Darcy & Darcy
[2011] FMCAfam 126
•4 March 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DARCY & DARCY | [2011] FMCAfam 126 |
| FAMILY LAW – Property – 16 year relationship – modest non-superannuation asset pool – husband in receipt of a hurt on duty police pension – whether a splitting order should be made in favour of the wife. |
| Family Law Act 1975, ss.79, 75, 90MS Police Regulation (Superannuation)Act 1906, ss.10, 14K,14P |
| C & C (2005) 33 FamLR 414 M & M (2006) 37 FamLR 150 Norbis v Norbis (1986) FLC 91-713 Pierce & Pierce (1999) FLC 92-844 Schmidt & Schmidt [2009] FamCA 1386 T & T (2006) FLC 93-263 |
| Police Superannuation and the Family Law Act, paper dated 13 August 2010 presented to the Mid-North Coast Law Society Conference by G Levick |
| Applicant: | MS DARCY |
| Respondent: | MR DARCY |
| File Number: | NCC 902 of 2009 |
| Judgment of: | Terry FM |
| Hearing dates: | 24 August & 6 October 2010 |
| Date of Last Submission: | 6 October 2010 |
| Delivered at: | Newcastle |
| Delivered on: | 4 March 2011 |
REPRESENTATION
| Solicitor Advocate for the Applicant: | Mr Byrnes |
| Solicitors for the Applicant: | Byrnes & Cox Lawyers |
| Counsel for the Respondent: | Mr Boyd |
| Solicitors for the Respondent: | Harris Wheeler Lawyers |
ORDERS
That within 42 days of the date of the orders the wife shall pay the amount required to discharge the mortgage registered in favour of the Commonwealth Bank over Property W being the whole of the land comprised in Certificate of Title folio identifier [omitted] (“the Property W property”).
That contemporaneously with the wife complying with Order (1) the husband shall sign all documents and do all acts and things required to transfer to the wife at the wife’s expense the whole of his right title and interest in the Property W property.
That the wife shall indemnify the husband and keep him indemnified from liability for the debt to the Commonwealth Bank and for all rates taxes and outgoings owing in respect of the Property W property.
That a base amount of $78,074.05 is allocated as required by s.90MT(4) of the Family Law Act 1975 to MS DARCY out of the interest of MR DARCY in the Police Superannuation Scheme.
That in accordance with s.90MT(1)(a) of the Family Law Act:
(i)the wife is entitled to be paid the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001; and
(ii)the husband’s entitlement to payments out of his interest in the Police Superannuation Scheme and the entitlements of any person to whom a splittable payment may be payable, is correspondingly reduced by force of this order.
That the Trustee of the Police Superannuation Scheme (“the Trustee”) shall do all such acts and things and sign all such documents as may be necessary to:
(a)calculate, in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations2001, the entitlement created for the wife by order 4 of these Orders; and
(b)pay the entitlement whenever the Trustee makes a splittable payment out of the husband’s interest in the Police Superannuation Scheme.
That pursuant to paragraph 90MT(1)(b) of the Family Law Act1975 whenever a splittable payment becomes payable in respect of the interest of MR DARCY in The Employee Retirement Plan, held within The [U] Super Scheme of which [M] Nominees Pty Limited is the trustee, MS DARCY shall be entitled to be paid 100% of the husband’s entitlement, and there be a corresponding reduction in the entitlement the husband would have had in the Employee Retirement Plan but for this order.
That having been accorded procedural fairness, these orders bind the trustee of The Employee Retirement Plan, held within The [U] Super Scheme, to observe the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001.
That pursuant to paragraph 90MT(1)(b) of the Family Law Act 1975 whenever a splittable payment becomes payable in respect of the interest of MR DARCY in the [F] Super Fund, MS DARCY shall be entitled to be paid 100% of the husband’s entitlement, and there be a corresponding reduction in the entitlement the husband would have had in the [F] Super Fund, but for this order.
That having been accorded procedural fairness, these orders bind the trustee of the [F] Super Fund to observe the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001.
That each of the superannuation splitting orders shall take effect from the operative time and the operative time for each of the orders is the fourth business day after the orders are served on the trustee of the relevant fund.
That unless specified in these orders and except for the purpose of enforcing payment of any money due under these orders or subsequent orders, each party be solely entitled to the exclusion of the other to all property (including choses-in-action) in possession of each party and superannuation standing in their respective names.
That in the event that either party refuses or neglects to comply with the provisions of these orders the Registrar of the Federal Magistrates Court of Australia at Newcastle is hereby appointed to execute all deeds and documents in the name of the defaulting party.
IT IS NOTED that publication of this judgment under the pseudonym Darcy & Darcy is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT NEWCASTLE |
NNC 902 of 2009
| MS DARCY |
Applicant
And
| MR DARCY |
Respondent
REASONS FOR JUDGMENT
Introduction
Ms Darcy, 48, and Mr Darcy, 51, separated in May 2005 after a sixteen year relationship. They have been unable to agree on a property settlement.
The husband, a former police officer, is in receipt of a hurt on duty pension. The principal issue in dispute was whether a splitting order should be made in respect of the pension.
The wife sought a base amount splitting order. It was her case that there were insufficient assets in the remainder of the pool to compensate her if a splitting order was not made.
The husband opposed the making of a splitting order. It was his case that the court should look at the real nature of his pension rather than the capitalised value, and that if it did so it would come to the conclusion that it was just and equitable to leave his pension (and his income) untouched.
In more detail the orders sought by the wife were that:
i)she retain the former matrimonial home, subject to the mortgage.
ii)a base amount splitting order be made allocating $325,000.00 to her from the husband’s pension entitlement.
iii)each party otherwise retain the assets in their possession or under their control.
The orders sought by the husband were that:
i)the wife pay him $40,000.00.
ii)he transfer his interest in the former matrimonial home to her.
iii)the wife deliver to him certain specified chattels and personal items.
iv)each party otherwise retain the assets in their possession or under their control.
During final submissions the husband’s counsel informed the court that the husband no longer sought delivery up of the chattels but that he sought an order for the return of some personal papers.
The husband’s counsel also informed the court that while the husband continued to oppose an order splitting his pension, he now proposed that the wife receive 100% of the two accumulation superannuation funds in his name (total value about $30,000.00).
The evidence
The wife relied on her application filed on 15 April 2009 and her affidavit and financial statement filed on 28 April 2010.
The husband relied on his amended response, affidavit and financial statement filed on 29 July 2010 and the affidavits of Mr T and Mr G filed on 29 July 2010.
The husband and wife were cross-examined. Mr T and Mr G were not required for cross-examination.
The husband’s evidence about historical factual matters was somewhat more reliable than the wife’s, although there was not much in it and there was a flavour of reconstruction rather than recollection about the evidence of both parties concerning some of the events which happened long ago.
Where I have made findings about an issue consistent with the evidence of one party it is because I have preferred that party’s evidence on the issue in question.
Background
The husband was born [overseas] and came to Australia when he was 15. At 22 he joined the NSW Police Force.
The wife grew up in country NSW and trained as a [omitted] after she left school.
The husband and wife met in [N] in 1989 when the husband was stationed there with the police force and the wife was working as a [omitted].
In 1990 both parties moved to Sydney. They gave differing explanations for the move but it is reasonable to find that the move suited them both. They married in July 1990 and their first child, [W], was born in 1991.
