DR & CAJ
[2005] FamCA 213
•30 March 2005
[2005] FamCA 213
FAMILY LAW ACT 1975
IN THE FAMILY COURT OF AUSTRALIA
AT BRISBANE No. NA70 of 2004
(DNM2630 OF 2001)
BETWEEN:
DR
Appellant Husband
AND:
CAJ
Respondent Wife
BEFORE THE HONOURABLE JUSTICE WARNICK
REASONS FOR JUDGMENT
Dates of Hearing: 9 March 2005
Date of Judgment: 30 March 2005
Appearances: Mr S of Counsel, instructed by S & A, Solicitors, appeared on behalf of the Appellant Husband
Ms T of Counsel, instructed by M & Co., Solicitors, appeared on behalf of the Respondent Wife
| Name of Appeal | DR AND CAJ |
| Appeal Number | NA70 of 2004 |
| Date of Appeal Hearing | 9 March 2005 |
| Date of Judgment | 30 March 2005 |
| Coram | Warnick J |
Catchwords: APPEAL FROM FEDERAL MAGISTRATES COURT – PROPERTY SETTLEMENT – Federal Magistrate made a mistake of fact by substantially understating the wife’s income – Could not be said that the mistake as to the quantum of the wife’s income had no impact upon the Federal Magistrate’s assessment of section 75(2) factors – RE-EXERCISE OF DISCRETION – Re-assessment of the asset pool – A portion of the husband’s superannuation accrued post-separation had been included by the Federal Magistrate in the asset pool and there would be some inconsistency in not taking into account the residence acquired by the wife post-separation – For similar reasons the husband’s Telstra shares were included in the re-assessed asset pool – CONTRIBUTIONS – Contributions are assessed as being equal between the parties – SECTION 75(2) FACTORS – Appreciable discrepancy between the parties’ current earnings in the husband’s favour – Wife faces greater contribution to the ongoing care of the children – Appropriate adjustment of 10% to the wife in recognition of s75(2) factors – Overall a division of the asset pool 60% to the wife and 40% to the husband – JUST AND EQUITABLE – Husband sought to retain the former matrimonial home – Retention of the matrimonial home is not an overwhelming factor and is only one of a number of considerations – Orders overall are just and equitable
Appeal Allowed and discretion re – exercised. Orders 1, 4, 6 and 8 of the Federal Magistrate set aside and new orders inserted.
DR appeals orders made by Federal Magistrate Brown on 5 October 2004 in resolution of property settlement proceedings between Mr DR and CAJ.
Essentially, the orders of the learned Magistrate divided a pool of property assessed at net $363,000.00, approximately (which included the husband’s superannuation at $165,000.00 approximately), 65% to the wife and 35% to the husband. The Federal Magistrate excluded from the “pool” a house acquired by the wife post-separation and shares of the husband, also acquired after separation.
Both at first instance and on this appeal, the husband contended that the property “pool” which, his counsel argued ought include the property of each party that the Federal Magistrate had excluded, should be divided equally.
Six grounds of appeal were argued. One of those grounds asserted two mistakes of fact. The others asserted errors in the exercise of discretion, including, as seen, the incorrect exclusion of items of property from the pool of assets and failures to give sufficient weight to particular aspects of contributions and factors relevant under section 75(2).
Both parties urged that, in the event I found merit in any ground, I re-exercise the discretion. Neither party sought to put further evidence before me in that event.
I will return to the grounds of appeal after discussion of the judgment of the learned Magistrate and the background facts emerging therefrom.
The judgment of the trial Magistrate and background facts emerging therefrom
The parties commenced cohabitation in 1988. They married in July 1989.
At the commencement of cohabitation, the wife had no formal qualifications and little by way of assets.
The trial Magistrate found that the husband had some chattels, including motor vehicles. He also recognised that the husband was a member of a superannuation fund and had been since November 1984. He accepted that the husband had been in a superior financial position to the wife at the outset of the relationship.
The husband was able to purchase the first matrimonial home of the parties in 1992 at a discount, as it was owned by his employer. Prior to that, the parties had lived in rented accommodation supplied by the husband’s employer at a discount rate.
