Earwood & Earwood
[2021] FedCFamC2F 631
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Earwood & Earwood [2021] FedCFamC2F 631
File number(s): ADC 3937 of 2019 Judgment of: JUDGE BROWN Date of judgment: 22 December 2021 Catchwords: FAMILY LAW – Property – property settlement – long marriage – assessment of contributions – superannuation – overseas superannuation funds – construction of the pool of assets – add backs – spousal maintenance – considerations of justice and equity.
FAMILY LAW – Parenting – issue of parental responsibility – child who is 17.
Legislation: Evidence Act 1995 (Cth), s 104
Family Law (Superannuation) Regulations 2001 (Cth)
Family Law Act 1995 (Cth) Pts VII, VIII, VIIIB, ss 4, 60B, 60CA, 60CC, 64B, 65C, 65D, 65DAE, 72, 74, 75, 79, 80, 81, 90XA, 90XC, 90XT
Superannuation Industry (Supervision) Act 1993 (Cth)Cases cited: Bartel & Schmucker (No 3) [2012] FamCA 1094
Bevan & Bevan [2013] FamCAFC 116
Biltoft & Biltoft (1995) 19 Fam LR 82
Bulow & Bulow (2019) FamCAFC 3
NHC & RCH (2004) 32 Fam LR 518
Clauson v Clauson (1995) 18 Fam LR 693
C & C (2005) 33 Fam LR 414
Ferguson & Ferguson (1978) 4 Fam LR 312
Ferraro v Ferraro (1992) 16 Fam LR 1
Fox v Percy (2003) 214 CLR 118
Hall & Hall (2016) 257 CLR 490
Hickey & Hickey (2003) 30 Fam LR 355
In the Marriage of Browne & Green (1999) 25 Fam LR 482
In the Marriage of DJM and JLM (1998) 23 Fam LR 396
In the Marriage of Kowaliw (1981) FLC 91-092
In the Marriage of Omachini (2005) 33 Fam LR 134
`In the Marriage of Townsend (1994) 18 Fam LR 505
Ingold & Ingold [2019] FamCA 734
Jones v Dunkel (1959) 101 CLR 298
SHL & EHL [2006] FamCA 1287
Pierce v Pierce (1999) FamCA 74
Railpro Service Pty Ltd v Flavel [2015] FCA 504
Robb & Robb (1994) 18 Fam LR 489
Rushton & Rushton [2011] FMCAfam 1259
Russell & Russell (1999) 25 Fam LR 629.
Stanford v Stanford (2012) 247 CLR 108.
Steinbrenner & Steinbrenner [2008] FamCAFC 193.
Trevi & Trevi [2018] FamCAFC 173.
Waters & Jurek (1995) 20 Fam LR 190.
Watson & Ling [2013] FamCA 57.Division: Division 2 Family Law Number of paragraphs: 390 Date of last submission/s: 16 August 2021 Date of hearing: 2 – 4 June 2021 Place: Adelaide Counsel for the Applicant: Mr Bowler Solicitor for the Applicant: Australian Family Lawyers Counsel for the Respondent: Mr Praolini Solicitor for the Respondent: Websters Lawyers ORDERS
ADC 3937 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR EARWOOD
Applicant
AND: MS EARWOOD
Respondent
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
22 DECEMBER 2021
THE COURT ORDERS THAT:
In full and final settlement of all applications for the settlement of matrimonial property:
1.That within twenty eight (28) days of the date of this order that the applicant, Mr Earwood (hereinafter referred to as “the applicant”) and the respondent, Ms Earwood (hereinafter referred to as “the respondent”, and collectively referred to as “the parties”) do all things necessary and execute all documents required to appoint an agent to sell/transfer the property known as and situate at B Street, Town C SA (hereinafter referred to as “the property”) and being the whole of the land comprised in Certificate of Title Volume … Folio … at a price to be agreed between the parties.
2.That contemporaneously with the production of the transfer and sale of the property referred to in order (1) hereof, the parties discharge the following using the proceeds of sale of the property:
(a)any payment and/or commission due to the selling agent;
(b)any mortgage or charge secured against the property;
(c)all extant water and council rates in relation to the property;
(d)the tax debt to the Australian Taxation Office standing in the husband’s name;
(e)X’s outstanding school fees; and
(f)as to any balance remaining:
(i)40% to the applicant, less $4,440.00
(ii)60% to the respondent, plus $4,440.00.
3.That pursuant to section 106A of the Family Law Act 1975 (Cth) (hereinafter referred to as “the Act”) that in the event that either party refuses or neglects to comply with the provisions of these orders, the Registrar of the Federal Circuit and Family Court of Australia is hereby appointed to execute all deeds and documents in the name of the defaulting party.
4.Pursuant to section 74 of the Act, the applicant pay the respondent, by way of spousal maintenance, a sum equal to fifty (50) percent of the United Kingdom Armed Forces Pension, payable to him by Veterans UK, to which recurrent pension he is entitled as a result of his service with the Armed Forces for a period of ten (10) years, as is indexed from time to time, by reference to the net amount received by the applicant in Australian dollars, with the said spousal maintenance to be paid into a bank account nominated by the respondent with the first payment to be due on 1 January 2022 and on the first day of each month thereafter and the last payment due on 1 December 2032.
5.The husband advise the wife in writing and provide written proof of same of any changes to the amounts to which he is entitled pursuant to the United Kingdom Armed Forces Pension.
6.The parties be at liberty to vary the time and manner of payment of spousal maintenance specified in order (4) hereof, if they agree to do so and such agreement is executed in writing and signed by each of them.
7.Including but without limiting the effect hereof, the applicant shall retain for his sole use and benefit absolutely free from any further claim or demand of the respondent:
(a)the furniture and furnishings in his possession, power and control;
(b)any motor vehicle in his possession;
(c)all savings, shares and investments in his name;
(d)any superannuation entitlement, long service leave, annual leave or other work related benefits, standing in his name subject to order (4) hereof;
(e)his personal effects; and
(f)any other real and/or personal property, particularly the property known as and situate at D Street, Suburb E SA and/or all other financial resources of the applicant or in the applicant’s name and/or possession not otherwise specified herein.
8.Including but without limiting the effect hereof, the respondent shall retain for her sole use and benefit absolutely free from any further claim or demand of the applicant:
(a)the tractor and the livestock;
(b)the furniture and furnishings in her possession, power and control;
(c)any motor vehicle in her possession;
(d)all savings, shares and investments in her name;
(e)any superannuation entitlement, long service leave, annual leave or other work related benefits, standing in her name;
(f)her personal effects; and
(g)any other real and/or personal property and/or financial resources of the respondent or in the respondent’s name and/or possession not otherwise specified herein.
9.All other outstanding applications are dismissed and the proceedings are finalised.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Earwood & Earwood has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE BROWN:
INTRODUCTION
These proceedings relate to the settlement of property and parenting issues. The parties to the proceedings are Mr Earwood (“the husband” or “Mr Earwood”) and Ms Earwood (“the wife” or “Ms Earwood”). They are the parents of X (“X”) born in 2004.
The parties met in 2001 and began to live together, in the United Kingdom, in late 2002. They married in City F, United Kingdom in 2010. The family lived in the United Kingdom until 2010, when the wife and X relocated to South Australia, where Ms Earwood originated. The husband joined them in Adelaide the following March.
The parties finally separated on 27 January 2019, when the husband moved out of their former matrimonial home located at B Street, Town C. On any view, theirs was an extremely difficult separation. Accordingly, the marriage between the parties was one of around 17 years in duration.
X is 17 and a half years of age. Currently his preference, confirmed by interview with an independent psychologist,[1] is to live with his father and see his mother, when he wishes to do so. Currently, this is extremely irregularly and it is the wife’s view that Mr Earwood is malignly influencing X against her. In this context, the major parenting controversy concerns how responsibility for making long-term decisions, concerning X, should be conferred between his parents.
[1] See Private Child Dispute Meeting Report of Ms G dated 29 October 2019.
During the parties’ lengthy marriage, the family lived for extended periods in both Australia and the United Kingdom, X has significant familial connections in the United Kingdom. Given that her relationship with X is currently not strong, Ms Earwood fears what may occur if she is not able to be involved in potential decision making for X possibly travelling overseas. She also wishes to be able to influence any significant health and education decisions pertaining to him. She does not wish to be frozen out of his life.
The latter stages of the parties’ marriage were extremely difficult for all concerned and their final separation was a traumatic one. Since at least 2016, the wife has suffered ill-health. This has had major implications for her capacity to work and for her on-going financial security. She has been in receipt of income protection payments, through Super Fund H, for a part of this period. The husband alleges that Ms Earwood has not been candid about the actual extent of these payments.
There is a dearth of expert evidence regarding the wife’s current state of health. She has provided a document which is headed a Mental Health 3 Step Process. The document does not disclose an author. It details a list of the medication which she is currently taking, which is lengthy. It also indicates a diagnosis of anxiety and depression as well as PTSD. Under the heading Medical Conditions are listed chronic hypercholesterolemia; hypertension; narcolepsy; GORD; inflammatory arthritis; anxiety; wheezing; and type 2 diabetes.[2]
[2] See Exhibit I.
The husband has re-partnered. His current partner, Ms J, is a former neighbour of the parties, from when they were living in the United Kingdom. In the past, she was a friend of Ms Earwood. Ms J, following the death of her husband, moved to Australia.
Ms J has lent a significant sum of money to Mr Earwood to enable him to purchase a new home, located at D Street, Suburb E, where he lives with X. Ms J holds a mortgage on the property. Ms Earwood is somewhat sceptical whether the mortgage is a bona fide one.
It is Ms Earwood’s allegation that Ms J is an extremely wealthy person, who will be both able and willing to provide financial support to the husband indefinitely, which is fundamentally unfair to her. Mr Earwood disputes this assertion and has deposed that Ms J is not a multi-millionaire, as the wife has stated. Ms J herself has not given evidence in the case.
These various factors have led to an extremely fraught emotional situation between the parties, which has prevented them from communicating effectively with one another for some time. In December 2019, the wife was charged by police, with assaulting the husband and Ms J and an intervention order was made against her. More recently again, the wife has been charged with breaching that order on several occasions and her related bail.
Ms Earwood pleaded guilty to some of the charges and others were withdrawn. The criminal proceedings have now all been resolved with assistance from the Treatment Intervention Court on the basis that Ms Earwood has been diagnosed with a complex Post-Traumatic Stress Disorder. However, the fact remains that Ms Earwood was charged with a serious criminal offence involving violence and she fears this may preclude her from holding any responsible position with the South Australian Government, as she has done in the past.
The parties are currently not in a strong financial position. Their major asset is their matrimonial home situated at B Street, Town C. It is agreed the property is worth approximately $890,000.00 and is subject to a mortgage in an amount of $630,107.53, which is currently in arrears in an amount of $48,448.01 and which the wife currently occupies.
The mortgagee concerned has commenced proceedings in respect of the mortgage. The parties realise the property must be sold. X’s school fees are also overdue in an amount of $3,100.00. The school concerned has lodged a charge, on the Certificate of Title, arising from a judgement debt made in its favour.
