G and G - [2003] FMCAfam 404

FEDERAL MAGISTRATES COURT OF AUSTRALIA

G & G

[2003] FMCAfam 404

FAMILY LAW – PROPERTY – Superannuation – splitting order – flagging order – no children – ESSS defined benefit fund.

Family Law Act1975
Emergency Services Superannuation Act1986
State Superannuation Act 1958

Family Law (Superannuation) Regulations 2001

West v Green (1993) FLC 92-395

Applicant:

JEG

Respondent:

PDG

File No:

MLM2558 of 2002

Delivered on:

15 September 2003

Delivered at:

Melbourne

Hearing dates:

15 & 28 August 2003

Judgment of:

Hartnett FM

REPRESENTATION

Counsel for the Applicant:

Ms Tulloch

Counsel for the Respondent:

Mr Ramsey

ORDER

All previous orders are hereby discharged.
For the purpose of these orders, pursuant to section 90MD of the Family Law Act1975:
(i)The operative time is the date of these orders;
(ii)The member spouse is the husband, PDG born 1953; and
(iii)The non-member spouse is the wife, JEG 1956.
The base amount allocated to the non-member spouse is $103,561.25.
Whenever the trustee of the Emergency Services Superannuation Scheme makes a splittable payment from the interest held in the defined benefit scheme by the member spouse, PDG born 1953, the trustee shall pay to the non-member spouse her entitlement calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations2001 and there shall be a corresponding reduction in the entitlement that the member spouse would have had but for these orders.
That the husband be restrained by himself his servants or agents from making any binding death benefit nomination to the trustees of the Emergency Services Superannuation Scheme in favour of any child who is an eligible beneficiary within the meaning of Regulation 13 of the Family Law (Superannuation) Regulations2001 which would have the effect of diminishing the value to the wife of the splitting order made in paragraph 3 of these orders.
Paragraphs 1 to 4 (inclusive) of these orders are binding on the trustee of the Emergency Services Superannuation Scheme.
Each party and the trustee of the Emergency Services Superannuation Scheme have liberty to apply in relation to the implementation of the orders affecting the superannuation interest.
That unless otherwise specified in these orders and except for all purposes of enforcing the payment of any money due under these or any subsequent orders:
(i)each party be solely entitled to the exclusion of the other to all property (including choses-in-action) in the possession of such party as at the date of these orders;
(ii)all insurance policies to become the sole property of the beneficiary named therein;
(iii)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders;
(iv)at a time to be agreed and within 14 days hereof the wife shall deliver to the husband five bottles of Penfold Grange Hermitage which shall remain his property absolutely.
That all extant applications be otherwise dismissed save the question of the wife’s entitlement if any, to the husband’s long service leave and nothing in these orders shall be taken to finalise this aspect of the wife’s claim.
That upon the expiration of the appeal period all exhibits filed in the proceedings be returned to the parties.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLM2558 of 2002

JEG

Applicant

And

PDG

Respondent

REASONS FOR JUDGMENT

The applicant wife, JG, filed her application on 29 January 2002. She has, in the intervening period, amended that initial application by amended application filed 14 August 2003. Likewise the initial response of the husband filed 14 March 2002 has been amended as to the orders sought.
Essentially the orders sought by both parties are as contained in orders numbered (1) to (8) inclusive of the amended application of the wife save that in order no. 2 of the orders sought the wife seeks that the base amount allocated to the non-member spouse be $120,000 and the husband seeks that the base amount to be allocated to the non-member spouse be $20,000. The orders sought relate to a splittable payment to be allocated to the non-member spouse – who is the wife in the proceedings – by the Trustee of the Emergency Services Superannuation Scheme (ESSS). I am satisfied that procedural fairness has been accorded to the trustee as required by s.90MZD of the Family Law Act 1975 (Cth) (the Act).
The court’s power to make an order under s.79 of the Act in relation to a superannuation interest shall be in accordance with part VIIIB of the Act. This part, together with the Family Law (Superannuation) Regulations 2001 (the Regulations) came into effect in December 2002. Section 90MT of the Act deals with splitting orders. Section 90MU of the Act deals with flagging orders and although an order of this type was not sought by the parties it is a matter which I have considered as described hereafter.
The wife relies upon her affidavit sworn 22 January 2002 and her statement of financial circumstances sworn the same date. In addition she relies upon two further affidavits being as follows:
a)an affidavit sworn on 8 August 2003 by Mr C, antique dealer which provides a valuation of a pair of Victorian ruby glass lustre vases together with numerous items of china. That valuation totals $9340 and is unchallenged by the husband. The parties agree that all items contained therein have been purchased during the course of the marriage and that since separation these items have remained in the possession of the wife. It is intended by the parties to leave that position unchanged.
b)an affidavit sworn on 12 August 2003 by NW, an actuary. The contents, including the annexure to this affidavit were also unchallenged by the husband. The report annexed and marked "NDW-1" considers the value of the interest of the husband in the defined benefit superannuation scheme known as the Emergency Services Superannuation Fund (ESSS).
The husband relies upon his affidavit sworn 20 February 2002 and his statement of financial circumstances sworn the same date.
Each of the parties was cross-examined by counsel representing the other party and numerous exhibits were tendered and form part of the evidence before me. They shall be retained by order of the Court until the expiration of the appeal period.
By order made 5 March 2002 by Federal Magistrate Walters restrained each party in a variety of ways with respect to their dealings with their respective superannuation interests. I shall discharge these orders.
Following the hearing and with my leave and the consent of the parties there was introduced into evidence, correspondence from the solicitors for the wife dated 9 September 2003 detailing income tax rates on the husband’s superannuation with the ESSS.

