G and G
[2000] FMCAfam 87
•20 December 2000
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| G & G | [2000] FMCA fam 87 |
| PROPERTY SETTLEMENT – Superannuation – Inheritance expectancy HARRISON (1996) FLC 92-682; DE ANGELIS; TOMASETTI |
| Applicant: | R J G |
| Respondent: | B J G |
| File No: | ZB2361 of 2000 |
| Delivered on: | 20 December 2000 |
| Delivered at: | Brisbane |
| Hearing Date: | 29 November 2000 |
| Judgment of: | Baumann FM |
REPRESENTATION
| Counsel for the Applicant: | Mr Galloway |
| Solicitors for the Applicant: | Edwards Lawyers |
| Counsel for the Respondent: | Mr Hamwood |
| Solicitors for the Respondent: | Michael Lynch & Associates |
ORDERS
The husband transfer his interest in the former matrimonial home at J Street, I to the wife within 30 days, with the wife indemnifying the husband against any claims in respect of the property.
The wife shall relinquish all her estate and interest in the investment property at J Street, I with the husband being entitled to sole ownership of the said property and shall be solely responsible for the mortgage encumbering that property and shall otherwise indemnify the wife in respect of that mortgage and any claims in respect of the property.
The wife shall be solely entitled, and the husband abandons any interest in, the wife’s Suncorp/Metway shares, Boral shares, Mazda motor vehicle, superannuation entitlements and all other chattels, bank accounts and property in her possession at the date of this order.
The husband shall be solely entitled, and the wife abandons any interest in, the husband’s Subaru motor vehicle, MLC policy, boats, tools, superannuation entitlements, long service and holiday leave and all other chattels, bank accounts and property in her possession at the date of this order.
The wife shall be solely responsible for repayment of the loan of $25,000.00 from her father.
The husband shall pay the wife $10,000.00 within 30 days.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
ZB 2361 of 2000
| R J G |
Applicant
And
| B J G |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant R J G (“the Husband”) filed an application in the Family Court of Australia on 9 September 1999 seeking an order by way of property settlement that the “matrimonial assets be split 65% to the wife and 35% to the husband”. The respondent B J G (“the wife”) filed a response on 28 October 1999 seeking an order that, in addition to payment by the husband of $60,000.00 the husband shall also transfer to her, the properties at 42 J Street, I and 139 J Street, I.
The parties attended a conciliation conference in December 1999 and with the consent of the parties, the proceedings were transferred to the Federal Magistrates on or about 7 August 2000, when the matter was set down for trial.
The parties each filed an Outline of Case setting out the documents on which they relied and the orders sought. In final submissions, counsel for each party sought orders in terms of their initiating applications set out in paragraph 1.
History
No serious dispute arose in relation to the past history of the parties’ relationship. The husband is 50 years of age and is employed as an Industrial Chemist by CE Energy (where he has been employed since 1981). The wife is 50 years of age and has worked for the last 4 years in a part-time capacity for the non-profit LUPUS Association (Qld Division). Both parties are healthy.
The parties married on 13 September 1975 and separated in August 1998 after nearly 23 years of marriage. There are 2 children of the marriage, A (now 21 years of age) and L (now 20 years of age). Both are University students. A is healthy, however L suffers from lupus. The wife’s affidavit provides a deal of material about this illness. It is clear that, although L is progressing through his studies in Information Technology, the management of his condition has been a point of contention between the parties for some time, evidenced by the wife’s comment that:
“The husband hasn’t come to terms with L’s illness.”
Whilst the husband says:
“My wife and I had different views on how to deal with Lupus, while accepting the condition I tried to keep his life as normal as possible.”
The parties previous work history was not seriously contested. The chronology of progressive acquisition of property set out in paragraph 14 of the wife’s affidavit was generally accepted by the husband.
The husband, in August 2000, drew down a further $40,000.00 on the mortgage over the property at J Street, I. The use of the funds and the way they were to be treated was a matter for my determination.
After separation in August 1998, the wife remained in the family home with the 2 adult children and has paid certain expenses on the home, including rates, insurance and repairs. The husband has continued to provide some weekly support for the children, in the form of cash payment (approximately $55.00 per week each), health insurance and other smaller, yet unspecified expenses.