The wife ceased work shortly prior to [W]’s birth and became his primary caregiver. Three other children were subsequently born to the parties and the wife ultimately did not return to the paid workforce until 2000.
Between 1990 and August 1992 the husband continued his career in the police force. However in August 1992 he injured his ankle and lower leg and from 1992 until 1995 he was either on ‘sick report’ as he described it or on light duties.
Later in 1992 the husband was diagnosed with depression and prescribed anti-depressants. In 1993 he had a number of operations on his right ankle.
In either 1993 or 1994 the parties purchased a home at Property S. Their daughter [X] was born in 1993 and their son [Y] in 1994.
In October 1995 the husband was discharged from the police force on medical grounds and received a lump sum severance payment of $42,000.00. His injury was not deemed work related.
Around the time of the husband’s discharge he was hospitalised for mental health problems and the parties separated, either for a few months or for up to six or seven months. In 1996 they reconciled and moved from Sydney to Property W. They sold the Property S property and purchased Property W which became their home for the remainder of the marriage. Their fourth child, [Z], was born in 1997.
The husband appealed against the refusal of the police force to recognise his injury as work related and after a long battle was successful in obtaining a hurt on duty classification. In about 1998 he commenced to receive a hurt on duty pension pursuant to s.10 of the Police Regulation (Superannuation) Act and he also received a lump sum which he described as back payments.
In the late 1990’s the husband trained as a [omitted] and he worked in this field from 1999 onwards. It was not a full time occupation however and otherwise the husband was at home.
In 2000 the wife did a [omitted] refresher course and returned to work part time. In 2002 she was diagnosed with coeliac disease and ceased work. She returned to work again in 2003 but then ceased work again in 2004.
The parties separated in May 2005. The husband moved to [P]. The wife remained in the Property W property with the children, who were then 14, 12, 10 & 7, and the husband commenced paying an agreed amount of child support.
In April 2009 the wife filed an application for a property settlement.
The wife returned to paid employment in August 2005 and has been employed ever since. She has remained living in the Property W property with the children.
The husband lived in [P] until July 2009 when he relocated to [N]. He continued to do some work as a [omitted] until February 2009 but has not worked since then and currently his sole income is his pension.
The husband’s pension
The husband joined the NSW Police Force prior to 1 April 1988 and his superannuation entitlements are governed by the Police Regulation (Superannuation) Act.
At the time of his discharge from the police force in 1995 the husband was refused a determination that he had been hurt on duty. He did not qualify for a pension based on age and years of service and was entitled only to a refund of his contributions. In 1998 however his appeal against the refusal to determine him as having been hurt on duty was successful, and he then became entitled to a pension pursuant to s.10 of the PRSA, payable retrospectively from the date of his discharge.
The amount paid to a disabled member pursuant to s.10 depends on their salary at the date of their injury and on their exact classification.
A member deemed totally incapacitated for work outside the police force is paid a higher percentage of their salary by way of pension than a member simply deemed incapable of exercising the functions of a police officer. A member deemed to have been hurt on duty because he was exposed to risks to which members of the general workforce would not normally be required to be exposed is paid a higher percentage again.
The husband currently receives $1,600.00 per fortnight, but I was told nothing about his classification. I intend to proceed on the basis that he has been classified only as unfit to exercise the functions of a police officer, firstly because I consider it highly unlikely that he would have failed to draw my attention to the fact that he had been classified as totally incapacitated for work outside the police force and secondly because it was common ground that he worked as a [omitted] between 1999 and 2009.
It is possible for the husband, if he has not already been determined to be totally incapacitated for work outside the police force, to seek a determination to that effect at any time up to him turning 60. I do not know whether this is something the husband is likely to do or whether any such application would be likely to succeed, as the issue was not raised or explored at the hearing.
At times during the hearing it appeared that the parties believed that the husband would never be able to convert his pension to a lump sum. This is not correct. While the husband has no entitlement to a lump sum in addition to his pension, pursuant to s.14K of the PRSA he has the right to commute some or all of his pension to a lump sum at age 55 or 60.
At the request of the parties the husband’s pension was valued by the Trustee of his fund. The Trustee valued the pension using scheme specific factors approved by the Commonwealth Attorney General and determined it to be worth $749,263.55 as at 20 May 2010.[1]
[1] In the agreed list of assets handed up on 6 October 2010 the parties adopted $756,969.00 as the value of the husband’s pension. They did not explain why they had adopted this figure rather than the figure in the 20 May 2010 valuation but nothing much turns on it and I have used the slightly higher figure later in the judgment.
The husband’s pension was valued differently in the case before me to the way a s.10 pension was valued in T & T[2] and Schmidt & Schmidt[3], two Family Court cases decided by Watt J in 2006 and 2009 respectively.
[2] T & T (2006) FLC 93-263
[3] Schmidt & Schmidt [2009] FamCA 1386
In T & T the husband’s pension was valued by Mr B of Superannuation Splitting. Mr B segmented the husband’s entitlement into two separate components, namely a non-commutable indexed pension to the age of 60 with a partial right to commute at age 55, and a commutable indexed life pension after the age of 60. Watt J termed these the husband’s category 1 and category 2 superannuation interests. Mr B valued the category 1 interest at $1,389,163.34 and the category 2 interest at $419,443.87, a total of $1,808,607.21.
Watt J assessed contributions to each component separately and made splitting orders in respect of each component, awarding the wife 15% of the husband’s category 1 interest and 40% of his category 2 interest.
In Schmidt & Schmidt the husband’s s.10 PRSA pension was also treated as having two separate components and Watt J again assessed contributions to each component separately and made two different splitting orders. He said as follows:
There is a distinction to be drawn between the contributions the wife has made towards the part of the husband’s superannuation interest that he receives because he was hurt on duty and the part of the superannuation interest that he will receive whether or not he had been hurt on duty.[4]
[4] Schmidt & Schmidt [2009] FamCA 1386
Whether it would ever have been appropriate to treat the entitlement of the husband in the case before me as having two separate components is open to question. He was not in the Police Force long enough to qualify for a pension based on years of service. He is in receipt of a hurt on duty pension and only a hurt on duty pension. It is this pension that he is entitled to commute at the age of 55 or 60 and it is this pension that he will continue to be paid after this age if he chooses not to commute.
In any event the Trustee of the husband’s fund has now taken a stand against the categorisation of hurt on duty pensions into two components, and in addition s.14P of the PRSA (which provides for the procedure to be followed when a splitting order is made) was amended in December 2008.
In a paper presented to the Mid-North Coast Law Society in October 2010 by Mr Greg Levick, a barrister, to which the wife’s solicitor drew my attention, Mr Levick said as follows:
The approach…taken by the Trustee of the Police Superannuation Scheme is that the categorisation of superannuation into Category 1 and Category 2 will no longer be recognised. The Trustee will now oppose orders which are proposed in which superannuation is divided into categories. Upon a party seeking a splitting order serving notice on the Trustee of orders which purport to categorise superannuation the Trustee will simply respond by an advice that the Trustee will not accept an order in that form and effectively opposes orders being made in that form.
Further, the Trustee will require that the orders sought will indicate a base amount payable to the non-member spouse….