Throughout the cohabitation the husband remained in employment with Telstra and he also obtained a number of tertiary qualifications, including a Bachelor of Business degree.
The learned Magistrate found that soon after the husband and wife met, the wife began a Bachelor of Business Degree and was thereafter engaged in full-time study for a number of years, though she also pursued part-time employment.
There are two children of the marriage, DER, born 25 April 1995 and JNR, born 6 October 1997.
The learned Magistrate recorded a concession from the husband that from mid-1995 until separation, the parties’ contributions, in differing forms of wage earner and homemaker, should be regarded as being essentially equal.
The parties separated in July 2000.
As earlier noted, the wife purchased a home for herself and the children after separation. The husband remained residing in the former matrimonial home. The learned Magistrate found that he had “…not significantly reduced the parties’ mortgage liability in respect of it during this period.”
Following a contested hearing, orders were made in relation to parenting arrangements for the children, which saw them spend five nights each school fortnight with the husband and nine with the wife. School holidays were divided equally. For child support purposes, this equated to a 60/40 division of responsibility for caring for the children.
Between March 2001 and July 2002, the wife left the paid workforce to care for the children. She received a parenting pension.
At trial, the wife was some 37 years of age, the husband nearly 41.
The wife is a certified practicing accountant, self employed. The husband remains an IT consultant employed by Telstra. The husband’s gross weekly income was $1,683.00 by way of salary, benefits, share dividends and rental. The learned Magistrate recorded that the wife estimated her average weekly income at $650.00. (This is a finding challenged in the appeal)
The husband paid child support in the sum of $251.00 per week.
Under the heading “The legal principles to be applied and the issues in the case”, the learned Magistrate turned to the identification of assets and liabilities in respect of which he said there were significant areas of dispute. In this context he discussed the husband’s superannuation, held in a defined benefit fund. He also noted a series of other disputes about whether items should or should not be included in the asset pool.
He recorded that apart from the former matrimonial home, the parties also had an investment property in Darwin. Both the former matrimonial home and that property were subject to mortgage.
The learned Magistrate noted that the husband had been employed by Telstra or its corporate predecessors for about 20 years and that as a result he had accrued considerable superannuation which was by far the most significant “marital asset”. He recorded that:
“However, the parties are in vehement dispute, not only as to how it is to be split, but also as to its real value.”
His Honour also recorded contention about post-separation contributions. The husband argued that he had borne the major burden of servicing the mortgage on both the former matrimonial home and the investment property, as well as providing substantial care and financial support for the children. The wife argued that the husband had paid the bare minimum in respect of the mortgages and the husband had had the benefit of the occupation of the former matrimonial home. She said she had borne a considerably greater share of the responsibility of caring for the children.
Though, as earlier indicated, the trial Magistrate found that the husband had been in a “superior financial position to the wife” at the outset of cohabitation the learned Magistrate said that, given the period of time which had elapsed since, he did not think the disparity a significant matter.
The trial Magistrate determined that contributions of the parties were equal.
As to section 75(2) factors, the learned Magistrate found that both parties had the capacity to earn a reasonable income and would be able to service their respective levels of debt. However, in the short term, until the children were older, the husband’s income was likely to remain greater than the wife’s and that was a factor that favoured the wife. In time, both parties had the ability to restore themselves to financial equilibrium.
The children spent the majority of each working week with the wife.
After addressing argument about the value of the superannuation and whether any further adjustment was needed, on that account the learned Magistrate said:
“142. Notwithstanding my disquiet about the evidence of the valuation of the husband’s superannuation, I have reached the view that the current discrepancy in respect of the preparedness of the parties for retirement, calls for some further adjustment in the wife’s favour.”
The learned Magistrate concluded there should be a further adjustment of 15% in favour of the wife.
He then addressed the question of whether the outcome was just and equitable, concluding that it was.
Grounds of appeal
General
There are six grounds of appeal contained within the only Notice of Appeal. Counsel for the husband in fact argued six amended grounds of appeal. However, these amended grounds were not contained within an amended Notice of Appeal but rather were set out within counsel’s summary of argument. There was no opposition to the argument of amended grounds and accordingly leave was granted.
Ground 3
This ground asserts that the trial Judge:
“3. …erred in fact in that in assessing the income of the parties he found the wife to have an income of “about $34,000” and failed to have regard to Exhibit W1 which evidenced the wife’s income at $48,891 for the year ended 30 June 2004.”
In the wife’s summary of argument for the appeal, it was said:
“1. It is conceded that the Magistrate appears to have overlooked the information given by the wife about her income at lines 36-37 of the Transcript in making the statement he did at Paragraph 124 of the Judgment about the wife’s income.”
The oral evidence of the wife referred to in the passage just quoted, confirms a then current annual income of approximately $48,000.
However, though conceding the Magistrate’s error, counsel for the wife did not concede that this ground of appeal ought succeed. It was argued that, though in making an adjustment for section 75(2) factors, the Federal Magistrate had placed weight on the disparity in the parties’ income, this was not incorrect, as a disparity still existed, notwithstanding the erroneous finding of fact. Reference was made to paragraph 131, where the learned Magistrate said:
“131. As a result of all these factors, it is inevitable that both the husband and wife will have to remain in the workforce for many years to come. However, in my assessment, they both have a capacity to earn a reasonable income and will be able to service their respective levels of debt. In the short term, until the children are older, the husband’s income is likely to remain greater than the wife’s. This is a factor that favours the wife. In time, both parties have the ability to restore themselves to financial equilibrium.”
As well, it was submitted that the Federal Magistrate took into account all relevant factors in making an adjustment for section 75(2) factors and “the adjustment the Federal Magistrate made for section 75(2) factors was a legitimate exercise of his discretion.”
In DeWinter and DeWinter, (1979) FLC 90-605, it was said that if a trial Judge has made a mistake of fact, the judgment will not be upheld merely because the result was within the range of discretion (see p 78,091).
However, in such circumstances, a judgment might be upheld if, notwithstanding the mistake, the result was plainly right. That a result is “plainly right” is difficult to establish in a case such as this, where there is no one right result within a discretionary range.
In considering the impact on the judgment of the mistake about the wife’s income, it is appropriate to examine those passages in the Federal Magistrate’s reasons (including paragraph 31 earlier set out) where he discussed the incomes of the parties. The learned Magistrate said:
“124. …She earns about $34,000.00 per annum or slightly more than half the husband’s base salary, not including the motor vehicle.
127. …I also anticipate that in the next few years, the wife’s financial circumstances will continue to be somewhat straitened.…
131. As a result of all these factors it is inevitable that both the husband and wife will have to remain in the workforce for many years to come. However, in my assessment, they both have the capacity to earn a reasonable income and will be able to service their respective levels of debt. In the short term, until the children are older, the husband’s income is likely to remain greater than the wife’s. This is a factor that favours the wife. In time, both parties have the ability to restore themselves to financial equilibrium.”
In the light of the above passages, and particularly in view of the finding that the (perceived) disparity in the parties’ comparative incomes was “factor that favours the wife” it cannot be said, in my view, that the mistake as to the quantum of the wife’s income had no impact upon the learned Magistrate’s assessment of section 75(2) factors.
Accordingly, in my view, this ground of appeal succeeds.
Other grounds
In view of my finding in respect of ground 3, I do not think it necessary to consider the other grounds of appeal, though many of the submissions made about those grounds bear consideration in any re-exercise of discretion.
Re-exercise of discretion
Since I have only found merit in a ground of appeal which goes to the assessment of section 75(2) factors, the question may seem to arise, of a re-exercise of discretion limited to the assessment of those factors. However, the appeal did challenge other parts of the exercise of discretion, including the assessment of contributions and the constitution of the asset pool. As will be seen, in the re-exercise of discretion, I have acknowledged force in some of the submissions made in support of the other grounds of appeal, by adopting the approach submitted. Though that is not the same as deciding whether or not submissions were sufficient to found a successful appeal on the grounds to which they were directed, in the circumstances I do not consider that the re-exercise of discretion should be limited to only one part of the process required by section 79.
