G & G
[2003] FMCAfam 459
•15 October 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| G & G | [2003] FMCAfam 459 |
| FAMILY LAW – property – comparison of lump sums brought into the marriage by each party – discussion as to the way in which financial and non financial contributions should be compared – relevance of the husband’s entitlement to an indexed DFRDB pension. |
| Applicant: | A G |
| Respondent: | J G |
| File No: | CAM3166 of 2003 |
| Delivered on: | 15 October 2003 |
| Delivered at: | Canberra |
| Hearing date: | 23 & 24 September 2003 |
| Judgment of: | Brewster FM |
REPRESENTATION
| Counsel for the Applicant: | Mr Nash |
| Solicitors for the Applicant: | Anne Marie Proctor & Associates |
| Counsel for the Respondent: | Mr Farrar |
| Solicitors for the Respondent: | Farrar Gesini & Dunn |
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CANBERRA |
CAM3166 of 2003
| A G |
Applicant
And
| J G |
Respondent
REASONS FOR JUDGMENT
Introduction
This matter concerns competing property applications and an application by the wife for spousal maintenance.
Background
The husband is 64 years of age and the wife 60. They commenced to live together in November 1987 and married on 19 November 1988. It was the second marriage for both parties and both have adult children from their previous marriages.
At the date of the marriage the husband was an Officer in the Royal Australian Navy. He joined the Navy in 1955. He retired from the Navy in July 1991. He received a substantial payment on his retirement and became eligible to receive a pension. I will return to this later in this judgment.
On 30 April 1991 the parties purchased a property at H. The property cost $240,000. The wife had received a sum of $30,000 from a property settlement and applied $14,000 of this towards the purchase. The remainder was covered by a bridging loan which was discharged from the husband's retirement monies.
After he retired from the Navy the husband obtained employment with X Pty Ltd. In 1997 he left that firm and took up a position with Y Pty Ltd. He still works for this organisation.
When the parties commenced their relationship the wife was employed as a legal secretary. At some later stage it appears that she was in the Public Service. In 1994 she resigned from her employment and she has not been in paid employment since that time. The decision for her to resign was a joint one.
In 1996 the wife inherited $70,000 from the estate of an aunt.
The parties separated in late May 2002 (the parties differ as to the exact date) when the husband left the H property.
On separation the husband sold shares to a value of $65,232 and divided this amount equally between himself and the wife.
Shortly thereafter the husband purchased a property at J. This property cost a little over $195,000. He husband applied $47,000 to the purchase and borrowed the balance. The $47,000 came from non preserved monies with ASGARD Trust of $35,000 and the balance from the monies referred to in paragraph 9.
On 11 November 2002 an order was made by consent in this court that the husband pay interim spousal maintenance of $2,000 a month.
The husband has re-partnered and plans to remarry in the near future. The wife has not re-partnered.
The parties' applications
The wife seeks an order that the husband transfer his interest in the H property to her and that monies held in an accumulation superannuation fund be divided equally between the parties. She does not seek a splitting order with respect to the husband’s pension as her entitlements would terminate on his death. She also seeks orders that each party retain the chattels and choses in action in that party's possession or name. She further seeks an order that the husband pay to her spousal maintenance the sum of $2,000 a month. She consents to a declaration that the husband is the sole legal and beneficial owner of the Mowatt Street property.
The husband seeks an order that the wife pay to him the sum of $160,000 in return for transferring the H property to her. He opposes any superannuation split. He also opposes an order for spousal maintenance. He also seeks orders that each party keep his or her chattels and choses in action.
The approach to be taken
I propose to approach this matter by applying the usual four stage process. The first stage involves making findings as to the assets and liabilities of the parties. The second stage involves a consideration of contributions of various types made by the parties during and after the relationship and if appropriate making an adjustment to existing property rights on this basis. The third stage involves a consideration of such matters contained in s.75(2) as may be relevant and, if appropriate, making an adjustment on this basis. The fourth stage involves taking an overview of the results derived from the second and third stages to determine if overall that result is just and equitable.
The property pool
The first matter I propose to address concerns the monies divided between the parties after separation. It will be recalled that the husband received $65,232 which he divided equally between the parties, each receiving $32,616. The wife used her share to buy a car. This is now valued at $28,000. She has savings of $2,500 which I infer are referable to those monies. The husband purchased furniture which is now valued at $3,790. He applied $12,000 towards buying the J property and spent the rest on holidays and legal costs. In my opinion it would distort the situation if I included on the husband’s side his contents and on the wife’s side her car and savings even though a notional part of the J property referable to this transaction would be on the husband’s side of the leger. It would in my opinion be unfair to the wife to do so. In my opinion the most appropriate course would be to include each party’s share of the $65,232 as notional property and to ignore the wife’s car and savings and the husband’s contents and to deduct $12,000 from the value of the J property.
On this basis the property of the parties apart from superannuation is as follows:
The H property $520,000
The J property (adjusted equity) $76,000
Husband's motor vehicle (equity) $30,474
Wife's contents $7,500
Wife's jewellery $4,835
Husband’s notional monies $32,616
Wife’s notional monies $32,616
The parties have an interest in the JG Superannuation Fund. This fund was established in about 1997. The husband's interest is $533,000. If this amount were withdrawn tax would be payable of about $68,000 leaving him $465,000 net. For the purpose of this case I propose to use the net figure. In cases where receipt of superannuation is years in the future taking into account the incidence of tax is very speculative given the distinct possibility of changes in tax law prior to that date. In this case the husband’s retirement is imminent. He could avoid this tax liability by purchasing an annuity but in my opinion it is more realistic to look at the reality of the situation and deal with it as a lump sum. I appreciate that as I propose to split this fund the tax liability will be affected but it is impractical to arrange for figures to be provided for every permutation and combination. The wife's interest in this fund is $5,035.
The total property is therefore $1,174,076
The husband has a half interest with his sister in a property in D. I will discuss this later in this judgment. I do not include it in the pool.
There are a number of debts that each of the parties has incurred. However as the level of the parties’ debts has changed significantly between the separation and the date of the hearing I do not propose to go through the exercise of deducting them from the property pool but will take them into account under s.75(2). These are as follows:
(a)The wife has a David Jones card on which $3,158 is outstanding. The amount outstanding at the date of separation is unknown but I can infer from other evidence in the case it was probably in the order of $2,000 or possibly a little less;
(b)The wife has a MasterCard debt of $14,207. The extent of this at the date of separation is not known although in September 2002 when she filed her first financial statement it was $8,000;
(c)The wife has a liability for legal fees of $10,000 and owes $2,000 with respect to a loan taken out to pay legal fees. For the reasons set out in the Full Court case of Farnell (1996) FLC 92-681 I do not propose to have regard to the wife’s legal fees and therefore I do not have regard to this loan;
(d)The wife has a taxation liability of $1,671;
(e)The husband has an American Express card debt of $1,994 which has not changed since separation. He also has a MasterCard debt of $605.
As I have indicated the husband is in receipt of a DFRDB pension. This is some $47,700 per annum and has been valued in accordance with the regulations at $615,953. This is an entirely theoretical valuation as the pension cannot be commuted into a lump sum.
Contributions
At the outset I will dispose of an issue that was raised in the affidavits but not given much attention during the hearing. This concerns the wife's involvement in horse racing. The wife was a part owner of racehorses and this pursuit involved monetary loss. I do not propose to take this loss into account for the following reasons:
(a)Whilst investing in racehorses is undoubtedly not the type of investment most calculated to lead to capital gains I imagine that if the wife and her partners had ended up with a champion horse of great value the husband would be seeking a share of its value;
(b)Whilst there were losses associated with the wife’s owning racehorses there were apparently also tax advantages obtained and the net loss is unknown; and
(c)The husband very fairly conceded that he consented to the wife's involvement in this activity.
The husband brought little by way of property into the marriage. As I have indicated the wife brought in a sum of $30,000. From this the sum of $14,000 was applied towards the purchase of the H property. On the basis of the Full Court authority of Pierce (1999) FLC 92-844 it could be argued that this $14,000 should be accorded, to a degree, some special significance. That case indicates that it is appropriate to have regard to the purpose to which a lump sum brought into a marriage by a party was applied. Thus if it were applied to purchase real estate which became the springboard to the parties’ assets it might be accorded greater significance than if it were applied to more transitory purposes. However I do not consider that the rationale of Pierce applies in the present case. In this case there is no reason to believe that the parties would not have been able to acquire the H property without the wife's contribution. Given the fact that the husband was shortly to receive substantial benefits on his retirement from the Navy it is entirely possible that the whole of the purchase price could have been borrowed. Alternatively the parties could have waited for a short period of time before they purchased a property. Having said that however I do not propose to ignore the $30,000 contributed by the wife notwithstanding the time that has passed since it was received.
As I have indicated in 1996 the wife inherited $70,000 which I infer was applied to the benefit of the parties.
On his resignation from the Navy in July 1991 the husband received a total of $263,738. As I have indicated a significant part of these monies was applied to discharge the bridging loan on the H property. The husband also received a productivity entitlement of $7,102 which was rolled over into his superannuation fund.
As I have indicated the husband joined the Navy in 1955 and it follows that the great majority of his entitlements were accumulated prior to the parties’ relationship.
There were contributions made by each of the parties other than these lump sums. For the purpose of analysing these it is convenient to divide the period of the parties’ relationship into three periods of time. These are:
(a)From November 1987 when the parties first lived together until 1994 when the wife ceased employment;
(b)From 1994 until May 2002 when the parties separated;
(c)The period since separation.
The husband contends that his contributions during the first and second of these periods substantially outweigh those of the wife. Essentially this contention is based on the fact that during the first period his earnings were greater than those of the wife. When both were working the wife was earning in the order of $25,000 a year. By the time he retired from the Navy the husband’s salary was in the order of $68,500 a year. When he commenced employment with X Pty Ltd in 1991 his commencing salary was some $82,000 per annum. This had increased to $150,000 per annum by the time he left in 1997. His salary with Y Pty Ltd since that date has been in the order of $189,000 per annum. In addition he had his DFRDB pension. He points out in relation to the second period when the wife’s contributions were confined to those of a homemaker that there were no children of the marriage and that the wife's non financial contributions should be assessed having regard to this fact. He further points out that in his employment during the second period he spent some months each year overseas and the wife's homemaking contributions during this period were essentially confined to providing for herself. Moreover she had some paid domestic assistance during the marriage.
I do not agree with the approach urged on me on behalf of the husband. It is appropriate that I discuss the reasons why I take this view.
So far as the first period is concerned the situation is not as clear cut as might appear on the face of it. In the early stages of the marriage the husband was engaged in litigation; first with his former wife and second with her daughter who claimed adult spouse maintenance. In relation to the latter of these claims he was successful in defending the application but it can be inferred that this litigation would have been a drain on the parties’ finances. Nevertheless I find that the husband made greater financial contributions in the first period than did the wife. On the other hand I find from all the evidence that the wife's contribution as a homemaker exceeded his contribution in this respect during this period.
The problem with the husband's contention in so far as the second period is concerned is that it involves making a direct comparison between financial contributions on the one hand and non financial contributions on the other. This is like comparing apples with pears or perhaps more appropriately, seeing apples and pears are both fruit, comparing apples with carrots. If strict logic were applied it would be possible to value non financial contributions. One could adduce evidence of what it would cost in any given case to employ a housekeeper/cleaner/nanny/cook and value a homemaker and/or parent contribution accordingly. This approach is legitimate in some areas of law. For example it is used to calculate Griffith v Kerkemeyer damages for gratuitous domestic services rendered to an injured plaintiff by third persons. It was an approach adopted by some judges in New South Wales in cases under the De Facto Relationships Act in the early days of the operation of that Act but this approach has long since been abandoned. It has never been accepted as an appropriate approach to property litigation under the Family Law Act.
If the court were to adopt the approach for which the husband contends it would face the difficulty that it would be impossible to apply it in a coherent way in practice. Take some examples. Suppose we had two identical cases where the husband was the breadwinner and the wife the homemaker and parent. Suppose in one case the husband earned $50,000 a year and in the other the husband earned $100,000 a year. As a matter of practical reality, in the absence of any special factors, a Court would find in both cases that there was no basis for making a contribution based adjustment in favour of either party. But logically how could this be so? Identical home making duties cannot be worth $50,000 in the one case and $100,000 in the other. It would become even more difficult to apply in a situation where a husband's income rose significantly during the marriage. Suppose during a fifteen year marriage where the wife was the homemaker the husband earned $50,000 a year for the first five years, $100,000 a year for the next five years and $200,000 a year for the last five years. At what point could the wife's non financial contributions be considered to be either less than those of the husband, equal to those of the husband or greater than those of the husband? If a finding were made that contributions in the first five years were equal then the wife would have to redouble her efforts at the end of this period to keep pace with the husband and do the same five years later. Or suppose we were to apply the Family Law Act to Victorian or Edwardian society. A husband who had acquired enough wealth to have the ultimate status symbol, namely a wife kept in complete idleness, would have the added bonus of knowing that if the marriage broke down she would not be entitled to any contribution based share of the parties’ property.
It was submitted on behalf of the husband that if I were to, in effect, regard the contributions made by the parties in the second period at any rate as equal I would be failing to make an assessment of those contributions and proceeding on the basis of a presumption of equality of contributions. It is submitted that to proceed on the basis of such a presumption is prohibited by the High Court authority of Mallett 156 CLR 605, (1984) FLC 91-507. I do not agree that I am applying any such presumption. The reality is that I am not starting from the position that contributions are equal but rather from the position that as the contributions of each of the parties are so different there is no basis for giving greater weight to one than the other.
It may be that the genesis of submissions such as those made on behalf of the husband can be found in the looseness of terminology that is sometimes employed in judgments. One sometimes comes across a finding that the contributions made by parties to a marriage, in circumstances where the contributions by one were financial and the other entirely non financial, were equal. In my view that is not an appropriate way to express such a finding. The appropriate finding in such circumstances is that there is no reason to place greater weight on the financial contribution of one party than the non financial contribution of the other or vice versa.
The reality is that courts faced with the impossible task of comparing financial and non financial contributions have looked at the roles each party has been assigned during the marriage and, if each has conscientiously performed his or her role, make no distinction between the parties’ contributions. I do not regard this approach as inconsistent with what the High Court said in Mallett. The only exception to this is in the so called “big money” cases such as Ferraro (1993) FLC 92-335 and Lynch (2001) FLC 93-075 where “special” contributions by an entrepreneurial husband in creating a very large asset pool have been recognised. However it appears that, influenced by the House of Lords decision in White [2001] AC 596, the tide may be turning and that Lynch may represent the high water mark in so far as recognition of “special” contributions is concerned. See Figgins (2002) FLC 93-122.
I find that there is no basis for treating the husband's contributions during the second period as greater than those of the wife. The first period is a little more complicated as both parties were in full-time employment. Nevertheless as I indicated I am prepared to infer that the wife had the greater role as a homemaker. The husband by his own admission was quite inexperienced when it came to things like preparing meals or stocking a larder. Again it is impossible to compare the additional non financial contributions made by the wife with the additional financial contributions made by the husband and I find for this period there is no reason to differentiate between the parties’ contributions or to make a contribution based adjustment in favour of either party.
I might add that there was a dispute between the parties in relation to the extent of the wife's non financial contributions in the provision of entertainment for business colleagues of the husband. She maintained that she was involved in organising dinner parties for these people. The husband averred that most dinner parties were for friends and were less frequent than claimed by the wife. He said that when he had to entertain business contacts he would usually do so at a restaurant using his corporate credit card. In the end I accept the husband's evidence in relation to this. However the issue is, in my opinion, irrelevant. If the wife had been requested as part of the husband’s business activities to be involved in entertaining colleagues or customers and had refused to do so it might be relevant for reasons that I have already discussed. There is no evidence that this was the case. As I have indicated there is no basis for according less significance to her non financial contributions than the husband's financial contributions and her non financial contributions would therefore not be boosted by the inclusion of entertainment. In other words a wife who is not called upon to entertain her husband’s business colleagues will not have her contributions assessed on a different basis to a wife who is asked to and does perform such a role. In my opinion in most cases, of which this was one, there is no point in parties incurring legal costs in fighting out these types of issues.
In relation to the third period the wife has been occupying the matrimonial home and when I come to s.75(2) matters I will take this into account. The husband has paid rates and body corporate fees totalling $1,849. The wife's contribution has been limited to paying body corporate fees of $749. In theory therefore post separation contributions have favoured the husband but, given the size of the pool, these additional contributions are de minimus and I propose to ignore them.
Part of the pool consists of the husband’s accumulated superannuation. Part of this was accumulated after separation. His employer pays $340 a week into his superannuation fund.
It is apparent that contributions favour the husband. In particular the lump sums received by the husband in 1991 and applied to the marriage require a significant adjustment in his favour. It will be recalled that he received a total of about $271,000 in lump sums as opposed to the wife’s $100,000. However one has to keep the magnitude of the difference in the lump sums in perspective. It is to be weighed in the balance together with contributions made by each of the parties both financial and non financial over a period of fifteen years and of these eleven years elapsed after the lump sums contributed by the husband were received.
I make a contribution based adjustment of five per cent in the husband’s favour. With a pool of about $1.17 million this represents a differential of about $117,000 between the parties’ contribution based entitlements and I consider this an appropriate allowance for the additional amount of about $171,000 contributed by the husband by way of lump sums and the post separation component of his superannuation.
Section 75(2) factors
As I have indicated the husband is employed and earns a substantial salary. He says that he proposes to retire on his 65th birthday which will be in July next year. As this is the normal maximum retiring age for employees in Australia I regard this as an appropriate decision and I do not assess him as having a capacity to earn income after this date. It was put to him by counsel for the wife that he could obtain consulting jobs after he ceased full-time employment. He was pessimistic about his prospects and said that in his field, whilst a number of people had, in his words, "hung up their shingle" few had got any work. There is no evidence to contradict this. Indeed as I understand it the work the husband is involved in relates to the sale of warships and such work does not have the appearance of lending itself to a “backyard” operation. I propose to proceed on the assumption that the husband's capacity to earn income from personal exertion will cease at age 65.
Whilst this income may cease however he has an indexed pension for life of $47,795. Whilst the capitalised value of this pension calculated in accordance with the regulations is a theoretical value only for the reasons I have given it is clearly a very valuable financial resource.
As I have indicated the husband proposes to re-marry. His new wife is a Z national. She is employed in Z selling advertising for a newspaper. It is possible that when she comes to Australia she will not be able to obtain employment and may be dependent on the husband. It is also possible that she will obtain employment in which case the husband will derive a financial benefit from that marriage, at least in the form of being able to share household expenses. In the circumstances I propose to treat his intended wife as a neutral factor. I might add that even if it were clear that she would be dependent on him I would probably ignore this for the reasons set out by the Full Court in Zelandonii v White (unreported 2003 FamCA 126) at paragraphs 28 and 29. However I do not need to discuss this case.
It was contended on behalf of the husband that the wife has a capacity for employment. I do not agree. She has suffered from cancer of late and has had operative treatment in relation to this. A sequel of this is a feeling of lethargy induced by chemotherapy. Her treating specialist who gave evidence indicated this could be expected to last for another year. In another year when the lethargy caused by the chemotherapy may have resolved she will be 61 years of age. She will not have worked for 10 years. She gave evidence that her keyboard skills have deteriorated considerably since she gave up employment. I thought that she exaggerated the extent of this deterioration but I accept that it is substantial. I do not consider her prospects of obtaining employment sufficient to factor them into a consideration of s.75(2) matters.
It was implied on behalf of the wife that a relevant factor in this case is her wish to retain the H property. I do consider this to be a relevant factor. It is a four bedroom home of considerable value which is surplus to her requirements. Whilst I understand her feelings in the matter in that she regards it as her home and does not wish to move, I cannot take this into account. I proceed on the basis that she could if she wished sell this property, purchase a more modest property and invest the surplus.
I take into account the debts referred to in paragraph 18, although with a pool of more than $1million their impact is minimal and on their own they would not justify any adjustment.
As I have previously indicated the husband is a joint tenant with his sister of a property in D. The evidence would suggest that he has no equitable interest in this property. It is however a potential financial resource in that if his sister dies before he does he will receive the whole of the property by way of survivorship. His sister is older than he is but by coincidence both have identical statistical life expectancies. There is no evidence of its value and given the entirely speculative nature of this financial resource however I give it very little weight.
I have regard to the fact that since separation the wife has had the benefit of occupying the H property which is unencumbered.
The most significant factor under s.75(2) is the husband’s entitlement to an indexed pension for life. In the circumstances I make a ten per cent adjustment in the wife’s favour.
Overview
The end result is that the wife would receive on the basis of this division $645,741 being 55 per cent of the pool of $1,174,076. The husband would receive $528,335. This is a difference of $117,406. I am satisfied that overall this represents a just and equitable result.
Conclusion
As indicated the wife is to receive $645,746. If she receives the H property this leaves an amount of $125,741 due to her. She has property of $49,986. This leaves an amount of $75,755 owing to her which I round off to $76,000. I propose to split the husband’s superannuation to give the wife this amount from it.
Spousal maintenance
Given the level of the husband’s income at present I consider it appropriate to continue the present order until he retires. On his evidence this will be in about nine months time. This period will enable the wife to re-organise her affairs so as to maximise her income. I do not consider that, taking into account his income after that time from his pension and the capital the wife will have as a result of these orders, that any order should go beyond that date. I propose to make orders accordingly.
Orders
The orders will be that:
(a)The husband transfer his interest in the H property to the wife;
(b)That a splitting order be made with respect to the husband’s superannuation such that the wife receive $76,000 from this fund;
(c)That as against the wife the husband is declared to be the sole legal and beneficial owner of the J property;
(d)That as against the other each party retain all chattels in his or her possession and all choses in action in his or her name;
(e)That until the husband attains the age of 65 years or retires from the workforce, whichever last occurs, he pay spousal maintenance to the wife in the sum of $2,000 per calendar month.
I certify that the preceding fifty-three (53) paragraphs are a true copy of the reasons for judgment of Brewster FM
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