I am unaware of any cases in which a litigant in family law proceedings has sought to challenge the Trustee’s interpretation of s.14P of the PRSA.[5]
[5] Greg Levick paper entitled “Police Superannuation and the Family Law Act” paper presented to Mid-Coast Law Society Conference 13 August 2010
The wife did not seek to challenge the Trustee’s interpretation and sought a base amount splitting order. A letter was tendered confirming that the Trustee had no objection to the proposed order.
Before leaving the general topic of the husband’s pension, I mention two further matters.
Firstly, the effect of s.14P(3) & (4) of the PRSA is that if a base amount splitting order is made the wife can request the Trustee to pay her entitlement to her as a lump sum in cash, or alternatively can request that it be transferred to a complying superannuation fund.[6]
[6] Pursuant to s.14P(5) if the wife fails to give instructions about how she wishes the amount to be dealt with the STC must transfer her entitlement to the [F] Superannuation Fund.
If the wife is paid a lump sum in cash the payment will be subject to “benefits tax based on the non member spouses personal circumstances.”[7]
[7] Letter from [S] Super to wife’s solicitor dated 3 May 2010
The evidence given at the hearing suggested that if a base amount splitting order was made the wife intended to request that a lump sum be paid to her in cash. However no evidence was given about the likely tax implications of this decision.
Secondly, the Trustee advised the solicitors for both parties that any reduction in the value of the husband’s gross entitlement as a result of a splitting order would have a directly proportional effect on the husband’s fortnightly payments, so that if for example the wife received the equivalent of 40% of the capitalised value of the husband’s entitlement the husband’s fortnightly payments would reduce by 40%.[8]
[8] Exhibit D
The law applicable to the resolution of property settlement applications
Pursuant to s.79 of the Family Law Act, a court can make such orders as it considers appropriate altering the parties’ interests in property. Section 79 (2) provides that the court shall not make an order under this section unless it considers that it is just and equitable to do so.
The procedure usually adopted in determining applications for property settlement is:
i)to identify and value the assets and liabilities of the parties;
ii)to assess the contributions of the parties under ss.79(4)(a), (b) and (c) and to express those contributions as a percentage;
iii)to consider the matters set out in ss.79(4)(d),(e),(f) and (g), which include the matters in s.75(2), so far as they are relevant, and to determine whether any adjustment should be made as a result to the contribution based entitlements;
iv)to consider the effect of those findings and resolve what orders are just and equitable in all the circumstances of the case.
Pursuant to s.90MS of the Family Law Act in proceedings under s.79 the court may make orders in relation to the superannuation interests of the spouses. In C & C[9] the majority of the Full Court made the following recommendation about the procedure to be followed in a case which involved superannuation interests:
….. it will be necessary where a splitting order is sought, or extremely prudent where no such splitting order is sought (in order to ensure that justice and equity is achieved) to:
(a)value the superannuation interest (according to the Regulations if an order under Part VIIIB is sought or according to the Regulations or otherwise if no order is sought);
(b)consider and make findings about the types of contributions referred to in s 79(4)(a), (b) and (c) which have been made by the parties to the superannuation interests on either a global approach or an asset by asset approach depending on the circumstances;
(c)consider the other factors in s 79(4) being the matters in s 79(4)(d), (e), (f) and (g); and
(d)ensure that pursuant to s 79(2) the orders in relation to the parties’ property, and any order under Part VIIIB in relation to superannuation interests are just and equitable.
[9] C & C (2005) 33 Fam LR 414
It is appropriate to follow these procedures in the present case.
Identifying and valuing the assets, liabilities and superannuation interests
The non-superannuation assets of the parties are as follows:
Description
Ownership
Value
Property W Joint 240,000.00 1286 [I] Shares Wife 4,681.00 1997 Proton Satria Wife 1,000.00 [R] time share interest Husband 5,000.00 Household contents Wife 6,000.00 Household contents Husband 1,000.00 Total 257,681.00
The husband expressed unhappiness about the [R] interest being included in the pool at a value of $5,000.00. However this was the value he placed on it in his financial statement (an admission against interest as he did not have to admit that it was worth anything) and no other evidence of its value was available. In the list of agreed assets handed up during final submissions the [R] interest was included at a value of $5,000.00.
The husband sought to have the following amounts included by way of add back:
Description
Value
Wife’s savings as disclosed in her financial statement filed on 15 April 2009 40,000.00 Mortgage draw downs after separation, which he attributed to the wife. 9,530.00 Total 49,530.00
The wife admitted that she had taken $7,350.00 from the mortgage
re-draw after separation and banked it into her personal account. Her evidence in effect was that this was a pre-emptive strike to stop the husband withdrawing the money and buying a car. The wife denied withdrawing the $2,000.00 which was separately withdrawn at about the same time.
The husband said that he had not taken the $2,000.00.
I prefer the husband’s evidence on this issue to the wife’s and I am satisfied that the wife did take $9,350.00 from the mortgage re-draw after separation, thus increasing the mortgage.
In one part of her affidavit the wife said that the $7,350.00 she admitted withdrawing had been used up on living expenses but elsewhere she made reference to it when explaining how she had managed to accumulate $40,000.00 in her bank account.
The wife said that the $40,000.00 was derived from:
i)mortgage drawdown after separation 7,530.00
ii)gift from her brother [name omitted] 5,000.00
iii)gifts from her Aunt [name omitted] (total) 10,500.00
iv)proceeds of sale of Tarago after her
aunt gifted her another motor vehicle 2,700.00
v)lump sum Family Tax Benefit
payment from Centrelink 15,000.00
This totals $40,000.00 in itself but the wife said that she also saved “various other government assistance payments and monies received from …tax returns.”
The wife said that all but $1,250.00 of the $40,000.00 which was in her bank account in April 2009 had now been used up, as follows:
i)home improvements for the Property W property ($10,000.00)
ii)paid legal fees ($5,000.00)
iii)expenses for the children including school fees, orthodontic costs and school excursions.
The wife backed up these claims by giving details about the work done and the expenses paid, but her evidence in this regard was suspect. She detailed work on the Property W property which was done over a period of five years, not fifteen months, and the majority of the children’s expenses she detailed were incurred prior to 2009.
Nevertheless, the wife’s assertion that most of the $40,000.00 was now gone was not challenged, and further she received most if not all of this money post-separation and the husband cannot claim to have made any contribution to it.
The only amount which it might conceivably be appropriate to add back to the pool as a notional asset would be the $9,350.00. However it was withdrawn from the mortgage five years ago and it no longer exists. The wife on any view had substantial expenses associated with the children post-separation, and although she did not provide a particularly convincing or consistent story about where the $9,350.00 had gone, in the exercise of my discretion I do not intend to add it back to the pool as a notional asset.
I will revisit the evidence about the wife’s post separation savings when dealing with post-separation contributions, because the fact that the wife was able to accumulate such a sum after separation rather undermines her claim that she struggled financially in the post separation period.
The only relevant liability is the mortgage of $41,507.00 on the Property W property.
The parties have the following superannuation:
Name of fund
Ownership
Value
[F] Super Wife 6,548.60 [M] Wife 12,480.00 Health Industry Plan Wife 16,526.43 [F] Super Husband 22,340.76 [M] Husband 8,406.59 Capitalised value of the husband’s superannuation allowance Husband 756,969.00 Total 823,271.38
Conclusion about the asset pool
The non-superannuation pool is thus worth net $216,174.00 and the superannuation is worth $823,271.38. The gross pool is worth $1,039,445.38.