There was a high level of conflict between the parties evident in the material and a general inability for either to concede any positive attribute of the other. The wife’s allegations against the husband about the neighbour’s dog (paragraph 49) and the husband’s comments about the death of his brother-in-law (paragraph 24) are examples of the irrelevant, yet inflammatory allegations made in the matter.
Issues to be determined
As a result of proper concessions made by counsel and agreements as to valuation, some elements of these proceedings that would normally require determination, were resolved. The parties in their final submissions agreed that contributions by the parties, of both a financial and non-financial nature during this relatively long marriage, to the date of trial, were equal. Most of the evidence on contribution was not in issue, and in the absence of any significant financial windfall during the marriage, I would have found on the evidence that the s79(4) contributions were equal to the date of trial.
The remaining issues requiring determination were:
a)The asset pool: The manner in which the husband’s “draw-down” of $40,000.00 is to be treated was the central dispute. The liabilities and gross financial resources were agreed. I should also record, that after the hearing both Counsel communicated with me, agreeing that no adjustment for GST on any future sale of shares was to be taken into account;
b)Section 75(2) factors;
c)Relevance of any alleged probable inheritance by the wife;
d)Orders which are just and equitable.
Relevant law
The approach to the determination of an application pursuant to s79 of the Act, is well established by authority (see LEE STEERE (1985) FLC 91-626; FERRARO (1993) FLC 92-335; DAUUT and RAIDF (1994) FLC 92-503; PRPIC (1995) FLC 92-574; CLAUSON (1995) FLC
92-595; WHITELY (1996) FLC 684 and DOIG (1999) FLC 92-869) which requires the adaptation of a “three step process”:a)Determine the extent and value of the property, liabilities and financial resources of the parties at the time of trial (see TOWNSEND (1995) FLC 92-569; BILTOFT (1995) FLC 92-614;
b)Consider what contributions have been made by the parties within s79 (4)(a), (b) and (c);
c)Consider what is identified as the “other factors”, being the matter in s79(4)(d),(e),(f) and (g), including by reference to s79(4)(e) the matters in s75(2) (LEE STEERE (supra) FERRARO (supra) WALTERS and JUREK (1995) FLC 92-635).
Finally, s79(2) requires the Court to be satisfied that in all the circumstances, it is just and equitable to make an order.
The issue of superannuation looms large in this matter as a result of the value of that financial resource compared to the value of the property available for division. I repeat the observations made by the Full Court in HARRISON (1996) FLC 92-682 when they said:
“It must be said that in most cases a spouse’s entitlement to superannuation is not property and therefore is not capable of any order under the provisions of s79 see CRAPP and CRAPP (1979) FLC 90-615, COULTER and COULTER (1990) FLC 92-104 and MITCHELL and MITCHELL (1985) FLC 92-601. The various attempts which trial judges, in their ingenuity, have made to take superannuation entitlements into account by reference to precise mathematical calculations, although desirable from a practical point of view, nevertheless do not enable or entitle them to include such sums as part of the property of the parties, however calculated.
It follows from what we have said that in most cases the proper approach to be taken by trial judges, when dealing with the parties entitlement to superannuation in Proceedings for alteration of property interest pursuant to the provisions of s79 of the Family Law Act, is to adjourn the proceedings under s79(5) with or without the making of any order under s79(6) or, in the alternative, to treat the superannuation entitlement as a resource pursuant to the provisions of s75(2)(f) or (j).
Section 75(i)(f) provides the Court shall take into account the eligibility of either of the parties for a pension, any superannuation fund or scheme whether the fund or scheme was established or operates within or outside Australia. Section 75(2)(j) requires the Court to take into account the extent to which a party whose maintenance is under consideration has contributed to the income earning capacity, property and financial resources of the other party.”
In this matter, neither party urged me to consider adjourning the matter under s79(5) and both submit, although with different effect, that the parties’ superannuation entitlements could be fairly adjusted. I accept that judges generally ought not move outside the lines drawn by the parties without inviting the parties to address on the appropriateness or otherwise of so doing (GIBBONS unreported Full Court decision 20 March 1997; GUTHRIE (1995) FLC 92-647).
The Full Court in WHITE and TULLOCK v WHITE (1995) FLC 92-640 considered whether expectancy from an inheritance was a financial resource within section 75(2)(b). The Court said the only basis for its admissibility was within s75(2)(o). Initial relevance in a particular case needs to be established. They further observed that at p82, 463:
“Once it is, it becomes a question of weight and degree. The issue is then approached by considering it in a broad, general way, by taking into account the age of the relative or other relevant testator, state of health, some general assessment of his or her financial position and some general assessment of the suggested inheritance expectancy. Detailed evidence of these matters is rarely allowed. Although that approach has a deal of imperfection about it is a process where the weight, if any, to be attached to it may be difficult to identify.”
During the course of argument I was referred to a passage in DE ANGELIS (Full Court unreported 12 November 1999) where Lindenmayer and Finn JJ said that:
“The discussion by the Full Court in WHITE and TULLOCH v WHITE (1995) 19 Fam LR 696 on this question of the treatment of anticipated inheritances in property settlement proceedings indicates that there is no absolute rule and that each case will depend on its own facts. However, we think it important to remember that the Court is required in exercising the jurisdiction under s79 of the Family Law Act 1975 to accord justice and equity to both parties. The question therefore has to be asked whether, in the present case, it would be just and equitable to the husband for the Court to have ignored the probability that, in what could well be a very short period of time (given the ages of her aunt and mother), the wife could well be the owner of two properties having a combined value of almost the same amount as the value of the parties' property currently available for distribution, and particularly in circumstances where the husband had been found to have done substantial improvement and maintenance work on both properties?
We consider that it would have been unjust to the husband to ignore this matter even if it was categorised only as a possibility and not a probability.”
Asset pool
It was the husband’s contention that of the sum drawn down by the husband of $40,000.00 the sum of $30,622.00 (being the purchase price of his car $19,200.00; and his legal fees paid – $11,422.00) should only be added back into the asset pool. The wife says the full $40,000.00 should be added back. The wife says, and I accept, that she was unaware of the increase in the mortgage. The husband was able to facilitate the increase without the wife's consent or knowledge. When called upon to explain the use of the funds he indicated, that in addition to the car and the legal expenses, the balance was expended on living expenses. He had approximately $3000.00 left. If the husband did not wish to have the whole of the $40,000.00 drawdown "added back" into the asset pool, he carried the onus of establishing that some of the funds were usual for the joint benefit of the parties towards, for example the acquisition, conservation or improvement of property. He has failed to do so. It is clear some of the finals were used to pay “rent” on his property at J Street. The husband acknowledged the property is negatively geared and the effect of any payments made on the mortgage is likely to be reduced because of this favourable treatment of that income. I find that the full draw down of $40,000.00 should be included in the asset pool.
As a result the pool of assets, liabilities and financial resources which I take into account in this matter and the current legal ownership is as follows:
a)ASSETS
i)42 J Street, I (joint)................................................. $199,000.00
ii)139 J Street, I (husband)....................................... $117,500.00
iii)Suncorp Metal Shares (wife).................................. $86,764.00
iv)Boral Shares (wife).................................................... $2,050.00
v)Mazda Motor Vehicle (wife)...................................... $1,500.00
vi)Furniture (wife)............................................................ $1,430.00
vii)Tools (husband).......................................................... $3,000.00
viii)Boats (husband)......................................................... $6,000.00
ix)MLC policy (husband)............................................. $15,935.00
x)Drawndown – added back (husband)................... $40,000.00
xi)Total :..................................................................... $473,179.00
b)LIABILITIES
i)Mortgage on J Street (husband)............................ $85,862.00
ii)Capital Gains Tax – J Street..................................... $8,000.00
iii)Loan from wife’s father............................................ $25,000.00
iv)Total :..................................................................... $118,862.00
c)NET ASSETS:................................................................ $354,311.00
d)FINANCIAL RESOURCES
i)Husband’s gross superannuation........................ $248,787.00
ii)Husband’s gross long service................................ $32,935.00
iii)Husband’s gross annual leave.................................. $7,296.00
iv)Total (H) :.............................................................. $289,018.00
v)Wife’s gross superannuation.................................... $3,700.00
The husband’s superannuation is split between an available cash entitlement of $104,677.00 and a preserved entitlement of $144,110.00. It has increased significantly since separation (by approximately $40,000.00 gross) as a result of contribution by and on behalf of the husband and accruals. It represents a major disparity in the parties’ financial positions.
