Glover & Glover (No. 2)

[2009] FamCA 441

FAMILY COURT OF AUSTRALIA

GLOVER & GLOVER (NO. 2) [2009] FamCA 441

FAMILY LAW – PROPERTY SETTLEMENT – Superannuation – entitlement to DFRDB pension for life – insufficient other property to provide for wife’s entitlement other than by periodic payment of pension for a term of years

Family Law Act 1975 (Cth)

APPLICANT: Ms Glover

RESPONDENT: Mr Glover

FILE NUMBER: SYC 6153 of 2007

DATE DELIVERED: 26 May 2009

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Moore J

HEARING DATE: 10 September 2008, 11, 17 February, 1 April & 6 May 2009

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Ms Young,
Stacks Family Law

THE RESPONDENT: Mr Glover appeared on his own behalf

Orders

1. The balance of the investment presently held remaining from the sale of the S property are to be disbursed as follows:-

   (a)      60% to the wife;

   (b)      40% to the husband.

2. A base amount of $42,547 is allocated, as required by Section 90MT(4) of the Family Law Act 1975, to the wife out of the husband’s interest in the SMF Funds Management Superannuation Fund [‘the Fund”].

3. In accordance with Section 90MT(1)(a) of the Family Law Act, the husband’s entitlement and the entitlement of such other person to whom a splittable payment may be made, to payments out of the Husband’s interest in the Fund is correspondingly reduced by this order. 

4. The order has effect from the operative time which is four (4) days after the date of service of this order on the Trustee of the Fund.

5. The Trustee of the Fund is to do all acts and things and sign all documents as may be necessary to:-

   (a)calculate in accordance with the requirements of the Family Law Act 1975 the entitlement created by these orders; and

   (b)pay the entitlement whenever a splittable payment becomes payable out of the husband’s interest in the Fund.

6. By way of property settlement pursuant to Section 79 of the Family Law Act 1975:

   (a)       the husband is to pay to the wife the sum of $313,326;

   (b)the sum of $313,326 is to be paid in fortnightly installments in an amount equivalent to the net received after tax from his entitlement under the Defence Force Retirements and Death Benefits scheme [on his current entitlement calculated to be paid in full in 13 years from and including the first payment];

   (c)this order is operative from the day it is made but payment is to commence on the first day the husband receives payment after 1 July 2009; and

   (d)the husband is to pay the periodic installments to such account as the wife may direct in writing from time to time. 

7. Unless otherwise specified by these orders, each party is to retain absolutely to the exclusion of the other all property of whatever nature and description of which they are the owner and is currently in their possession, to include their respective superannuation entitlements, and each is to be responsible for all liabilities they have incurred. 

IT IS NOTED: The payment by the husband and the receipt by the wife pursuant to Order 6 should not be included to calculate the amount of child support payable by the husband to the wife under the Child Support (Assessment) Act 1989 for the duration of the obligation imposed.

IT IS NOTED that publication of this judgment under the pseudonym Glover & Glover is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 6153 of 2007

MS GLOVER

Applicant

And

MR GLOVER

Respondent

REASONS FOR JUDGMENT

Proceedings

1. This decision relates to the division of the parties property consequent upon the breakdown of their marriage.  On 9 April 2009 I delivered reasons for judgment and made parenting orders about the future care arrangements for their four children and these reasons are to be read in conjunction with the earlier judgment. 

Approach

1. The distribution of their property is governed by s 79 of the Family Law Act 1975 which prohibits the Court making an order altering the interests of parties in property unless it is satisfied in all the circumstances that it is just and equitable to do so.  It is well established that this involves a series of sequential steps: (i) the identification of the parties’ property and its’ value; (ii) an evaluation of the parties’ contributions; (iii) an evaluation of any adjustment to that assessment by reason of any relevant matters in s 75(2); and finally (iv) consideration whether the outcome fits the legislative requirement to arrive at a just and equitable outcome. 

2. The material features of the financial history are to be outlined before coming to those steps. 

Orders sought

1. The matter has not been without complexity by reason of the husband’s entitlement to a DFRDB pension for life.  While it will not be possible for the orders to be made here to deal with all of the possible adverse consequences of distributing that entitlement fairly, there is ultimately broad agreement on what can be done to minimise the consequences.  Aside from that, the husband proposes distributing the funds invested from the sale of property 60/40 in the wife’s favour, splitting his superannuation to achieve an equal division of both superannuation entitlements, paying to the wife periodically over 13 years the net amount he will receive periodically from his DFRDB entitlement after deduction of tax, and otherwise they would each retain chattels they now have.  The wife, on the other hand, proposes distribution of the cash so that she receives a ‘larger amount’, a splitting of the husband’s superannuation so as to give her 65% of their total current superannuation entitlements, and 13 years of the periodic payments he receives by reason of his DFRDB entitlement. 