Assessing Contributions
The husband’s counsel urged me to assess contributions separately in respect of the husband’s pension entitlement on the one hand and the remainder of the assets (which I will call the non-pension pool) on the other. This is a legitimate approach,[10] as the wife’s solicitor conceded, and I intend to adopt it in this case.
[10] Norbis v Norbis (1986) FLC 91-713
I will deal first with the non-pension pool.
Initial contributions to the non-pension pool
The wife adopted 1989 as the starting point for the assessment of contributions and the husband did not take issue with this.
The wife said that in 1989 she had the following assets:
i)an interest with her brother in a property at [T] Queensland.
ii)$5,000.00 in a term deposit and $5,000.00 - $10,000.00 in additional savings.
iii)a motor vehicle.
iv)[M] superannuation worth about $3,000.00.
No information was provided about the date the [T] property was purchased, the purchase price or the amount borrowed. The wife said that she was the legal owner of 50% of the property but was the beneficial owner of a greater interest because she had put in half of the deposit and an additional $10,000.00 when the property was purchased and because she had been making the mortgage payments to the exclusion of her brother.
The best that I can say on the state of the evidence is that it is likely that the wife’s interest in the property in 1989 was worth at least $10,000.00 plus half of the deposit.
In August 2001 the husband and wife paid $24,800.00 off the [T] mortgage.
The wife said that she contributed $14,800.00 and the husband $10,000.00. The husband said that he contributed $17,000.00.
The wife’s claim seems more likely to be correct. She produced bank statements showing several deposits into the mortgage account and showing that she had $15,000.00 in savings at the time. However there was a strong flavour of reconstruction rather than recollection in the evidence of both parties about this issue.
If the wife did put in $15,000.00 it seems more likely than not that this was the money the wife had in savings in 1989.
The husband made the mortgage payments on the [T] property from the time the wife ceased work in late 1990 until the property was sold in 1993. The wife received $60,000.00 upon the sale of the property. The parties used the $60,000.00 to purchase the land at Property S on which they subsequently built a home.
No evidence was provided about the value of the wife’s motor vehicle in 1989. The wife said that she had purchased the motor vehicle eighteen months prior to cohabitation for $5,000.00. The husband said that in 1989 it was a rust bucket and was of little value. I have no reason to prefer the evidence of one party to the other on this topic.
The wife’s evidence was that she commenced the [M] Policy in 1988 and she estimated that she had $3,000.00 in it in 1989. No documentary evidence was provided to corroborate this claim.
The wife’s evidence was that she cashed in this policy in October 1995 and received $10,236.00 which she paid off the Property S mortgage.[11] How the policy increased from $3,000.00 in 1989 to $10,236.00 in 1995 given that the wife was not working for most of this period was not explained.
[11] In her affidavit the wife said that it was paid off the Property W property but she corrected this in oral evidence.
The husband said that at the commencement of cohabitation he had the following assets:
i)a Brock Holden Commodore;
ii)2 motor bikes;
iii)an interest in [F] Super.
The wife agreed that the husband had the motor vehicle but made no admission about its value. There was no evidence about the value of the motor bikes. The husband said that he later sold the bikes for $7,000.00 in total and used the money for household expenses. This evidence was not challenged.
The husband’s [F] Super entitlement commenced in 1981 when he joined the police force. There was no evidence of its value in 1989.
The husband said that he had little by way of savings at the commencement of cohabitation but that in 1990 he received $17,000.00 compensation for a motor vehicle accident which occurred prior to 1989. The wife did not refer to the accident claim and asserted that the husband had $10,000.00 in savings in 1989.
This evidence by the wife about the husband’s savings may be a reconstruction following on from what the wife believed was paid off the [T] mortgage in 1991. I prefer the husband’s evidence that he received $17,000.00 from a motor vehicle claim as it seems unlikely that he would invent this odd amount but what happened to the money if it was not used to pay off some or all of the [T] mortgage I am unable to say.
In summary doing the best I can the initial contributions look like this:
Wife:
[T] Equity probably about 10,000.00 plus half the deposit (amount unknown but mortgage balance in 1991 suggests it could have been a relatively small amount) Savings, which probably but not certainly ultimately went into [T] Between 10,000.00 and 15,000.00 [M] Superannuation 3,000.00 Motor vehicle Unknown value Likely total 23,000.00 to 28,000.00 plus an unknown amount
Husband:
Savings possibly a small amount Motor vehicle Unknown value Motor bikes 7,000.00 when sold but sale date unknown MVA compensation for pre-cohabitation motor vehicle accident 17,000.00 [F] Super Unknown amount Likely total 24,000.00 plus unknown amount
Nothing stands out as suggesting that there was a vast disparity between the initial contributions of the parties.
Financial contributions during the relationship
From 1989 until June 1992, the husband worked full time as a police officer. He was injured in August 1992 and described himself as being on ‘sick report’ or light duties after that. The extent to which he thereafter continued to receive income from the police and the extent if any to which he was thereafter reliant on Centrelink benefits I am unable to say.
When the husband was discharged in 1995 he received $42,000.00. The wife said that this money was used for living expenses, the husband said that it was paid off the Property W mortgage. Property W was not purchased until 1996 and it is possible that the money was used partly for both purposes.
No evidence was provided about the makeup of the $42,000.00.
Pursuant to the PRSA the husband would have been entitled to receive a refund of his superannuation contributions, plus interest, upon his discharge, although he would also have been entitled to leave some of his superannuation in the scheme, and it is to be noted that he still has [F] Superannuation.
The $42,000.00 thus might have included a refund of some of the husband’s superannuation contributions but it might also have included pro-rata long service leave and unused annual leave.
The husband was a police officer for about eight years prior to cohabitation and received the $42,000.00 six years into the relationship. It is reasonable to infer that some part of the $42,000.00 was attributable to his service during each period, but in the absence of evidence I cannot say more than that.[12]
[12] I am conscious of the fact that I have already referred to the husband’s superannuation as an asset he had at the commencement of cohabitation. However I was unable to assign a value to it and do not consider that referring to it again here is double counting.
The evidence though scant suggests that between late 1995 and about 1998 the parties were in receipt of Centrelink benefits.
In about 1998 the husband commenced receiving fortnightly pension payments following his successful appeal. He was also awarded $65,000.00 which he described as back-pay, but it was his evidence that the $42,000.00 he had previously received was deducted from this and that he received net $23,000.00. The $23,000.00 must be treated as wholly attributable to the relationship.
It was the husband’s evidence that the $23,000.00 was paid off the Property W mortgage.
From 1999 until separation in 2005, the husband was in receipt of his fortnightly pension and thus made a consistent contribution to the financial support of the family. He also worked as a [omitted] during this period but the parties agreed that the husband’s income from this occupation was limited.
In 2001 the husband inherited $25,000.00. It was his evidence that he gave the money to the wife to pay into the mortgage. The wife’s evidence was that the amount paid off the mortgage at this time was $18,000.00 not $25,000.00. The wife produced a bank statement to corroborate her evidence and I accept it, but there was nothing to suggest that the balance of the inheritance was used for something other than family purposes.
The wife was in paid employment from 1989 until late 1990, just prior to [W]’s birth. She returned to work part time as a [omitted] between 2000 and 2002 and was also in paid employment between 2003 and 2004. No evidence was provided about her income.
