Dobbs and Dobbs
[2018] FamCA 66
•15 February 2018
FAMILY COURT OF AUSTRALIA
| DOBBS & DOBBS | [2018] FamCA 66 |
| FAMILY LAW – PROPERTY – where the assets were modest but disputes arose over issues such as “add backs”, money lost in a failed business and where the wife had remained in the former home but not paid the mortgage – where there were disputes about contribution which were related to money issues but both parties had made transfers of their property to the other for benefits. Orders made. |
| Evidence Act 1995 (Cth) Family Law Act 1975 (Cth) |
| Browne & Green (1999) FLC 92-873, Kowaliw & Kowaliw (1981) FLC 91-092 Rosativ Rosati (1998) FLC 92-804 |
| APPLICANT: | Mr Dobbs |
| RESPONDENT: | Ms Dobbs |
| INDEPENDENT CHILDREN’S LAWYER: |
| FILE NUMBER: | MLC | 8793 | of | 2015 |
| DATE DELIVERED: | 15 February 2018 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 9 February 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Mccreadie |
| SOLICITOR FOR THE APPLICANT: | Calley Rajah Family Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Macfarlane |
| SOLICITOR FOR THE RESPONDENT: | Costanzo Lawyers |
| COUNSEL FOR THE INDEPENDENT CHILDREN’S LAWYER: | Ms Kildea |
| SOLICITOR FOR THE INDEPENDENT CHILDREN’S LAWYER: | Victoria Legal Aid |
Orders
That the husband transfer to the wife all of his interest in the house at B Street, Suburb C.
That the remaining funds from the sale of the property at F Street after allowing for the anticipated capital gains tax liability, be immediately paid to the husband.
The husband retain and the wife relinquish any interest in the parties MISA account.
That the wife forthwith place the house at D Street, Suburb E on the market for sale on terms to be agreed and failing agreement, upon order of the court. Upon the settlement of the sale, the proceeds be dispersed as follows:
(a)First, to pay all costs, commissions and expenses of the sale;
(b)Secondly, to discharge the mortgage to the Commonwealth Bank;
(c)Thirdly, to set aside the sum of $108,000 to cover the capital gains tax liability arising from the sale; and
(d)Fourthly, to substitute the net remaining balance for the figure set out as the net equity anticipated from the sale of D Street in paragraph 42 of the reasons for judgment this day.
That upon the completion of the matters required of the parties in order [4] hereof, the equity in the assets set out in paragraph 42 of the said reasons be divided as to 55 per cent to the wife and 45 per cent to the husband.
That if necessary, the wife pay to the husband (within such time as is agreed, and failing agreement within 30 days after the calculations are concluded in order [5]), such sum as is necessary to enable the husband to receive his entitlement under order [5].
If the wife fails to make the payment required as contemplated by order [6], she forthwith thereafter place the house at B Street on the market for sale on terms and conditions to be agreed and failing agreement as ordered by the court and the proceeds of the sale be applied as follows:
(a)First, to pay all costs, commissions and expenses of the sale;
(b)Secondly, to discharge the mortgage to the Commonwealth Bank;
(c)Thirdly, to substitute the figure set out as the value of B Street in paragraph 42 of the reasons for judgment this day; and
(d)Fourthly, to divide the assets set out in paragraph 42 of the reasons for judgment according to order [5].
Pursuant to s 90MT of the Family Law Act 1975, whenever a splittable payment becomes payable to the husband in respect of his interest in the self-managed superannuation fund held in BT Investor Wrap Personal Super Plan, the wife be paid the base amount which is fixed in the sum of $54,000 and there be a corresponding reduction in the entitlement of the husband in the said fund.
The operative time for the purposes of order 8 is the 10th day after the date of these orders.
That the husband retain, and the wife relinquish any interest in, the property in his possession not otherwise covered by these orders.
That the wife retain, and the husband relinquish any interest in the property in her possession not otherwise covered by these orders.
That save as to issues of costs, all outstanding applications between the parties are otherwise dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Dobbs & Dobbs has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 8793 of 2015
| Mr Dobbs |
Applicant
And
| Ms Dobbs |
Respondent
REASONS FOR JUDGMENT
Mr Dobbs (the husband) seeks orders for a property settlement arising out of his marriage to Ms Dobbs (the wife). The wife joins in the proceedings also seeking an alteration of the interests in the property most of which they own jointly. Each agrees that it is just and equitable to make orders as their legal interests ought not be left as they are.