History

1. The father (46) and the mother (44) married in December 1985.  They separated in April 2007 and were divorced in September 2008.  Their children are presently aged 17, 15, 13 and their youngest will turn 5 on 6 June.  Parenting orders have been made about the children’s future care. 

2. At the time of their marriage the husband was enlisted in the Australian Defence Force.  He had been promoted as an officer before he was posted to Sydney.  The wife had been studying physiotherapy but she did not complete her degree before she moved to Sydney to join him prior to their marriage.  Their work history was summarised in the earlier judgment which can be repeated in part and elaborated here:

   ·    In 1981 the husband enlisted in the Australian Defence Force and he was promoted as an officer in 1984.  His career in the Defence Force thereafter saw him serve in a succession of positions, achieve promotions in rank, and take up postings in various places including overseas.  In 1994 he suffered an injury at work and was paid $40,000 in compensation.  He applied the money towards repayment of a car loan and other debts.  He undertook study in management for a year in 1996, there were times he was required to travel away from home, either in Australia or overseas, and he was constantly on call.  His last posting was back to Sydney in 2001. 

   ·    In August 2003 he took accumulated leave entitlements and accepted a position as operations manager for a sales company, which involved him in some interstate travel.  In early 2005 he retired from the Defence Force and he received around that time a lump sum payment from his DFRDB entitlement.  His remaining entitlement is in the form of a life pension which he cannot commute.  Currently he receives $1,241 gross per fortnight which attracts CPI increases.  After his retirement he maintained his employment, spending part of his week in Canberra prior to their separation in April 2007 and beyond.  In July 2007 he moved to another firm which also required of him some interstate and overseas travel.  His salary package was $180,000 per annum.  He was retrenched in January 2009 and he received a redundancy payment of $30,000. He has since been concentrating his efforts to find work in Sydney and he will move to get work if it comes to that but to date he has been unsuccessful in repositioning himself back in the paid workforce. 

   ·    Just prior to their marriage the wife abandoned study in physiotherapy and took up study in nursing, graduating in 1987.  Her career in that field took many turns as she followed her husband’s postings.  Over the years her work - either part time or full time - was punctuated by the birth of their four children and child care responsibilities.  She has put her qualifications to use in various ways including positions in mental health, youth work, public service and she has undertaken administrative work in nursing.  After the family returned to Sydney in 2001 she took part time employment in mental health and began an undergraduate degree in nursing to upgrade her qualifications.  She was diagnosed towards the end of 2002 with bowel cancer, which was successfully treated, and she returned to part time work in mental health.  Apart from a short period of employment for a small business, she has continued to work part time in the mental health sector.  She presently works 3 days a week with some regular but periodic work one day on the weekend.  She earns approximately $45,500 per annum.

3. Throughout their marriage they lived mainly in housing provided by the Australian Defence Force or in subsidised private rental accommodation.  Over time they bought and sold some property:

   (i)In 1992 they purchased an investment unit in Queensland for $92,500.  Her parents lent them $9,500 interest free, they borrowed under a low interest loan from the Defence Force, and the remainder required was borrowed from a bank.  The unit was rented and managed by her father.  They have repaid $5,500 to her parents.  The wife says the balance remains owing and she feels obliged to do so while the husband says her father has said many times they do not have to repay it.  Obviously there have been many years and later opportunities to repay it but that has not occurred and while there is no reason to doubt the wife’s view of her responsibilities, it could not be regarded for present purposes as repayable.  Therefore it will not be brought to account in assessing their current net assets. 

   (ii)In 1996 they purchased a rural property in New South Wales for $160,000.  They borrowed what was required from a bank. 

   (iii)The following year they sold the Queensland unit for $102,000 and the net proceeds were put towards the rural property loan.  They moved to live in the shed on the rural property which lacked the usual amenities such as electricity and running water and had limited cooking facilities and heating.  Improvements were made by installing a solar electricity system, water tank and pump and the shed was extended in time and other improvements made.  The husband was working in Canberra at the time.  He contributed to the work on the property and the wife also contributed by manual labour and doing what was necessary in difficult conditions to see to the running of the household and to the children’s schooling some distance away.  She was successful in obtaining the Isolated Children’s Allowance and she rented accommodation at one point in town where they stayed on occasions to facilitate the children’s attendance at school.  She later rented other premises and worked on the landlord’s orchard.  Given the difficult conditions, in 1999 the family moved into married quarters in Canberra. 

