F and F - Property Settlement
[2004] FMCAfam 75
•1 April 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| F & F – PROPERTY SETTLEMENT | [2004] FMCAfam 75 |
| FAMILY LAW – Property – valuation of assets and assessment of contributions – consideration of a global versus an asset by asset approach – consideration of superannuation contributions before and after cohabitation. |
Family Law Act 1975 (Cth), ss.75, 79, 90MT, 106A
Family Law (Superannuation) Regulations 2001
Bremner (1995) FLC 92-560
Russell & Russell (1999) FLC 92-877
Weiss & Weiss [2003] FMCAfam 228
| Applicant: | KF |
| Respondent: | VF |
| File No: | PAM981 of 2002 |
| Delivered on: | 1 April 2004 |
| Delivered at: | Parramatta |
| Hearing date: | 18 December 2003 22 January, 20 February 2004 |
| Judgment of: | Driver FM |
REPRESENTATION
| Counsel for the Applicant: | Mr Roberts |
| Solicitors for the Applicant: | Richardson Burgin Steer |
| Solicitors for the Respondent: | Mr Reeve Marsdens |
ORDERS
Forthwith both the husband and the wife shall do all things and sign all documents necessary so as to cause the former matrimonial home, to be sold by private treaty.
The home shall be listed with an agent, as agreed to between the parties. However, in the event that the parties cannot reach an agreement, then the parties shall list the property with an agent that is appointed by the President of the Real Estate Institute of New South Wales or his nominee.
In the event that the property does not sell by private treaty within three months then both the husband and the wife shall forthwith do all things and sign all documents necessary so as to cause the home to be offered for sale by public auction at a reserve price of $805,000 or otherwise as agreed, and in particular are to:
(a)place the property with an auctioneer which is agreed to between the husband and wife or failing such an agreement with an auctioneer appointed by the President of the Real Estate Institute of New South Wales or his nominee, for the sale of the property by public auction at the earliest possible date;
(b)execute all documents requested by the auctioneers for the sale of the property;
(c)pay to the auctioneers equally, any sums requested for advertising expenses in relation to the auction;
(d)attend at the auction sale or sales and negotiate with the highest bidder in the event that the reserve price is not reached and accept the advice of the auctioneers as to the acceptance of a price less than the reserve price;
(e)execute contracts of sale;
(f)co-operate in every way with the auctioneers in relation to the auction of the property;
(g)execute all other documents necessary to complete the sales.
Upon sale of the home the proceeds of the sale shall be disbursed in the following manner:
(a)In payment of reasonable legal expenses, agent’s commission, auction expenses (if any) and sale costs with respect to the sale of the home;
(b)In payment of the mortgage with the St George Bank secured against the home including any outstanding rates and charges;
(c)55 per cent of the balance of the proceeds to the wife subject to order 5;
(d)the balance then remaining to the husband subject to order 5.
In the event that the home sells for greater than the reserve price of $805,000 then each additional dollar that is received shall be divided between the husband and the wife in the proportions 45 per cent to the husband and 55 per cent to the wife.
The base amount allocated to the wife out of the defined benefit interest held by the husband in the State Superannuation Scheme (hereinafter referred to as “the Super Fund” is $86,500.
Pursuant to s.90MT(1)(a) of the Family Law Act 1975 (Cth), whenever the Trustee of the Super Fund makes a splittable payment from the interest held by the husband, the Trustee shall pay to the wife, her or her administrators, executors, beneficiaries, heirs or assigns the entitlement calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 and there shall be a corresponding reduction in the entitlement the husband would have had in the Super Fund but for these orders.
Order 6 is to have effect from the operative time.
The operative time of these orders is 28 days after the date of entry of the orders.
The husband is to serve a copy of these orders on the Trustee of the Super fund within seven days of the date of entry of these orders by ordinary pre-paid post.
The Trustee of the Super Fund, in accordance with the obligations set out under the Family Law Act and Family Law (Superannuation) Regulations, shall do all such acts and things and sign all such documents as may be necessary to calculate the entitlement of, and make to, the wife in accordance with order 6 of these orders.
All other items of property, financial resources, shares and superannuation, funds, liabilities presently in the name, possession or control of the wife shall remain hers absolutely to the exclusion of the husband.