The husband says he intends to take 3 months long service from
1 February 2001. In any event the benefit of that entitlement will be more in the form of being paid without work than any substantial cash benefit.
The parties agree that a certain shareholding in the Commonwealth Bank is the property of the children and has been deducted from the pool of assets.
Section 75(2) factors
With the parties agreeing that contributions to trial under s79(4) were equal the relevance and impact of the factors under s75(2) bear careful examination. I propose to deal with them sequentially:
a)Age and state of health : Both parties are about the same age and enjoy good health. They both are physically and mentally capable of obtaining gainful employment;
b)Income, Property and Financial Resources : It is this aspect of the s75(2) factors that deserves the greatest analysis:
i)Superannuation: leaving aside the husband’s right to long service leave and holiday pay which will be utilised between now and retirement, the husband’s superannuation entitlement is substantial. It continues to grow because of the capital base and the husband’s election to pay an additional amount into the scheme. Currently this amounts to $60.00 each week (see Exhibit 8). Apart from the period since separation, all of the superannuation accrued during the marriage. In submissions Counsel for the wife, whilst not urging a strict adherence to a “WEST and GREEN formula”, (derived from the judgment of Kay J in WEST and GREEN (1993) FLC 92-395) nonetheless calculated such an assessment of the gross financial resources of the husband including long service and holiday pay) as being:
17/38 of $289,000.00 = $129,297.00
ii)Whilst I think it is artificial to make such calculations, as if the husband were notionally to receive his superannuation today, the Full Court has observed that such calculations:
“are of some value in the context of considering an appropriate s75(2) adjustment since they help to focus attention on what the non-member spouse is effectively losing by being excluded from enjoyment of the benefits of the superannuation entitlements of the other spouse built up during the marriage.”
And further indicated, when considering giving the wife in that case an additional $320,000.00 in respect of those financial resources that:
“an adjustment of that magnitude would be somewhat excessive, since it contains no discounting for her early receipt of her notional share of those entitlements which may not vest in possession for anything between three and eight years.” (see TOMASETTI – Full Court unreported 13.4.2000.)
iii)I would assess the “notional” entitlement as follows:
·Gross superannuation................................. $248,787.00
·Less 21% tax on preserved amount............. $30,263.00
·Total:............................................................ $218,524.00
·218,524 x 17/38=$97,760.00 on 27.5% of the asset pool.
This amount would need to be discounted for the tax incidence on the cash proportion of the sum, together with an allowance for the fact that the wife would be notionally receiving that adjustment now, rather than waiting 4 to
9 years for the husband’s retirement.
iv)Wage disparity
The husband’s current net wage (after tax) is $46,000.00 pa. The wife earns with the Lupus Association only about $15,000.00 pa. The wife’s financial statement reflects a gross annual income of $27,300.00, however this includes dividends ($72.00 per week) and an Employer Fringe Benefit payment ($196.00 per week). The nature of those employer-sponsored benefits was not revealed in the evidence. The wife has chosen to work for a non-profit organisation where the salary rates, and security, may be less than some private sector employment. She, quite understandably, has an interest in the organisation and its work. She says that if she was to lose her employment.
“my options are almost non-existent given my age and my present job skills and my son’s health problems”.
The wife was not cross-examined and this statement effectively remains unchallenged.
v)The husband, who was the subject of cross-examination, says his job security is uncertain due mainly, it seems, to the gradual privatisation of the electricity industry. He detailed in his evidence the significant reduction in the workforce and examples of redundancy when Collinsville shut down. A copy of CS Energy Swanbank Power Station (Enterprise Bargaining) Certified Agreement 2000 was tendered, but it makes no provision for redundancy payments. Accordingly the likelihood and the amount of any redundancy is pure speculation at this time. This factor heavily favours the wife.
c)Not relevant;
d)Commitments to support others : Both parties continue to support the 2 adult children – the wife by providing a home for them to live in; the husband through his acknowledged cash and other financial payments to the children. The impact on the long-term effects of Lupus suffered by him and thereafter the level of commitment of both the wife and husband is unclear. Annexure “A” to the wife’s affidavit says:
“with today’s technology – improved diagnostic tests and medication – you can anticipate a near normal life span. However, having Lupus means adjusting your lifestyle.”