Controversies also arise in respect of the ongoing financial support of X. In the early period of the parties’ separation, Mr Earwood was assessed to pay child support for X, which he paid. Since X has come into the husband’s care, Ms Earwood has been assessed to pay child support.
It is Mr Earwood’s case that the wife has not paid any child support whatsoever and she owes $4,465.00 in arrears as at 28 April 2021. In addition, he has to pay for X’s various extracurricular activities, which is an added expense for him.
Apart from one discrete issue, relating to the husband’s entitlement to receive an overseas based defined benefit pension, the legal issues surrounding the parties’ financial affairs are not unduly complex. In basic terms, a defined benefits pension entitles the recipient to a regular stipend for the remainder of life. Accordingly, the entitlements are open-ended and thus impossible to quantify.
The husband’s defined benefits pension arises from his military service, with the Armed Forces over a period of 22 years, a significant proportion of which pre-dated his relationship with the wife. As a consequence, he is now entitled to receive a monthly pension for the remainder of his life.
His evidence is that it provides him with a monthly sum of £850.00, which equates to around $1,500.00, depending on the exchange rate. It would be his preference that the court, in some way allocate a proportion of this monthly sum to the wife, given it is evidence that it cannot be divided as a lump sum. [3]
[3] See the Affidavit of Mr Earwood filed 5 May 2021 at [33]-[34].
On the other hand, the wife’s preference would be for the court, in some way attribute a capitalised value to this pension, which could be included at this figure in the parties’ pool of assets and then allocated to the husband as part of his entitlements. In this way, she would receive the far larger proportion of the parties’ immediately realisable assets, in cash, which is her preference. As will be delineated in more detail in due course, this is an issue not without its legal complexities.
Both parties have had significant career working in Australia where it is more generally the case that employers contribute a statutorily fixed percentage of an employee’s salary into what is usually termed an accumulation superannuation fund. The superannuation fund is often managed by the industry body in the particular field of employment engaged in by that employee.
In this case, each party has an entitlement to superannuation with accumulations funds in Australia. In the wife’s case she has an SA employee’s fund and an industry fund; whilst the husband has one industry fund. Given the nature of such accumulation funds, their value is easily ascertainable and the Family Law Act 1975 (Cth) (“the Act”) provides ready mechanisms for their division, if just and equitable, on marital separation, which is not necessarily the case with overseas based pension funds.
Given the longer period of her employment in Australia than Mr Earwood, Ms Earwood has a great store of superannuation in this country. In this context, the husband seeks a splitting order which would result in an equalisation of the Australian based superannuation between the parties. On the other hand, the wife seeks that she retain all superannuation interests, including her United Kingdom pension entitlements and the husband retain both his Armed Services pension and his Australian superannuation.
Apart from the pension issue, the controversies which arise between the parties relate to the construction of the pool of assets to be distributed between them, particularly in respect of the potential add back of items of property notionally already accessed by the parties and how the court should assess their respective prospective needs, particularly in terms of their comparable levels of health, age and capacity to work.
That is not to say that determining this case is not without its inherent difficulties for the court. These difficulties largely stem from the parties’ extremely compromised relationship, which has led to them having a significant level of mistrust for one another. Necessarily, this is a state of affairs which makes it difficult for the court to ascertain the truth of their financial relationship together.
Given their recent history, with one another, the parties currently have no or an extremely limited capacity to work through the various issues arising in the case, with the assistance of their respective legal advisors. Against this parlous emotional background, each asserts that the other has not been fully frank in disclosing their true financial circumstances to the court.
In this context, the husband complains that the wife has not provided a proper level of detail of her income received from 2012 onwards, particularly in respect of a claim she has made for income protection from Super Fund H from 1 January 2017 onwards; payslips in respect of her current employment position; details of her Australian superannuation and her Company L pension from the United Kingdom; and disclosure of financial information relating to a business she runs from the former matrimonial home entitled “K”.
In my view, the evidence does indicate that Ms Earwood has been reluctant to provide documentary evidence to both the court and Mr Earwood about her financial affairs, particularly in respect of her UK based pension entitlements. This has made it difficult for the court to discharge its obligations under the Act. On balance, it seems more likely than not that this recalcitrance, on Ms Earwood’s part, is more explicable by emotional paralysis than an intention to deceive.
“K” is a livestock business. It is Mr Earwood’s evidence that the business earns approximately $2,000.00 per month. It is run at a loss as a mechanism to defray expenses relating to the running costs of the former matrimonial home. He asserts that Ms Earwood retains the income from this business.
For her part, the wife is critical that the husband has not provided more information regarding Ms J’s financial affairs; details regarding the proceeds of sale of a property located at Town M, United Kingdom, which Mr Earwood owned prior to the parties relationship and which he sold in January 2020 for £91,430.84;[4] and details regarding the current status of two policy investments, which the husband owned prior to the marriage, held with Company N, one of which has been cashed in.
[4] See Exhibit C.
It is also the wife’s case that the husband continues to operate a number of bank accounts in the United Kingdom, which he has not properly disclosed. In her trial affidavit, the wife has deposed as follows:
The husband has retained control of the sale proceeds of the Town M United Kingdom property, the Company N investments, his UK bank accounts and other assets in the UK post-separation and has refused to contribute to the our joint mortgage in Australia since separation. I say this supports my position that the husband was secretive and controlling with his finances during the relationship and the he largely used my earnings for joint expenses to benefit himself.[5]
Essentially, Ms Earwood characterises Mr Earwood as a controlling and abusive spouse who was cruel to her and her children and who has lied about and concealed his true financial circumstances.
[5] See Affidavit of Ms Earwood filed 12 May 2021 at [32].
For reasons, upon which I will elaborate, it seems Mr Earwood has been more candid about his financial affairs than has Ms Earwood. I remain concerned however that there may exist significant lacunae in respect of his UK military pension, particularly in respect of its potential to increase in quantum, if he retires from the permanent workforce or accesses an aged pension, either in this country or in the UK.
I have not been provided with any actuarial analysis or expert investigation of Mr Earwood’s UK military pension. This concerns me. However, in my view, no useful purpose can be served in delaying the case and it must be determined on the basis of the evidence provided to me by the parties concerned, notwithstanding any reservations I may have about such evidence.
Other controversies arise in respect of tax incurred on income earned by the husband during the marriage. He asserts that he earmarked part of his earnings to pay the tax when it was assessed but the wife accessed this money and utilised it for her own purposes following separation. He now asserts that the tax debt should be approached by the court as a joint liability.
For his part, the husband asserts that Ms Earwood has always been secretive about money and has not disclosed to him what her level of salary has been. In addition, he characterises her as having a history of badly managing money.[6]
[6] See Affidavit of Mr Earwood filed 5 May 2021 at [56] and [69].
In addition, it is his case that, during the parties’ marriage, he performed the vast majority of household duties and provided the greater component of the parenting required for not only X but also the wife’s two children from her earlier marriage.
Mr Earwood refutes his characterisation as a coercive and controlling person. Rather he presents himself as a stoic person who, in extremely difficult circumstances, struggled to keep the family together, when Ms Earwood was suffering a series of uncertain or unspecified medical conditions, which have included sleep apnoea, narcolepsy, rheumatoid arthritis and cancer. He asserts he kept the business going, notwithstanding the fact that he is allergic to animals.
In his trial affidavit, the husband has deposed as follows:
I say that I have made the overwhelmingly greater contributions to the assets of our relationship and to the welfare of our family, both financial and non-financial.[7]
[7] Ibid at [70].
Underpinning this assertion, is the husband’s position that he brought into the parties’ marriage a significant portfolio of assets, the chief of which was his home in City O in United Kingdom, the sale of which purchased their first shared home in the United Kingdom and their more recently acquired home in B Street, Town C; whilst on the other hand, the wife had little or no property at the commencement of the parties’ relationship.
Essentially, it is the husband’s case that these direct financial contributions require special recognition, when the court comes to the task of assessing the parties’ respective contributions to their family unit, in percentage terms.
In these circumstances, the parties propose different approaches to the division of their matrimonial assets, whilst also differing markedly as to what those assets are. At the end of the day, the wife wishes to leave the proceedings with a cash sum of $100,000.00 and her various superannuation/pension resources. In general terms, the wife proposes a division of 60%/40% in her favour; whilst the husband proposes it should be 65%/35% in his favour.
As previously indicated, this would require an equalisation of the Australian superannuation and an approach which does not involve the direct capitalisation of his United Kingdom pension but the court approaching it as an income stream, which is amenable to being diverted by a court order.
How either of these outcomes are to be achieved in practical terms is one of the moot points of these proceedings. The wife proposes the extension of the asset pool by the inclusion of various add backs to be allocated to the husband; whilst the husband wishes the wife to be made personally responsible for 50% of a variety of expenses, including mortgage arrears and other expenses related to their former matrimonial home; X’s school fees; and arrears of child support.
Regrettably, this series of impasses, when combined with the parties’ challenging emotional circumstances, has led to each of them incurring significant legal fees, which they can ill afford. In the husband’s case, his legal costs to date are $117,689.95;[8] in the wife’s case, she has incurred legal fees in an amount of $115,936.41 in respect of these proceedings; $16,459.42 in respect of the criminal charges laid against her; and $8,077.60 in respect of employment proceedings.[9]
[8] See Affidavit of Ms P filed 24 June 2021.
[9] See Affidavit of Mr Q filed 11 June 2021.
The wife’s legal fees remain outstanding in total. The husband has paid $79,522.14 and has $37,921.40 outstanding. The wife, ostensibly through the written submissions of her counsel, is suspicious of this discrepancy and asserts that the only source of the legal fees paid by the husband to date can be joint assets and therefore a significant portion of the sum paid needs to be notionally added back into the pool to avoid injustice to her.
In short, the parties’ financial situation is a disaster slowly unravelling around them. However, throughout the proceedings to date, the parties themselves appear incapable of directing any form of shared focus to mitigating their situation, which would be to their mutual benefit.
Necessarily, the wife believes that the husband is intent on ruining her, out of malice, because he has the financial backing of Ms J; whilst the husband believes that the wife is stubbornly refusing to acknowledge their perilous situation because of her bitterness she holds for him.
Wherever the truth lies, I found this to be a particularly perplexing case. It also strikes me that the parties have not been well served by the adversarial litigation process and have not received value for the extraordinary sums of money which they have each expended on legal fees. In common parlance, the case is a slow motion train wreck.
The Evidence
The parties were the only witnesses in the proceedings. They each relied on affidavits prepared in anticipation of the trial and both had updated their respective financial circumstances statements shortly prior to the date.
Each of these documents had been professionally prepared. It is my finding that each party took the task of their preparation seriously and assiduously made sure that the contents of each such document was correct.
Accordingly, I am satisfied that both the husband and wife attempted, as best they could, to recount their financial circumstances of their relationship as best and as honestly as they could prior to trial. However, as indicated above, I have some nagging doubts that I have not been provided with the full picture.
The wife is not particularly business or financially orientated. The husband is critical of her for failing to supply source documents relevant to her current financial situation, particularly in respect of her Australian superannuation and her United Kingdom pension entitlements. There is some validity to these criticisms and it has been difficult to gain a complete picture of these matters.
In addition, the proceedings were characterised by a spirit of rancour and bitterness, which obviously had its origins in the parties’ extremely traumatic separation and in the light of what happened in its aftermath. I am concerned that this atmosphere prevented the parties (and their legal advisors) from focussing on what were the substantive issues in the case and the nuts and bolts of how it should be resolved.
There is, however, little love lost between the parties and each is not beyond making tactical decisions in respect of how their respective cases are presented with a view to achieving the most optimal outcome. In particular, at least in the past, each had the capacity to earn a comfortable livelihood in their respective fields of endeavour.
Both the husband and wife now assert that their circumstances have changed and the future is no longer rosy. The wife is particularly bitter at what she perceives to have been the father’s calculated estrangement of X from her, in the context of pursuing his relationship with Ms J, whom she asserts has almost unlimited resources. A fact the husband denies.
As a consequence, much of the evidence was focussed on innuendo and suspicion, rather than on a search for forensic detail. This is particularly so in respect of issues surrounding the husband’s United Kingdom Armed Forces pension entitlement. After the conclusion of the evidence, many controversies remain, and the parties’ respective written submission have thrown up other controversies.
In his oral evidence, the husband presented as calm and detached. He is certainly more resolved in his emotional outlook. No doubt this is reflected in the fact that he has re-partnered and this seems to have given him a level of financial security, which the wife sorely lacks and which is a source of resentment for her. In addition, the fact that X has elected to live with the husband is an outcome, for obvious reasons, unlikely to provide the wife with any source of emotional equilibrium in how she approaches this case.
In my estimation, the husband was significantly the better financial historian, as he seemed to me to have a better head for figures and was much calmer. Ms Earwood was distraught during much of her evidence. She is clearly deeply suspicious of Mr Earwood and believes he is intent on deceiving and defrauding her. I could find no concrete evidence to support this assertion.
I accept unequivocally that she was very much struck off balance by what happened at the end of the parties’ relationship (as indeed was the husband). I have great sympathy for her in this regard but am concerned that given her emotional lability, it may have implications for her objectivity and the reliability of some of her recollections now – not that I consider she has consciously set out to deceive anyone.
Ms Earwood did not strike me as a person with large stores of fiscal acumen. She seemed to me to have a somewhat laissez faire attitude to finances and not to be a great record keeper. In these circumstances, in my estimation, the husband had a better handle in respect of what happened in the parties’ relationship in a financial sense.
As is often the case in matters of this kind, the parties shared the common characteristic of recalling their own individual contributions, particularly as a homemaker and in respect of the rigours of paid employment, with more clarity than those of the other spouse. The marriage between the parties was one of significant length, which spanned two countries. I have no doubt that the parties approached their relationship as one of equals and, as such, they pooled their financial resources.
I am also satisfied that each of them was fully committed to their marriage and family, which comprised not only X but also the wife’s children from her earlier relationship, the twins R and S and, as such, they each made manifold and diverse contribution to the welfare of each other and the children concerned, over many years.
In these reasons for judgment, findings of fact are made on the balance of probabilities, from my observation of the demeanour of each of the witnesses concerned.[10] I have tried to reach my conclusions on credibility and reliability “on the basis of contemporary materials, objectively established facts and importantly, on the apparent logic of events”.[11]
[10] See Evidence Act1995 (Cth) s 140.
[11] See Fox v Percy (2003) 214 CLR 118, 129 [31] (Gleeson CJ, Gummow and Kirby JJ).
The husband elected not to call Ms J to give evidence. It is the submission of counsel for the wife, Mr Praolini that the court may draw an inference that any evidence from Ms J, regarding issues in controversies in the case, particularly what level of financial assistance she has or is capable of providing to Mr Earwood would not have assisted him in regards to the manner in which his case is currently framed, according to the principle in Jones v Dunkel.[12]
[12] Jones v Dunkel (1959) 101 CLR 298.
However, in my view this principle must be approached with some caution in its application to the current matter, given the rocky emotional topography which exists between the parties, a feature of which is the husband’s relationship with Ms J. In Railpro Service Pty Ltd v Flavel,[13] Perry J said as follows of the principle in Jones v Dunkel:
While the principle may make certain evidence or the inferences which may be drawn from the evidence more probable, it does not permit any further inferences that the untendered evidence would have been damaging the party who might have been expected to tender the evidence; nor can the failure to lead the evidence fill gaps in the evidence, or convert conjecture and suspicion into inference.
[13] Railpro Service Pty Ltd v Flavel [2015] FCA 504 at [95] (Perry J).
Chronology and findings of fact
The husband was born in the United Kingdom in 1971. Between 1989 and 2011, the husband was employed as an engineer, in the service of the Armed Forces. As a consequence of his United Kingdom military service, he currently receives an Armed Forces Pension in an amount of £850.00 per month. The pension is paid by an agency of the British Government – Veterans United Kingdom. The level of evidence regarding the nature of this pension is lamentable.
Mr Earwood describes his overall heath as being good. He has some back issues referrable to arthritis in two vertebrae. He has lost the sight in one eye due to a failed medical procedure. He is able to work but not without some level of difficulty. No independent medical assessment of his various conditions has been provided to the court.
Mr Earwood has not previously been married and has no other children other than X. Ms Earwood has been previously married and has twins R and S, who were born in 1996. The twins lived, with the parties, from the time they began their relationship.
It is Mr Earwood’s case that he provided significant levels of financial and parenting support in respect of the twins. This was particular significant given that during the period the family was living in the United Kingdom, the twins’ biological father provided no child support.
On the family’s return to Australia, it would appear to be the case that the father of R and S began to pay child support to Ms Earwood for the children. This amounted to around $220.00 per week. Ms Earwood finalised property proceedings, with her first husband, in late October 2012 receiving a net sum of $46,489.61, which was utilised for joint matrimonial purposes.
The major reason, Mr Earwood did not leave the United Kingdom with the wife and children was because he wished to finish his service with the Armed Forces in order to qualify for his military pension. He received a lump sum on leaving the Armed Forces in an amount of £40,000.00. Initially, on arriving in Australia, he was prohibited from paid employment. He did some voluntary work and then worked as a hospital orderly for a few months.
It is the husband’s evidence, which I accept, that his Armed Forces termination payment was used to fund family expenses, which included the twins’ school fees; medical and legal fees of the wife; and establishment costs relating to the acquisition of the B Street, Town C property. It is case, which is not challenged by the wife, that the sum is now gone.
In early 2012, he began work in his previous area of expertise as a Manager. Currently, Mr Earwood is employed casually as a Manager, by a company called Employer T and has been so employed since early 2015. Given his status as a consultant, Mr Earwood is considered to be self-employed and must make his own arrangements to pay tax.
This is the origin of the controversy between the parties regarding his current tax debt to the Australian Taxation Office (“ATO”). Prior to the parties’ separation, it is Mr Earwood’s position that he earmarked part of his income to pay tax incurred in the financial years ending in June 2017 and 2018. The sum in question was about $50,000.00 and the tax currently owing was $60,766.07 as at March 2019.[14]
[14] See Affidavit of Mr Earwood filed 5 May 2021 at Exhibit -4.
However, he asserts that the sum in question was diverted from the tax account to an account controlled by the wife, details of which she has failed to disclose adequately. In these circumstances, in the period since separation, he has been compelled to make regular monthly instalments of $1,836.69 to bring the debt under control. As at the date of trial, he owed $46,204.12 to the ATO.[15] I accept that this later amount is to be regarded as a joint marital debt.
[15] Ibid at -5.
It is Mr Earwood’s position that his income, as a consultant, has been severely impacted by the pandemic emergency, and the fact that he has been the main provider of care, for X, since late 2019, which has impacted on his capacity to take consultancy work, particularly overseas.
In the past he concedes that he had an ability to earn a relatively comfortable income from Employer T, which has ranged as follows in the nominated financial years: $97,062.00 (2016); $174,415.00 (2017); $77,466.00 (2018); $97,270.00 (2019); $73,753.00 (2020). The husband accepts that he has received a number of bonuses from time to time, the most significant of which was one of $50,000.00 received in 2017, which explains the higher income in this year. The bonus was used to put in solar panels at the B Street, Town C home. Currently, he estimates his income to be around $65,000.00 per annum, which he augments with his United Kingdom Armed Forces Pension, which translates to about A$18,000.00 per annum.
It is the wife’s position that Mr Earwood has significantly discounted his income and it is realistic to assess his current capacity to earn as being somewhere in the vicinity of $160,000.00 per annum. She does not accept that the husband’s responsibility to parent X, given his age, acts as any sort of impediment to Mr Earwood being able to resume his previous level of employment.
The wife was born in Australia in 1963. By profession, she is a health care worker, who began work at the Employer U in 1993, after completing a health care degree. More recently, she has held senior managerial and clinical positions, in both the United Kingdom and South Australia, variously described as a health care manager or consultant.
She has experience in overseeing professional standards relating to infection protection and control in a large hospital setting. She has held a number of senior positions, with the Company L in the United Kingdom, at a variety of positions in both United Kingdom and England, which required frequent travel. My impression, gained from her evidence, is that she is a highly experienced health care worker.
Her most recent senior position has been at the Employer V in Adelaide. She joined the hospital in 2012, after working in a previous health care position at Employer W. It is her case that she has suffered a number of difficulties with her health since suffering a car accident in 2012, which resulted in some spinal issues.
More recently, it is her evidence that she was subject to bullying and harassment, in her workplace, at the Employer V, in 2016, which caused her significant psychological stress. She was diagnosed with anxiety and depression, which she in part attributes to the husband’s conduct towards her. In any event, she took leave from her employment.
In May of 2017, whilst on leave, she suffered some form of auto immune disease, which was not amenable to obvious diagnosis. At various stages, it was suspected that she may be suffering from multiple myeloma and then some form of rheumatoid disease. She was treated with a complex regime of drugs and various surgical interventions. Unfortunately, she suffered from complications precipitating diabetes. The most recent diagnosis is one of auto immune disease, complicated by high blood pressure and early stage renal failure.
Ms Earwood also asserts that she suffers a Post-Traumatic Stress Disorder as well as anxiety and depression. I have not been provided with a psychological assessment of the wife or indeed with any medical reports regarding her other conditions. She attributes her current difficulties to the stresses to which she was subject to at work, and a lack of emotional support from the husband at home.
The lack of expert medical opinion in respect of the wife poses a problem for the court. However, Ms Earwood did not present well in court. I did not think her mental distress was feigned or manufactured. I am at a loss to know why she did not provide more concrete evidence in support of her various ailments, which she obviously characterises as serious. On balance, it seems more likely than not that her health is currently seriously compromised, as she contends.
In the context of what has occurred in her life since 2012, it becomes apparent why Ms Earwood has incurred such significant legal fees in addition to the costs related to the proceedings before me. It seems apparent that she has commenced proceedings in respect of her motor vehicle accident; a bullying claim against the Employer V; and has made an application for Workcover payment, relating to her incapacity to work.
It would also appear to be the case that Ms Earwood has or had an entitlement to seek income support through her superannuation scheme. Prior to her various medical and workplace issues, Ms Earwood was earning between $60,000.00 and $80,000.00 per annum. Given her status as a health care worker employed by a non-profit organisation, she was entitled to enter into a form of tax free salary sacrifice, which saw her able to receive the equivalent of a further $8,164.00 per annum in benefits.