History

The husband is a senior sergeant in the Victorian Police Force. He resides in subsidised police accommodation at a cost of $29 each week in the country town of G. He is aged 50 years, having reached that milestone this year. His income has increased from that referred to in his statement of financial circumstances as being $61,360 per annum gross to $66,000 per annum gross. He currently resides with no other person.
The wife is a medical receptionist who was earning $31,115 gross per annum before becoming voluntarily unemployed during the course of these proceedings. She is aged 47 years. She has decided to commence a new life in Melbourne and recently travelled from G to Melbourne to take up accommodation in G with Mr T whom she describes as her boyfriend. She is looking for work and anticipates finding it in the 2 to 3 weeks following her move. In the meantime her male companion shall assist her by the provision of accommodation and other financial support. He is a financial planner by occupation, owns a 1999 Ford motor vehicle and no real property. His income is unknown to the wife. She makes no claim for spousal maintenance in the proceedings nor for any s.75(2) of the Family Law Act 1975 (the Act) percentage adjustment in her favour on the basis of a disparity between the parties' respective earnings or earning capacity.
The parties married on 6 December 1992 and separated on 27 January 2001. A decree nisi has become absolute. Their cohabitation period before their marriage was one from November 1991 and thus their total cohabitation period was approximately nine years and two months. There were no children born to the husband and wife during the course of their marriage.
The parties moved from H where the husband was initially stationed, to G for him to take up a new position. This move occurred in approximately January 1992. Consequent upon the move (the wife had resigned from her employment in H) the wife was unemployed for a 12 month period. She then gained part time employment before gaining full time employment in or about 1993. Whilst she was unemployed she sought out employment and performed home duties for the benefit of the husband and wife. She continued to perform these during the marriage, assisted by the husband.
Counsel for the husband urged me to take into account the disparity in direct financial contribution between the parties in the form of a disparity in income. I decline to do so. The parties approached their life together in a united way. Their intention was for each to benefit from and support the other. The wife was initially unemployed as a result of the husband’s transfer in his employment. When she became employed their respective salary ranges throughout were – for the wife, upward to $30,000 approximately and the husband $45,000 to $60,000 approximately. The husband’s employment also provided the benefit to the parties of subsidised accommodation. However, the husband was throughout paying child support for his three sons of an average of $177.00 per week. This resulted in a lessening of the gap in their direct financial contributions to the household. Even were there not a child support amount going out of the household, the disparity in income levels is not of such magnitude as to give the husband some percentage adjustment. The wife’s indirect contribution in the performance of household tasks exceeded the husband’s but again not to result in any percentage adjustment in her favour.
Each of the husband and wife entered this marriage having been previously married twice. The wife has two children from her first marriage, namely S born June 1974 and N born December 1975. Both children are adults and live independently and save for the initial period of the parties' cohabitation – a period of 12 months in relation to S and 2-3 years approximately in relation to N with whom the husband did not get on - these children have otherwise lived independently. The husband has three sons from his second marriage, namely D born October 1983, A born September 1986 and P born January 1989. The husband's sons lived, throughout the course of the marriage with their mother and had spasmodic but in the later years more regular contact with their father. They are now aged 19, 16 and 14. Their father and the husband in these proceedings paid a sum which by agreement with his former wife departed from the assessed amount of child support for the support of the boys throughout the period of cohabitation. This sum totalled $84,986.00 out of his net income at the average rate of $177.00 a week. He continues to meet a child support obligation of approximately $342.00 a fortnight with respect to his two younger children and he voluntarily makes a payment with respect to the support of his son D in the sum of $120 a fortnight.
The husband claims that he spent significant sums on the support of the children of the wife. He detailed these in his affidavit. The reality of the situation is that little of the husband’s income was spent on the wife's children whilst the parties were together. In comparison with the moneys paid in weekly child support for the support of the husband's three sons the amount was considerably less. It is unfortunate that the husband in his affidavit material saw fit to elaborate upon his expenditure upon the children of the wife. It showed a lack of insight into the parties combined support directly or indirectly of all their children.
Following separation the parties signed a document entitled "Minutes of Consent Orders" and dated 15 February 2001. This document was never submitted to a Court and the parties have differing versions as to the circumstances surrounding the construction of, and signing of, the document. In any event, I have determined that it is not necessary for me to make a finding of fact as to which of the husband or wife's evidence I prefer, as the document is of limited relevance. Overall, I found each of the parties to be honest witnesses who endeavoured to give a straightforward account of matters put to them. They were both generally impressive. They find themselves in the uncertainties of new superannuation legislation, third marriages and little by way of assets “in the hand” now. This is not a case as to the credit of one or the other.

Asset pool at time of trial

It was conceded by the parties that at the time of the hearing their asset pool was as follows:
a)husband's 1994 Falcon purchased post separation with borrowed funds $8500
b)wife's Chrysler motor vehicle won in a raffle post separation $25,000
c)china and vases in wife's possession as per valuation             $9340
d)wife's interest in her CARE Super fund   $16,815.29
e)husband's interest in his defined benefit fund ESSS          $352,575
f)husband's interest in his accumulated benefit fund ESSPLAN $31,103
g)wife's jewellery total purchase price est. $9,000      value unknown
h)wife’s receipt of sale proceeds of family motor vehicle    $10,500
Debts – Husband NWCC loan   $22,500