The husband’s financial contributions during the relationship clearly exceeded those of the wife. For about 13 of the 16 years of the relationship he consistently brought income into the home. The wife by comparison was employed for only the first two years of the relationship and for about three years or so in total between 2000 and 2004. It is reasonable to infer that some part of the $42,000.00 the husband received in 1995 was attributable to his pre-cohabitation police service and he contributed $25,000.00 from an inheritance received in 2001 to either the mortgage or family purposes.
Homemaker, parenting and welfare contributions and other non financial contributions
From 1990 onwards the wife carried out a significant role as homemaker and parent.
The wife ceased paid employment in late 1990. The husband continued to work until August 1992 and he worked long hours. I accept the husband’s evidence that he carried out some parenting activities and did some work at home when he was not on duty but the majority of the parenting and homemaker tasks during this period were done by the wife.
In August 1992 the husband was injured and between that time and late 1995 he suffered from a variety of health problems and a very heavy burden was cast upon the wife at home.
The wife said as follows:
In about June 1992 [the date the wife ascribed to the husband’s injury] the Respondent suffered an injury to his ankle whilst at work. He was unable to work. Unfortunately, as time went on the injury worsened. The Respondent had various operations. He was incapacitated for periods. He was only able to get around by using crutches. On such occasions I had to carry out numerous tasks for the Respondent as he was unable to do such tasks for himself. I had to fetch him things as it was difficult for him to get around. I had to drive him everywhere he wanted to go.
The Respondent also developed depression as a result of his injury. He was placed on anti-depressants however they did not seem to assist. He became very irritable and withdrawn. He also became short-tempered.[13]
[13] Wife’s affidavit paragraphs 55, 56
The wife’s evidence was that between June 1993 and September 1993, starting when [W] was 2½ and [X] about 3 months old, the husband was on “increasing amounts of a medication which seriously affected [his] faculties.”[14]
[14] Husband’s affidavit paragraph 32
The husband conceded that the health problems he suffered in the initial few years after his injury affected his ability to care for the children and help out at home.
It was the husband’s case that after the parties moved to Property W he was more available to help out at home. In his affidavit he provided some detail about his parenting and homemaker contributions from 1996 onwards. He also went into considerable detail about the physical work he did on or organised for the home.
The wife was not initially prepared to give the husband much credit for making non-financial or parenting or homemaker contributions but she made some concessions during cross-examination. She conceded for example that in 2000 when she went to Sydney to do her [omitted] refresher course the children remained in Property W in the care of the husband.
Mr T and Mr G provided some corroboration of the husband’s evidence about his involvement in tasks at home as well as his involvement in doing repairs and renovations at the Property W property. I accept the husband’s evidence about his non-financial and homemaker and parenting contributions.
However while I am satisfied that the husband made non financial contributions and contributions as a homemaker and parent to a much greater extent than the wife was willing to acknowledge, I am also satisfied that even after the parties reconciled and moved to Property W and the husband became more available the wife continued to be the primary homemaker and parent.
Between 2000 and separation in 2005 the wife was sometimes in paid employment and the husband probably spent more time at home during this period than the wife did, but I consider it more likely than not that because of her experience in the role and her relationship with the children the wife continued to do more of the homemaker and parenting tasks even when she was also in paid employment.
I am satisfied that the wife’s contributions as homemaker and parent and to the welfare of the family over the totality of the relationship exceeded the husband’s, and that between 1992 and 1995 she made these contributions in particularly arduous circumstances.
Post separation contributions to the non-pension pool
After separation the parties reached an agreement that the husband would pay the wife $1,200.00 per month for child support and as a contribution to the mortgage repayments and other expenses. The husband paid this amount from 2005 until early 2010.
The husband was reliable with his monthly payments and his contribution was a generous one given his income, but his contributions between 2005 and early 2010 even if they are all treated as child support amounted to only $75.00 per week per child. The financial support of the children therefore fell more heavily on the wife during this period.
The wife of course had the benefit of the $9,350.00 taken from the mortgage redraw and the fact that the wife was able to save government benefits, family gifts and tax refunds between 2005 and April 2009 to the point where she accumulated $40,000.00 rather suggests however that she was able to manage financially using the contribution by the husband, her own income from employment and the government benefits to which she was entitled.
It was the husband’s evidence, and I accept it, that he also made some additional financial contributions for the children’s benefit during this period but even accepting this evidence and taking into account the matters in the preceding paragraph I am satisfied that the financial support of the children during this period fell more heavily on the wife.
In early 2010 the husband commenced paying child support at a lesser rate ($450.00 per month according to the wife and $518.00 per month according to the husband) presumably in accordance with a child support assessment.
Responsibility for the day to day care of the children fell predominantly on the wife after separation.
Between May 2005 and the end of 2006, the husband visited the former matrimonial home on weekends and saw the children but he had little or no involvement in their day to day care. At the end of 2006 the wife told him that she was not happy with him coming inside the house and he thereafter visited the home every two or three weeks and remained on the porch.
Since 2007 the husband has spent almost no time with [W] and [X].
[Y] and [Z] stayed overnight with the husband in [P] from time to time in the years after separation and he took these children away on two holidays (one of which also involved [X]) but in June 2009 the husband left [P] and moved to [N]. He admitted that he did so because he could not cope with living close to the children and being unable to spend time with them.
I accept that the husband may have been ready and willing to spend more time with the children than he was able to, but there was no evidence that the wife set out to exclude him.
I am satisfied that the wife’s contributions in the five year post-separation period to the financial and non-financial support of the children considerably exceeded those of the husband.
I take into account that after separation the husband continued to pay $14.00 per month into the wife’s [M] superannuation fund. He did this until July 2010, when the wife put a stop to it after reading about it in the husband’s trial affidavit.
The other relevant post separation issue is that the wife has been in employment since August 2005 and must have accumulated additional superannuation as a result. No evidence was provided however about how much of the wife’s superannuation had increased post separation and I can therefore do little with this issue.
Conclusion about contributions to the non-pension pool
The husband argued that contributions to this pool should be assessed 55/45 in his favour “principally because of the lump sums brought in.”
The wife argued that contributions should be assessed 70/30 in her favour because of her homemaker and parenting contributions during the relationship, some of which were carried out in onerous circumstances, and because of her substantial financial and non-financial contribution to the care of the four children post-separation.
The lump sums of $42,000.00 and $25,000.00 were significant, especially when considered in comparison to the small pool now under consideration, and some of the money was paid directly off the home loan. However while the $25,000.00 came in four years prior to separation the $42,000.00 came in only six years into the sixteen year relationship, and while it is reasonable to infer that some of it was attributable to the husband’s pre-cohabitation employment, I cannot ascertain how much that was, and some of it must also have been attributable to his membership of the police force during the early years of the relationship.
The wife’s homemaker and parenting contributions between August 1992 and November 1995 when the husband was very ill and could not drive and when the three children then born were all under the age of five, were made in particularly onerous circumstances, and her contributions to the parenting of the four children post-separation over a period of five years considerably exceeded the husband’s.
To paraphrase what the Full Court said in Pierce and Pierce,[15] it is necessary to weigh the significant cash contributions of the husband with all the other relevant contributions of both the husband and the wife. I am satisfied in all the circumstances of the case that the matters especially relied on by each party cancel each other out and that contributions to the non-pension pool should be assessed as equal. This would entitle each party to $141,238.19 from this pool.
[15] Pierce & Pierce (1999) FLC 92-844
Contributions to the pension
The husband’s counsel urged me to find that the wife had at best made a 10% contribution to the husband’s pension entitlement. He emphasised that the husband was in the police force for 11 years prior to his injury but was with the wife for only two of those years.
There are flaws in this argument. The parties were together for more like three years prior to the husband’s injury than two, and the use of a ‘time served’ basis to calculate contributions has been disapproved of by the Full Court.
In M & M ,[16] a case which also involved a former police officer who was in receipt of a hurt on duty pension, the Full Court said as follows:
We do not find a contribution assessment based on a calculation of years of marriage divided by the years the member had been in the fund helpful.
[16] M & M (2006) 37 FamLR 150
In T & T[17] Watt J observed that ‘time served’ was a particularly inappropriate method to use in the assessment of contributions to a s.10 PRSA pension. He said as follows:
[17] T & T (supra)
The amount of the husband’s current superannuation interest is not primarily based upon the amount of time that the husband was in the SAS Trustee Corporation Pooled Fund.
It is based on:-
i)The husband being hurt on duty;
ii)The circumstances in which the husband was hurt on duty;
iii)The amount of the husband’s salary at the time that he was hurt on duty (which indirectly has some connection to the amount of time the husband was with the police service but primarily relates to the level to which he had been promoted in the police service).[18]
[18] T& T (supra)
Two things led directly to the husband in the case before me being in receipt of a hurt on duty pension, namely that he joined the NSW Police Force prior to 1988 and that he was hurt on duty. The wife did not make a direct contribution to either of those matters.
There was no evidence that the wife made any contribution to the level of salary the husband was receiving in 1992. No evidence was given about his salary at all. The extent if any to which the move to Sydney affected his salary for the better was not the subject of evidence and there was no evidence that the wife made a sacrifice in moving from [N] to Sydney in order to assist the husband to further his career.
As acknowledged by the husband’s counsel however the wife did make an indirect contribution to the husband continuing to earn an income after 1990, in that she gave up her employment after [W] was born and accepted a traditional role as homemaker and parent, enabling the husband to continue in his employment unhampered by those responsibilities.
The wife did not contribute to the husband being injured, but she did play a significant role in caring for him between 1992 and 1995 when his condition was at its most acute. This role was made particularly difficult because the wife was also at the same time caring for first one and later two and three very young children.
Another salient factor is that in order to obtain his pension, the husband had to appeal and he had to pursue the appeal for several years. The husband was in a fragile emotional state after his injury, and although the acute stage of this appears to have passed after late 1995, it is reasonable to infer that the wife’s support was very important to him while he was pursuing the appeal. The wife also made a very important contribution to the care of the children and the household during this period.
The wife’s counsel urged me to find that the contributions of each party to the pension asset should be assessed as equal. This is not appropriate, given that the central reason for the existence of the pension is a personal injury to the husband. However taking into account all of the matters outlined above I assess contributions to this asset as 30% by the wife and 70% by the husband. This would entitle the wife to $227,090.70 and $529,878.30.
A consideration of the matters in s.79(4)(d), (e), (f) and (g)
As to s.79(4)(d), the orders sought by the wife will not affect the husband’s earning capacity. They will affect his income, but this can be considered when dealing with s.75(2) matters as required by s.79(4)(e). Section 79(4)(f) has no relevance in these proceedings and as to s.79(4)(g) I have taken the payment of past child support into account in assessing contributions and I will consider the payment of future child support pursuant to s.75(2)(na).
I therefore turn to a consideration of the s.75(2) matters.
Findings about s.75(2) matters
The wife is 48. She is a [occupation omitted] and currently has two part time jobs from which she earns $527.00 per week.
Until August 2009 the wife had a full time job with [omitted] and earned $1,000.00 per week.
In her affidavit the wife said that she resigned from this job because the hours increased and she was working seven days a week and could not cope with working such long hours and caring for the children. However during cross-examination she conceded that she gave up this job because she did not like being on call on weekends and did not like the full time hours.
There was no evidence that the job compromised the wife’s ability to parent the three youngest children, who were 16, 15 and 12 in August 2009.
The wife’s evidence was that she suffered from coeliac disease, anxiety and depression. She agreed that her coeliac disease was controlled by diet. She said that she took medication for her anxiety condition. No medical evidence was provided to establish that the wife suffered from any medical condition which was likely in the future to affect her ability to work or limit the hours for which she could work.
The wife admitted during cross-examination that she was hoping to increase her hours in the future.
I am satisfied that the wife has the capacity to earn $1000.00 per week or $52,000.00 per annum if she chooses to do so.
The wife was out of the workforce for 10 years while the children were younger, but there was no evidence about the impact if any which this absence from the workforce had on her income earning capacity. This absence from the workforce would however have had an effect on the wife’s ability to accrue superannuation.
All four children still live at home. It was the wife’s case that she would need to support all of them for some time into the future.
[W] is an adult (aged 19) and has left school and is unemployed. The wife said that he was depressed and that she expected to have some degree of financial responsibility for him for some time. There was no medical evidence however to support a claim that [W] was likely to remain indefinitely dependent on the wife.
[X] will be 18 in 2011 and will complete Year 12 this year. The wife said that she hoped that [X] would attend university and said that in that event she would be required to continue to support [X], but there was no evidence which would allow me to assess the likelihood of this occurring.
[Y] is 16 and will be in Year 11 in 2011. [Z] is 13 and will be in Year 8.
The wife’s evidence was that [W] received a youth allowance of $34.87 per week and that [X] worked part time and earned $70.00 per week.
The wife receives $518.50 per month child support from the husband, and given the source of the husband’s income she is assured of receiving child support as assessed for so long as a child support assessment is in place. The child support currently being paid however equates to only $40.00 per child and leaves the wife with the overwhelming burden of supporting the three youngest children financially.
If a splitting order is made in respect of the husband’s pension as the wife proposed, the husband’s income will reduce and the child support payments will also reduce. On the state of the evidence I can say nothing more precise.
The wife has not re-partnered and is not responsible for the support of any other person.
On the basis of contributions the wife is entitled to $141,238.19 from the non-pension pool. If she retains the home, her car, furniture, [I] shares and her accumulation superannuation she has assets to the value of $245,729.02. She would need to pay the husband $104,490.83 in order for him to receive his share of the non-pension pool on the basis of contributions.
In this scenario the wife would retain liability for the mortgage ($41,507.00). She also owes $3,000.00 on her credit card and owes some money for legal fees. She said that she had been told that her unpaid legal fees would be “something in the order of $10,000.00 to $15,000.00” by the conclusion of the proceedings.
On the basis of contributions the wife is entitled to $227,090.70 from the pension pool. If a splitting order is made she can either take this in cash or roll it over to a superannuation fund. The impression I gained at the hearing was that the wife would take her entitlement in cash.
The husband is 51. He receives a pension of $800.00 per week. He is not precluded from also working in paid employment but he has not done this since February 2009.
The husband claimed that he had a plethora of health problems and no capacity for paid employment. He said that he had problems with his hands, ankles, knees, lower lumbar discs and the sciatic nerve distributions of each leg, that he suffered from debilitating headaches and migraines, frequent idiopathic nosebleeds and pain and deepening depression and had dental problems and diminishing vision. He said that he was lethargic, slept excessively and required regular melanoma checks.
The husband provided no medical evidence to substantiate his claims and there was no evidence that he had been classified by the police as totally unfit for paid employment, as opposed to unfit to exercise the functions of a police officer.