All other items of property, financial resources, shares and superannuation, funds, liabilities presently in the name, possession or control of the husband shall remain his absolutely to the exclusion of the wife.
Pursuant to s.106A of the Family Law Act the registrar of the Court shall be appointed to sign all documents required to be signed by the parties in the event that they fail or neglect to do so.
Both the husband and the wife shall do all acts and things and give all consents and executes any documents in relation to give effect to these orders made herein.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PARRAMATTA |
PAM981 of 2002
| KF |
Applicant
And
| VF |
Respondent
REASONS FOR JUDGMENT
Introduction and background
The applicant husband and the respondent wife are in dispute over the division of matrimonial property. A divorce application was filed on 29 July 2003, and a decree absolute was granted on 16 October 2003. The combined matrimonial assets exceed the jurisdictional limit of this Court. However, the parties have consented to the proceedings remaining in the Court. The parties are generally agreed about what comprises the net matrimonial property and the value of it. They are, however, in dispute about the respective contributions that were made to the accumulation of that property, in particular, the former matrimonial home. The are also in dispute about their respective circumstances and needs following separation.
The major assets are the former matrimonial home, which the wife still occupies and the husband’s superannuation. The parties are agreed that the former matrimonial home should be sold. The husband proposes that the wife should receive 50 per cent of the net proceeds of the sale (following payment of $20,000 to the a credit union in relation to a loan, and sale costs). By her amended response filed on 22 January 2004, the wife sought 75 per cent of the net proceeds (after deducting sale costs and the sum of $41,000 she wanted paid to her parents). However, by a further amended response filed on 19 February 2004 (after the husband’s case had closed) the wife now seeks 60 per cent of the net proceeds of the sale of the former matrimonial home, without making any provision for a payment to the wife’s parents. The husband also proposes that there should be a splitting order on his superannuation using a base figure of $68,050 (or 50 per cent of the discounted value of the husband’s interest less the wife’s interest) from that superannuation. The wife has not sought any order in respect of the husband’s superannuation. I was told by Mr Roberts, for the wife, that I should not make a splitting order but that, rather, I should give the wife a greater share of the proceeds of the sale of the former matrimonial home to take account of her interest in the husband’s superannuation. Consistently with the further amended response, that share would be 60 per cent.
The wife had also made an application for spousal maintenance, however that was abandoned on 20 February 2004. The parties are otherwise agreed that each should hold what they currently have.
The husband is now aged 50. The wife is 49. They commenced cohabitation in 1976, on the date of their marriage. They separated in December 1999. The parties have two children who are both now adults and live independently.
The husband is a teacher and was until 22 March 2004 a school principal. He is currently a deputy principal. The wife trained and initially worked as a secretary, but then re-trained and works as a teacher. Both worked during the period of cohabitation, with the exception of two interruptions to the wife’s employment while she was on maternity leave. During the course of cohabitation the parties purchased, improved and sold two homes in suburban Sydney, and a house on the New South Wales central coast and also purchased land at on the New South Wales central coast on which the present matrimonial home was constructed and substantially, but not finally, completed. Both parties also undertook further education and training during the course of cohabitation. The husband improved his qualifications and the wife obtained teaching qualifications. The parties had a windfall gain in the form of a $100,000 Lotto win in early 1984 which they shared with the wife’s parents. The funds were put towards the second property purchased in suburban Sydney as a joint and equal contribution by the parties and the wife’s parents.
Following separation in December 1999 the parties have suffered some reverses. The wife lost her job but obtained alternative employment as a kindergarten teacher. The husband was on 22 March 2004 advised of the outcome of disciplinary charges against him. He has been reduced in grade from principal to deputy principal. The wife is awaiting the outcome of a reserved judgment in an unfair dismissal claim in the NSW Industrial Relations Commission.