In all the circumstances, it is clear that income came into the household, which is attributable to one or other of the parties. However, it is the wife’s case that both in the United Kingdom and up to at least 2013, in Australia, her income was greater than that of the husband. It is the husband’s position that the wife has previously earned an annual salary of about $120,000.00 per annum.
As is often the case, the parties disagree about household tasks and parenting responsibilities were allocated between them. Each accepting that the other performed some of these tasks, particularly whilst the other was away for work, but each asserting that he or she did more of them when both were at home.
Clearly, the onset of the wife’s ill health, the precise aetiology of which remains controversial between them, exposed fractures in the parties’ relationship and led to disagreements about financial matters. The wife took sick leave and received income support.
In April of 2017, she received a settlement in the sum of $36,971.35 as a compensation for her car accident injuries. She cashed in an entitlement to long service leave, in 2017, which netted her approximately $18,000.00. She has deposed that both of these sums were utilised in joint living expenses.
In the two financial years ending 30 June 2016 and 2017, Ms Earwood has deposed that she received a taxable income in the low $80,000.00’s together with her salary sacrifice components. This reduced to $50,000.00 in 2018. More recently, whilst she has been unwell, Ms Earwood has been receiving income protection payments of $2,610.00 per fortnight. These ceased in October 2020.
Through economic necessity, Ms Earwood has recently returned to work. She did so in April 2021. Currently, she is working as a professional at a health service providing advice on its policies and procedures. She earns $35.00 per hour and works 20 hours per week.
It is her evidence that due to her recent engagement with the criminal justice system, as a result of being charged and convicted of an offence involving violence, she will not be able to return to a position funded by the SA Government in a health setting, certainly not at a senior level.
It is Ms Earwood’s case that she has not been in a position to pay the recurrent mortgage payments on the B Street, Town C property since the parties separated, given her current financial situation. It was in response to the growing crisis surrounding the B Street, Town C mortgage that Mr Earwood instituted the proceedings in September 2019.
The B Street, Town C property was purchased in July of 2014 for the sum of $825,000.00. The purchase was funded by way of a mortgage of $660,000.00 advanced by the Commonwealth Bank, with the remainder being supplied from the husband lump sum Armed Forces discharge payment, which equated to around $80,000.00 and the proceeds of sale of the family’s former home located at Y Street, City O in United Kingdom.
The evidence regarding the purchase of the Y Street, City O property is scanty and there are no longer any documents relating to it. It was purchased soon after the wife and twins moved to the United Kingdom. The husband asserts the purchase price was £118,000.00.
It is the wife’s evidence that she contributed around $26,500.00 towards the purchase. She concedes the husband also contributed some funds realised from a sale of a smaller property, which he owned in Y Street, City O. The husband asserts the sum realised by the sale of the property was around £20,000.00.[16]
[16] See Affidavit of Mr Earwood filed 5 May 2021 at [50].
In his oral evidence he refutes the wife’s assertion that she paid the deposit and asserts that in total he contributed around £35,000.00 to the purchase of the parties’ Y Street, City O family home. In these circumstances, it is position that his financial contributions, over the course of the parties’ entire relationship, which are now reflected in their joint interest in the B Street, Town C property, emanated almost entirely from him.
Both parties were engaged in full time employment during the eight years of their relationship in the United Kingdom. The wife asserts that her income was greater than the husband and her employment particularly onerous, given that it involved a great deal of travel. For his part, the husband asserts that he was significantly involved in parenting the twins and X, whilst the wife was away for work and in financial terms, he brought more into the marriage.
It is the husband’s position that the wife is not adept in the management of money and was secretive about financial resources. In this context, Mr Earwood complains that the wife has not disclosed to him the full details of her financial settlement with her first husband, Mr Z.
The wife, in her trial affidavit, concedes that she received a cash settlement of $77,000.00, from Mr Z in 2012, which after payment of legal fees, left her with $46,489.61, which was utilised largely in acquiring the motor vehicles which each party currently retains; and in funding a holiday in Queensland and some of X’s hobby activities.
Each party has acquired entitlements to a variety of financial resources, which can be loosely characterised as being superannuation. The husband has his Armed Forces Pension and a modest fund in Super Fund AA, an accumulation industry fund based in Australia. As will be explained in more detail, in due course, complexities surround the Armed Forces pension, particularly its amenability to being split.
The husband has provided an up to date printout of his Super Fund AA account, which indicates a holding of $67,384.80 as at 30 June 2020.[17] The wife has two Australian funds, which can be characterised as accumulation funds – one an industry fund, Super Fund AA; the other being a government based fund for South Australian government employees.
[17] See Written Submissions of Mr Earwood filed 16 August 2021.
The only evidence regarding these funds comes from the wife’s financial statement. This indicates an amount of $180,936.41 held in Super Fund H and an amount of $9,361.00 in Super Fund AA. In her written submissions, the wife agrees that the amount held in the later account is currently $10,061.00.
She also has interests based in the United Kingdom – a United Kingdom pension scheme and a United Kingdom Government pension arising from contributions made by her during her employment in the United Kingdom. It is the husband’s position that the wife has been derelict in providing transparent information regarding her superannuation entitlements.
On any view, the husband’s entitlement to receive a guaranteed income stream for the remainder of his life is an extremely valuable resources. The husband has deposed that it had a cash equivalent value, as at May 2019, of £347,742.00, which for the sake of these proceedings the husband asserts can be quantified as being equivalent to $610,000.00 and which the wife asserts is $624,000.00, over Mr Earwood’s remaining lifetime.
No expert evidence has been provided by either party regarding the specific implications of this pension or how the cash equivalent value is calculated in actuarial terms or otherwise by the United Kingdom authorities. Certainly, there has been no attempt by either party to see firstly whether the interest can be valued pursuant to the provisions of the Family Law (Superannuation) Regulations 2001 (Cth), or secondly in some other manner.
I am troubled by this lacuna in the evidence. However, I am also troubled by the prospect of the case being delayed by any further investigation of these apparent deficiencies in the context of the modest extent of the parties’ asset pool, when it is readily apparent that each is haemorrhaging money in legal fees and it is in their mutual interests to conclude the litigation as soon as is reasonably possible.
Part VIIIB of the Act provides mechanisms for the splitting of certain superannuation interests and their allocation to the separated parties of a marriage.[18] Pursuant to the relevant definition section of this Part, such splits can only be made in respect of superannuation interests held in what are termed eligible superannuation plans. Amongst other things, an eligible superannuation plan includes a superannuation fund within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth).[19]
[18] See section 90XA of the Act.
[19] Hereinafter referred to as “the SIS Act”.
In broad terms, the SIS Act provides a regulatory regime of the Superannuation Industry, within Australia, provided by the Australian Prudential Regulatory Authority – APRA; the Australian Securities and Investment Commission – ASIC; and the Australian Taxation Office – the ATO. No evidence has been provided to me as to whether the SIS Act applies to the United Kingdom Armed Forces Pension Schemes.
Although it has not been articulated as such by counsel for each of the parties, it would seem to be their joint position that the husband’s Armed Forces pension is not amenable to regulation under the SIS Act and therefore cannot be split pursuant to Part VIIIB of the Act.
In this context, each of the parties approach the Armed Forces Pension, to which Mr Earwood is entitled, in significantly different ways. The wife’s preferred position is that the husband should retain the pension in its entirety, and for the purpose of calculating its value it should be included as an asset of the husband at its provided cash equivalent value. This exercise would result in her receiving a greater share of realisable assets in cash, which is her preferred outcome.
As an alternative to this outcome, counsel for the wife, Mr Praolini, submits that the court should take into account the Armed Forces pension as a financial resource to which Mr Earwood is entitled. As such, it is argued that it could provide the source for an award of spousal maintenance to be made in the wife’s favour payable to her by Mr Earwood for a finite period of time. The proposal being that a sum of maintenance be fixed at the rate of 50% of the sum being received by the husband for a period of ten years.
On the other hand, it is the husband’s position that the Armed Forces pension can be split by application to the Veterans UK, the relevant administrative authority in respect of pension payments made to former members of the United Kingdom Armed Forces. Mr Earwood has deposed that he has made inquiries of Veterans UK and has been told that it will action a request to split his pension. In this context, he has provided to the court a document entitled Pension Benefits on Divorce and Dissolution of Civil Partnerships produced by Veterans UK and dated September 2016.[20]
[20] See Exhibit H.
In his trial affidavit, Mr Earwood deposes as follows:
I have spent considerable time making enquiries of Veterans UK in relation to how this Armed Forces pension can be ‘split’ in the event of a matrimonial settlement. I have been advised that I can nominate an agreed percentage split of the income stream to go to the wife as part of the terms of our property settlement. There is no capacity to split a lump sum (to either of us) and there never will be, not even at retirement.[21]
[21] See Affidavit of Mr Earwood filed 5 May 2021 at [34].
In respect of how this split should be calculated, Mr Earwood points to the fact that his entitlement to the Armed Forces pension was accrued over his 22 years of service in the United Kingdom Armed Forces, of which only eight and a half years is directly attributable to the period of his relationship and marriage to Ms Earwood. In these circumstances he proposes that a 35% split be made in the wife’s favour in respect of his Armed Forces pension.
In these circumstances, counsel for the husband, Mr Bowler submits that the court should make the following order in respect of the Armed Forces pension:
That the parties do all things necessary to allocate to the wife 35% of the Armed Forces pension income stream for her lifetime pursuant to the rules of the Pension.[22]
I have not be provided with a copy of the rules so referenced.
[22] See Written Submissions of Mr Earwood filed 16 August 2021 at [15].
In response, Mr Praolini points to the following portion of the Veterans UK document provided by Mr Earwood, which reads as follows:
If your divorce or dissolution proceedings are taking place outside the UK, the pension sharing legislation cannot apply and Veterans UK would not be able to implement any Court Order made in a Court outside of the UK. In these circumstances, independent legal advice should be sought.[23]
[23] See Exhibit H at [20].
The document in question, in its definition section, defines the expression cash equivalent value in the following terms:
This is a valuation of the scheme’s member’s benefits for divorce or dissolution purposes.
This definition axiomatically provides no assistance as to how the valuation is calculated. Although the guide does indicate that, in general terms, the value so provided is good for 12 months.
It is the wife’s case that the husband, whilst in effect being financially supported by Ms J, is artificially restricting his employment opportunities to gain a tactical advantage over her in these proceedings. In addition, it would appear to be her case that Mr Earwood is not being completely transparent about the true extent of his prospective entitlement to the Armed Forces pension.
In this context, she deposes as follows:
The husband has a significant UK pension to rely upon. It is my understanding that the amount he can draw each week increases as he gets older and increases significantly when he retires.[24]
This is a significant assertion. Apart from saying it, the wife can muster no evidence to support it. However, on the other hand, there is dearth of evidence from the husband and Veterans UK as to what are the precise extent of his entitlements, particularly whether they change, as Mr Earwood ages and transitions out of the paid workforce.
[24] See Affidavit of Ms Earwood filed 12 May 2021 at [182].
Other controversies arise between the parties regarding the extent of the proceeds of sale of the property owned by the husband in Town M United Kingdom. I accept that Mr Earwood owned the property from 1995. Originally, in 1993, he loaned his grandparents the sum of £9,225.00 to enable them to purchase the flat which they had hitherto rented on the understanding that it would be bequeathed to him on the last of their deaths. Later, it became the grandparents’ preference that the property be transferred prior to their deaths but that they should continue to live in it. The property was never subject to mortgage.
Mr Earwood’s last surviving grandparent died in 2018 and he had no personal desire to retain the property. However, due to his grandparents’ long occupation of the property, it was in a poor state of repair. In these circumstances, I accept Mr Earwood’s evidence that he arranged with his father to repair and renovate the property in order to achieve a good sale price on the understanding his father would be reimbursed his expenditure in so doing.
The sale of the Town M property occurred on 24 January 2020 and netted an amount of £91,430.84.[25] Mr Earwood has deposed that around £17,000.00 was utilised in renovation expenses and has provided some receipts in support of this assertion.[26] Bank records also supplied[27] indicate the sum of $59,375.00 (which equated to £30,000.00) was deposited in his Australian account in late March 2020.
[25] See Exhibit C
[26] See Exhibit D
[27] See Exhibit F
Of this sum, Mr Earwood asserts he advanced $40,000.00 to Ms J to reduce the mortgage payments said to be due by him to her in respect of the D Street, Suburb E property. However, after this repayment had been made, financial necessity drove him to reclaim the sum and it has now been utilised in the following manner: $17,000.00 was used to purchase a motor vehicle for X; and the rest was expended on living expenses.
In these circumstances he resists the notional add back of the sum as, from his perspective, it has been spent on living expenses and is otherwise reflected in the D Street, Suburb E property, in which he effectively has nil equity and so the property in question is largely irrelevant to these proceedings.
He concedes that an amount, which equates to $62,000.00, remains in the control of his father in the United Kingdom and represents the remainder of the proceeds of the sale of the Town M property. He agrees that this sum should be in the parties’ pool of assets but, from his perspective, the wife’s contributions towards it must be considered limited, given he acquired the property prior to marriage and his grandparents occupied it for many years.
It is the wife’s position that the husband has been living an extravagant lifestyle since the parties separated. This has included him and X travelling overseas. She believes that the husband has squandered or concealed the proceeds of realisation of the Town M property and his Company N endowment policy to fund this lifestyle and has in reality funded the purchase of the D Street, Suburb E property and, in effect, the mortgage and related loan agreement to Ms J are a sham to conceal the money he has funnelled back to her, from these sources.
It is the husband’s evidence that there is nothing untoward about his financial relationship with Ms J and he has been completely transparent about the realisation of both the Town M property and his Company N endowment policy and what has occurred in respect of the proceeds produced.
Given the circumstances surrounding the parties’ separation, it was untenable for Mr Earwood to continue to live at the B Street, Town C property. I accept his evidence that he wished to obtain his own accommodation to maintain his relationship with X but was not in a position to approach a conventional financier to apply for a mortgage, given his continued indebtedness in respect of the former family home.
In these circumstances, he elected to purchase what he considered to be the modest property at D Street, Suburb E, which he now shares with both X and Ms J. The purchase price was $250,000.00 and settlement occurred in May of 2019, some three months after the parties had separated.
The property was in poor condition and needed repairs. I accept Mr Earwood did not have access to funds to purchase the property and approached Ms J, whom at this stage he regarded as a friend, to borrow the monies needed to finance the purchase and the renovations needed.
Given that Ms Earwood does not assert otherwise, I accept that Ms J advanced $300,000.00 to Mr Earwood to enable him to purchase and repair the D Street, Suburb E property. The controversy arising relates to whether the loan is a genuine one and should be taken into account in these proceedings and, if so, how.
Other issues tangentially arise as to the extent to which Ms J is funding the husband, including in respect of the payment of his legal fees and how, if at all, such a financial relationship should be referenced in the court’s determination as to what is a just and equitable outcome between the parties concerned.
In this context, the wife has deposed that the husband receives financial support from Ms J, whilst her post separation relationship has broken down. It is also her position that she faces an uncertain employment future, given her compromised health and the fact that her recent criminal conviction renders her further employment by SA Health entities problematic.
The husband asserts that the loan to Ms J is a genuine one. In support of this assertion, he points to the fact that there is a formal loan agreement memorialising the loan, prepared by a solicitor, which includes a specified rate of interest (3% per annum), a specific term of fixed instalments ($1,500.00 per month over 300 months); and provisions in respect of default.[28]
[28] See Exhibit A.
The loan agreement led to the production of a mortgage, held by Ms J, which is secured over title of the relevant property.[29] In addition, it is Mr Earwood’s unchallenged evidence that he reduced the mortgage by $40,000.00 from the proceeds of sale of the Town M mortgage. Mr Earwood has deposed that he is paying the mortgage instalments required by the loan from Ms J and has recorded it as a recurrent expenditure on his statement of financial circumstances.
[29] See Exhibit B.
It is the wife’s assertion that Ms J inherited a sum in excess of £5,000,000.00 when he her second husband died in August 2018. In these circumstances, she is in a position to fund the husband’s lifestyle and does so to a significant degree. In addition, she asserts that the loan in question is all for show and essential a ruse to solicit the proceeds of sale of the Town M property and the Company N policy out of the pool of matrimonial assets.[30] In this context, Ms Earwood places emphasis on the failure of Mr Earwood to call Ms J to rebut these assertions.
[30] See Affidavit of Ms Earwood filed 12 May 2021 at [126].
I do not consider that I am in a position to make any concluded finding of whether Ms J is an extremely wealthy person. In my view, there is no necessity for me to resolve this issue, particularly in the context of ascertaining what is the pool of the parties’ marital assets and the liabilities to which it is subject.
Whether the loan from Ms J is likely to be called upon by her or not or whether it is to be accounted some form of gift to Mr Earwood from her, the fact remains that the D Street, Suburb E property was purchased after the parties separated and substantially with monies that had no connection to Ms Earwood, as they originated with Ms J.
Some monies came from the sale of the Town M property but again their connection of those monies with Ms Earwood must be regarded as somewhat tenuous, given this property was acquired prior to the parties’ marriage, with no direct financial contributions being made to it during the marriage.
I will return to these issues in due course, when I come to the legal principles to be applied to the case, as they pertain to the construction of the asset pool, particularly in the context of so called add backs and the approach taken to liabilities that may or may not be accounted. At the end of the day, the process to be followed by the court is one of justice and equity rather than of strict accounting.
In my view, issues relating to the proceeds of sale of the Town M property and how the court is to approach the current ownership of the D Street, Suburb E property and any liability which attaches to it are appropriately engaged when consideration is given to relevant contributions of the parties to the acquisition and maintenance of those items; and issues relating to Ms J’ financial circumstances are likely to be engaged when consideration is given to the prospective circumstances of the parties pursuant to the considerations delineated in section 75(2)(m) and 75(2)(o) of the Act.
The husband acquired two Company N endowment policies prior to the parties’ marriage. As I understand them, each is a form of assisted saving and life insurance, which requires payment of a monthly premium until maturity but is redeemable prior to maturity. The husband redeemed one policy in November 2019 and netted £22,830.46. The other policy is currently valued at £13,409.83 and requires a premium of £31.05 per month.[31] Its current value equates to about $24,500.00.
[31] See Exhibit E.
In respect of the funds released from the sale of the first policy, the husband deposes that it has been expended on work done preparing the Town M property for sale (£10,000.00); with the remainder funding a trip to the United Kingdom taken by him, X and X’s girlfriend, in the Christmas period of 2019. Essentially, it is the husband’s position that the sum is gone and it would not be fair for it to be included in any pool of assets.
I accept the husband’s evidence that he was effectively regarded as being self-employed during the latter stages of the parties’ marriage as he was contracting his services to Employer T and was therefore liable to make provision himself for the payment of tax. To this end, the parties maintained a separate account into which a portion of his income was deposited to defray the payment of tax, when it fell due.
As indicated above, this period also coincided with the wife’s prolonged absence from the workforce, which inaugurated a period of significant financial austerity for the parties. I also accept the husband’s evidence that the wife is not particularly adept at exercising financial restraint. In these circumstance, from time to time, sums were withdrawn from the tax account to fund other expenses and, as a consequence, the husband’s tax was not paid.
I also accept that his wage subsidised the entire household at the time and therefore the unpaid tax, currently standing at $46,204.12 must be accounted as a joint debt of the parties. I do not accept that it was recklessly incurred by the husband alone or can be regarded as his sole responsibility.
The parties’ separation exacerbated the parties’ financial crisis. As indicated above, the husband deemed it untenable for him to continue living in the B Street, Town C property, which he vacated in early 2019. In the period following the separation, and whilst X continued to live with his mother, Mr Earwood felt obliged to continue to meet the recurrent mortgage payments due on the property. However, it was his position that it was in the parties’ financial interests to manage a controlled sale of the property as expeditiously as possible.
With the benefit of hindsight, this was an eminently sensible proposal. However, the wife did not agree. In June of 2019, Mr Earwood ceased making any contributions towards the mortgage – he asserts as a consequence of having to provide his own accommodation and ostensibly having gone into a mortgage relationship with Ms J.
These developments seemed to have exacerbated the already tense relationship between the parties and led to the husband instituting the proceedings in September 2019 in which he sought orders enabling him to spend regular time with X and orders for the sale of the B Street, Town C property.
In response, the wife proposed subdividing the property in order to enable her to remain in the dwelling. It being the case that the parties had earlier discussed the possibility of such a subdivision prior to their separation and the husband had, in fact, paid a consultant around $11,500.00 to investigate the issue.
It is apparent that the mortgage was not being serviced. It is the husband’s evidence that he was being pressured by the ATO in respect of his outstanding tax liabilities. In October of 2019, the Commonwealth Bank foreshadowed foreclosure proceedings, at which stage the mortgage was just under $8,000.00 in arrears.[32]
[32] See Affidavit of Mr Earwood at Annexure -7.
The arrears have continued to accrue at the rate of around $4,000.00 per month. As at the date of trial, the amount outstanding was $630,107.53.[33] In April 2021, the wife agreed that the property should be sold and an order was made to this effect. However, some repairs need to be effected to make the property fit for sale.
[33] Ibid at [89].
It is the husband’s position that the wife has been unreasonable in respect of her approach to the property and it should be factored into any resolution of the case that she had the benefit of the accommodation, which it provided, whilst he had to make alternative arrangements.
The wife’s position is that she did the best she could, whilst she was struggling with her illness and related invalidity for employment and other stressful factors in her life – the underpinning of her case being that the husband effectively washed his hands of the B Street, Town C property, leaving her in the lurch, whilst he pursued his relationship with Ms J.
It is her case that the husband had more than ample means to pay the mortgage, given the reality of his financial relationship with Ms J but declined to do so out of spite. She has deposed that she had limited means at the time and her only form of income was her tax return refund, which she used to pay her immediate living expenses and repay loans advanced by family and friends. In short, each party feels hard done by in respect of issues to do with the management of their financial affairs post separation.