Contributions

At the time of cohabitation the husband contributed: (i) a motorcycle worth approximately $1500. At the time of cohabitation the wife contributed: (i) a 1981 Ford motor vehicle which was used as a trade-in of $3,042 on the purchase of a new car; (ii) $13,000 cash derived from her previous property settlement; and (iii) a household of furniture.
During the cohabitation period each of the husband and wife contributed the income earned by them to the marriage. The wife paid generally for day-to-day living expenses and the husband paid for the rent, utility and other like expenses. Each of them applied the entirety of their earnings for the benefit of each other and to the marriage. The husband contributed throughout to his superannuation fund over and above his employer's contribution. The evidence of both parties is that the wife knew additional payments were being made by him to allow them to benefit from such payments in retirement. At times, this caused difficulty in their marriage as they saved additional sums for the future rather than spending such sums in the present.
The husband cashed in a 10-year tax free plan that he had with Manchester Unity Society. The amount obtained by him was approximately $19,838.95. This sum, redeemed in September 1992, was applied in part toward the purchase of a VN Commodore sedan from H Motors in H and such vehicle was registered in the wife's name. The wife’s vehicle was also used as a trade-in as referred to in paragraph 18 hereof. All of the vehicles acquired by the parties during their cohabitation period were registered in the wife's name as it was determined by the parties to be more “risk management” appropriate. The balance of the Manchester Unity funds were applied by the parties toward their general living expenses.
On 29 May 1995 the husband inherited from his grandmother Mrs S’s estate the sum of $27,901. The entirety of this sum was applied to the marriage in the form of payment of expenses incurred during the marriage and the purchase of a Ford motor vehicle.
The parties initial contributions I find to be reasonably equal. The inheritance acquired by the husband some 5 and a half years prior to the cessation of the relationship was generally expended. I do not proposed to allow any balancing on the husband’s side of the ledger for this contribution. Overall, looking at the justice and equity of the matter and contributions; the quantum of this sum; and its application it would be inequitable to isolate this sum or any part thereof and determine it to be a contribution in relation to which the wife must now be called into account. As I said earlier, the parties were engaged in a shared life with a mutual interest of sustaining the relationship.
Following separation the wife retained for her use the family motor vehicle being then a 1995 Falcon registered number YYY-YYY which she sold not long after separation for the sum of $10,500. She also retained a pair of antique ruby glass lustres that the parties had purchased, together with an assortment of crockery and some furniture, all purchased during the marriage. I am satisfied that the purchase such of motor vehicles and items of china was determined by mutual agreement. On 31 October 2001 and following separation, the wife won a Chrysler Cruiser motor vehicle in a raffle. I am satisfied that she purchased the ticket with post separation income and post separation.
Following separation the husband continued to pay child support at the rate of $171 together with $60 a week by way of direct payment to his eldest son each week and loan repayments of $210 in relation to a loan with NWCC totalling $18,500 and subsequently increased by him to $26,000. This loan resulted in his acquisition post separation for the sum of $10,000 of a motor vehicle being a 1994 Ford and furniture to accommodate his growing sons and for the payment of legal fees. In addition he says the parties had a credit card debt of $4000 which he consolidated into this larger loan. He also continued to make voluntary contributions to his superannuation fund in the sum of $102 a week to the defined benefit fund - $60 a week to the accumulated benefit fund. I find on the evidence that as at separation the parties had a credit card debt of $3,353.03 being the debit balance of the husband’s account no. 5163 2300 0016 5659. The wife’s evidence is that this sum included the monies paid by the parties for a microwave oven and washing machine which she removed from the home upon separation. I accept her evidence as to this and further evidence that she repaid this amount to the husband by way of reduction on the credit card debt. Although she claimed the balance to be zero I am satisfied that the husband had an amount to pay of $3,353.03 less the reimbursement paid by the wife for the purchase of the washing machine and microwave. This was in the vicinity therefore of $2,000 and given their disparity in income and the wife’s need to incur expenses in the obtaining of and setting up of other rental premises, it is an amount I make no adjustment in relation to.
The parties long ago divided their furniture. I have no evidence as to the valuation of those chattels (other than in the valuation referred to) retained by each. The parties seek no order as to any further adjustment.
The husband has post separation chosen to take out a loan and purchase a car, some furniture and to pay other debts. He has chosen to, very sensibly, continue his superannuation contributions to the ESSS at the maximum level. He has also paid a higher contribution to his accumulated benefit fund. The wife has had the benefit of $10,500 car sale proceeds and retained for her enjoyment china etc valued at $9,340. She has thus already received $19,840 by way of a division of the matrimonial assets.
I consider it just and equitable overall to not adjust the interest of the wife in the CARE Super Fund not the interest of the husband in his ESSPLAN accumulated benefit fund. The husband’s contributions which predated the parties cohabitation commencement and the husband’s post cohabitation contributions have not been insignificant. What I am left with is a reasonable equity of contribution although the husband has a greater sum now available to him.

The documents tendered in evidence indicate that the husband has long service leave entitlements of $33,054 gross. I was not provided with any submissions or other evidence as to this – when accumulated; taxation implications; how it is to be taken; and the like. I am unable to determine whether the wife should have a further adjustment in her favour in relation to this benefit available to the husband. I think it a discrete issue and shall grant leave for the parties to address me further as to this.

Superannuation

The husband has 2 interests – the ESSS and ESSPLAN in the Emergency Services Super (as governed by the Emergency Services Superannuation Act (1986)):-
(a)The first is his defined benefit interest. The value of this interest, as determined in accordance with the Regulations and as at the 19 March 2003 is $352,575. This interest is currently in its growth phase. There is no scheme specific calculation method and factors which have been approved and therefore the default valuation method as per Schedule 2 of the Regulation has been adopted. The eligible service date of the husband was the 2 February 1971 in the fund established under the State Superannuation Act (1958) Scheme. On 24 February 1987, the husband’s interest was transferred into the ESSS. The husband has made voluntary payments to the maximum member contribution percentage rate amount in relation to this scheme which initially were 9% of salary before becoming by legislative force 8% of salary on 1 January 1994. The reason for his making such contributions, despite the cost to the parties in terms of the absence of monies that went into their household for day to day expenditure, was to enable him to:-
(i)Reach the date at which he could cease making contributions earlier – ie 52 years; and
(ii)Reach by that time the maximum defined benefit multiple of 8.4. Currently, at aged 50 years that multiple is already 7.76 on a salary figure of $64,327. At age 55 years it is 8.4. There is also available to the husband upon immediate voluntary retirement at aged 50 years the sum of $488,020.81 gross. If the husband elected to retire now he would receive this payment less tax. However the Regulations value the husband’s interest in the defined benefit scheme in the sum of $352,575.
(b)the second is his accumulated benefit interest. As at the 30 June 2003 this was valued in the sum of $31,103 and is in the growth phase. This interest was at the 30 June 2001 in the sum of $26,316.35 and was transferred by the husband to the ESSS on 2 February 1994.
Since separation, the husband has contributed $5,139 to his defined benefit fund. He has contributed $3,120 to his accumulated fund interest, having contributed $10,900 of his income to this fund during the period of cohabitation.
The husband also has long service leave entitlements currently in the sum of $33,054 gross.
The wife has an accumulated benefit interest in the CARE Super Fund, the Trustee of this fund being the Clerical Administrative and Related Employees Super Pty Ltd. The wife first became a member of the plan on the 29 March 1993. The value of her interest at the 27 March 2003 was $16,815.29.
Counsel for the wife argued the Court to consider the value of the husband’s fund to be that which he could obtain now should he retire. The husband’s evidence is that he has no intention of retiring either now or in the foreseeable future. In any event were he to retire now the taxed component of post 30 June 1983 contributions would be 20% (as opposed to after aged 55 years 0% for the first $117,576 and 15% for the balance) and the taxation rate of post 30 June 1983 untaxed contributions would be 30% (as opposed to after aged 55 years 15% for the first $117,576 and 30% for the balance). The $117,576 tax threshold is indexed annually in line with AWOTE.
It is also noteworthy to add that the roll-over of a benefit to a non-member spouses’ superannuation fund from an ESSS interest will incur a 15% contributions taxed on the post June 1983 untaxed component upon deposit to the external fund. I do not take this into account. The wife currently is unable to roll-over this amount. Emergency Services Super is currently precluded from paying out an interest in the ESSS defined benefit scheme until a member has met a condition of release. The Fund has advised in correspondence of the 17 March 2003 and in evidence as exhibit “JEG 1” that if presented with a splitting order the Fund will flag the request until such time as it can be actioned.
The husband’s benefit on resignation which the wife argued me to consider as the ‘real’ value of the husband’s fund was based on the unchallenged evidence of Mr W that in the instance of this fund, it should be treated as having a retirement age of 50 and not aged 65 as envisaged by the Regulations, as the husband was close to age 50 on 19 March 2003 and the resignation benefit available to him at the calculation date was nearly his full accrued retirement benefit, rather than the value discounted to age 65 as envisaged by the Regulations. That calculation would produce a value of the husband’s interest in the fund of $489,764 at 19 March 2003. Mr W’s evidence is that the default valuation methodology of the Regulations is inappropriate and the ESSS is a prime example of the weakness of the Regulations in certain circumstances and amendment is needed.
Introduced into evidence were the personal benefit statements of the husband for the years of cohabitation. Although not indicated by Counsel, I note that the retirement benefit stated includes the ESSPLAN balance. At the commencement of cohabitation that resignation amount was $111,052.
In proceedings in relation to property under section 79 of the Act a superannuation interest is to be treated as property irrespective of whether it is a splitting or flagging order that is to be made. This is the effect of s.90MC of the Act. The parties have not sought a flagging order. I have given some consideration to the making of such an order as that may have been the only way to achieve a just and equitable outcome. However, I am mindful that the parties desire finality and that together they urge the court to make, instead, a splitting order. I shall do so after taking into account the current retirement interest available to the husband. As I have earlier said however, taxation is a relevant liability as distinct from the value of the fund.
The valuation methodology is mandated by the legislation. This produces an interest of approximately $352,575 currently. However, it is appropriate to also take into account the husband’s resignation benefit of $488,020 approximately because of the unchallenged evidence of Mr W that the real value of the husband’s interest in the fund is $488,020.81. The differential is $135,445 but in relation to this:-
(a)there is an extra tax liability should the husband resign now;
(b)the evidence of the husband, which I accept, is that he is many years away from retirement – 60 years would seem the earliest; and
(c)this sum includes the husband’s $31,000 interest in the ESSPLAN.
The husband’s contributions to his defined benefit fund commenced

20 years before cohabitation and have continued for two years post. Counsel for the husband urged me to consider a West v Green (1993) FLC 92-395 formula approach. I have determined this is not appropriate and will not do justice and equity between the parties. The husband throughout cohabitation spent approximately 2/3 of his total income on his child support payments and in making superannuation contributions. His contributions were maintained at the maximum rate to ensure the earliest cessation of payments by him and the maximum multiple becoming applicable at the earliest opportunity. This has been achieved and will occur in less than 2 years. The growth of the fund has not been in equal sum in each year since 1971. His resignation benefit at the commencement of cohabitation was $111,000 approximately and is now $488,000 approximately. No contributions were made by the wife to any fund as the parties determined it was mutually beneficial to apply their income to the husband’s fund. I say ‘their’ income given the wife’s evidence which I accept that she often thought she was supporting the husband give the application of his income to child support and superannuation as priorities. I do not say that she was nor that those priorities could or should have been other – just that the husband’s superannuation represents simply the parties major asset. It was intended by them to be so.
The husband suggests that the base amount to be allocated to the wife be $20,000. This is completely outside an acceptable exercise of judicial discretion. The wife seeks the allocation of a base amount of $120,000.
A percentage adjustment to the wife of 35% of the defined benefit interest of $352,575 is $123,401.25. In my view this is an appropriate apportionment given the matters canvassed in these reasons and taking into account the current retirement benefit available to the husband and Mr W’s evidence in relation thereto.
The wife has already received the sum of $10,500 and chattels to the value of $9,340, totalling $19,840. The base amount should thus be $103,561.25. To my mind this is a just and equitable outcome for the parties vis-à-vis each other and in relation to the factual matters as described above.

I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of Hartnett FM

Associate: T. Jones

Date: 15 September 2003