The evidence
The husband relies upon his amended application filed on 20 January 2004 and upon his amended financial statement filed on 18 December 2003. He relies upon his own affidavits filed on 12 July 2002 and 22 December 2003, as well as an affidavit by Zoe Dowsett filed on 16 December 2003. Ms Dowsett deposes as to the valuation of the husband’s superannuation. She was not required for cross‑examination. The wife relies upon her further amended response filed on 19 February 2004 and her financial statement filed on 16 December 2003. She further relies upon her own affidavits filed on 18 July 2002 and 16 December 2003, as well upon affidavits by her father and mother, both filed on 1 April 2003. Her parents were not required for cross-examination. The wife corrected and updated her affidavit evidence and her financial statement by way of oral evidence. I also took into account the letter to the husband from the NSW Department of Education dated 22 March 2004 concerning the disciplinary charges.
Findings of fact are made on the balance of probabilities test, having regard to the evidence and my observations of the parties and witnesses. In what follows, statements of fact constitute findings of fact.
The law
Section 79 of the Family Law Act 1975 (Cth) (“the Family Law Act”) defines the Court’s powers in determining applications for an alteration of property interests.
The approach to the determination of an application under s.79 of the Family Law Act is well established by authority. The process ordinarily involves a three step procedure: first, identifying the property, liabilities and financial resources of the parties at the time of trial of the matter, secondly, evaluating the contributions made by the parties as defined in s.79(4)(a)-(c) and, thirdly, evaluating the matters contained in s.79(4)(d)-(g) insofar as they are relevant (which incorporates the s.75(2) factors).
In determining what order the Court should make under s.79 the Court must in addition be satisfied, in all the circumstances, that it is just and equitable to do so: s.79(2). Section 79(2) provides that:
The Court shall not make an Order under this Section unless it is satisfied that, in all the circumstances, it is just and equitable to make the Order.
It is the justice and equity of the actual orders that the Court must consider: Russell & Russell (1999) FLC 92-877.
Reasoning
Identification and valuation of net property
The principal matrimonial asset is the former matrimonial home situated on the New South Wales central coast. The parties agree that the value of this property is $805,000. There is also no real dispute about the value of the wife’s shares, superannuation, savings, furniture and personal effects. Neither is there any real dispute about the value of the husband’s tools and personal effects, a small superannuation account he holds in relation to his employment with the a company (he declares around $7,000 in two MLC plans in his financial statement) and his personal savings. The husband has a Mitsubishi Magna motor car which he values at $2,000 and which the wife values at $3,000. The car is now 11 years old and, in my view, the husband’s valuation is more realistic. I accept his valuation as an admission against interest. The wife has a 1995 Toyota Carolla motor car which she values at $6,000 and which the husband values at $10,000. I prefer the wife’s valuation which is more realistic, given the age of the car, and which is an admission against interest.
The only item of significance about which the parties disagree on valuation is the husband’s superannuation with New South Wales State Super. The husband initially valued his State Super at $125,000 and the wife valued it at $252,000 as at 2002. Ms Dowsett, in her evidence, values the fund at $228,067 as at 16 May 2003. Her evidence was unchallenged and I accept it. There is no more recent valuation. Ms Dowsett discounts the value of the superannuation fund by ten per cent to allow for taxation. I agree. This produces a figure of $205,260. For consistency, I will apply the same rate of taxation to the other superannuation funds. The husband seeks to further discount the value of his superannuation to take account of earnings prior to cohabitation and since cohabitation. I do not accept that such a further discount should be made. The parties were married only two years after the husband joined the State Superannuation fund and the assets that both parties brought into the marriage were quite modest. Their finances afterwards merged. The husband’s superannuation asset became a marital asset and it did not cease to be a marital asset simply because the parties separated. I see no reason to treat the husband’s superannuation differently from other marital assets. The wife has made no contribution to the husband’s superannuation asset since separation, but that can be reflected in the assessment of the parties’ contributions generally in a global, rather than an asset by asset approach. In my view, an exclusion of superannuation earnings before or after cohabitation for the purpose of identification and valuation of net marital property assumes an asset by asset approach to the division of property and pre-empts an assessment of contributions.
The husband also claimed liabilities in the form of a credit card debt of $15,000 and a personal loan of $19,555. However, the credit card debt has been paid off from the proceeds of an MLC Insurance policy. His evidence in relation to these debts is unchallenged and I accept it. The parties agree that $65,000 is owing to a bank under its mortgage over the former matrimonial home.