Much of the parties’ litigation had been about their 9 year old daughter but that issue was compromised and, at their request, I made final parenting orders by consent.
The remaining financial issues have been extant for over two years and, with the benefit of hindsight, should have been resolved earlier. Both parties had the benefit of legal representation.
The husband
The husband is self-employed after previously working in a company from which he resigned in 2012. At that time, he received a payment of his entitlement of $117,000. He is now earning a taxable income of about $50,000 per year but he has the benefit of a corporate structure which enables his motor vehicle, telephone, depreciation and the like to be claimed as deductions. That income was a bone of contention for the wife.
The husband’s taxable income is controversial because he runs his business through that entity for tax minimisation purposes. He quaintly described what payments the business paid, and those he paid, but the reality is that it is all him. He distracted attention from the precise details of his financial positon by saying that he followed accounting advice and did not understand the finer details of the system he was using. I found it puzzling that discoverable documents were still being exchanged as the hearing proceeded. In addition to the financial documents about the husband’s business, there was a dispute about a company loan relating to drawings giving rise to Division 7A of the Income Tax Assessment Act 1997 (Cth) considerations but there were also uncertainties about the wife’s superannuation entitlement. It was only at the conclusion of the case that counsel seemed to reach agreement about what each party had. These disputes had been in the court system since 2015.
Because the reference was made to a “Division 7A loan”, I asked how it arose and the husband seemed unsure. I did not have the benefit of accountancy evidence and no endeavour had been made to obtain it. It would seem that drawings were made against the business revenue (as distinct from its income) and the accountant created loans in the corporate books which ultimately had to bear a commercial interest rate. The continued use of the entity suggests that income is diverted to loan reduction rather than payment to the husband. That seems to be the way he pays both the interest and reduces the debt in the books of account. In reality, it seems that in better days, he was drawing on the company to pay personal expenditure including that in which the wife shared. Counsel for the wife made a concerted endeavour to get to the bottom of it but I am none the wiser. The issue was not picked up in re-examination so I have concluded that there is an opportunity for the husband to use this structure to reduce his real taxable income which in turn affects his child support position. It is impossible to calculate the real effect of the loan but in respect of other benefits he has such as telephone, car and depreciation, I find his real income is somewhere around $65,000.
The wife
The wife works in academia and recently begun a new role and, with some extra work, can earn more than $100,000 with other commitments. In addition, she has a superannuation component of her remuneration.
Of the two parents, the wife will have a greater weekday role in the care of their daughter depending upon where the husband decides to live but the holidays will see each of them participating in a significant way as parents. Each will need to make arrangements about their daughter’s care.
The state of the evidence
As the case began, notwithstanding the requirement under the court’s directions to provide a list of objections to evidence, both counsel agreed that none was to be taken. As such, notwithstanding the various irrelevancies that soon became apparent, the court was left with the problem of sorting out what was relevant and was not. That becomes particularly difficult when I turn below to what was also approached by the parties as “add backs”.
As the affidavits of both parties were prepared by legal practitioners, the focus should have been confined to admissible evidence such as would satisfy the requirements of ss 55 and 56 of the Evidence Act 1995 (Cth). That did not happen and even though the parties wanted the court to know all of this “background”, their lawyers might have assisted them better had the issues been confined to admissible evidence and been issue-focused. The husband devoted pages to “add backs” but they are the exception not the rule because the court is obliged to alter interests in property. If property no longer exists, and that was the situation here (whether spent on legal costs or otherwise), the best the court can do is somehow work out a way of taking into account the fact that the property once did exist. It is naïve to think that the interim property sums can simply be added to “the pool” and divided as if they still did exist because that concept does not take into account costs, reasonable living expenses, taxes, interest and similar sums. I shall address the issue again below.
The issues
The parties’ issues as eventually defined were modestly straight forward. They were:
(a)Who should retain the parties’ former primary residence;
(b)What should be attributed to the net value of an investment property known as “D Street”;
(c)What should be done about these “add backs”?
(d)What (if any) “loading” should be applied to the entitlements of either party because of the matters set out in s 75(2) of the Family Law Act 1975 (Cth) (“the Act”)? and,
(e)How (if at all) should the parties’ respective superannuation entitlements be divided.