   (iv)In early 2005 they purchased a home in the Sydney suburb of S for $564,000.  They used the husband’s lump sum payment from the DFRDB, an inheritance of $10,000 the husband received, and the sale proceeds of a motor vehicle.  They borrowed the balance from a bank. 

   (v)The following year they sold the rural property and this was used to pay some debts and construct a swimming pool at the S home. 

4. After separation they maintained an arrangement about the use of the home for a few months.  Then in early August 2007 the wife moved out with the children to rented premises near to the girls’ school while the husband remained living there.  He paid outgoings and the mortgage instalments.  At one point arrangements were made to move from a variable rate of interest on the mortgage loan to a five year fixed rate. 

5. In July or thereabouts the husband moved to live with his present wife at Z and he ceased to pay the mortgage instalments after several months.  The S home was placed on the market for sale and sold.  There was some engagement with the bank about the bank’s retention of $44,000 in penalty for early repayment of the loan but they were able to resolve that by having the bank waive the penalty.  The upshot is that they now have around $62,000 invested to distribute. 

6. When the husband started work in 2003 he was provided with a leased vehicle as part of his salary package and at the end of 2004 his wife had the use of a second leased vehicle.  But her use of that vehicle was withdrawn after separation and she borrowed money from her family to purchase a second hand vehicle.  She regards herself as bound to repay the debt. 

7. Following separation the children had contact with their father and spent time with him – the youngest child more regularly and the other three children by arrangements made from time to time. 

8. As for child support, there was a child support assessment issued in early 2008 when the husband was assessed to pay a lesser sum than he had been paying.  A fresh assessment issued following his notification of redundancy and there was further engagement with the Agency which appears to have resulted in an assessment for the husband to pay $3,529, apparently for reasons related to the timing of his notification of redundancy.  In any event, he has been recently assessed as liable to pay $333 per month and that assessment is due to expire 10 July 2009.  Obviously future assessments will depend on his income amongst other things.  Since separation the wife has paid the school fees and met the children’s costs not covered by child support or the costs paid by their father while in his care. 

Assets and liabilities

1. There is no dispute they have around $62,000 invested from the sale of the S home.  The husband has an entitlement in the Spectrum Super Personal Superannuation Fund as at 19 February 2009 of $82,246.  The wife has an entitlement in the First State Super Fund of $17,000.  They each have some chattels, for which they give estimates of value in their financial statements, and since their separation each has incurred some debt which is also referred to in their financial statements:

   Husband

   Household contents   5,000
   Liabilities incl. credit card debt                    7,900
   Net debt:   (2,900)

   Resource – anticipated inheritance            10,000

   Wife
   Hyundai vehicle   6,000
   Household contents   5,000
     11,000
   Tax   890
   Credit card debt  17,200
   Loan - family  10,000  28,090

   Net debt:  (17,090)

2. There is otherwise the husband’s DFRDB entitlement which is a defined benefit interest in the payment phase.  The single expert accountant, Ms B, valued it as at 23 October 2007 at $609,139 and that opinion was not put in dispute.  But whatever its capitalised value, the difficulty here is that there is no sufficient other property to give to the wife a proper apportionment of the capitalised value in recognition of her contributions.  They have both resolved this difficulty by proposing the wife receive the whole of his net after tax entitlement for a period of 13 years, which is not without implications for obligations and entitlements related to child support, Centrelink benefits and income tax assessment.  Those implications cannot be solved by orders here, but to the extent orders can address possible issues related to child support assessment they will be made.  Of course the DFRDB payment she receives will be towards her property entitlement and the funds will already have been taxed in the husband’s hands. 

3. In his Minute of Order the husband nominated a base amount of $32,623 to be included in the splitting order he proposes.  That is calculated by combining their superannuation entitlements and distributing them equally:

   Husband’s SMF fund            $82,246

   Wife’s First State fund  $17,000

   Total:  $99,246

   50%  $49,623

   Less Wife’s entitlement                  $17,000

   To be split  $32,623

4. His Minute proposes total payment to the wife in fortnight payments over 13 years of $313,326, based on current figures, this way:

   Gross per fortnight  $1,241  [$32,266 per annum]

   Net per fortnight   $927  [$24,102 per annum]

   Tax deducted   $314  [$8,164 per annum]

   Gross receipt over 13 years:           13 X $32,266 = $419,458

   Less tax paid over 13 years             13 X $8,164 = $106,132

   Net receipt over 13 years                13 X $24,102 = $313,326

Evaluation of contributions

1. This is a long marriage of more than 21 years and it is now 2 years since they separated. In that time they have each made contributions of various kinds falling into the description given in s 79(4)(a)-(c) of the Act.