I find that L will most probably complete his degree and find employment without requiring a long-term financial commitment by his parents, but that if that is required, the parties will equitably contribute.
e)Already dealt with;
f)The effect of the superannuation has been dealt with;
g)The future lifestyle of the parties is not likely to be adversely affected;
h)Not relevant;
j)Already dealt with;
k)The respective disparity in anticipated wage outcomes has been dealt with;
l)Not relevant;
m)Not relevant;
n)Terms of proposed order : The terms of the proposed order for the wife, will be the continued right to occupy and enjoy the family home and the capacity to control her share investments. Those shares are a continuing source of income. She has demonstrated an ability to seek and accept advice in respect of her financial position (see particularly the transaction achieved and detailed at paragraph 123 of her affidavit) and although she will not have lump sum entitlements to superannuation which the husband will ultimately enjoy, she has the benefit of the assets now. The husband, as a result of the orders I propose to make, will have his income preserved to either continue to reduce the mortgage on the J Street house, or sell that property and re-establish himself until his superannuation vests on retirement. Whilst the wife will be required to bear the liability for the loan from her father of $25,000.00, the evidence leads me to a conclusion that it is unlikely the father will demand it from his daughter at this time;
na)Not relevant;
o)Wife’s father’s estate : thankfully, and in my view properly, Mr L N A was not required for cross-examination. He is nearly 75 years of age and was diagnosed with Leukemia in 1986 and Parkinson’s disease in 1993. Apart from these illnesses, the wife says her father is otherwise “in very good health”. A copy of Mr A’s handwritten Will of 1 December 1992 is Exhibit 2, and that document bequests all of his property to his daughter, the wife in these proceedings. The husband has estimated the value of Mr A’s assets to be approximately $271,000.00. The wife in these proceedings indicates at paragraph 98 of her affidavit, that she is offended by the:
“suggestion that my father should be embroiled in these Court proceedings.”
I find that the expectancy of an inheritance is a probability (not a mere possibility) but that it is only one of the factors under s75(2) to be brought into account.
Just and equitable
Considering the concession as to equal contribution under s79(4) to trial, and all the factors set out above under s75(2), I believe a fair just and equitable division of the available property pool requires the assets to be divided as to 75% to the wife and 25% to the husband, with the husband having a further obligation to pay the wife the sum of $10,000.00. This payment will assist the wife in defraying her legal expenses without drawing on her investments.
The effect of these orders will be that the wife will then receive:
a)House at J Street....................................................... $199,000.00
b)Suncorp Shares............................................................ $86,764.00
c)Boral Shares................................................................... $2,050.00
d)Mazda Motor Vehicle..................................................... $1,500.00
e)Furniture........................................................................... $1,430.00
f)Cash payment from husband...................................... $10,000.00
g)Total :......................................................................... $300,744.00
Although the wife has the liability for her father’s loan, as I have already indicated, I think it unlikely that she will have to pay it.
The husband will then receive:
a)J Street House............................................................ $117,500.00
b)Tools................................................................................ $3,000.00
c)Boats................................................................................ $6,000.00
d)Benefit of drawdown.................................................... $40,000.00
e)MLC Policy.................................................................... $15,936.00
f)Sub-Total :................................................................ $182,436.00
Less:
g)Mortgage....................................................................... $85,862.00
h)Cash payment to wife.................................................. $10,000.00
i)Total deductions :..................................................... $95,862.00
j)Total :............................................................................ $86,574.00
Whilst the husband may ultimately sell J Street, the capital gains effect on the sale proceeds is speculative – especially if he has assumed occupation of the home, as he now has, as his principal place of residence. The husband will have the full benefit of his substantial financial resources.
Both parties have, after this long marriage, some prospect of financial security for the future – although from different sources.
I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Baumann FM
Associate:
Date:
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