roof over Ms F’s head. If the financial statement concept is used, the calculation using food costs and the like would mean that the husband would be paying the lot. Nothing in the wife’s evidence suggested she would be charging Ms F board (and if so how much) from this $2045 per month.

13. Whilst that may have been covered by her proposal that the order apply whilst Ms F is living at home with her, it does not provide an answer to the s 66K problem nor does it resolve the additional philosophical problem raised by the wife that in any event, she did not want Ms F involved in some form of negotiation process with her father. 

14. Indeed, if Ms F left home, how (if at all) would she then approach both parents to negotiate the very issues contemplated by s 66J and s 66K?

15. In respect of the second difficulty mentioned above, much about the evidence of Ms F’s future was crystal ball gazing.  Counsel for the wife put to the husband that no-one wanted to see another application being made once the university placements became clear.  That is an admirable sentiment but it also does not overcome the major concern about what it is that will enable Ms F to complete her education.  I have no doubt from watching the parties that each would encourage their children to get the best tertiary education possible but the power of the Court is to make a decision which is proper (s 66G).

16. The discretionary nature of the exercise of the power requires the Court to know that the proposed course is part of a process to enable an adult child to complete their education.

17. Section 66L does not have any temporal limitations but for the Court to be able to exercise its discretion, it must have a comprehensive picture of what the child is likely to embark upon. That is important here where the husband opposes any order being made yet says he will provide for Ms F as “determined between” them “again”. The “again” was a reference to an unchallenged agreement that the husband and Ms F reached only some weeks ago when Ms F turned eighteen. In his evidence, the husband volunteered that only the night before his entry into the witness box, Ms F had asked him for $50 to go out socially; he had provided it.

18. Thus, I am not satisfied it is proper to make an order where I do not know what course Ms F will be doing, what she needs to be able to do any such course and what contribution the wife could make.  Accordingly, the wife’s application fails.

Legal aspects relating to property

1. In Stanford and Stanford (2012) 247 CLR 108; (2012) FLC 93-518 the High Court of Australia discussed the very question of why orders should be made and one example there given was that as a result of the choice made by one or both of the parties, they are no longer living in the marital relationship. Here, there was agreement that it was just and equitable to make an order altering the interests of the parties in their property.

1. It was also not suggested other than that the parties had contributed to their various roles, equally. It is therefore unnecessary for the Court to point to the evidence that supports findings concerning s 79(4)(a) to (c). The issue of contention lies in s 79(4)(e) as it relates to the matters referred to in s 75(2) of the Act.

2. In Dickons and Dickons [2012] FamCAFC 154 whilst talking about the classification of contributions of the parties at various stages of their relationship, the Full Court said the task of the evaluation was holistic. The same should be said of the various factors in s 75(2). Here, the assessment requires the attribution of weight to all of the factors even though the disparity of income and earning capacity stand out as the important distinction between the husband and the wife.

3. Section 75(2) as a component of the s 79 assessment was examined by the Full Court in Waters and Jurek (1995) FLC 92-635. It is an authority that has stood the test of scrutiny and in particular, the judgment of Fogarty J has been seen as helpful when examining the relevance of the provision. As his Honour observed, the various factors come into play when it is concluded that they are relevant to the making of a property order which is just and equitable. This is not an invitation to do some social engineering but rather to effect a redistribution of property so that justice and equity are done (see Wilson J in Mallet and Mallet (1984) FLC 91-507 at 79,127).

4. As Fogarty J in Waters reflected, this consideration is done on a snapshot of a particular time when no-one can predict the certainty of either party’s financial future. It is important to observe that because of s 79(4)(e), this is very much part of the process of trying to work out what is fair knowing what has happened in the past but therefore assuming that things will not significantly alter from what can be foreseen.