2. More particularly, the husband brought to the marriage some years of service in the Australian Defence Force when he had been accumulating entitlement to the DFRDB pension he now receives.  They had no assets of any note between them.  Nonetheless, over the two decades and more to follow they both worked and contributed their earnings to the family’s living expenses and in meeting financial commitments they undertook from time to time.  The wife’s employment was more patchy than the husband’s, but to the extent this puts her behind his financial contributions she matched it with her greater responsibility for the care and supervision of the children and for the running of the household generally, including at times when the husband was absent by reason of his work commitments.  The husband received an inheritance and the wife introduced the benefit the interest free loan from her parents which has not all been repaid. 

3. They have continued to make similar contributions over the past two years of their separation.  In that time, however, the wife has had the greater share of responsibility for the care and supervision of the children and she has borne the greater burden for their financial support since child support has been reduced.  However, to the extent that weighs it might be seen as counter-balanced by the husband’s pre-marriage service which is now reflected in his pension entitlement. 

4. In my assessment their contributions overall should be seen as approximating equality and there ought to be a sharing of the DFRDB income stream since there is no other way of providing for her indirect contributions to it. 

Section 75(2) factors

1. That is not to say their assets should now be divided in those proportions.  There is an obligation to consider what adjustment to make, if any, by reason of relevant factors set out in s 75(2) of the Act.  The submissions about those factors were brief. 

2. In their early to mid 40’s, there is no great disparity in the parties’ ages and both appear to be in good health and capable of earning income for their own support and meeting their financial obligations. 

3. As for the wife’s working future, the husband says her employment is secure despite the fallout from the financial crisis which has impacted on his position since it is in a ‘growth field’.  Be that as it may, there is no reason to anticipate any difficulty in her maintaining her employment into the foreseeable future.  It is accepted therefore that she will continue to use her skills and training to earn an income. Her work is a commitment she manages that with the responsibilities she has for the children, the youngest of whom is almost five years of age. 

4. As for the husband’s working future, that is somewhat more clouded.  It is now some months since he was made redundant and he has not yet been able to find work despite a multitude of job applications.  He says it is unlikely he will return to employment in the short term and the economic reality is that salary cuts are being taken in his field.  This is a rather grim outlook but he may be right.  Perhaps he will not be able to command the same remuneration he received before January and he may have to shift his sights downwards.  For now there is nothing concrete on offer and so no certainty about what the future holds.  But if the probabilities are to be the predictor then - at his age, being in good health, with a considerable range of skills and experience behind him, and his obvious motivation - it is more probable than not that he will find employment, albeit perhaps not maximising his skills and perhaps less well paid then he was before.  For the purpose of these proceedings, therefore, he should certainly be seen as having an earning capacity and that his financial position will improve through employment in the future. 

1. In the meantime, the wife is bearing the brunt of the financial cost of the children’s upbringing as well as seeing to their care and supervision for most of the time and as part of her obligations she has to provide suitable accommodation for them.  Their father will take some share of that care and it can also be anticipated that he will meet whatever child support is determined by the Child Support Agency from time to time.  But the imbalance requires an adjustment to the assessment of contributions in her favour. 

Just and equitable

1. There is little realisable property to distribute and as the parties have recognised part of the wife’s entitlement has to be met by passing over the net amount received from the DFRDB entitlement.  In my view their respective contributions and the adjustment to the wife can be properly recognised by this arrangement:

   To the wife:

   ·    60% of the cash = $37,200

   ·    60% total superannuation entitlements = $59,547 [therefore allocation of a base amount of $42,547] and

   ·    $313,326 paid from the DFRDB entitlement over 13 years or shorter period

   ·    each keep the chattels they have and pay their own debts. 

2. Since the entitlement is to be passed through to the wife over those years and not paid in a lump sum, it is a flawed exercise to calculate the proportion this total sum bears to the its value according to Ms B but nonetheless it can be noted that $313,326 is a little over 51% of $609,139 or, to put it another way, it is close to 53% of the value attributed to the period of marriage of $593,750. 

3. There will be increases in CPI over the years and therefore the gross and net fortnightly figures set out earlier will change over time.  So the husband’s obligation should be clear.  It is to pay the wife $313,326 by periodic instalments.  He is to meet that obligation by paying the whole of the amount received after tax when he receives it.  Obviously as CPI increases are received and passed on, the 13 year period discussed may be reduced.  The orders are drafted to achieve this. 

4. The husband will retain the balance of the money invested, the remainder of his superannuation, and he will have sole entitlement to his DFRDB entitlement in due course. 

5. In my assessment this will bring about a just and equitable distribution of their property. 

I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Moore

Associate: 

Date: