DUGAN & DUGAN
[2011] FMCAfam 799
•25 August 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DUGAN & DUGAN | [2011] FMCAfam 799 |
| FAMILY LAW – Property – superannuation – enforcement – interest – whether Respondent should pay interest. WORDS & PHRASES – “Retrenchment”. COSTS – Indemnity costs – where applicant seeks order that costs should be paid on an indemnity basis – failure to comply with Court order. |
| Family Law Act 1975, ss.117, 117B |
| Dugan & Dugan (Unreported) 19 October 1998 West & Green (1991) 16 Fam LR 811; (1993) FLC 92-395 T & T (Pension Splitting) (2006) 35 Fam LR 181; (2006) FLC 93-263 Macquarie Dictionary Revised Third Edition, 2001, Sydney |
| Applicant: | MS DUGAN |
| Respondent: | MR DUGAN |
| File Number: | SYC 3334 of 2010 |
| Judgment of: | Scarlett FM |
| Hearing date: | 12 November 2010 |
| Date of Last Submission: | 12 November 2010 |
| Delivered at: | Sydney |
| Delivered on: | 25 August 2011 |
REPRESENTATION
| Counsel for the Applicant: | Ms Druitt |
| Solicitors for the Applicant: | Streeterlaw |
| Counsel for the Respondent: | Mr Dalley |
| Solicitors for the Respondent: | Verekers Lawyers Wollongong |
ORDERS
The orders made by consent on 5 July 2010 are discharged.
The Respondent is to pay to the Applicant the sum of $19,762.90 within fourteen (14) days.
IT IS NOTED that publication of this judgment under the pseudonym Dugan & Dugan is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYC 3334 of 2010
| MS DUGAN |
Applicant
And
| MR DUGAN |
Respondent
REASONS FOR JUDGMENT
Application
This is an application by the Wife to enforce property orders made by Judicial Registrar Loughnan (as he then was) on 19th October 1998.
The Applicant seeks the following orders:
a)That the Husband pay to the Wife the additional sum of $114,131.89 plus interest to 20 September 2010 in the sum of $628.46;
b)That the Husband pay the Wife’s costs on an indemnity basis.
The Respondent seeks that the application be dismissed.
Background
The parties were married [in] 1971 and separated on 8th May 1993. They were divorced on 24th February 1997.
There were proceedings between the parties for adjustment of property interests which were heard before Judicial Registrar Loughnan in the Family Court of Australia on 20th July 1998. On 19th October 1998 the Court handed down judgment. A copy of the orders made on 19th October 1998 is annexed to the Applicant’s affidavit of 27th May 2010.
The Orders included a superannuation splitting order to take effect upon the Respondent’s resignation or retirement from his employment. The relevant orders state:
5. That superannuation payable to the Husband be paid to the Wife upon the Husband’s resignation or retirement from his employment in accordance with the following formula:
A x B divided by C x 50%
Where
A = the lump sum net of taxation payable to the Husband
B = years of marriage and
C = the years elapsed between the date the Husband joined the superannuation fund and the date of his retirement
6. That the Husband be restrained from dealing with or disposing of any entitlements he has under his [P] superannuation fund other than in accordance with the terms of these orders.
7. That a sealed copy of this order be delivered to the Trustees of the [P] Superannuation fund.
The Respondent was retrenched from his employment with [B] on 7th April 2009.[1] He received by way of superannuation the sum of $592,340.19 on 5th May 2009.[2]
[1] Affidavit of Mr Dugan 15.10.2010 at paragraph [4]
[2] Ibid Annexure “R3”
The Applicant commenced proceedings in this Court on 27th May 2010 seeking final and interim orders. The interim orders sought included an injunction restraining the Respondent from:
a)disposing or, encumbering or otherwise dealing with in any way any of his money, property or other assets up to the value of $500,000.00; and
b)dealing with, dissipating, encumbering, selling or disposing of or otherwise dealing with a property at Property B, New South Wales.
The final orders sought include an accounting of all superannuation monies paid or payable in accordance with Order 5 made on 19th October 1998, interest on the amounts payable under Order 5 from 1st September 2009, and costs on an indemnity basis.
The Respondent filed a Response, an affidavit and a financial statement on 5th July 2010. In his Response, the Respondent sought that the Application be dismissed and:
that a splitting order be made to give effect to Order 5, made in the Family Court of Australia by Loughnan, Judicial Registrar, on 19 October 1998.
The Respondent also sought an order for costs on an indemnity basis.
The application came before the Court on 5th July 2010, where the parties entered into interim consent orders:
1. That the Respondent be restrained from disposing of, encumbering or otherwise dealing with in any way his superannuation interest in any fund, other than his current pension entitlements.
2. That the Respondent be restrained from dealing with, dissipating, encumbering, selling or disposing of or otherwise dealing with the property known as Property B, Folio Identifier [omitted].
3. That the Respondent cause to be delivered to the solicitors for the Wife all documents in relation to his interest in the [A] Superannuation Fund and allocated pension and any other interest held by him in any other superannuation or pension fund from 19 October 1998 to date.
4. That the proceedings be adjourned for a period of six (6) weeks.
On 30th August 2010 the Respondent’s solicitors forwarded to the Applicant’s solicitors a cheque for $148,172.76, representing an amount of superannuation calculated by the Respondent less the sum of $11,000.00, being an unpaid loan.
The Application was set down for final hearing on 12th November 2010. The Court was informed that the matters would be dealt with by way of submissions and no oral evidence would be required.
Evidence
The Applicant relied on the following affidavits:
a)her own affidavit of 27th May 2010; and
b)the affidavit of Dr W, Chartered Accountant, sworn 10th September 2010.
The Respondent relied on the following affidavits:
a)his affidavit sworn 2nd July 2010; and
b)his affidavit sworn 15th October 2010.
In her affidavit of 27th May 2010, the Applicant deposed that after the Family Court made Orders on 19th October 1998, she instructed her solicitors to serve a copy of the Orders on [H] Pty Ltd, the trustee of the [P] Superannuation Fund. On 8th April 1999 the Benefits Administrator of the [P] Superannuation Fund acknowledged receipt of the copy of the Orders and advised:
There has[3] been no alterations or withdrawals from his superannuation account since the 19 October 1998.[4]
[3] sic
[4] Affidavit of Ms Dugan 27.5.2010 Annexure “B”
The Applicant deposed that:
a)She had not received any payment or correspondence with regard to superannuation payout from either [P] or the Respondent;[5]
b)The Respondent retired from his employment with [B] and had failed to make any payment to her from his superannuation fund in accordance with the Orders of the Family Court;[6]
c)She believed that the Respondent ceased his employment with [B] in September 2009;[7]
d)She became suspicious that the Respondent had retired when she attended the baptism of the parties’ grandson and heard that he and his current partner had been travelling in South America;[8]
e)She asked the Respondent if he had retired but he replied “No, I still have work to do”;[9]
f)The Applicant made telephone inquiries from [P] on 30th April 2010 and was informed that the Respondent had retired in September 2009;[10]
g)The Applicant acknowledged having received two personal loans from the Respondent, being $3,000.00 in 1999 and $8,000.00 in 2006.[11]
[5] Ibid at paragraph [7]
[6] Affidavit of Ms Dugan 27.5.2010 at [17]
[7] Ibid at [18]
[8] Ibid at [22]-[23]
[9] Ibid at [24]
[10] Ibid at [26]
[11] Ibid at [27]
The Applicant relied on the affidavit of Dr W, a Chartered Accountant, who prepared an assessment of the interest payable to the Applicant and the monies due to her “pursuant to the formula contained within the 1998 Court Orders”.[12]
[12] Affidavit of Dr W 10.9.2010 at Annexure AW1
Dr W based her calculations on these facts:
a)That the Respondent ceased his employment with [B] on 9th April 2009[13];
b)He received a benefit on leaving the fund of $592,340.19;
c)The benefit of $592,340.19 was rolled over into the [B] Superannuation Fund Retained Benefit Division and a voluntary contribution of $200,000.00 was added to the original benefit on 19th June 2009;
d)On 25th August 2009 the accumulated balance of $798,079.05 in the [B] Superannuation Fund was rolled over into [A] Personal Super.
[13] The Respondent states that he ceased his employment on 7th April, but the difference is immaterial
Dr W noted that the formula in the orders of 19th October 1998 was silent on the treatment of additional contributions to superannuation, such as the $200,000.00 made on 19th June 2009.
Dr W calculated the benefit payable according to two different interpretations of “years of marriage”, namely:
a)From the date of marriage to the date of separation; and
b)From the date of marriage to the date of divorce.
Further, Dr W used two possible dates to calculate the years elapsed between the date the Respondent joined the superannuation fund and the date of his retirement.
Again, Dr W noted that the Applicant received an amount of $148,172.76 from the Respondent on 27th August 2010. Therefore, she calculated the interest payable to 27th August 2010 and then on the balance calculated as owing to 20th September 2010.
Dr W calculated that the total amount still owing to the Applicant ranged between $19,762.97 and $114,131.89, depending on the assumptions used. Similarly, she calculated the amounts of interest due as ranging from 5 cents through to $628.46.
Dr W’s assessment includes a table showing the four different figures for the total payment plus interest to 27th August 2010 less the payment received on 27th August 2010 of $148,172.76.
First, using the redundancy date of 9th April 2009 and rolled over benefit of $592,340.19, on the basis of date of marriage until date of separation, the figure is $19,762.90, plus interest on the unpaid balance of 5 cents as at 20th September 2010.
Second, using the redundancy date of 9th April 2009 and rolled over benefit of $592,340.19, on the basis of date of marriage until date of divorce, the figure is $51,836.67, plus interest on the unpaid balance of $195.32 as at 20th September 2010.
Third, using the rollover date of 25th August 2009 to the [A] OneAnswer account and rolled over benefit of $798,079.05, on the basis of date of marriage until date of separation, the figure is $72,715.72 plus interest on the unpaid balance of $367.70 as at 20th September 2010.
Finally, using the rollover date of 25th August 2009 to the [A] OneAnswer account and rolled over benefit of $798,079.05, on the basis of date of marriage to date of divorce, the figure is $114,131.89 plus interest of $628.46 as at 20th September 2010.
The Applicant is claiming the amount of $114,131.89 and interest of $628.46.
The Respondent deposed that:
a)He was retrenched from his employment with [B] on 7th April 2009;[14]
b)He received superannuation benefits of $592,340.19;[15]
c)He rolled those funds over into the [A] superannuation fund in August 2009;[16]
d)He received a retrenchment benefit of approximately $255,188.00 after tax, of which he paid $200,000.00 of that amount into his [A] superannuation fund;[17]
e)He decided to move his funds into the [A] Super Fund because [B] did not have a pension package, but it took some time to be transferred and he did not start to receive a pension until September 2009;[18]
f)He calculated the amount he owed to the Applicant out of his superannuation as $159,172.76, based on the formula in the Court Orders;[19]
g)As the Applicant still owed him $11,000.00, he deducted that amount from the total and arranged to pay her the sum of $148,172.76.
[14] Affidavit of Mr Dugan 15.10.2010 at paragraph [4]
[15] Ibid at [5]
[16] Ibid at [6]
[17] Affidavit of Mr Dugan 2.7.2010 at paragraph [17]
[18] Ibid at [19]
[19] Affidavit of Mr Dugan 15.10.2010 at [11]
In reply to the Applicant’s claim that he had replied to inquiry as to whether he had retired by saying “No. I still have work to do”, the Respondent deposed that he had had a cochlear implant only about two months previously and was still not getting the full benefit of it. He stated:
I was unsure of my future in regard to being able to work.[20]
[20] Ibid at [16]
The Respondent annexed to his affidavit of 15th October 2010 a copy of the Reasons for Decision of Judicial Registrar Loughnan dated 19 October 1998.
Submissions
Counsel for the parties agreed that the issues are:
(1)The construction of Order 5 made by the Family Court on 19th October 1998;
(2) Whether the Respondent should pay interest; and
(c) Costs.
Mr Dalley of counsel, who appeared for the Respondent, submitted that the Respondent had paid the amount according to the formula set out in the order. The formula provided that the amount payable to the applicant was to be calculated by reference to the formula:
A x B divided by C x 50%
Where
A = the lump sum net of taxation payable to the Husband
B = years of marriage and
C = the years elapsed between the date the Husband joined the superannuation fund and the date of his retirement.
Mr Dalley submitted that the relevant construction in respect of “B” in the formula is the length of cohabitation. Thus, the length of time is from the date of marriage until the date of separation, not until the date the parties were actually divorced. Similarly, the appropriate date is the date that the Respondent was retrenched, not the rollover date of 25th August 2009 referred to in Dr W’s assessment.
Ms Druitt of counsel, who appeared for the Applicant, submitted that the difficulties in construing the years of marriage are manifold. Years of marriage do not equal years of cohabitation. The only construction of the phrase “years of marriage” must be the period from date of marriage to date of divorce, that is, [date omitted] 1971 to 24th February 1997, a period of 25.16 years.
This formula differs from that in West & Green[21], where the formula was years of cohabitation, which is clearly different. The words of the order are clear and so can be distinguished from the formula in West & Green. The formula in West & Green has not universally been accepted as fair in all cases (e.g. T & T (Pension Splitting) [22] per Watts J at [170]), which may explain the variation.
[21] (1991) 16 Fam LR 811; (1993) FLC 92-395
[22] (2006) 35 Fam LR 181; (2006) FLC 93-263
It was submitted that the formula as ordered should be construed literally to include the total of the Respondent’s superannuation benefits available to him at date of retirement not retrenchment. Ms Druitt also submitted that Order 6 needs to be taken into account. That Order says:
That the Husband be restrained from dealing with or disposing of any entitlements he has under his [P] superannuation fund other than in accordance with the terms of these orders.
What the Respondent did was to take the money he had received by way of retrenchment and superannuation and, without consultation with the Applicant, was to put the money and some more money into another superannuation fund. Therefore, it is submitted that the Applicant is entitled to claim that the other money has been rolled into the superannuation.
Further, the Applicant claims that the Respondent should pay interest on the money payable to her. She made her claim by filing an application in late May 2010 and he then paid her the money in August. The Applicant says that this should have happened 18 months previously, but it did not happen because the Respondent did not understand his obligation.
The Applicant is seeking costs on an indemnity basis because the Respondent did not obey a court order. The Respondent did not pay the money that he did pay for three months after the proceedings were commenced and the parties were still engaged in litigation about what should have been paid.
In reply, Mr Dalley submitted that the West & Green approach supported the view that the Court intended to apply the period of cohabitation as the relevant period.
Conclusions
This is a case about the construction of Court Orders and their enforcement. Order 5 provides:
That superannuation payable to the Husband be paid to the Wife upon the Husband’s resignation or retirement from his employment in accordance with the following formula:
A x B divided by C x 50%
Where
A = the lump sum net of taxation payable to the Husband
B = years of marriage
C = the years elapsed between the date the Husband joined the superannuation fund and the date of his retirement.
The parties have been unable to agree as to when the Applicant’s share of the superannuation should be payable to her, what the lump sum payable to the Respondent in A should be, and what period of time is referred to in B in the formula.
True it is that the order 5 refers to “resignation or retirement” and not specifically to “retrenchment”, but that is of little moment. The Respondent did rather weakly raise the point in his affidavit of 15th October 2010, saying:
With respect to order 5 I say that I have neither resigned nor retired from [B] or any other employer.[23]
[23] Affidavit of Mr Dugan 15.10.2010 at paragraph [3]
Sensibly, his counsel did not trouble to argue that proposition. The Respondent was not claiming that he was still in employment, or that he had retired at some later date. It is noteworthy that in both of his affidavits the Respondent has given his occupation as “Retired”.