5. In Waters (at 82,378), Fogarty J observed that with separation, previously agreed roles of a partnership nature come to an end and that the person who undertook a familial welfare role can be at a disadvantage but it is equally possible that regardless of the division of roles during the relationship, there may have always been a significant financial disparity at least in terms of contribution. The legislature contemplated that by enacting s 75(2)(g), (k) and (o).

6. Section 81 of the Act imposes on the Court a duty, as far as practicable, to make orders that will finalise the financial relationships of the parties. That provision (in other words, the clean break principle) is not part of the justice and equity determination required by s 79; its usefulness is questionable other than to encourage the cessation of proceedings so that each party knows what they have to enable them to start life anew.

7. Attempting to achieve an outcome by reference to percentages of a “pool” of assets (as the parties have here) can ignore the real changes going on in the parties’ life and the Court needs to guard against too formulaic approach.

8. Section 79 and therefore s 75(2) highlights the Court’s very wide discretion which exacerbates the complications involved in coming up with a solution (see Norbis and Norbis (1996) 161 CLR 513 at 520 per Mason and Deane JJ).

9. These “complications” in the pursuit of a just and equity outcome were also described by Coleman J in Steinbrenner and Steinbrenner [2008] FamCAFC 193 at 234 as part of the exercise of a discretion under which the assessment moves from a qualitative approach to a quantitative reflection of such an evaluation. Apart from the focus of the parties on disparity of income, no specific approach to work out the answer was suggested; in other words, much depends upon intuitive synthesis (or described as instinctive synthesis in R v Barbaro [2014] HCA 2). Perhaps it might be helpful to look at comparable cases for some yardstick in the future.

10. Before turning to that assessment and how the parties proposed it should be divided, it is first imperative to work out what property and liabilities the parties have. 

Assets and liabilities

1. The husband’s list of assets and liabilities was set out in his affidavit and then he attached a “portfolio valuation” prepared by his financial advisor.  The wife provided a much simpler aide memoir which was updated to the commencement date of the trial. 

2. Comparing the two was complicated.  The husband’s approach was made so by the fact that on the base of the document was the following statement:

   Reports are accurate based on (the advisor’s records).  Reports are informational only.  Please reconcile report to documents sent directly from share registries, fund managers, etc. (The financial advisor) does not accept responsibility for any inaccuracies as a result of relying on this report.

   Whilst that statement may have come off some computer program much more care should have been taken.  Because the husband reverted to his financial advisor for accurate details and the financial advisor was not taking full responsibility, it is hard to know exactly what to do with the document.

3. Having said that, a comparison of the document shows very little discrepancy.

Assets and liabilities

1. There was common ground in respect of the home, the Suburb E property and a variety of other assets and it is only necessary for me to deal with those that were either not mentioned by either party or were contentious.

The Husband’s Commonwealth Bank account

1. The husband’s Commonwealth Bank account has already been referred to in the reasons above and it was not disputed that it contained $20,000.  The convoluted schedule provided by the husband’s financial advisor made no mention of the account notwithstanding the husband relied very heavily upon him.

2. I propose to include that as an asset.

Payments to the wife

1. The wife received a part property settlement of $20,000 and in May 2015 she sold shares netting $25,000.  Both occurred at a time when the wife was reliant upon the husband for financial support and he was largely providing it even if he was complaining about her expenditure.

2. Life cannot remain in suspended animation subsequent to separation.  An examination of the wife’s expenditure would suggest that activities were not necessarily curtailed but I would not be prepared to find on the evidence that it was extravagant.  There is now no evidence of the existence of those monies.  There is no basis for me to include them in any asset pile therefore for division.

Unaccounted monies by the husband

1. I have already dealt with the fact that I am satisfied an adequate explanation has been given (albeit it was hard to find) for the supposed missing money.  The reasons are earlier set out.  I propose to ignore that proposed “add back” or adjustment.

The G Clinic interest

1. The wife’s G Clinic interest was shown as “nil” value.  In the schedule provided by the husband, it was said to be $100,000 but there was no evidence to support that.  The item will not be included in the list of assets and liabilities.

Rabo Direct account of the wife 

1. The wife disclosed a bank account with Rabo Bank.  In the schedule, the amount was shown as “nominal”.  When I scoured the husband’s schedule, a figure of $276 was disclosed.  Having regard to the minimal nature of the nominal balance and there being no evidence as to where the funds came from, I propose to ignore that as well.

Husband’s Macquarie Bank account

1. The respective schedules disclosed the husband’s account but there was a difference of $22,000.  The husband’s advisor had prepared a schedule on 22 September with $22,000 more in the account than that in the aide memoir of the wife.  It seems to me the logical conclusion is to take the lower amount on the basis that counsel had been aware of that schedule and accepted the lower figure.  Accordingly, I will put into the asset and liability list a sum of $273,377. 

The joint Westpac account  

1. Neither party provided any detail as to what was in this account and accordingly, I propose to ignore it.

Cars

1. In his schedule, counsel for the wife put figures in for the husband’s car and that of the wife but they were not mentioned at all in the schedule prepared by the husband’s financial advisor.  As it was not the subject of controversy or cross-examination, I have presumed that the disclosure in the aide memoir of the wife is correct.

Furniture

1. The aide memoir from the wife indicated that each party was taking $7000 worth of furniture.  No mention was made of that in the husband’s document.  That is perhaps unsurprising because it was prepared by the financial advisor.  Paragraph 65 of the husband’s affidavit says that the document does not list vehicles and assets such as furniture and effects “the ownership and values of which are not in dispute”.  In my view however, it is of such minimal value and each party is keeping the furniture and chattels in the respective real properties that they are retaining, I do not propose to add them in.  It seems to me that it is a fair outcome for both parties to retain those chattels in the respective property.

Prepaid legal fees

1. The legal fees in this case become confusing from an accounting point of view.  The husband does not seem to dispute the wife’s assertion that he has incurred $84,745.

2. The wife’s assertion was that she had spent various amounts and along with the money remaining in trust, the total was said to be $115,037.

3. In his affidavit, the husband said that he paid his legal fees from the Macquarie Cash Management Account but it remains unclear whether he was acknowledging that that money should be added back in some way having regard to the fact that the deposit into that account largely came from the period after separation.  The difficulty is that in his affidavit, he said that of the $505,000 deposited into the account since December 2014, a large portion came from trust distributions in which case, the investments were such that the wife had an interest in them.  I consider it fair in the circumstances that those funds should be added back in a notional way.

4. The wife did not have access to the resources of the parties for the purposes of paying her legal fees.  The parties consented to an order that funds would be borrowed and that the wife would be responsible for the debt.  Whilst that may be so, if her legal fees are added back as having been “prepaid”, the picture becomes distorted unless the liability is equally added back into the equity picture.  It is clear that had the wife not prepaid her fees, there would be no such asset and no such liability.  One cannot be taken without the other.  Accordingly, the only fair way is to include both asset and liability and look at the matter from a joint perspective.  The fact that the wife and the husband noted on the order of 17 September 2015 that it was to be treated as a liability cannot bind the Court.  It was certainly the position of the wife that the asset could not be taken without the liability and it seems to me that there was no specific submission put by counsel for the husband as to how I should treat the equitable position.  Having regard to the way the husband opened his case, I suspect it was intended to be in line with the notation on the order.  In my view, that would be unfair to the wife.

5. Accordingly, I propose to add in both the prepaid legal fees and the liability.

Liabilities

1. I have accepted the husband’s recent and anticipated 2014 tax liability but ignored the three debts of the wife for reasons already set out. 

