GUTHRIE & RUSHTON
[2009] FamCA 1144
•27 November 2009
FAMILY COURT OF AUSTRALIA
| GUTHRIE & RUSHTON | [2009] FamCA 1144 |
| FAMILY LAW –PROPERTY – Approach – Superannuation Interests – Pension – Prospective pension as “property” – Two-Pools approach – Splitting order - Post-separation property – Contributions – Post-separation contributions – Section 75(2) factors – Section 75(2) one assessment or two? – Justice and equity of orders – Justice and equity relevance of prospective pension. |
| Evidence Act (Cth) Family Law Act 1975 (Cth) Family Law (Superannuation) Regulations 2001 |
| Aleksovski & Aleksovski (1996) FLC 92-705 Bremner & Bremner (1994) 18 FamLR 407 Coghlan and Coghlan (2005) FLC 93-220 Farmer and Bramley (2000) 27 FamLR 316 G and G [1984] FLC 91-582 Gibbonsv Gibbons [2007] FamCA 26 In the Marriage of Best (1993) FLC 92-418 In the Marriage of Bonnici (1991) 15 FamLR 138 In the Marriage of Browne and Greene (1999) FLC 92-873 In the Marriage of Clauson (1995) 18 FamLR 693 In the Marriage of Ferraro (1993) FLC 92-335 In the Marriage of Hickey (2003) FLC 93-143 In the Marriage of Money (1994) FLC-485 In the Marriage of Pearce (1998) 24 FamLR 377 In the Marriage of Warne (1982) FLC 91-247 In the Marriage of Waters and Jurek (1995) FLC 92-635 In the Marriage of West and Green (1991) 16 FamLR 811 In the Marriage of Zappacosta (1976) FLC 90-089 Mallet v Mallet (1984) 156 CLR 605 Norbis v Norbis (1986) 161 CLR 513 Robb v Robb 1995) FLC 92-555 T and T (Pension Splitting) (2006) FLC 93-263 VAK and AK [2005] FamCA 803 Williams & Williams (2007) FamCA 313 |
| APPLICANT: | Mr Guthrie |
| RESPONDENT: | Ms Rushton |
| FILE NUMBER: | MLC | 12473 | of | 2007 |
| DATE DELIVERED: | 27 November 2009 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Murphy J |
| HEARING DATE: | 1 & 2 June 2009 and 20 July 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Geddes QC |
| SOLICITOR FOR THE APPLICANT: | Taussig Cherrie & Associates |
| COUNSEL FOR THE RESPONDENT: | Mr North SC leading Mr Strum |
| SOLICITOR FOR THE RESPONDENT: | Kenna Teasdale Lawyers |
Orders
As and by way of settlement of property pursuant to s 79 of the Act:
(a)The property and superannuation interests of the parties or either of them identified at paragraph 46 of the Reasons for Judgment delivered contemporaneously herewith, be divided in the proportion 42.5% to the wife and 57.5% to the husband and to give effect to same, the parties each retain the property and superannuation interests there attributed to them and the husband pay to the wife within 30 days of the date of this Order, the sum of $150,000; and
(b)The husband’s superannuation interest constituted by his entitlement to a Public Official pension be subject to a splitting order that effects a split of 30% to the wife and 70% to the husband.
The parties shall, at the earliest opportunity, confer through their legal advisers with a view to settling the precise terms of orders giving effect to paragraph 1 and, in particular, the terms of the requisite splitting order or orders pursuant to s 90MT of the Act necessary to give effect to paragraph 1 hereof.
The parties each do all such things and sign all such documents as may be necessary to accord procedural fairness to the “trustee” of the husband’s superannuation interest, within the meaning of Family Law Act 1975 (Cth) as amended, including, but not necessarily limited to, submitting to the said “trustee” for (as the case may be) his, her, or its consideration the precise terms of orders giving effect to the said split of the husband’s superannuation interest constituted by his entitlement to a Public Official pension.
In the event that the “trustee” referred to in paragraph 1 of these Orders wishes to be heard in respect of the said splitting order, the parties shall, as soon as practicable after becoming aware of same, notify the court to that effect by joint e-mail communication to the chambers of Justice Murphy.
In the event that the “trustee” referred to in paragraph 1 of these Orders does not wish to be heard in respect of the said orders, the parties be at liberty, by joint e-mail communication to the chambers of Justice Murphy to:
(a)Notify the court of that fact, and contemporaneously with such notification;
(b)Forward minutes of order giving effect to paragraph 1 of these Orders.
Upon receipt of each of the documents contemplated by paragraph 5 of these Orders, the court shall, if the minutes of Order are considered appropriate, make Orders in Chambers without the necessity for further appearance by either party.
IT IS NOTED that publication of this judgment under the pseudonym Guthrie & Rushton is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 12473 of 2007
| MR GUTHRIE |
Applicant Husband
And
| MS RUSHTON |
Respondent Wife
REASONS FOR JUDGMENT
Three major issues lie at the heart of the decision as to what orders constitute a just and equitable settlement of property between the parties to these proceedings, whose relationship to the date of trial spans some twenty-three years.