Mr Reeve, for the husband, submits that I should add back into the asset pool the sum of $31,500 received by the wife from the proceeds of her MLC Life Insurance policy and in the form of a termination payment by the wife’s former employer. The wife actually received $37,704 between May 2001 and July 2002 and Mr Reeve submits that only $6,125 has been accounted for. However, the wife was unemployed for the greater part of 2001/02 and had to maintain herself. She paid off a car loan and a small tax debt. She (belatedly) corrected her financial statement to declare savings of $9,500. I accept that the money received by the wife was reasonably spent on payment of debts and living expenses and, if anything remains, it has been disclosed. I will not add back any amount.
Accordingly, I find that the assets and liabilities of the parties are as follows:
ASSETS HUSBAND WIFE
matrimonial home $402,500 $402,500
Mitsubishi Magna $2,000
Toyota Carolla $6,000
Furniture and personal effects $3,290 $4,000
Savings/shares $100 $13,700
*MLC superannuation $6,300
*State superannuation $205,260
*Wife’s superannuation $31,400
TOTAL $619,450 $457,600
LIABILITIES
Credit Union $19,555
Mortgage $32,500 $32,500
TOTAL $52,055 $32,500
NETT ASSETS $567,395 $425,100
TOTAL NETT ASSETS $984,795
*Adjusted for taxation at a rate of 10 per cent
I find that the total net marital assets of the parties have a value of $984,795 of which the husband currently holds approximately 58 per cent and the wife 42 per cent.
Contributions of the parties
This was a long marriage. Only modest assets were brought into the marriage and the finances of the parties merged during the marriage. They jointly owned the former matrimonial home, subject to the mortgage to a bank. They had a joint liability under that mortgage. During the course of their cohabitation the parties accumulated a substantial equity in real estate through the successive purchase, improvement and sale of that real estate. The husband, assisted by the wife and also by her father, contributed in particular through the carrying out of physical work on several properties, including the former matrimonial home.
During the first 15 years of the marriage the finances of the parties were merged. However, in early 1994 the husband took up a teaching position in country New South Wales while the wife continued living in the former matrimonial home. In 1995 the husband was transferred to another country town and again the wife did not relocate. She remained in the former matrimonial home with the children. Over the past 10 years the parties have progressively separated their finances. They have adopted separate savings accounts over that period, although the mortgage account on the former matrimonial home remains a joint account. The wife asserted that when the husband commenced employment in country New South Wales, she became solely responsible for the maintenance of the home and as carer for the two children. The husband disputes this and gave evidence about his frequent trips back to the matrimonial home on weekends and holidays, during which time he carried out work on the home and also undertook household chores. He also gave evidence of the support he provided to the children during this period. He was unshaken in his evidence under cross-examination. By the end of the hearing Mr Roberts was prepared to concede, on behalf of the wife, that the husband had continued to contribute in non financial ways after 1994, but submits that his contribution was minor. The wife also asserts that she has had the dominant responsibility for making mortgage payments on the former matrimonial home since 1990. However, the husband gave evidence of making regular financial contributions of $300 per fortnight plus other ad hoc financial payments. Again, he was unshaken in his evidence under cross‑examination.
The wife made a substantial effort to persuade me that I should accept that, at least following the husband’s move to country New South Wales in 1994, she was the dominant contributor. She failed. The husband gave detailed evidence, which I accept, of his financial and non financial contributions during the course of the marriage, including in the period after he took up employment in country New South Wales and later in another country town. This was a marriage which was under some strain, even prior to the husband’s move to country New South Wales but, notwithstanding those difficulties, the parties did not finally separate until December 1999. The husband was the dominant financial contributor up until the end of 1993, although the wife did make a significant financial contribution from the proceeds of her ABC superannuation fund in 1983 (approximately $8,000). I accept the husband’s evidence that one of the central coast properties was purchased for $40,000 in 1984. The property was in a run down condition. The wife’s affidavit evidence was that she could not remember the purchase price. Her parents also contributed about $20,000 (or 50 per cent of the purchase price) to the purchase of that property, from their share of the Lotto win which they shared with the parties in 1991. However those contributions do not outweigh the husband’s financial contributions to the several mortgages maintained by the parties, to other loans taken out by the parties, and to the day to day maintenance of the family.