The wife submitted that in those circumstances it was not open to the court to find that the husband had no capacity for paid employment.
The wife pointed to the fact that between 1999 and 2005 the husband
…worked – on a sporadic basis – either for himself or as an employed [omitted]. He also worked – cash in hand – fixing computers.[19]
She speculated that he might be able to obtain work in unskilled occupations such as cleaner, service station attendant and newsagency employee.
[19] Wife’s affidavit paragraph 85
I acknowledge the lack of medical evidence to substantiate the husband’s claim that he is suffering from medical or mental health conditions which render him unfit for paid employment.
I am also conscious of the fact that the husband gave evidence of doing a considerable amount of physical work on the Property W property prior to separation, including painting the interior of the home, removing a kitchen from a house in [P] and re-installing it at the home, painting 70% of the exterior of the home, climbing onto the roof and painting it with bitumen, building a chicken coop in the back yard and preparing a concrete slab in the backyard for two aviaries to be placed on. This certainly establishes that up until 2005 the husband was able to exert himself physically from time to time if he chose.
It does not automatically establish however that the husband is likely to be able to obtain or maintain paid employment in 2010, and his employment history creates considerable doubt about whether he has a capacity to earn an income working for an employer or as a self employed person.
The husband was a police officer from 1981 until 1995. He was deemed unfit to continue that employment. In 1995 he commenced a computer course at [omitted] but did not complete it. He denied that he had ever earned any substantial amount fixing computers and I accept his evidence in that regard. He subsequently did the [omitted] course and then worked as a [omitted] for ten years, but the wife’s evidence was that he worked sporadically and the husband’s evidence (unchallenged by the wife who did not seek to tender any of his income tax returns) was that at best he earned a few thousand dollars a year net from this employment.
The husband gave up this employment in February 2009, prior to the commencement of these proceedings, and has not worked since.
Given that history I cannot be satisfied that the husband has a capacity to earn much income from paid employment in the future. However I note that he did refer in his affidavit to an interest in doing a [omitted] course and if he becomes a qualified [occupation omitted] it is difficult to accept that he would not then have the capacity to generate some income, as opposed to simply offering his services as a volunteer.
The husband is entitled to $141,238.19 from the non pension pool. He has the [R] interest, a motor vehicle, his accumulation superannuation and household contents which are worth $36,747.35 in total. He is entitled to $104,490.83 from the wife if she retains the remaining assets in this pool.
The husband has a debt of $18,500.00 for legal fees. He also has a police credit union loan for $20,000.00 which he took out to pay for earlier legal fees. If the husband received a cash payment from the wife he could pay off these debts. Otherwise he will be obliged to continue repaying the loan from income and will have to find some other way to pay his current legal fees.
The husband is entitled to 70% of the pension pool but perhaps more importantly from the perspective of the husband’s income the wife is entitled to 30%. If a splitting order is made in line with contributions the husband’s fortnightly income would reduce by 30%.
The husband’s case was that he would not be able to maintain a reasonable standard of living if he was required to forgo any of his pension.
On a weekly basis the husband receives $800.00 and pays $12.00 income tax. His weekly expenses include $250.00 for rent, $90.00 repayment to the Police Credit Union, $119.00 child support, $42.00 health insurance premium and $50.00 per week storage costs for furniture. On this basis he then has $237.00 left to pay for food, electricity, motor vehicle expenses and other costs. It was the husband’s case that in the past he had required assistance from charities to help him meet some of his outgoings. If his income was reduced by 30% he would have nothing left to live on after paying his expenses save for the difference between his current child support assessment and the new assessment and the few dollars by which his income tax might reduce.
The husband’s financial situation will of course improve in the future. His child support will reduce as the children one by one turn 18 and leave school. [X] will finish school this year and [Y] next year. [Z] will turn 18 in 2015. The personal loan will be paid off in 2016. The husband could if he chose either move his furniture into his rented accommodation or sell surplus furniture and save himself the weekly storage payment of $50.00.
The husband has not re-partnered and he is not responsible for the support of any other person.
Whether an adjustment should be made in favour of either party for s.75(2) matters
The issue of whether there should be an adjustment in favour of either party for s.75(2) matters is inextricably bound up with the issue of whether a splitting order should be made in respect of the pension.
The wife sought a splitting order, and on the basis of contributions she is entitled to a base amount splitting order in the sum of $227,090.00.
However the wife ‘owes’ the husband $104,490.83 from the non-pension pool. If a splitting order is made in line with contributions, the wife would receive $227,090.00 which she could obtain in cash but she would immediately have to hand $104,490.83 back to the husband. As the husband’s preference is to leave his pension intact, the logical course is to deduct the $104,490.83 from the $227,090.00 and (if a splitting order is to be made at all) make it in the sum of $122,599.17.
It was the husband’s case that regardless of the fact that the wife was entitled to some of the pension on the basis of contributions, and regardless of the fact that there was no $122,599.17 in the pool to compensate her if a splitting order was not made, no splitting order be made. In support of his case he relied on the Full Court decision of M & M[20].
[20] M & M (2006) 37 FamLR 150
In M & M a similar dilemma faced the court to the one confronting me, namely that on the one hand there was a non-pension pool of modest value and consisting largely of the equity in the former matrimonial home, and on the other hand, dwarfing the other pool in value, there was the capitalised value of the husband’s s.10 PRSA pension.
Coleman J hearing the matter at first instance declined to make a splitting order, thus leaving the husband’s pension entirely with the husband, and ordered that the wife retain the equity in the former matrimonial home and pay the husband $98,000.00.
The wife appealed and the Full Court allowed the appeal. They revoked the order for the wife to pay money to the husband, but still left the husband’s pension untouched.
The Full Court found (on a rough basis using a time served calculation) [21]that the wife was entitled to $330,850.00 of the pension on the basis of contributions. The husband’s equity in the home was worth only about $150,000.00, and therefore the outcome in dollar terms was that the wife had to forego $330,850.00 in exchange for receiving $150,000.00 (albeit as the legislation then stated the wife was foregoing fortnightly payments rather than a lump sum). Explaining this decision the Full Court said as follows:
…we would observe that, given the emphasis on the husband’s [S] Superannuation interest and its relative value in this case, it needs to be borne in mind that the husband’s pension payments are also his income and pension payments whilst recognising their real and substantial present day value, are derived at this point in time because of his disability. While he may many years in the future receive a lump sum, or engage in some employment other than in the Police Force, it must be remembered that the wife is to receive the immediate capital benefit of the equity in the house.[22]
[21] The Full Court considered itself forced to use this basis due to the absence of other evidence available to assist it to assess contributions to the pension.
[22] M & M (2006) supra
It is important to note however that the Full Court in M & M did not have to grapple with the issue of whether a splitting order should be made because by the time it came to re-determine the matter the wife no longer sought a splitting order, rather she sought to retain the equity in the home and to receive “a cash sum of such amount the court considered appropriate.” There was no cash sum in the pool to give the wife and the Full Court awarded her only the equity in the home.
The wife in the case before me does seek a splitting order.