The parties’ overall positions
Although the affidavit evidence would suggest otherwise, in reality, there was not a lot of challenge to the disputed issues about the parties’ contributions to their various assets. In final address, counsel for the wife said that for the purposes of s 79(4) of the Act, “it was hard to argue that (those contributions) were not equal”. On the same topic, counsel for the husband said the parties made their “best endeavours” and although the husband had wanted “56 per cent”, it “should be equal”. That statement was equivocal because the “56 per cent” was really an overall division of the parties’ assets which would therefore require contemplation of the matters in s 79(4)(e) of the Act before any division could occur.
When considering the dispute, it is not readily apparent how the parties approached their entitlements and, as there is some uncertainty about whether, unlike the wife, the husband was making a concession that the parties had contributed equally, I intend to deal with the facts and assess them with s 79(4) in mind. In case it is thought that the wife was enthusiastically embracing the equality concession, I have reservations.
The start of the relationship
The parties’ contributions
There was a dispute about when the parties became a committed couple in any sense and that arises from the husband’s evidence that before the marriage in 2007, he had planned to buy property; he also had invested money.
Any reasonable view of the evidence indicates the parties met “on line” in 2006 and became engaged to be married in November 2006. There was a dispute about where that engagement occurred and how a ring came into existence which I find entirely irrelevant to the determination. The approach to the assessment of contributions is an holistic one. However, the engagement does assist in determining the husband’s argument about his intentions in buying the B Street property.
The parties attended an auction at B Street, Suburb C, in December 2006. It will be readily apparent that they were, by that date, engaged and had planned to commit themselves to a marriage. Despite that state, evidence was led about how each separately arrived at the auction and who made bids. It would almost seem that the husband was horrified to find that his bride-to-be was bidding against him. All of that is entirely insignificant because the husband was successful. Even so, he initially argued that his purchase of the property in his name alone gave rise to his greater contribution than that of the wife. I reject that for the reasons that follow.
Whilst the contract for the purchase was in his name alone, he transferred his interest to himself and the wife jointly not long after they married. Even so, there was a dispute which did little credit to the husband. He said that he “reluctantly” transferred it to the wife. If that evidence was intended to show that he was endeavouring to maintain some form of separate investment ownership policy or philosophy, it did not. At the time, he was a businessman and an adult. More curiously, although the evidence did not say so because there seemed some uncertainty on the part of the wife, it would seem the consideration for stamp duty purposes was “for natural love and affection”. The wife too was not above saying that there was an ulterior motive on the part of the husband about other things such as the first home-buyers’ scheme but as that was not explored, I make no further comment beyond saying that much of this was petty. It should also be said that care needs to taken about settling affidavits in which allegations of fraud are made.
At the time of the auction, the settlement of the purchase was still some way off. Neither party addressed the precise timing but that settlement must have occurred shortly before the wedding. The husband pointed to the auction and his execution alone of the contract as evidence of his intention to keep this propriety right separate. He reluctantly conceded that this home was (and always has been) “the parties’ matrimonial home”.
The search for some relevance in this dispute about that point lies again in the parties’ respective contributions. When they married, the husband had interests in assets of $545,000. There was some cross-examination about what was borrowed to acquire B Street and where the stamp duty for it was paid from but all of those matters are insignificant because of the assets that the wife had at that time. She owned two properties. One was at D Street and the other at F Street. Both were encumbered but it seems common ground that her equity was about $420,000.
Then arises another interesting twist. Notwithstanding at the Auction at which the parties both offered bids, the purchase price was $935,000, a retrospective valuation exercise was undertaken by the husband to show that at the time of settlement, it was much higher. I find the issue nonsense having regard to the fact that the purchase price was regulated by the market and more importantly, this was to be the parties’ future home. To the extent that they got a bargain or the market swung enormously in their favour after the auction, it is hard to see how both parties should not have been entitled to the windfall. Neither party argued there were equitable interests at play but I find there was a clear and express assumption by the wife that this was the parties’ future home. The marriage ceremony went ahead not long thereafter.
Disparity of contributions?
As the case had been prepared, the disparity in the parties’ initial contributions had been their focus and certainly was the focus of the lawyers who drafted the evidence. The mathematics shows there was about $120,000 difference favouring the husband. But, two significant things happened which make that disparity irrelevant. First, the husband transferred his equity in B Street into the parties’ joint names. The wife’s earnings along with those of the husband went into a joint fund from which their living expenses, including the mortgage, were paid. There was initially a disparity in their respective earnings and the husband highlighted the taxation figures. That would not reflect accurately what was happening because the wife also had the opportunity to earn a bonus and she had benefits such as computer, telephone and travel expenses.
Even if some inference could be drawn that there was a difference in their contributions, they each knew that when they began their married life together, and there is no indication that either requested the other to change careers. They made equal efforts, even if unequal financial contributions. Indeed, each accepted the role of the other as part of what they were setting up for the rest of their lives. As such, equity would baulk at a litigant being permitted to get a calculator out and rely on raw numbers as the parties did here.
A child is born
It was not long into the marriage that the wife was pregnant. It was not suggested here that the decision to have a child was not a conscious one. Equity would again baulk at someone arguing that the resultant birth of a child meant that, as here, financial and non-financial contributions should not be assessed other than as equal. That must be so where there was a conscious decision such as the parties made.
The parties’ only child was born in 2008. Even so, the parties had a dispute about their finances thereafter. From the husband’s perspective, the wife took two years maternity leave from which I inferred he was suggesting she could have been employed. Whilst agreeing that she took leave, and presumably intending the court to infer that she also could have gone back to work earlier, she said that because the husband wanted to advance his career in the company where he was working, she took over a greater parenting and homemaker role. She then said that the resultant role as a mother meant that she continued “taking responsibility for most things and household duties as well as raising” their daughter. I am not sure what that means.
Relevantly, there was no major dispute about who was the primary homemaker and main parent but the wife’s departure from the workforce led to two other matters, one disputed and the other not so. First, because the husband was then a high-earner, the parties agreed at the time to transfer the wife’s investment property into his name for tax purposes because the consequent benefits assisted them both. When the court assesses justice and equity, it assesses all “contributions” of a financial and non-financial nature. Here, the financial contributions were made by the husband but he had made a gift of an undivided interest in B Street in the same way that the wife made a gift of her interest in the investment property. But underlying both transfers was a philosophy of doing what was done for their joint benefit. The husband wanted the court to understand, at least in relation to their banking accounts, that there was some separation of financial interests but the assumptions each made indicate joint ownership and joint benefit was in mind. Equity will ignore decisions whether made reluctantly (as the husband would have it) or otherwise particularly where the parties have such a benefit motive.
The wife’s start up business
The second question focuses on the husband’s view that money spent by the wife on a “start up” business was wasted. I am not entirely sure that is what he was intending to argue but his practitioner’s outline on this subject read as an issue to be determined by the court:
Whether the wife shall be solely liable for the debts incurred by her businesses.
I think that was intended to mean the debts incurred by the wife rather than some other entity.
The husband’s view was that the businesses were unsuccessful and the wife had run up the credit card facility. She had also used savings or money in the MISA offset account. The husband focused in his evidence on this being something for which the wife alone was responsible. He said:
I had previously agreed with (the wife) that she would be responsible for paying back all monies loaned to her startup businesses.
The wife’s response was:
I did not withdraw any money from the Misa Account without mutual agreement with the (husband) as the business was a family business where both the (husband) and I were involved in decision making.
The husband denied any such agreement pointing to some emails that he had written to the wife’s brother but also to a decision he made to request the Commonwealth Bank not to permit unilateral withdrawals from the MISA account.
This evidence did not focus upon the more important issues of whether or not this was a family business. It did not mention how the consequent tax issues and losses were sorted out. It did not mention the discussions that took place between the parties. It did not mention how the wife reacted when the Commonwealth Bank was asked to become involved. Relevantly, none of this evidence was the subject of cross-examination. It was also not raised by counsel after I queried its significance.
Apart from the husband’s opinion being inadmissible (despite it not being the subject of any complaint by the wife) I do not know whether these sums were a wanton and reckless use of the parties’ money or, if losses did arise, whether deductions were made in tax returns. Neither party has satisfied me of any of the matters that require consideration for a determination that the court should take these somehow into account (see for example Browne & Green (1999) FLC 92-873, Kowaliw & Kowaliw (1981) FLC 91-092).
I do not intend to give further consideration to the losses in circumstances where the parties have not provided an opportunity to the court to properly determine the issue. Put another way, the husband has not established his assertion (whatever it may have been) on the balance of probabilities.
The parties’ transfers of property
Despite the initial disparity of their financial contributions, the benefits given to the husband by the wife in her property transfer (“for natural love and affection”) and vice versa, meant she, but more likely both, received the benefit of having more income in the household. Her income position may have been reduced, as was his tax, but that was presumably because of the negative gearing they were able to adopt. They both benefited.
These were decisions which were not taken lightly; they were well-thought out and the revisionist approach as to contributions now does no credit to either party.
The parenting role
There was some evidence distinguishing the parties’ respective contributions in a non-financial sense. The wife pointed to her role in parenting but at the same time, she financially benefited from the husband’s career in the law for which he no doubt had to work.
Sensibly, counsel for the parties conceded there was no difference between the respective contributions during the marriage even though the husband set out in some detail, the roles he fulfilled. He noted that the wife was unable to fulfil some home-making duties and the parties “were forced to often engage nannies” but then attributed the wife’s incapacity to her “severe post-natal depression”. In remain uncertain whether that description of her activities was intended as a criticism, a contribution or a complaint. In my view, the evidence must be seen as a contribution by the wife under trying circumstances because he seemed to otherwise suggest that, rather than him taking over those roles, people were paid on an “ad hoc” basis. Endeavouring to compare entirely different roles is difficult where the parties approach that issue by placing the distinctly different values between financial and non-financial contributions in issue.
The husband leaves his previous employment; wastage?
In 2012, the husband had a dispute with his company and left. The wife seemed to indicate that there was a difference between him resigning and being asked to leave. She tendered evidence to show that he was in dispute with management and would not go to work. This could only be relevant if there was a suggestion of wastage or deliberate and wanton destruction of assets on his part. This all happened before the parties separated and it was undoubtedly a bone of contention. The husband received a payment of $117,500 so the parties were not destitute and it would seem from the husband’s taxation returns that although there was a significant drop in available income, he began business on his own and clients soon followed him. It is not clear to me what else he could have done except perhaps seek other employment. No evidence was presented to show that his approach was inappropriate. Despite all of that, life went on and the parties continued to live; the mortgages were paid albeit, it would seem, not necessarily on time.
Nothing in the evidence enables me to say that the husband leaving his previous employment was wanton or wasteful; he was clearly unhappy and the family does not seem to have been prejudiced. Even if it was, there was not much the wife could do about it and indeed, she remained in the marriage for another three years.
Separation
In May 2015, the parties separated. There were intervention order proceedings and the parties entered into a parenting agreement in the Magistrates’ Court.
At the time of their separation, the wife remained in B Street. Expenses were paid from the MISA account. That had a balance of $130,318 but it is now all gone because of expenses incurred by the parties. The evidence of the husband about what he paid towards the jointly owned F Street property was no doubt intended to show that he expected the wife to be contributing. I have no understanding of what each party was spending on necessary living expenses. Naturally, life cannot be placed in suspended animation but equally, nothing seemed to be done about selling property (as has now occurred) to alleviate the financial haemorrhaging.
Proceedings begin
In September 2015, the husband began proceedings in the Federal Circuit Court and sadly, the delays and adjournments there meant that the dispute remained unresolved. There were parenting disputes and contraventions applications culminating in that Court transferring the proceedings to this Court in September 2016. It is unfortunate that matters did not proceed quickly to a resolution here either but, in part, that seems to have been because of the interlocutory disputes which prevented the matter being listed for trial. In November 2017, I listed the matter for trial in February 2018.
The parties’ dispute has not just cost them a lot of money but it has also cost the community because of the resources that have gone into these disputes in three different courts. Apart from the matters briefly mentioned above, there were also criminal proceedings over breaches of the intervention orders. Thus, to the extent that the wife seemed to be saying that the husband had not been diligent about money, she was content to spend money on lawyers.
It was difficult to discern what issues the parties wanted to determine because attention had been focused mostly on the parenting dispute but sensibly, counsel limited their cross-examination to the issues which I have identified above.
The assets and liabilities
The respective lists of assets and liabilities of the parties varied but in discussion, it was agreed that for the purposes of any alteration of interests, the court should accept the following as: (rounded up or down)
· B Street $1,800,000
Mortgage (780,000) $1,020,000
· D Street 975,000
Mortgage (180,000)
Capital Gains Tax (108,000) 687,000· F Street proceeds 48,000
Capital gains tax (20,000) 28,000
· MISA account 50,000 50,000
Total $1,785,000
A few observations must be made about that list. First, it ignores the proceeds of the sale of a car. To the extent there was no agreement about what happened to this money, I am unable to discern whether it was used for a specific or general purpose. The wife sold the car after separation and I have presumed that as discovery should have been undertaken, the husband knew where the proceeds went. I do not know what the money was used for. Absent a finding, it should be ignored. There is also the wife’s car which is subject to a debt greater than its value but it was also acquired after separation. The list also ignores an investment of nominal value. Of the latter two items, counsel agreed I should ignore them.
Capital gains tax
Reference to the two capital gains tax amounts in that list also deserves mention. The amounts were not contentious but how they should be treated was. In respect of the D Street house, it is the husband’s case that the wife should move out of the B Street home to what is a ready-made property once she removes the present tenants. It is the wife’s case that she should not have to do that because she wants to stay in B Street. It was put to her that she could remove the tenants if she wanted to live in D Street but no specific provision of the State legislation was put to her and she was not aware of how easy or otherwise that exercise would be. In the absence of agreement, I will not presume that it is an easy exercise. More importantly, even if she did move there, I do not know (because neither party presented any evidence) what would happen to the CGT question. There is common agreement that the property is pregnant with CGT and on the basis that the wife needs to sell it if she remains at B Street, there is no certainty that the CGT will go away. How the Court should treat the CGT if the house was not sold immediately, remained unsaid and I do not intend to guess (reference was made to Rosativ Rosati (1998) FLC 92-804). It was also the husband’s case that the distance between D Street and the private school and B Street and the school was not much different. Whilst that might be so, I do not consider that is the appropriate way to determine who should retain the B Street property to which I turn below.
D Street
Much depends on what happens to B Street first and then D Street follows because the husband does not want the latter. I am satisfied that the capital gains tax will have to be paid as I have set out in the list of assets.
There is then the question of sale costs on D Street. In my view, they should be either factored into the amounts available for distribution or ignored. As all of the modest amounts were contentious here, I will treat the likely costs as having to come out of the sale proceeds.
It would seem from a suggestion made by counsel that B Street has not been valued for over a year so I have no idea what, if any, changes in value would occur regardless of who retained it. Both parties produced a list using the same figure and I see no reason why that should not be adopted.
Mortgage arrears
The June 2017 orders also had a provision drawn by the parties that their arrears of mortgage would be paid out of the proceeds of the sale of F Street but that thereafter, the wife could renegotiate the mortgage with the lender. It seems common ground, although not entirely clear from the affidavits, that when the parties did try to do a deal with the bank, they were refused. That left the situation with the debt rising and neither party addressed it.
The wife had possession of the home and the husband asserted that the wife should have been paying for it. On the other hand, the income of the wife and the husband’s modest child support meant that there was not enough to make ends meet. If it was otherwise, nothing put to the wife would suggest that she was spending inappropriately or had retained undisclosed savings. The husband too did nothing about rearranging the obligation and on the evidence, did nothing to endeavour to protect his asset. Whilst all of this was going on, the parties had their daughter in a private school. During the hearing, the husband was closely questioned about his income and his modest contribution to child support yet there is no suggestion that either party wants to change the schooling. Child support arrangements under a formula based system were not intended for this purpose as education is factored into the formula already.
Child financial support
The husband was asked what financial support he provided for his daughter but even there, a dispute arose as to what is, and what is not, included in the school fees. The parties had an argument about who was paying for singing lessons through to soccer and piano costs. It descended to questions about lunch money, pocket money and birthday presents for friends. A fair reading of the parenting arrangements which are now embodied in orders will explain why these disputes about such expenses not only had to be aired in the final hearing but also why this case has taken so long to get finalised.
Doing the best I can, I find that each party had a different income and a different role in their daughter’s life and it would not be just and equitable to do some revisionist approach apportioning blame or responsibility for the amounts that were spent and which have not been explained or quantified. More significantly, with almost three years of litigation, it beggars belief that discovery had not been completed such that each party knew exactly where their money had gone. I propose to ignore all of these amounts as assertions about which I am unable to make findings.
“Add Backs”?