The asset pool
I consider that the asset pool should be as follows:
46 N Terrace, N 225,000.00
43/7 F Street, D 90,000.00
Furniture taken by the wife 1,310.00
Furniture retained by the husband 10,672.00
Wife’s car 2,800.00
Telstra shares (ESOP 99) 1,950.00
Monies received by husband from sale of shares
pursuant to orders of 6 January 2004 10,000.00
Capital Gains Tax set aside in respect of sale of shares 2,840.64
Husband’s superannuation 165,863.50
Wife’s superannuation 13,505.00
T House (W) 235,000.00
Telstra shares (H) 25,700.00 $784,641.14The relevant liabilities in respect of those items are as follows:
Mortgage on 46 N Terrace, N 88,078.00
Mortgage on 43/7 F Street, D 61,233.00
Loan to Telstra for ESOP 99 shares 2,667.00
Credit card debt as separation 6,550.00
T 180,000.00
Debt to wife’s uncle 10,914.00
Debt to husband (tax) 12,721.00 $362,163.00NET: $422,478.14
This table of assets differs from that used by the learned Federal Magistrate in several respects:
(i)Wife’s superannuation – counsel for the husband said that the figure used by the Federal Magistrate ($11,791.00) failed to include a small additional membership by the wife of a superannuation fund referred to in oral evidence. This proposition was not challenged.
(ii)The inclusion of the residence acquired by the wife after separation. There are arguments for and against the inclusion of this asset. However, in circumstances where the portion of the husband’s superannuation accrued post-separation is included, notwithstanding that it can be argued inclusion was appropriate because his fund membership was an asset in existence prior to separation, there remains some inconsistency in not taking into account an asset held by the wife, because it was acquired post-separation.
The desirability of inclusion is increased in circumstances where the parties continue to make ongoing parental contribution, each contribution being significant. As well, the husband pays child support. Also, other real property is included and the equity in those properties is affected certainly by payments made in relation to mortgage debts, but perhaps also by capital growth post-separation.
(iii)Similarly, the husband’s Telstra shares have been included.
(iv)The liabilities in respect of the wife’s residence and the tax on the husband’s shares have also been included.
Assessment of contributions
Counsel for the husband drew attention to the comparison of the parties’ financial positions at the commencement of cohabitation. In particular he, as the husband had done at trial, relied heavily upon the husband’s membership of the superannuation fund. However, unlike the husband at trial, he did not seek the application of any mathematical exercise to determine a value of the husband’s contribution at cohabitation but rather, drew attention to the nature of the fund, namely a defined benefit scheme, and the years membership of the fund prior to cohabitation, together with the percentage of salary contributed, which had direct impact on the multiplier used in the formula to calculate the husband’s superannuation entitlement.
Counsel for the wife pointed out some material which indicated that at the commencement of cohabitation the fund of which the husband was a member may not have been a defined benefit fund, but even if that is so, I accept that in any conversion of the husband’s interest to a membership of a defined benefit fund, the years service from the time he joined (November 1984) had the same significance as they would have had if he were always in a defined benefit fund.
Counsel for the husband also pointed to what he submitted was an imbalance of contributions during the period from commencement of cohabitation to the birth of the first child of the parties in 1995. I accept that during that period the wife had only a reduced capacity to contribute financially because of studies pursued by her.
As to the balance of the period of cohabitation the husband of course was bound by his concession below as to the equality of contributions during that period.
As to post-separation contributions, though counsel for the husband was concerned to clarify that the husband in fact reduced the mortgage over the former matrimonial home during the post-separation period, I do not consider that (in respect of the matters addressed) I am in any better position than the learned Magistrate, or indeed would come to any other conclusion than the learned Magistrate, when he said:
“116. This particular period is one in excess of four years. In my view, the evidence indicates that the larger burden in this regard has fallen on the shoulders of the wife. It has been more difficult for her to re-establish herself, following the end of the parties’ marriage. She has not had such regular income as the husband and has been compelled to find accommodation for herself and the children. On the other hand, the husband has largely had the benefit of living in the former matrimonial home, although he has not significantly reduced the parties’ mortgage liability in respect of it during this period. I accept that since the orders of August 2002, the husband has played a significant role in caring for the children and has made contributions of child support. However, notwithstanding these significant matters, I believe that the post-separation contribution factors favour the wife.”
However, in the paragraph just quoted, the learned Magistrate was not considering the wife’s post-separation contribution comprised of her equity in the home purchased by her after separation. Of course, the learned Magistrate had not included that equity in the asset pool. I have acceded to the submissions on behalf of the husband that that asset be included, as well as the husband’s shares acquired post-separation.
Leaving aside indirect contributions by each of the parties, each has made the sole direct contributions to these assets acquired post-separation. I regard the husband’s post-separation contributions to his superannuation and Telstra shares as equal to the wife’s contribution of the equity in her house purchased post-separation.
As stated above, I adopt the findings of the learned Magistrate as to other post-separation contributions favouring the wife.
Bearing in mind:
· the background facts relating to the period of cohabitation to which I have earlier referred;
· the husband’s superior financial position at commencement of cohabitation;
· the imbalance of contributions during the period up to the birth of the parties’ first child;
· the concession of the husband at trial about the period from 1995 to separation of the parties;
· my conclusions about contributions post-separation
I am of the view that contributions should be regarded as equal.
Section 75(2) factors
In addressing the current disparity in earnings between the parties, I do not accept the calculations put forward by counsel for the husband insofar as they deducted from the husband’s income, child support and added that amount to the wife’s income. Upon such an approach, the wife is disadvantaged unless all that she expends on the children, which may well exceed the child support paid by the husband and constitute a call on her own income, is deducted from the wife’s income, after child support has been added to it.
However, I do accept that a result of division of property will be the sale of the rental property and that that will decrease the husband’s gross income, but because of the loss of deduction, increase the husband’s taxation.
It is appropriate to have regard to the impact of taxation.
Even so, recognising the wife as currently earning around $48,000.00 per annum, there remains an appreciable discrepancy between the parties’ current earnings. The wife is disadvantaged by the arrangements for child care because of the greater period of time for which the children are with her and the fact that it is mid-week.
However, I bear in mind that the disparity in earnings may be greatly reduced or removed altogether as the children constitute less of a call on the wife’s time.
I also bear in mind that the wife is likely to have the assistance of an appropriate level of child support.
However, an additional factor favouring the wife is her probable greater contribution to ongoing child care.
It is appropriate at some stage of dealing with this matter to give consideration to the nature of the superannuation asset of the husband. In doing so, recognition can be given to the fact that at retirement his entitlement may be proportionally much greater than simply multiplying the ultimate years of membership over the current years of membership, against the value presently placed upon the fund.
Also, the evidence at trial was that the husband’s termination entitlement was some $270,000.00.
On the other hand, it is appropriate to recognise that superannuation is not immediately realisable in normal circumstances. However, where a splitting order is proposed and particularly where that split might be equality or close to it, that feature, as with those referred to in the preceding paragraphs, may have little or no impact.
It is appropriate when considering a percentage adjustment for section 75(2) factors to have regard to the monetary size of the asset pool. Ten percent of it is some $42,000.00. Bearing this in mind, I consider an appropriate adjustment in the wife’s favour, to be 10%.
Thus, the end result would be a division of the asset pool 60% to the wife and 40% to the husband.
Result of the proposed division – the determination of just and equitable orders
60% of the net assets of $422,478.00 is $253,487.00.
As to the constitution of assets received by the wife, there are competing interests. On the one hand, the husband wishes to retain the former matrimonial home. In considering the justice and equity of the orders this is a wish to be taken into account, particularly having regard to the amount of time which the children spend with him. On the other hand, it is by no means an overwhelming factor and it must be balanced against other considerations. To reduce the amount of cash payable to the wife, it is necessary to increase the split of the husband’s superannuation entitlement. The more the wife receives under a splitting order, the less realisable assets she receives.
In the end, I consider that the parties ought receive superannuation in the proportions of division of the other assets overall. The total of superannuation is $179,368.50. 60% of this is $107,621.00. The wife already has $13,505.00, thus she should receive, as the base amount for a splitting order in respect of the husband’s superannuation, $94,116.00.
The wife has or will receive:
Furniture 1,310.00
Car 2,800.00
Superannuation 13,505.00
Splitting order 94,116.00
T property 235,000.00
346,731.00
Less
T debt 180,000.00
Debt 10,914.00 190,914.00 155,817.00Plus payment due from husband and by way of
receipt of proceeds of investment property 97,670.00Net $253,487.00
The amount of cash required to be paid by the husband to the wife could be reduced by the wife receiving the total proceeds of sale of the investment property. Currently, that would be of the order of $25,000.00 after costs of sale. That would leave payable by the husband in exchange for the wife’s interest in the former matrimonial home, the sum of $70,000.00 approximately.
Of course, the F Street property is to be sold, so the orders must provide for the amount to be paid by the husband to vary according to the comparison of actual net sale proceeds to the figures used in the asset table.
Counsel for the husband suggested that the learned Magistrate had overstated the evidence about the capacity of the husband to borrow, when he found:
“165. … The husband has the capacity to borrow a further sum of approximately $100,000.00, which can be secured against the N property.”
Counsel for the husband submitted and I accept, that the evidence supported the husband having a capacity to borrow that sum, only if he achieved the result which he sought in relation to property settlement.
As I stated earlier however, the desirability of the husband having an opportunity to retain the former matrimonial home is not an overwhelming factor and is only one of a number of considerations. In my view, the orders as outlined are just and equitable.
Conclusion overall
It follows that the appeal should succeed though, in the end result, the orders that I propose will not differ all that greatly from the orders made by the learned Magistrate.
The appeal only challenged the orders effecting percentage division of property, (orders 1, 4 and 8). However, as superannuation was to be divided on the fourth business day after service of the order made on 5 October, I consider it proper for the order now made to make 5 October 2004 as the operative date.
Costs
The appeal has succeeded because of a mistake of fact.
That mistake was not the fault of the wife, but on the other hand, she might have realised that merit was likely to be found in that ground.
In her favour, however, is that the end result is not greatly different from what the learned Magistrate ordered. Had the result been the same, the appeal would have been dismissed.
That the result on appeal was unlikely to be substantially different from the result below is a matter against the husband bringing the appeal, or at least, obtaining his costs of so doing.
In my view, each party should bear his/her own costs. I do not consider it is a matter for grant of certificates under the Federal Proceedings (Costs) Act, 1989.
ORDERS
That the appeal be allowed.
That orders 1, 4, 6 and 8 of the orders of the Federal Magistrate’s Court made 5 October 2004 be set aside and in lieu thereof the following orders be inserted.
1.That within 30 days of the settlement of sale of the property referred to in order 8, the husband pay to the wife the sum of $97,670.00 plus or minus 60% of the difference between the net sale proceeds of the property referred to in order 8 and $28,767.00 as the case may be less the amount of such sale proceeds.
4.That the base amount allocated to the wife, CAJ out of the interest of DR in Telstra Super is $94,116.00.
6.That order 5 of these orders has effect from the operative time which shall be the 5th of October 2004.
8.That the husband and wife do all acts and things and sign all documents necessary to effect the sale of the property known as and situate at F Street, D for a price to be agreed between the parties and failing agreement to be as set by the president of the Real Estate Institute of the Northern Territory and that pending the sale of the said property the husband be entitled to occupy the property and shall pay all mortgage payments, rates, taxes and insurances as they fall due and upon the sale, the proceeds of sale be paid as follows:’
(a) Firstly, to pay the mortgage debt secured thereon, and the costs, commissions and expense in relation to the said sale;
(b) Secondly, to pay the balance to the wife.
I certify that the preceding 84 paragraphs
are a true copy of the Reasons for Judgment
herein of the Honourable Justice Warnick.
Legal AssociateDate: 30 March 2005
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