It is neither useful nor appropriate for me to pass any form of moral judgment in respect of how either party responded to this highly charged situation, other than for me to indicate that I accept unconditionally that it was an extraordinarily difficult and stressful situation for all concerned.
Things came to ahead later in the year when there was an unpleasant altercation between the wife and Ms J at a petrol station. This is turn led to an intervention order being granted, which was subsequently breached by Ms Earwood. Against this background, X elected to live with his father.
As a consequence of X’s election to live with his father, Ms Earwood has been assessed to pay child support to Mr Earwood. There is no controversy that Ms Earwood has struggled with this assessment and there are significant arrears which currently stand at around $4,600.00.[34]
[34] See Exhibit K.
As I indicated at the outset of these reasons for judgment, I have been greatly concerned at the extent of each party’s exposure to legal fees, which I fear is disproportionate to the issues thrown up by the case and more significantly by the extent of the relevant asset pool, no matter how it is ultimately configured, with or without add backs.
The trial was originally listed for 3 and 4 June 2021, which were taken up with evidence from each of the parties. At the conclusion of the hearing, I made the following orders:
•Within seven days from the date of this order the Applicant and Respondent file an accurate statement of legal fees arising from these proceedings and in addition, the Respondent file accurate statements of account relating to other criminal and employment proceedings.
•That within 28 days the Respondent file written submissions regarding the asset pool and submissions regarding contributions and addressing the relevant considerations of the s 75(2) factors pursuant to the Family Law Act 1975 (Cth).
•That within 14 days after that the Applicant provide his written submissions regarding the asset pool and submissions regarding contributions and addressing the relevant considerations of the s 75(2) factors pursuant to the Family Law Act 1975 (Cth).
•That the proceedings be adjourned for judgment delivery on a date to be fixed.[35]
[35] See orders of Judge Brown dated 4 June 2021.
These orders led to each of the parties’ solicitors filing the affidavits referred to above which delineated their respective exposure to costs. It was in this context that it became apparent that the husband had paid a significant component of his costs and had also put monies into trust on account of costs. In contrast, the wife’s extensive legal costs remained outstanding.[36]
[36] See Affidavit of Ms P filed 24 June 2021; and the Affidavit of Mr Q filed 11 June 2021.
As to the source of funds, the letter provided by his solicitor reads as follows:
We confirm your instructions that you have paid your legal costs to date from one or more of your income, savings or loans and will pay future legal fees from the same sources.
It was only as a result of the court’s own initiative that the issue of legal fees has been formally broached. As I recall the issue of how each party had or proposed to meet their obligation to meet their legal fees was not the subject of examination at trial. Neither party alluded specifically to the issue in their trial affidavits. It is only in written submissions that the court has been engaged to determine how the issue of costs should be directly approached.
The process of written submissions was completed on 16 August 2021. I regret the delay in the preparation of the relevant reasons for judgment, particularly in the context of the mortgage foreclosure proceedings instigated by the Commonwealth Bank in respect of the B Street, Town C property. Although, in this context, I note that an order has been made authorising the sale of the property concerned.
THE LEGAL PRINCIPLES APPLICABLE
Property
Part VIII of the Act deals with financial matters relating to parties who are or have been married to one another. In particular, section 79(1) authorises the court to alter the property interests of the parties to a marriage.
As indicate above, Part VIIIB provides specific provisions enabling the splitting of superannuation between spouses. For reasons, already delineated, I am satisfied that this part can have no application to the parties overseas based superannuation.
However, there can be no doubt that these are to be regarded as financial resources available to the parties and, as such, amenable to the application of Part VIII. It will, however, be necessary to consider the real nature of these resources in considering the justice and equity of any particular outcome in the case.[37]
[37] See SHL & EHL [2006] FamCA 1287 [47] (Kay, May and Boland JJ).
The process to be followed for the division of the parties’ property is well-established by law.[38] The relevant legal principles are primarily contained in sections 79 and 75(2) of the Act. I am required to follow a number of specific steps.
[38] See Ferraro v Ferraro (1992) 16 Fam LR 1; Clauson v Clauson (1995) 18 Fam LR 693; Hickey & Hickey (2003) 30 Fam LR 355.
In the first step, I must ascertain what are the parties’ assets and liabilities available to be divided between them. The general rule is that those assets are to be determined as at the date of trial.[39]
[39] See Biltoft & Biltoft (1995) 19 Fam LR 82.
In the second step, I must ascertain the contributions, which each party has made towards the matrimonial pool of assets, as I find them, following the first step. Contributions fall into two broad categories.
The first kind is contributions to the property: financial contributions and non-financial contributions, made directly or indirectly, by or on behalf of a party to the marriage to the acquisition, conservation or improvement of any of the property.
The second kind is contributions to the welfare of the family: in the words of the section, “the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent.”[40]
[40] See Family Law Act1975 (Cth) s 79(4)(c).
It is clear from the authorities that this second kind of contribution must be given appropriate weight and is not to be treated as a token matter or as a contribution which is inherently less valuable or important than a financial contribution to property.
At this second stage, the task set for me requires the balance and comparison of a multiplicity of contributions, many of which are necessarily different in nature, within the framework of a marriage.
Many contributions in a marriage, such as being a homemaker, do not result in the direct acquisition of assets. They are also difficult to value in absolute dollar terms. In contrast, the monies contributed by a wage earner are easier to quantify. However these difficulties do not absolve the court of its obligation to undertake the required assessment of contributions.
The court’s discretion is a wide one but must be exercised judicially. The task conferred is to weigh and assess contributions, which are necessarily disparate in nature. In summary, contributions, within the framework of a marriage, which are different in quality and nature must be compared, in order to achieve a just and equitable division of property. It has been referred to as a holistic exercise.[41] Certainly, it is not to be approached as a simple accounting or arithmetical exercise.
[41] See Watson & Ling [2013] FamCA 57 at [13] (Murphy J).
The third step involves the assessment of the parties’ prospective needs, by reference to the factors set out in section 75(2) of the Act. Pursuant to section 75(2)(o), the court is entitled to take into account “any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account”.
Finally in determining what order the court should make under section 79, the court must be satisfied that in all the circumstances, it is just and equitable to make the relevant orders. Overall, it is the justice and equity of the actual orders that the court must consider.[42]
[42] See Russell & Russell (1999) 25 Fam LR 629, 644 [80] (Ellis, Finn and Mushin JJ).
The “overriding requirement” of section 79 is that considerations of justice and equity should inform each step of the process. The exercise I must undertake is not a “process of social engineering”,[43] or of equalisation of assets or financial resources.
[43] See Waters & Jurek (1995) 20 Fam LR 190, 196 (Baker J).
It is clear that this orthodox stepped approach remains current, notwithstanding the High Court’s decision in Stanford v Stanford (“Stanford”).[44] In Stanford the High Court placed significant emphasis on section 79(2), which actively prevents the court from making an order, in respect of property, unless it is satisfied that it is just and equitable to do so in all the circumstances prevailing. This follows from the use of the prohibitive words “shall not” in the relevant section.
[44] Stanford v Stanford (2012) 247 CLR 108.
I am now required to consider the various matters set out in section 75(2) and in particular to consider whether any further adjustment should be made in favour of either party. The section 75(2) factors are mainly, but not only, prospective in nature.
As such, they focus on considerations relating to maintenance. In the context of the proceedings, the issue of maintenance has two characteristics. Firstly, what is the equitable sum of marital capital, if any, which should be settled on Ms Earwood, in addition to that to which she is entitled to by dint of her various contributions during the marriage, to provide for her financial support.
Secondly, is it proper to make a further order for an ongoing income stream to be provided to Ms Earwood by reason of one of the criteria specified in section 72(1), specifically because of her inability to support herself adequately by reason of either her physical or mental incapacity to engage in gainful employment or a combination of both.
Both aspects must be considered in the light of the criteria listed in section 75(2), specifically, they are as follows:
(a)the age and state of health of each of the parties;
(b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
(d)commitments of each of the parties that are necessary to enable the party to support:
(i)himself or herself; and
(ii)a child or another person that the party has a duty to maintain;
(e)the responsibilities of either party to support any other person;
(f)subject to subsection (3) the eligibility of either party for a pension, allowance or benefit under –
(i)any law of the Commonwealth, of a State or Territory or of another country; or
(ii)any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia,
and the rate of any such pension, allowance or benefit being paid to either party;
(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
(h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain adequate income;
(ha)the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant; and
(j)the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
(k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
(l)the need to protect a party who wishes to continue that party’s role as a parent;
(m)if either party is cohabiting with another person – the financial circumstances relating to the cohabitation;
(n)the terms of any order made or proposed to be made under section 79 in relation to:
(i)the property of the parties; or
(ii)vested bankruptcy property in relation to a bankrupt party; and
(naa)the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i)a party to the marriage; or
(ii)a person who is a party to a de facto relationship with a party to the marriage; or
(iii)the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv)vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(na)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o)any other fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p)the terms of any financial agreement that is binding on the parties.
The considerations within the above section are multifarious. I will make reference and address each subsection comprised within section 75(2) below.
Section 75(2)(a)
The husband is 50 years old. He holds significant skills. I accept that his employment has been affected by the pandemic emergency, but in the past he had the capacity to earn a good salary, in excess of $100,000.00 and sometimes more, when he has worked overseas and received bonuses.
Apart from a back injury and a damaged eye, his health is good. Accordingly, in my assessment, he will be able to maintain a position in the workforce for the next fifteen or so years, barring unforeseen exigencies.
The wife is 58 years old. Although the evidence is not extensive, I accept she faces some significant health issues. Of particular significance is her diabetes and hypertension, which she has indicated has contributed to early stage renal failure. In addition, I accept that her psychological health is far from robust. She has not been in regular employment for a number of years.
As such, I find that she faces an uncertain and problematic future so far as her health is concerned, which is likely to have ramifications for her future capacity for self-support. Accordingly, she is not as well placed as the husband in regard to the factors arising under this subsection, having fewer years in the workforce before her and a compromised level of health.
The husband’s position is that the issues currently facing the wife will resolve, over time, as she adjusts to the end of the marriage between the parties. I accept that there will be a certain amount of such accommodation but consider the wife still faces a problematic future, so far as her health is concerned.
Section 75(2)(b)
The husband presented as a self-possessed sort of person, with significant logistical and manager skills. He also seems to be willing to turn his hand to a variety of occupations as his decision to work as a hospital orderly, on his arrival in Australia indicates. As previously indicated, in my assessment, he has the capacity to earn an income, at a minimum, in excess of $100,000.00 per annum as a manager, which will continue until he is in his early sixties.
In addition, in the form of his United Kingdom Armed Services Pension, the husband has access to a significant financial resource, which provides him with an income of around $18,000.00 per annum depending on the exchange rate. Given he has secured this entitlement for the remainder of his life, he is accorded a significant protection from the exigencies of life. If he chooses, he could earmark this sum to provide for his retirement.
In addition, the husband has a financier, in the form of Ms J, who is unlikely to foreclose on the mortgage secured on the D Street, Suburb E property given it is also her home. Accordingly, the husband has security so far as his future accommodation is concerned. As a consequence of these factors, the husband’s financial future is much more assured than that of the wife, who does not have either of these advantages.
Ms Earwood is an extremely experienced registered health care worker with high level management experience in both Australia and the United Kingdom. Previously she had the capacity to earn a comfortable salary in excess of that of the husband given her clinical managerial experience. However, I also accept that since 2012 her health has been compromised, and as a consequence her employment prospects have become more limited.
The wife’s health was compromised in the period leading up to the parties’ separation. She reacted very poorly to the separation and regrettably came to the attention of the police. As such, I accept that she is under something of a cloud so far as her future employment with the South Australian Government is concerned.
It also seems likely that SA Health, given their past experience with Ms Earwood and given the fact that she now has a criminal conviction, are likely to take a cautious approach to re-employing her. These factors are likely to be exacerbated by the fact that she is now in her late fifties.
Ms Earwood is currently working, albeit not at the high level at which she previously operated and currently on a part-time basis. Financial necessity has compelled her to go back into the workforce. At present, she earns around $700.00 net per week, which equates to an annual salary of $36,400.00. She is exercising her skills and expertise in health administration but on a much more limited basis. She earns an extremely modest salary, which will not provide Ms Earwood with a sufficient income on which to lead either a comfortable or secure life.
The B Street, Town C property will have to be sold. Accordingly, the wife will have to find a new source of accommodation for herself, almost certainly rented, in circumstances in which her recurrent income is likely to be modest. I would hope that she will be able to increase her hours in time and return to a more senior position.
Medical and psychological evidence regarding her prognosis is extremely limited but my impression of her is that she will remain fragile for some time to come. Clearly, she has not reacted at all well to the end of the parties’ marriage.
I would hope that she will adjust, in time, to her change of circumstances and be able to resume a working role more in keeping with her level of skills and experience. This cannot be guaranteed, given Ms Earwood’s age and the issues arising from her criminal history. In respect of the latter issue, there are undoubtedly some extenuating circumstances.
It has been said, by the Full Court, that the most valuable “asset” a party can take out of a marriage is “a substantial, reliable income-earning capacity”.[85] In this case, the evidence is clear that the husband presently has such an asset to a significant degree, but the wife does not, although it is not beyond the bounds of possibility she will regroup and recover and be able to return to a more active career.
[85] See Clauson & Clauson (1995) 18 Fam LR 693, 710 (Barblett DCJ, Fogarty and Mushin JJ).
In addition, the husband has other forms of financial resources, which accord him with a degree of financial security, whilst the wife does not. In my view, these are significant factors which favours the wife at this stage of the court’s deliberations.
Section 75(2)(c)
X will be 18 in the middle of next year. He will require financial support until this time. This is a factor which favours the husband but not to any significant degree.
Sections 75(2)(d) and 75(2)(e)
The end of the marriage has been a financial disaster for each of the parties, but much more so for the wife than for the husband. Largely as a consequence of his relationship with Ms J, which has enabled him to secure accommodation for himself, the husband has a greater capacity to provide for his own needs. The wife is likely to face a precarious financial future in the short to medium term. Neither party resides under any responsibility to support any other person, apart from X.
Section 75(2)(f)
The matters falling under this consideration fall at the centre of the court’s necessary deliberations. The husband does have an eligibility for a pension under a law of the United Kingdom. The relevant United Kingdom authorities assert that this pension has a cash equivalent value of around $600,000.00. How this sum is calculated has not been revealed to me.
The husband accrued the right to receive this pension between 1989 and 2010, which coincided with around about one half of the parties’ relationship. As previously indicated, I accept that the wife must be accorded as having made a significant indirect contribution to the acquisition of this right, which resides with the husband.
It seems clear that considerations of both justice and equity and the wife’s currently comprised capacity to earn an income dictate that she be allocated some portion of the income stream derived from it as a form of on-going spousal maintenance, it is also apparent that the pension itself cannot be split in respect of any capital which it potentially represents.
The wife is potentially seven years away from the date on which she can access her Australian superannuation, which is accessible on her attaining the age of 65 years or permanently retiring from the paid workforce, whichever event occurs first. As matters currently stand, she has a modest store of superannuation set by, which is unlikely to sustain her completely, in a financial sense, for what I would hope would be at least a couple of decades of retirement.
As previously indicated, what are the practical implications of her United Kingdom based pension entitlements is unknown to me, particularly whether the monies due will be paid in recurrent form and how such payments will interact with any social security entitlement to which she may become entitled.
The husband’s Australian based superannuation is modest at present. However, he has potentially a further fifteen years, perhaps more, in the paid workforce, which will allow him to grow his superannuation entitlements significantly. This, when combined with his entitlement to a recurrent United Kingdom military pension, indicates that he is significantly better placed than the wife in respect of financial security on his retirement. These factors favour the wife.
Section 75(2)(g)
This consideration recognises that one of the inevitable consequences of the end of the majority of marriages is a drop in living standards for the individuals concerned. This is particularly so if the marriage concerned has been a lengthy one and involves issues regarding the income earning capacity of the parties’ concerned.
It is trite, but true nonetheless, that two households cannot live as economically efficiently as one. What is important is that any drop in living standards should not be borne disproportionately by one party more than the other.
Due to his personal circumstances, particularly the opportunity to borrow a significant sum of money from his current partner and so secure a place in which to live, the husband is in a significantly more resilient financial position than the wife. On the other hand, the wife must look for alternative accommodation for herself, most likely in the rental market. The factors arising under this consideration favour Ms Earwood.
Sections 75(2)(h), 75(2)(j) and 75(2)(k)
These provisions relate to maintenance. It is convenient to consider them together and the other relevant provisions as they relate to spousal maintenance. Pursuant to section to section 74 of the Act, the court may make such order as it considers “proper” for the provision of maintenance to the wife in accordance with the provisions of Part VIII of the Act.
In particular, section 72 deals with the right of a spouse to maintenance and reads as follows:
(1)A party to a marriage is liable to maintain the other party, to the extent that the first‑mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:
(a) by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b) by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c) for any other adequate reason;
having regard to any relevant matter referred to in subsection 75(2).
The discretion arising under section 72 is to be exercised in accordance with the provisions of section 74 with “reasonableness in the circumstances” being the “guiding principle”.[86]
[86] See Bevan & Bevan (1993) 19 Fam LR 35, 42 (Nicholson CJ, Lindenmayer and McGovern JJ).
Given her age and state of health, I accept that Ms Earwood is presently under a level of both physical and mental capacity sufficient to preclude her from being able to fully provide for her own financial support, certainly when compared to the standard of living which she previously enjoyed in the period of the parties’ relatively lengthy marriage.
As previously indicated, Ms Earwood is an experienced medical administrator. As such, she does not require financial support to retrain as her qualifications remain current. Mr Earwood has an extremely valuable resource available to him in the form of his United Kingdom Armed Forces pension. This will provide him with a financial bulwark for the remainder of his life. I accept that Ms Earwood made significant contributions, during half of the period in which Mr Earwood acquired his pension entitlements. These contributions must be regarded as significant.
Sections 75(2)(ha), 75(2)(l), 75(2)(naa), 75(2)(p) and 75(2)(q)
These paragraphs are not relevant in the current matter.
Section 75(2)(m)
It is Ms Earwood’s belief that Ms J is a very wealthy woman, who is subsidising the husband’s standard of living to a marked degree. Mr Earwood denies that this is the case and asserts that mortgage and related loan agreement are bona fide commercial agreements between him and Ms J.
In the absence of evidence from Ms J, it is difficult to resolve these controversies definitively. However, there can be no doubt that due to his relationship with Ms J, Mr Earwood has been able to secure accommodation for himself and remains in the housing market. Ms Earwood does not have these advantages.
Whether Ms J would ever exercise any of the powers available to her under the mortgage, in the event that Mr Earwood should default on it, is another issue which cannot be resolved. However, given the intimacy of the relationship between the two, it seems improbable that she would.
In the absence of evidence from Ms J, I am unable to make any assessment of the long term viability of the relationship which she shares with Mr Earwood. I assume the two love one another and intend to remain together for the indefinite future. In these circumstances, I am satisfied that Mr Earwood derives significant financial benefits as a consequence of his relationship with Ms J.
Section 75(2)(na)
The weight to be attached to a child support assessment will vary in the circumstances of each particular case concerned. The court is directed to look at the amount of the assessment, the financial circumstances of each of the parties, the needs of the children concerned and whether child support is likely to be paid regularly and at an adequate rate in future.[87]
[87] See Clauson & Clauson (1995) 18 Fam LR 693.
X will be eighteen years of age in about six months. At which stage, his financial support will no longer be amenable to the provisions of the child support system. His mother currently pays no child support, and is in arrears. As such, the husband is solely responsible for X’s financial support. I also accept that Mr Earwood has funded a motor vehicle for his use. Overall, child support is not a significant issue in the case, given X’s age and Ms Earwood’s limited capacity, at present, to provide financial support for him.
Section 75(2)(o)
In Ferguson & Ferguson,[88] the Full Court of the Family Court held that section 75(2)(o) was to be read ejusdem generis with the other matters listed in the section 75(2) which enabled the court to bring into account “conduct which has an economic significance in the parties’ dealing with each other or the property in dispute.”
[88] See Ferguson & Ferguson (1978) 4 Fam LR 312, 330 (Watson and Wood SJJ).
The main factors, with economic significance in respect of the parties’ prospective needs can be summarised as follows. Firstly, each of them has an extraordinary level of indebtedness in respect of legal costs. In Ms Earwood’s case, she has exposure not only in respect of these proceedings but also in respect of her criminal case and her action against her former employer.
The only liquid source of funds to satisfy these debts relating to legal fees is the proceeds of sale of the B Street, Town C property, which is significantly mortgaged. In round terms there is approximately $220,000.00 remaining in equity and the parties’ combined fees are around $256,000.00.
I appreciate the B Street, Town C property may well achieve a better price than that currently estimated but the mortgage is also increasing and the above calculation makes no reference to the likely selling costs. In this sense, the dispute between the parties is analogous to “two bald men arguing over a comb”. The reality is that what has occurred has been a financial disaster for each of the parties.
The second factor, which must be considered is how each party is currently placed to deal with the fallout of this disaster. The husband must be regarded as being significantly better placed. As a consequence of his relationship with Ms J, at the very least, he has a sympathetic financier, who is unlikely to take action in respect of his mortgage. In this context, it may well be the case that she is in a position to provide him with a bulwark, whilst the financial tsunami breaks around, a bulwark which Ms Earwood does not have.
In addition, Mr Earwood has the ongoing security provided by his recurrent United Kingdom Armed Forces pension. This is significant given he has access to an assured source of accommodation. Ms Earwood has none of these things and faces challenges in earning an income, which are compounded by her age and compromised health.
Ms Earwood has her own United Kingdom pension entitlements. At present their attributed worth is modest and the benefits likely to be payable uncertain, including when they will crystallise. I accept, however, notwithstanding the uncertainty surrounding them, that Ms Earwood’s United Kingdom based entitlements confer significantly less financial benefits than those referable to Mr Earwood’s pension.
Another factor arising in this context is the financial conduct of the parties’ post separation. On the one hand, Ms Earwood’s assertion that Mr Earwood has been able to holiday and enjoy a comfortable lifestyle, which meet his assertion that she has wasted funds and allowed the marital asset base, particularly the equity in the B Street, Town C property, to dwindle.
In this context, in my view, the failure to maintain the relevant mortgage is clearly the more significant factor. The arrears have grown at a rate of around $4,000.00 per month. I appreciate Ms Earwood has not been in a position to easily maintain the payments given her work situation. However, she has had the benefit of the property and this must temper the court’s assessment of the other section 75(2) factors which favour her.
The final issue concerns the economic support Mr Earwood provided for the twins during the marriage. In strict legal terms, he had no obligation to provide support for them. However, in practical terms they were part of the joint household which he shared with Ms Earwood and their finances were to all intents and purposes fused.
The Full Court discussed the application of financial support to step-children in Robb & Robb.[89] The Full Court considered that the issues of the weight or otherwise to be given to such contributions turned on “ordinary considerations of justice and equity between the parties”.
[89] Robb and Robb (1994) 18 Fam LR 489.
Given the dynamic of the case – a blended family, with both spouses working and supporting the other – I do not consider that any allowance should be made in respect of the issues arising in this context. Mr Earwood provided what support he could for the twins because he loved their mother and wanted her and them to come to live in the United Kingdom. The twins are half-siblings to X.
Summary of section 75(2) factors
In my assessment, in their totality, the cumulative effect of the various factors to be considered arising under section 75(2) favour the wife to a significant degree. In summary, her age, compromised health and challenging employment situation, when combined with the fact that she lacks protection from the economic fallout arising from the demise of the parties’ marriage, render her financial future extremely dark. In theoretical terms, I would allocate her a further 20% of the parties’ non-superannuation assets on the assessment of section 75(2) factors, which at the of the third phase leads to a distribution of 60%/40% favouring Ms Earwood.
I do not consider that it would be just to make any further percentage allowance in favour of either party in respect of how their Australian superannuation is currently held, which as previously indicated I have calculated to amount to a sum of $258,382.78 of which $190,997.98 is attributable to the wife; and $67,384.80 to the husband.
The wife is far closer to the age at which she will have to consider permanent retirement from the workforce and move to the phase of her life at which she must access resources put aside across the course of her working life to fund that retirement. She has, at best, a further ten years in the paid workforce, even if she is able to overcome her health challenges.
At the end of the second step, I determined in relation to superannuation that the respective contributions of the parties percentage terms is 74%/26% in the wife’s favour, given the fact the wife had accumulated a significant proportion of her superannuation prior to the commencement of the parties’ relationship.
The more difficult aspect of the case is whether there should be any further allowances, made referrable to section 75(2) factors, in respect of the parties’ Australian based accumulation funds. The husband seeks equalisation of this superannuation, which would require a split being made in his favour, from the wife’s holding, in an amount of $61,806.59.
The chief benefit of such a split, from the husband’s perspective, is that it would grow his accumulation superannuation, which he will also be able to increase, over the next fourteen years of his likely Australian working life, leaving him with a potentially significant lump sum on his retirement.
Necessarily, the wife will not be so well placed. Her Australian superannuation, the majority of which she accrued outside the relationship, will be significantly depleted. However, because she is much closer to retirement than the husband, she has less time to recoup the loss. A difficulty which is compounded by her current compromised health. She will face a bleaker retirement than the husband. If this were the only financial resources available, I do not consider that it would be just and equitable to make such a split.
However, this determination cannot be made in isolation. Necessarily, it must be in the context of the parties’ off shore retirement funds, which cannot be split and, in the case of the wife’s United Kingdom based funds, are not currently in payment phase and the precise effect of them, on crystallisation, is not known to me.
It is a case of comparing apples with oranges. As best as can be ascertained, the wife’s United Kingdom entitlements, derived over a period of employment of less than a decade, equate to a value of around $74,000.00 – which is approximately equal – about $12,000.00 more – to the amount proposed by the husband to be split in his favour from the wife’s Australian based superannuation.
At present the husband has available to him a financial resource, which provides him with a guaranteed income stream. If this sum was exposed to an actuarial analysis – which has not occurred – as to what is its capitalised worth, there can be little doubt that it would equate to a significant sum. However, at the present time, whilst Mr Earwood is gainfully employed, on a comfortable salary, the recurrent income is of less value to him than as an accruing capital sum.
On his retirement, it will become valuable as he utilising it to augment other sources of income potentially available to him – such as the aged pension; crystallised Australian accumulation superannuation – to provide him with a comfortable income in retirement.
On the other hand, Ms Earwood is more in need of the financial safety net provided by a guaranteed source of income, even if the amount in question is modest. In my assessment, the evidence indicates that Ms Earwood is currently compromised in her capacity to earn an income and likely to remain so for the foreseeable future. This situation renders it proper to make an award of spousal maintenance, in her favour, from the financial resource represented by the husband’s United Kingdom Armed Forces pension.
If there is an end date to such an award of spousal maintenance, it will not prejudice Mr Earwood’s security in retirement as his right to the pension, as I have currently been informed, will not change on him attaining any particular age. Again, what are its implication so far as Mr Earwood’s entitlement to Australian social security is an issue which has not been traversed in the current proceedings.
Mr Earwood will turn 65 in 2036 – a little over fourteen years away. This is the date on which his Australian superannuation will crystallise, unless he has permanently retired from the workforce earlier.
On this date, Ms Earwood will be 73 and although it is not beyond the bounds of possibility that she will still be undertaking some form of paid employment, on balance this appears unlikely. I would expect that she will qualify for some form of aged pension from the age of 67, which will augment her United Kingdom pension entitlements – although I have not been advised of when they are likely to vest.
In my view, the answer to the conundrum posed by these different forms of retirement benefit and the disparate needs of the parties arising from their differing situations and working capacities at the present time is to order that Mr Earwood pays spousal maintenance to Ms Earwood in a monthly amount based on 50% of his United Kingdom Armed Force pension entitlement per annum.
At present this equates to a modest sum of around $750.00 per month. No doubt the sum will fluctuate with changes in the exchange rate and rates of indexation by the United Kingdom authorities. I appreciate that the payment of such a sum is not without its administrative challenges and will not bring about a clean break in the parties’ financial inter-relation, which the relevant legislation views as desirable.[90]
[90] Family Law Act 1975 (Cth) s 81.
I propose to make this order for a period of approximately 10 years, until 31 December 2031. On this date Ms Earwood will be 67.5 years of age and Mr Earwood will be around 60. If Ms Earwood elects to contribute this sum in superannuation it will compound and be available to her to fund her retirement. In addition, I propose that she retain her United Kingdom entitlements. The quid pro quo being that Mr Earwood will also retain his United Kingdom pension, in its entirety from 2032 onward.
What is apparent to me, regardless of the fact that I have determined Ms Earwood should keep, in effect, all her retirement benefits, it is more likely than not, if the various section 75(2) factors play out in the manner which I have envisaged, Mr Earwood will be significantly better off, in retirement than Ms Earwood. This will chiefly be as consequence of his younger age and likely longer working career. The award of spousal maintenance is an attempt to balance out this disadvantage, so far as Ms Earwood is concerned.
CONCLUSIONS
I am satisfied that in all the circumstances of this case, it is just and equitable to make orders pursuant to section 79(2) of the Act. The marriage between the parties has clearly ended and the financial relationship between them must be brought to an end. The next issue is what form those orders should take and where individual items of property should lie.
This is the most difficult aspect of the property aspect of the proceedings. It is the point at which abstract notions of justice and equity must become concrete. This is true not only of how the parties’ actual property and debts are to be allocated but also significantly what is a just and proper order so far as spousal maintenance is concerned.
In Steinbrenner & Steinbrenner,[91] Coleman J observed as follows:
Given that the evaluation of contribution based entitlements inevitably moves from qualitative evaluation of contributions to a quantitative reflection of such evaluation, there will inevitably be a “leap” from words to figures. That is the nature of the exercise of discretion, whether it be in the assessment of contributions in the matrimonial cause, assessment of damages in a personal injuries case, or determination of compensation in a land resumption case.
[91] See Steinbrenner & Steinbrenner [2008] FamCAFC 193 at [234] (Coleman J).
This is the point at which the court must make the metaphorical leap from words to figures or from abstractions to what is concrete. After all, it is all well and good to talk in percentages, so far as orders and outcomes are concerned, but what matters to the parties is what the orders mean to them in dollars and cents and what affect they have on their long term plans and aspirations.
This leap from abstraction to the concrete must be undertaken in terms of what is just and equitable to each of the parties concerned. It must also incorporate what is the proper overall mix of assets, debts and financial resources, given the respective situations of each of the parties concerned. It is a particularly difficult task given the small extent of the property pool and the disparate nature of their financial resources.
I have determined that Ms Earwood is entitled to 60% of the non-superannuation asset pool as I have calculated it. The wife will retain property to the value of $18,000.00 in the form of the tractor ($6,000.00); her livestock ($3,000.00); her motor vehicle ($8,000.00); and her savings ($1,000.00). The husband retains property to the value of $25,400.00 in the form of his motor vehicles ($11,000.00) and his savings ($14,400.00). A difference of $7,400.00.
60% of this sum is represented by $4,440.00. It is not a significant sum in the greater scheme of things but given the vehemence with which these proceedings have been conducted, it will be taken into account in the apportionment of the proceeds of sale of the parties’ former family home at B Street, Town C.
I will approach the ATO debt; X’s school fees; and the arrears of rates; as joint liabilities which will be deducted at settlement from the proceeds of sale of the B Street, Town C property after the selling costs have also been paid. Of these proceeds the wife will receive 60% of them plus $4,440.00; with the balance to go to the husband. It seems inevitable that the greater proportion of these monies will be consumed by legal fees.
The orders I envisage give Ms Earwood a significantly greater amount of Australian based accumulation superannuation. I consider this is equitable given the fact that her retirement from the workforce is likely to be closer than is the husband’s. In addition, she is has less capacity to contribute to her Australian superannuation than Mr Earwood.
Finally, in my view, an award of periodic maintenance, in the wife’s favour, referrable to the husband’s United Kingdom pension entitlements, but for a fixed period, is an equitable response to the fact that these resources cannot be split and given that there is a lack of clarity about what is the effect of the wife’s United Kingdom pension.
Children’s Issues
The most significant aspect of the issues surrounding X is his age. He will be 18 years of age in approximately six months. Once he has attained this age, he will be able to apply for his own passport and travel the world as he sees fits – subject to financial constraints and any restrictions imposed by the Australian Government on its citizens.
I can appreciate the sensitivity of the issue from Ms Earwood’s perspective, given X has strong connections with the United Kingdom and her fear that he may choose to live there. However, sad as it may be, the evidence indicates X is currently deeply estranged from his mother. In my view, if he does elect to travel and indeed live in the United Kingdom, this is his decision to make.
In these circumstances, I do not consider that it would be in X’s best interests to make the order as proposed by Ms Earwood and therefore I decline to make any order in respect of parental responsibility pertaining to him and dismiss this application.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding three hundred and ninety (390) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Dated: 22 December 2021
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