From 1994 the wife made an increased financial contribution, however, the husband continued to provide significant financial support. The husband continued to make payments on the mortgage over the matrimonial home, and made numerous financial payments directly to the wife. In addition, the husband made a substantial continuing contribution to the accumulation of his superannuation benefits, to which the wife did not contribute after 1994. Neither did the wife contribute to the maintenance of the husband after 1994. Overall, I find that the financial contributions of the parties were roughly equal from 1994.
Up to 1993 the parties contributed equally in non financial ways as homemakers and parents. The wife was assisted by her mother but that was support provided to her in her role, not support provided in substitution for the husband’s role. From 1994, the husband continued to contribute in non financial ways as a homemaker and parent, although his contributions were compressed in time principally to periods during weekends and holidays. Although physically distant, the husband continued to provide practical and emotional support to his daughters. The wife made the more substantial non financial contribution from 1994 onwards, taking into account the assistance provided by her father to the upkeep of the matrimonial home and her dominant role in the care of the parties’ children.
The assessment of the respective contributions of the parties is not a strict mathematical exercise. The length of the marriage, the size of the asset pool, the responsibilities of parenthood and employment are all relevant and important considerations. As the Family Court Chief Justice observed in Bremner (1995) FLC 92-560:
…when one considers cases of this sort, it should be remembered that they are not decided upon a pure mathematical basis, and looked at from the point of view of abstract justice, it would appear to me that in a case where the assets of the parties are… comparatively modest [in that case $360,000], there has been a 20 year marriage and two children, where both parties have worked as these people have, it is difficult to argue with a judgment which divides those assets equally.
In this case, where the parties cohabitated for nearly 25 years, bought, improved and sold several homes, shared equally in a windfall gain of $100,000 and raised two children, there is a compelling case for a finding of equal contributions.
The wife has failed to persuade me that she has contributed in excess of 50 per cent to the accumulation of the net matrimonial assets. Neither has the husband satisfied me that I should take an asset by asset approach to the division of assets. The parties contributed equally to the accumulation of their combined marital assets. Their interest in the former matrimonial home is the result of the accumulation of equity in four homes, over the whole marriage. The husband made a substantial non financial contribution to the physical construction work of the present home, as he did to the previous homes. Over the course of the marriage, his financial contribution was somewhat greater than the wife’s. The husband has accumulated substantial superannuation benefits during the course of cohabitation and afterward, which is a major financial contribution, but the wife’s support provided to the husband up to 1993 to enable him to obtain advancement in his employment is in itself a significant contribution. The home will in due course be sold and the proceeds distributed. It is appropriate that the wife should also obtain an interest in the husband’s accumulated superannuation benefits. I find that the overall contributions of the parties, taking account of contributions both financial and non financial, before the marriage, during cohabitation and since separation have been equal. I take a global approach to the division of the net marital assets. Prima facie, each party is entitled to 50 per cent.
Section 75(2) factors
The parties are approximately the same age and both are in general good health. Their children are now adults and live independently. Neither party is responsible for the care of any other person. The husband has formed a relationship with another woman. However, I accept his evidence that they live independently and neither is financially responsible for the other. The wife has not repartnered. The wife gave evidence on the final day of the trial of this matter that her income has significantly reduced. She amended her financial statement to reduce her pre-tax weekly income from $1,022 to $672. I accept her oral evidence, which was supported by documentary evidence: exhibit R3, that her hours of employment have been reduced. I also accept her evidence that, pursuant to her contract of employment, her income could be further reduced. That is in the hands of her employer. On the other hand, the wife is awaiting the outcome of legal proceedings instituted by her in the NSW Industrial Relations Commission in which she seeks reinstatement to her former position. If she is successful in those proceedings and gains reinstatement, her income will be increased. Alternatively, it is possible that she may receive an award of compensation for wrongful dismissal for an amount up to six months salary. This would be a lump sum payment. There is nothing before me that would allow me to form a view on her prospects of success. It is pure speculation. However, the wife is unlikely to be worse off following the IRC proceedings and the possibility that she will be better off is at least as great as the possibility that her present employer will further reduce her income. For present purposes, I will proceed on the basis that she will maintain her present income.