2. Obscurely written in the schedule prepared by the financial advisor was a reference to an estimated tax liability for 2015 by the husband and even a prognostication as to potential liabilities in 2016.  No evidence was led in respect of any of those and they must be largely anticipated as a result of the husband continuing to have a share portfolio in addition to his income.  From his employment, his tax is taken at the appropriate rate.  The distorted tax position arises because of the capital gain arising from the sale of shares more so than the dividends because the dividends have franking credits.  It being such a vague notion and there being no evidence to support it, I do not propose to take those estimated tax liabilities into account.  It was not suggested that shares would have to be sold to pay out the wife and indeed there is sufficient cash.  It was also not suggested that I should contemplate a sale of shares for debt reduction.  Thus, capital gains in the future giving rise to tax may be ignored.  Even if the position was otherwise, the husband has the higher income and borrowing capacity relative to the wife.

3. I otherwise accept that there are credit cards that the husband is responsible for albeit they are joint responsibilities because those funds have been used for family purposes and in any event, they appear in the wife’s aide memoir and are therefore seen by me to be conceded.

Superannuation  

1. As I earlier indicated, the parties reached a compromise and it is unnecessary for me to deal with that issue save to say that it will now be apparent that in the foreseeable future each party will have superannuation entitlements just in excess of $400,000.

The property to be divided

1. I find the following is the property of the parties to be divided for the purposes of orders under s 79 of the Act. I have rounded some of the figures off for my convenience.

   Suburb C Home  $2,350,000

   Suburb E Home  1,800,000

   Husband’s Commonwealth Bank  20,000

   Wife’s Macquarie Bank  3,000

   Wife’s shares  66,000

   Husband’s Wesfarmers shares  137,000

   The GMO Trust  155,000

   Systematic Global  100,000

   Less  3,000  97,000

   Husband’s Macquarie Bank   273,000

   Husband’s car  44,000

   Wife’s car  35,000

   The wine  25,000

   Wife’s legal fees  115,000

   Husband’s legal fees  85,000

   Sub-total  $5,208,000

   Less:

   Legals borrowing  91,000

   Husband’s tax  312,000

   Westpac debt  2,000

   Husband’s credit card  25,000

   Sub-total  $430,000

   Net Equity in Assets  $4,778,000

2. It will be seen that I have ignored such things as the furniture and the minimal accounts.

What does the wife presently have?

1. From the list shown above, the wife has assets of $2,569,000 and modest debts but then there is the liability of $91,000 for the “legals borrowings”.

What does the husband presently have?

1. The assets above show that the husband has $2,639,000 but has liabilities of $342,000. 

2. There is no logical reason let alone a fair one, for the wife to take the responsibility for the $91,000.  In my view, the husband is much better placed to carry that liability and can do with it what he wishes.  The end result does not affect the outcome. 

3. If the husband takes all of the liabilities, he will be carrying debt of $430,000 to $433,000.  If that were to occur, the wife would end up with assets of $2,569,000 and the husband with $2,206,000.  In my view, that gap would not be a fair outcome because the income and earning capacity of the husband will see him stronger in the foreseeable future whilst the wife will remain comparatively stagnant. 

4. The question then remains what cash should the husband pay to the wife?

5. Obviously, the parties’ positions varied depending upon what liabilities were taken where and what assets were included.  It is trite to say that the underlying value of the assets is what is important rather than the percentages but it is equally important to look at the gap between what each party has.  I am satisfied that a gap of $363,000 would not be a fair outcome in the wife’s favour.

How to approach the gap?

1. It is important to assess the relevant factors under s 75(2) of the Act and I shall do that below but the following indicates my view once all of those matters have been considered.

2. If 2014 is a guide, and ignoring any capital gains, the husband’s employment income was $471,000 whilst he had income from shares of about $120,000.  His income was therefore about $591,000 from which tax associated with those (but not the capital gain) was somewhere around $246,000 (assuming the franking credits cover the shares).  That leaves the husband with income after tax of about $345,000 or close to the $324,000 which are his declared living and maintenance obligations expenses.  To an extent therefore, the earning capacity over and above employment is illusory.