In M & M the Full Court when discussing the reasons for decision of the trial judge said as follows:
It is clear to us from his reasoning in paragraphs 98 to 101, and then from 112 and 113 that [Coleman J] did not consider that a splitting order was appropriate in this case, and that it was preferable to make any necessary adjustment in the wife’s favour out of the other assets. His Honour’s reasons for not favouring a splitting order included the desirability of preserving the husband’s income stream and, also the concern that if the husband were to return to work as a police officer, his pension payment would cease (as also, presumably, would any payment being made to the wife pursuant to a splitting order).
His Honour was entitled to rely on these matters as reasons for not exercising the discretion to make a splitting order, provided that he was able otherwise to make orders in relation to the other assets of the parties which were just and equitable having regard to all relevant matters referred to in s 79(4) including the parties’ respective contributions to their respective superannuation entitlements.
The issue in the case before me is whether I can, without making a splitting order, “make orders in relation to the other assets of the parties which [are] just and equitable having regard to all relevant matters referred to in s 79(4) including the parties’ respective contributions to their respective superannuation entitlements”.
In global terms a refusal to make a splitting order results in an adjustment in the husband’s favour of about $122,000.00, a significant adjustment, and a number of matters incline me to the view that I should not make this adjustment and that a splitting order of some description should be made.
If no splitting order is made, the wife will retain the former matrimonial home subject to the mortgage (net $198,493.00), her [I] shares, furniture and her motor vehicle ($11,681.00) and her accumulation superannuation ($35,555.03) but she will be left with debts namely the mortgage, her credit card debt and (unless her lawyers allow her to pay her fees off out of income) a loan to assist her to pay her legal fees of between $10,000.00 and $15,000.00.
The wife has an income earning capacity of $1,000.00 per week but this is a modest income earning capacity. She has the care of the three youngest children and [Z] will not complete school until 2015.
The husband can be relied up to pay child support but the amount the wife receives will be constrained by the husband’s capacity to pay, and the financial burden of caring for the children will fall much more heavily on the wife while the children are still dependent on her.
The likelihood is high that if any of the children do need assistance past the age of 18, whether because of illness or because they go on to tertiary education or for any other reason, it is the wife who will be called upon to provide that assistance.
Unless a splitting order is made, at least to the extent of enabling the wife to pay her debts, she will have to meet the financial burdens associated with the children while also paying off debts.
If a splitting order is made in accordance with the wife’s contribution based entitlement the wife could pay off her mortgage and pay her legal fees. She would also be left with a cash buffer of about $56,507.00 which ameliorate to some extent the financial burden she will bear in relation to the children.
Another issue is that while the wife will go forward into the future with both a home and an income, whereas the husband will only have an income, the husband’s income is guaranteed for life and indexed to keep pace with the cost of living. The wife’s income is dependent on her exertions and she is at the mercy of unexpected events such as illness, accident or redundancy.
The wife’s counsel also urged me to take into account that the husband would likely be in a better position than the wife in retirement because he would have the indexed pension while the wife might not have much superannuation. The wife will continue to accrue superannuation over the next 17 years however and many things can happen in such a period and it is difficult to make a realistic assessment of what the parties positions are likely to be in retirement.
Two matters on the husband’s side of the ledger need to be thrown into the mix, that is, the effect of a splitting order on his income and the fact that he has debts for legal fees which total about $38,000.00.
The husband of course sought an order not only that there be no pension split but that the wife pay him $40,000.00, and if this order was made he could clear his debts. However I am not prepared to order that the wife borrow money to pay the husband’s debts and the only place the $40,000.00 could realistically come from would be an increased superannuation split which the husband clearly did not want.
If the wife receives $122,000.00 of the husband’s pension his income will reduce by 16% or 128.00 per week, to $672.00. If the husband has to pay rent and child support and repay the $38,000.00, this income will not leave him with a great deal to live on, although his situation will of course improve in later years once the children are older and his debts are paid off.
The wife’s counsel conceded that if a splitting order was made in favour of the wife so that she received a lump sum immediately in cash, some discounting of the amount the wife was to receive would be warranted, given that the husband for the next few years at least would only receive a fortnightly pension.
Another reason to discount the amount is that the wife will with a lump sum be able to clear her debts including her legal fees while the husband will be left with significant debts to pay from income.
Another way by which a more equitable balance could be struck between the parties, in addition to discounting the superannuation split from the pension in order to take account the matters on the husband’s side of the ledger, would be to reduce the split of the pension and transfer to the wife the husband’s two accumulation funds worth $30,747.35. The wife does not have much superannuation and this would provide her with something extra for use in retirement.
If the accumulation funds are transferred the wife then on a simple arithmetical basis she would be entitled to $91,851.82 from the pension. If this was discounted by 15% to take account of the advantage to the wife of having immediate access to cash to pay off her debts, and the disadvantage to the husband inherent in him being required to pay a significant debt on reduced income, the wife would receive $78,074.05 from the pension pool.
In this scenario the husband’s pension would reduce by about 10.5% or $84.00 per week.
I acknowledge that the husband will face a heavy burden over the next few years while his debts for legal fees are current, but the wife has responsibilities for the children and has an entitlement to a share of the pension on the basis of contributions which should not lightly be taken away from her, and given the very low rate of income tax the husband pays the fact that he loses 10.5% of his pension should not in the longer term cause a serious diminution of this standard of living.
Whether the outcome is just and equitable
As a result of the orders I intend to make the wife will receive:
Property W, net 198,493.00 Motor vehicle 4,681.00 [I] shares 1,000.00 Household contents 6,000.00 Split from husband’s pension 78,074.05 Superannuation in accumulation funds 35,555.03 Superannuation split from the husband’s accumulation funds 30,747.35 Total 354,550.43
The husband will receive
[R] interest 5,000.00 Household contents 1,000.00 Police Pension 678,894.95 Total 684,894.95
This outcome results in the wife receiving ‘only’ 34% of the pool but it also results in the husband receiving only his pension, and being left with a significant debt for legal fees.
Looked at another way the wife will into the future have the advantage of owning an unencumbered home. The husband however will have the advantage of a fixed income for life, an income moreover which will keep pace with the cost of living.
The husband has the right to commute his pension, and he is not precluded from home ownership in the future, although he may only be able to achieve it at the cost of a significant reduction in his income.
Balancing all of the relevant matters I consider that the outcome is just and equitable.
Procedural fairness as required by the Family Law Act has been given to the Trustees of all the relevant superannuation funds and there is no impediment to a splitting order being made.
The husband initially applied to have some specific items of property given to him including his personal papers, some cookbooks and an aboriginal painting. He also sought an order that the wife make photographs available to him so that he could scan them.
The wife said that she did not have the cookbooks and that she wanted to retain the aboriginal painting, which had been a wedding gift from her brother. The issue of the photographs was not pursued.
The husband ultimately sought only an order that:
within 14 days the wife make available for the husband’s collection any documents belonging to the husband, and in the wife’s possession.
To make such an order when no documents are specified and when the parties have been separated for five years is almost to invite further (probably fruitless) litigation and I do not intend to make the order. I do trust however that if there are documents in the wife’s possession which are important to the husband but of no value to the wife, she will ensure that the documents are given to the husband as soon as possible. At the same time, the husband must accept that documents do get lost or mislaid and he must be prepared to let the matter go if the wife says that she does not have some or all of the documents. The parties have four children and the children do not need there to be acrimony between their parents because of a dispute over documents.
I certify that the preceding two hundred and twenty-six (226) paragraphs are a true copy of the reasons for judgment of Terry FM
Associate:
Date: 4 March 2011
3
2
2