After the hearing of this matter the outcome of the hearing of disciplinary charges against the husband became known. He has been reduced in grade, resulting in a reduction in income of around $10,000 per annum. His present income is now $73,177pa. The husband still enjoys an income of more than twice that of the wife.
Following the sale of the former matrimonial home, the wife will need to re-establish herself in a new home. She will not need a home as large as the former matrimonial home as she will be the only person living in it, although her children may wish to visit her from time to time. The wife will have a very limited capacity to service a mortgage.
Having regard to the disparity in the income of the parties and the need of the wife to re-establish herself in new accommodation, and her very limited capacity to service a mortgage, I find that there should be an adjustment of property interests in favour of the wife of five per cent. After that adjustment the wife will be entitled to $541,637 of the net matrimonial assets and the husband will be entitled to $443,158.
The remaining question is how the assets should be distributed. As previously noted, the only assets of real significance are the former matrimonial home and the husband’s superannuation. By her further amended response, the wife should receive 60 per cent of the net proceeds of the sale of the former matrimonial home. In contrast, the husband proposes that the wife should receive a mix of the proceeds of the sale of the former matrimonial home and a future benefit by virtue of a superannuation splitting order. Sixty per cent of the anticipated proceeds of the sale of the former matrimonial home (even without allowing for sale expenses, but allowing for the mortgage) would be $444,000. Fifty five per cent of the net proceeds, allowing for the mortgage and say $15,000 for sale expenses, would give the wife approximately $400,000. I see no particular reason to give the wife more than a 55 per cent share of the net sale proceeds of the former matrimonial home. I will not order that the husband’s debt to the credit union be discharged before distribution of the proceeds of the sale. The husband’s debt is a personal one and has been taken into account in assessing net assets and contributions. With 55 per cent of the net proceeds of the sale of the former matrimonial home, and with the other assets she holds, the wife will have $455,100. The wife should receive the balance of her share of the net matrimonial assets in the form of a superannuation splitting order. This will be based upon a base amount of $86,500 (rounded to the nearest $100). The parties should keep the chattels which they currently hold.
Is this just and equitable?
It is apparent that the orders that I will make could give the wife more than she sought in her further amended response. She sought only 60 per cent of the net proceeds of the sale of the former matrimonial home, and the car and other chattels that she currently holds. That would produce a figure of around $490,000 or approximately 50 per cent of the net matrimonial assets. That outcome would be at odds with the wife’s case as presented to me. She will also receive more than the husband proposed in his application. The orders the husband proposes would have given the wife around $475,000 (after allowing for payment of the credit union loan). Without payment of that loan the outcome sought by the husband in dollar terms would be about the same as the outcome would have been, based upon the wife’s proposed orders.
I am not bound by the parties’ proposals and, in my view, the wife was misguided in her further amended response. She claimed to be the greater contributor and to have the greater need which logically would have entitled her to more than 50 per cent of the net marital assets but her further amended response would not have given her that. The wife’s need is primarily for cash now so that she can re-establish herself in a new home without debt. The husband does not have a need for cash that is as pressing as the need of the wife. In the longer term, when the parties both retire, they will both need an income, lest they be entirely dependent upon social welfare benefits. The wife is entitled to an adequate level of retirement income, having regard to the lifestyle that she enjoyed over a long marriage and her contribution to the accumulation of the net marital assets, including the husband’s superannuation. In addition, it would not be just and equitable to deprive the husband of a substantial share of property to which he has made contributions over a long period of time on the basis that he will one day be able to enjoy substantial superannuation benefits: Weiss & Weiss [2003] FMCAfam 228 at [51].
In all the circumstances, I am satisfied that the orders I will make are just and equitable. I note that the husband’s solicitors have consulted the trustee of the State Superannuation scheme about the orders proposed by the husband. The trustee has expressed a lack of concern with those proposed orders. I will use the form of orders proposed by the husband but, noting that I am using a different base amount to that proposed by the husband, I need to give the trustee the opportunity to apply to the Court before the splitting order in relation to the superannuation fund takes effect.
I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 1 April 2004