“Retrench” is defined by the Macquarie Dictionary as meaning, inter alia:
To sack or dismiss, as part of an effort to economise.[24]
[24] Macquarie Dictionary , Revised Third Edition 2001 at page 1614
In this case, the Respondent was offered by his employer a sum of money to leave his employment, either by resignation or retirement, if he were old enough to retire. The operative date was 7th April 2009, which was the date that the Respondent should have taken into account and made arrangements to pay the Applicant her entitlement under Order 5.
The Respondent did not do so, and thereby breached the order.
He was restrained by order 6 from dealing with or disposing of any entitlements he had under his [P] superannuation fund other than in accordance with the terms of the orders. He breached that order, also. He rolled the money over into another superannuation fund and did not advise the Applicant.
The Respondent added other money to the superannuation money, namely the sum of $200,000.00 that came from his retrenchment or redundancy package. However, I do not see that the Applicant accrued any entitlement to any part of this additional sum of money. Her entitlement was to a share of the superannuation payable to the Respondent, not to any other funds.
Similarly, I know of no authority that would permit the Court to find that the operative date was the “rollover date” of 25th August 2009, when the superannuation funds plus the additional $200,000.00 were rolled over into the [A] Superannuation Fund, was an appropriate date from which to calculate the Applicant’s entitlement.
Thus, of the four options referred to in Dr W’s assessment, options 2(a) and 2(b) do not apply.
The operative date for the formula in Order 5 is 7th April 2009, not 25th August.
The Meaning of A
A, in the formula set out in Order 5, is defined as “the lump sum net of taxation payable to the Husband”. That figure is the amount of superannuation to which the Respondent became entitled on 9th April 2009, namely $592,340.19.
The Meaning of B
B, in the formula set out in Order 5, is defined as “years of marriage”.
The Applicant contends that the words should be taken literally, so that the period of time goes from the date of marriage, [omitted] 1971, to the date when the parties’ divorce became final, which was 24th February 1997. On the Applicant’s contention, the period of time would therefore be 25 years and 2 months.
The Respondent contends that the words in fact refer to the period of cohabitation, so that the period of time would go from [date omitted] 1971 to the date of separation, 8th May 1993. On the Respondent’s contention, the period of time would only be 21 years and 5 months. The difference is significant, a period of 3 years and 9 months.
In my view, with respect, the Court needs to refer to the reasons for judgment in order to arrive at the meaning of the words used. The learned Judicial Registrar discusses the question at pages 16 through to 23 of the judgment, under the heading Treatment of the Superannuation Entitlements.
In that discussion, the approach taken in West & Green is referred to without disagreement. Indeed, the learned Judicial Registrar said at page 22 of the judgment:
Here, however, the parties have sought orders in identical terms for the ultimate disposition of their superannuation. The only differences in their applications are that the Husband puts as an alternative, a proposed percentage payout to the Wife and that the Wife’s superannuation also be brought in. Neither could be said to constitute opposition to the West and Green approach.[25]
[25] Dugan & Dugan at page 22
The learned Judicial Registrar at page 17 of the judgment refers specifically to contributions during the parties’ cohabitation:
The only area of disagreement seemed to be the percentage share of the superannuation that accumulated during the course of cohabitation which should be ultimately made available to the Wife.[26]
[26] Ibid at 17
Again, at page 18, the learned Judicial Registrar said:
As I have already indicated in this case, the parties cohabited for 20 years…On the facts of this case I see no reason not to extend that concept of equal contribution to that part of the superannuation entitlement which accrued during the course of cohabitation.[27]
[27] Ibid at 18
It seems clear, with respect, that at all times the reasons for judgment show that the Court considered that the proper approach was to deal with the superannuation on the basis of the parties’ contributions during the period of cohabitation. There is no support for the contention that the learned Judicial Registrar considered that the duration of the marriage was the appropriate period.
True it is that the words used in Order 5 are “years of marriage” and not “years of cohabitation”, but the Reasons for Judgment make it quite clear that the latter meaning was what was intended.
Accordingly, I am satisfied that the meaning of B in Order 5 should be interpreted as “years of cohabitation”.