3. For the husband, a $433,000 debt level might be serviced from income but there would be limited capacity to do so (whereas the wife has no encumbrance to service).  The only capital that the husband has to reduce his debt would be either the sale of his shares or the sale of Suburb E.  If he sold Suburb E, that would be unfair in circumstances where the wife has property in the entitlement and the use of the former family home which is of significant capital value.  She too could sell a property were she in need.  If the husband sold the shares, his income would drop and his earnings from his employment would be his sole source of support.  Whilst that income alone is still high by community standards it is less attractive than the picture first examined in the list of assets and liabilities.  All of the evidence about income from the tax returns shows that the high level is distorted by capital gains.  Income and earning capacity are important, if not significant, but the true extent of the capital position is as well.  In my view the husband should pay to the wife a further $250,000 which would then make the gap fairer.

4. To take $250,000 from the husband will leave him with a balance of cash that he can put into debt reduction as well as maintain his share portfolio the income from which along with his employment, enables him to meet his commitments and continue the lifestyle to which both parties have been accustomed.  It would seem that the parties’ lifestyles have not largely altered even though they may argue that they have had to watch their spending.  Each of them is still a millionaire and each is still in control of substantial real property.

Section 75(2) and its relevance

1. Returning to the assessment and to the factors that are relevant, I make the following findings.

Section 75(2)(a), (c), (d), (e) and (l)

1. The issues of the parties’ ages, health, responsibilities for children and other people along with their desire to care for the children were not in dispute and none of those factors has any significant bearing in trying to work out a just and equitable outcome.

Section 75(2)(b)

1. In the snapshot of time, I find it unlikely in the foreseeable future that the husband’s income will significantly drop.  His income is not dependent on the property division other than as I have already indicated in relation to his capacity to sell shares and in any event, any capital that he loses now would be made up eventually (but I accept not immediately) on the basis of his net disposable income after tax allowing for all of the support that he is currently providing and intends to continue to provide.  The husband can advance financially but so can the wife by disposal of capital assets.  This disparity of earning capacity is the most significant factor which justifies the wife having more as a result of the end of this marriage than the husband.

Section 75(2)(g)

1. I have already referred to the parties’ historical lifestyle.  There is sufficient capital here for both to continue that lifestyle so this factor is not significant.

Section 75(2)(ha)

1. I earlier indicated why I would not make the wife’s modest loan arrangements a joint liability.  Whilst it is true that the husband has had access to funds, he has also made adequate provision for the family after separation.  In my view, the creditors here will not miss out.

Section 75(2)(n)

1. The terms of the proposed orders simply require reflection as to how lives will change.  Even dividing the parties’ assets, each will remain a millionaire.  By community standards they will remain affluent.  Each in their own way will be able to afford to live comfortably albeit, the husband has the stronger chance of improving his lot by virtue of his income.  Again, that justifies an allowance in favour of the wife.

Other matters

1. I find that s 75(2)(f), (h), (j), (k), (m) and (na) are not relevant here because I am satisfied that the wife’s income would not increase in any significant way.  It was agreed that the wife had made a contribution to the husband’s earning capacity and property.  There was no argument about the duration of the marriage and its limitation on the wife’s earning capacity.  There are no other persons whose cohabitation with a party is relevant.  Child support agreement seems to have been sorted out between the parties to their respective satisfactions.  In addition, each party can start the final working years of their respective lives knowing that there is a superannuation nest egg there and upon which each can build.  Whilst that will favour the husband because he has significant income, I am mindful of the fact that he has a limit on what he can access from his income for that purpose having regard to the logic that I have used above.  The wife too can continue to put money into superannuation or even part of the award here.  She will have significant resources to make her retirement comfortable.  It is not the function of the Court to socially engineer that sort of future.

2. Having regard to all of those matters, and on the basis that the parties keep the assets and the liabilities to which I have earlier referred, a just and equitable outcome for both parties is a payment by the husband of the sum of $250,000.  I will make orders as outlined at the commencement of these reasons.

I certify that the preceding One Hundred and Fifty Four (154) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 21 October 2014.

Associate:

Date:  21 October 2015