Two other sums have been ignored in the asset list. They relate to the order for interim property settlement made by Johns J on 6 June 2017. That was an order by consent of the parties under which the wife received $100,000 and the husband $25,000. In the respective outlines, each counsel used these as “add backs” and wanted the court to decide what to do with them. Again, despite including them in their lists of assets (sometimes referred to as “the pool”), I know nothing more about what was done with the money and more importantly, why such a stark division of the amounts was made. At best, I was informed that there was a dispute about whether those sums went on living expenses, legal costs and, in this case, school expenses. It would seem a large portion has gone in legal fees and whilst that should be dealt with somehow, I am left unable to say what amounts were so spent and whether it was reasonable. As the husband consented to the wife having such a large sum greater than him, I have inferred that he knew why she needed it and why he did not press for the same amount. If I am wrong about that inference, I am still bereft of any evidence that would enable me to make a finding about whether or not it is now just and equitable to take it into account in some way. The outlines of case did not assist me. From the husband’s perspective, all that was said was that each was to retain those amounts received. The wife’s outline did no more than include the amounts in the list of assets.
Whilst both parties have agreed that these amounts should be included, it is ultimately a matter of whether it is just and equitable to make orders relating to property which undoubtedly no longer exists. I do not know if the wife’s money all went on legal costs or how the husband paid his with his limited income. To the extent that any light could be shed on this issue, the husband’s financial statement showed he owed no legal fees as at 29 November whilst the wife owed $137,000 as at 21 December. If her greater interim property distribution went to legal fees, how did the husband pay his on his limited income? He owes his mother $152,500 but for monies lent after separation for what he described as “day to day living expense” (see [146] of his affidavit). He did not mention his costs. I shall take into account that the wife has had a benefit from the parties’ joint resources and will make an adjustment reducing what I might otherwise have given her in contemplating s 75(2)(o) of the Act.
I turn then to the remaining issues identified above.
B Street
First, B Street. It is common ground that this was the home of the parties. I do not accept that who should get it now can be decided by some proprietary interest determination as the husband seemed to suggest. The matters that are significant here are that it is the only home that the parties’ daughter has known. Counsel for the husband put a bold argument that if the wife moved out, the daughter would still have this as a base because she would be spending time there when living with the husband. That would mean slightly less time than with her mother under the parenting orders. The parenting orders have a staged approach if the husband moves up to Melbourne from G Town. I know nothing about how that would work because he said his ambition is to reorganise his professional business so that he can work electronically. In any event, he could do that from some other place as well. It was suggested at the very end of the case that I should take into account that if he had to buy another property, he would incur stamp duty. But that also depends on where he buys and how much he spends. It seemed to be suggested that he should have a property of equivalent value to B Street. I do not understand why that is necessary. I also do not see how it is relevant as to whether he rents or buys as it is a matter of choice.
A second consideration is that the wife has remained in the house since separation which has been just on three years now. I see no reason why after all this time, she should be inconvenienced any more or less than the husband but there is no compelling case here which says that it would not be just and equitable for her to have the house. This is also not a case where I could determine the particular justice issue based on value such that I could direct that each bid at some sort of sale. No arguments were put that were compelling.
In my view, the answer lies in the fact that from a day to day parenting approach, the wife has the greater responsibility and therefore, she should remain so that as little disruption as possible occurs for the parties’ child.
CGT on D Street
That last determination resolves the question of the CGT on D Street as the only way the wife can pay the husband the necessary amount to which he would be entitled is by a sale. The CGT will be paid out of the sale.
Superannuation
Superannuation is the fifth issue mentioned above and that should be determined before any loading is considered although I am conscious of not double dipping.
It is agreed that the husband has $407,000 in superannuation and the wife has $96,000. Two reasons account for that disparity. First, the husband had $250,000 in 2007 when the parties married. 10 years later, it has grown largely by virtue of interest. The husband wanted his initial contribution quarantined.
The wife has $96,000 in superannuation and sought a splitting order. Counsel for the wife conceded that the husband’s initial contribution warranted recognition. Both parties are a long way from retirement and therefore, it is not appropriate to treat this property as cash or at a value like the other assets. The reach and use of the asset is therefore a relevant consideration.
Both parties agreed that superannuation should be treated separately from the non-superannuation assets but that assessments still had to be undertaken.
For the purposes of s 79(4), I find that the husband’s initial contribution is still easily recognised but it is not appropriate to quarantine it. That is because to do so would ignore the wife’s general subsequent contributions. For example, the wife went out of the workforce to have the parties’ daughter and that was a conscious decision of them both. That must mean that it was a conscious decision by the husband to recognise the wife’s non-financial contribution. The approach to s 79(4) along with s 79(2) is an holistic one and it is artificial to try and isolate components. That said, I accept the husband’s contribution to the superannuation was much greater at the start but there is no distinction thereafter even though both had different additions put into their funds by virtue of their very different employment opportunities and no doubt, the availability of money to deposit.
The wife has something approaching 20 per cent of the total superannuation and in my view, that does not recognise the disparate contributions throughout the relationship. If the husband’s initial contribution was quarantined and the balance divided equally, that would still only give the wife about 25 per cent of the total.
Having regard to the disparate contributions and earnings during the relationship, I do not consider that 25 per cent recognises the efforts of the wife appropriately when the evidence suggests the parties were working towards the one goal. That can be seen in the decisions they made about owning joint property. In my view, the best way to deal with the issue is to find that the husband’s contribution was greater. It is necessary to finalise this however by a consideration of the matters in s 75(2) of the Act. The wife will earn more than the husband although that is partly in his hands. The husband’s capacity to contribute to child support is limited even with the increased real income I accept he earns. Against that however, the wife can make more contributions to superannuation if she chooses. I am satisfied she will carry the larger burden of child expenses and as such, her capacity to make those sorts of superannuation contributions will be limited for the next few years. She may be restricted to her employment contributions which are still significant.
I assess her overall entitlement to the superannuation at about 30 per cent; that is, factoring in both her contributions and the factors in s 75(2), 30 per cent reflects a just outcome for the husband too. Of $503,000, she should have $150,000 and she already has $96,000. There should therefore be a splitting order of $54,000.
Non-superannuation assets
That leaves the final determination of what, if any, adjustment should be made in favour of the wife out of the non-superannuation assets. I find that whether the husband concedes equality of contribution or not, all of the evidence supports that conclusion.
The factors in s 75(2) of the Act favour the wife only marginally and not to the extent she pleaded in her outline of case where she sought 65 per cent. The various factors all highlight her greater earning capacity but as already mentioned, she will have to bear the greater child rearing expenses at least in the foreseeable future. The parties to some extent have that decision in their hands because they wish their child to be privately educated so it cannot be a huge argument in the wife’s favour.
There are no arguments about health or other economic circumstances here so the major one is the disparate child responsibilities which are alleviated by the disparity of income which favours the wife. I do not know what the husband could otherwise earn if he chose a different path but it was not suggested he opt out of the business of the law. It was not suggested he could earn more in the law and I take into account his capacity to manage his income tax through the corporate structure.
The interim distributions
Two other matters should be taken into account under s 75(2)(o) of the Act. First, the wife has already received substantially more than did the husband in the interim property distributions and I have been unable to adequately assess why that was so. The disparity alone justifies an adjustment in the husband’s favour as at that time, the money seemed to belong to both parties. Secondly, notwithstanding what I have already said about the reasoning behind the wife retaining B Street, it is an advantage to her to have continuity of residence and it does not disrupt the parties’ daughter. But against that, the husband has to start again if he wishes to have property rather than cash. Both of those matters justify a modest allowance back in the husband’s favour, or, more significantly, less of an adjustment in the wife’s favour as she had originally pleaded.
Conclusion
I consider it is just and equitable to give the wife a small increase on the otherwise equal division such that it equates to 10 per cent more than the husband; that is, a division of 55 per cent to the wife and 45 per cent to the husband. Critically, it is the underlying value of those percentages which must be just and equitable and that is somewhat uncertain here because D Street may not sell for what the parties anticipated. That necessitates an order ensuring a formula to allow for the rise and fall in the sale.
Based on the assets listed, the husband thereby retains the F Street money after the payment of CGT, the net proceeds of D Street but also after CGT is paid, the MISA account and the wife then must give him $38,250 or thereabouts depending upon what the net proceeds are from the sale of D Street.
In my view, that is a just and equitable result for both parties.
I certify that the preceding seventy-three (73) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 15 February 2018.
Associate:
Date: 15 February 2018
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