Whether Interest Should be Paid
The facts are that the Respondent accrued an entitlement to superannuation in April 2009 when he was retrenched but did not contact the Applicant or advise her in any way about that fact. The Applicant did not find out that the Respondent had ceased working until April 2010, when she made her own inquiries. She asked him on 18th July 2009 if he had retired but he replied in the negative.[28] The Respondent gives a different account of that conversation in his affidavit of 15th October 2010, saying that his cochlear implant had only been functioning for two months and he was unsure of his future in regard to being able to work.[29]
[28] Affidavit of Ms Dugan 27.5.2010 at [24]
[29] Affidavit of Mr Dugan 15.10.2010 at [16]
Whilst the matter was heard on submissions and there was no opportunity for the parties’ affidavit evidence to be tested by cross-examination, I note that at the time of the conversation between the parties on 18th July 2009 the Respondent had left work more than three months previously and had received a superannuation payout. In my view the Respondent was aware, or should have been aware, that his obligation to comply with Order 5 and pay the required proportion of superannuation to the Applicant had arrived.
It was not until August 2010, more than a year later, that the Respondent paid the amount of $148,172.76 to the Applicant. The payment was not made until after the Applicant had commenced proceedings in this Court, which she did on 27th May 2010.
Subsection 117B(1) of the Family Law Act 1975 provides that interest is payable, subject to any order made by the Court, at the rate prescribed by the applicable Rules of Court from the date on which the order is made or the date on which the order takes effect, whichever is later, on so much of the money as is from time to time unpaid.
In my view, the Respondent should pay interest on the money that he actually paid up to the date of payment. He should also pay interest on any amount that remains unpaid.
I am satisfied that option 1(a) in Dr W’s assessment sets out the correct position. Using the redundancy date of 9th April 2009, based on the superannuation benefit of $592,340.19 and taking the period from the date of marriage until the date of separation, the total payment plus interest to 27th August 2010 would amount to $167,935.66. I note that Dr W’s calculations all factor in the sum of $11,000.00 that was owed by the Applicant to the Respondent.
Subtracting the sum actually paid on 27th August 2010[30], namely $148,172.76, from the sum of $167,935.66, the sum due and payable amounts to $19,762.90. I propose to order that the Respondent pay this amount to the Applicant.
[30] I note that the covering letter was dated 30 August 2010 but the bank cheque was dated 27 August 2010.
Costs
The Applicant seeks an order for costs on an indemnity basis.
The first matter to be decided is whether costs should be payable at all, as costs do not follow the event in this jurisdiction. However, if the Court is of opinion that there are circumstances that justify it in doing so, the Court may make such order for costs as it thinks just (s.117(2)).
In considering the circumstances, the Court shall have regard to the matters set out in subsection 117(2A) of the Act.
I am satisfied that the Respondent’s financial circumstances are such that he has a capacity to pay. Neither party is in receipt of assistance by way of legal aid.
There is no criticism that can be levelled against the parties as to their conduct of the proceedings.
It is relevant that these proceedings were necessitated by the failure of the Respondent to comply with Order 5 made by the Family Court on 19th October 1998. He failed to notify the Applicant that he had left his employment and did not make any payment until after the Applicant had commenced proceedings.
It is a reasonable inference that if the Applicant had not commenced proceedings the Respondent would not have made the payment required by the Order. As it is, he did not pay any more than the bare sum required, and did not make that payment until more than a year later. Interest, under s.117B, was clearly a matter that should have been considered.
It is a consideration whether any party to the proceedings has been wholly unsuccessful in the proceedings (s.117(2A)(e)). The Applicant has been successful, but not as successful as she might have wished. However, the Respondent sought that the Application should be dismissed, which is certainly not the way this matter is to resolve.
The only matter upon which the Court does not have information is whether either party to the proceedings has made an offer in writing to the other party to settle the proceedings and, if so, the terms of any such offer.
As this is a matter that may be relevant, I will refrain from making any order for costs until such information is to hand. I will certainly require submissions as to why costs are sought on an indemnity basis, rather than on a party and party basis.
However, it is appropriate, in my view, to discharge the injunctive and procedural Orders made by consent on 5th July 2010.
I certify that the preceding eighty-five (85) paragraphs are a true copy of the reasons for judgment of Scarlett FM
Date: 16 August 2011
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