First, the treatment of items in an otherwise agreed “pool” of property needs to be determined. Secondly direct financial contributions made by each of the parties at different times within the marriage are said to result in differing ultimate assessments of contributions for the purposes of section 79 of the Family Law Act 1975 (Cth) (“the Act”).
Thirdly, the superannuation interests of the parties include the husband’s prospective Public Official pension payable pursuant to, and upon meeting the conditions of, the relevant State legislation and the relevant Family Law (Superannuation) Regulations2001.
Superannuation, “Steps” and “Pools”
The parties are agreed that, as part of an ultimate settlement, the wife should receive the former matrimonial home (unencumbered and valued at $1,100,000) as well as her superannuation interests and some personalty.
The wife contends that, in addition, she should receive a “split” of the husband’s pension which, it is agreed, would have the result that a capital sum would be rolled into a superannuation fund of her choice where it must be preserved until the wife’s minimum preservation age of 56 (which is in approximately eight years time).
That would result in a calculation being performed in respect of the husband’s resulting pension entitlement. The intricacies of that, and expert evidence in respect of that superannuation interest generally, is contained in a report from Mr B exhibited to an affidavit filed 11 May 2009.
On instructions, that report contained calculations, in accordance with the wife’s Amended Response, that she receive a splitting order providing for 50 percent of the husband’s pension. At my request, at the conclusion of the trial, the parties agreed to obtain from Mr B (who is a single expert for the purposes of the proceedings) a series of further calculations based on percentage splits between 10 percent and 50 percent in 10 percent increments.
It was agreed that, upon receipt (assuming both parties then requested it) the trial would be re-opened for the purpose of receiving that further report. The parties, in jointly signed correspondence dated 20 July 2009, forwarded that report to the court and requested that it be received into evidence.
The wife adopts a “two pools approach” (to which further reference will be made below) placing all of the superannuation in one “pool” and other real and personal assets in the other. (See Coghlan and Coghlan (2005) FLC 93-220 at [63]).
The orders for which the wife contends are based on an overall equal division of the totality of the two pools and, in order to effect the same, an approximately 49% split of the husband’s pension is sought by her. The husband contends that there should be no split of his pension. He, too, adopts a “two pools” approach but places the non-pension superannuation interest in one pool and the pension in the other.
The husband contends for an overall result which would see the former matrimonial home at E transferred to the wife and her receiving cash, shares and the extinguishment of a debt. She would also retain her superannuation. The husband then attributes a “West v Green”-type calculation (see In the Marriage of West and Green (1991) 16 FamLR 811) to his prospective pension “value” (or more accurately, “amount”) to arrive at a notional capital-sum entitlement.
The position just described is summarised in calculations outlined in a document handed up by counsel for the husband, Mr Geddes QC. It is convenient to reproduce it:
Total assets: $2,515,506
less Mortgage / Overdraft $27,000 = $2,488,506
add Non pension superannuation $151,461
Total$2,639,967
@ 40%= $1,055,986
Wife has$1,100,000 FMH
$6,000Lexus
$9,492Shares (sold)
$10,000AMP
$89,142Super
__________
$1,214,634
plus Pension calculated as 4/7ths x $1,242,024 = $283,891
TOTAL$1,339,887
Less$1,214,634
Balance Due $125,243
Payable as$20,578 Shares
$62,319AMP
$42,166 Cash
The husband’s pension entitlement cannot vest until, at the earliest, 2012 - the pension entitlement does not vest (death and permanent disability excepted) until the husband has completed ten years of service and turns 60. By reason of the husband’s age at his appointment, he will be 65½ years of age when he completes his ten years of service. He says he is committed to continue working for a further four and a half years until age 70.
The Pension as “Property”
As I understood it, the husband sought to argue that, because his superannuation interest had not vested, it was not “property” within the meaning of the Act and, specifically, section 79 of the Act. As a result, he sought to treat it, as I understood the argument, as a financial resource.
The majority (Bryant CJ, Finn and Coleman JJ) in Coghlan, above at [40], held:-
We acknowledge that were it not for s 90MS(1), it might perhaps be possible to take the view that because of the provisions of s 90MC, superannuation interests should be regarded as synonymous with property for the purposes of proceedings under s 79. However we are of the view that the use of the word ‘also’ prevents such an interpretation. We interpret the use of the word ‘also’ in s 90MS(1) to mean that superannuation interests are another species of asset which is different from property as defined in s 4(1), and in relation to which orders can also be made in proceedings for property settlement under s 79.
In In the Marriage of Hickey (2003) FLC 93-143 an earlier Full Court held that a superannuation interest is to be “treated as property” (at [30]) and went on to hold that the expression “treated as property” should be understood as meaning “treated as if it were property even though it is not” (at [75]).
Mr B observes in his report that “the husband disputes the calculations made by the trustee on the basis that he has not yet fulfilled all the necessary criteria for entitlement under the [applicable legislation].” That argument appears related to (albeit that it is different in form) to the argument advanced on the husband’s behalf at the conclusion of the trial.
Mr B, correctly in my respectful view, opines that the husband’s view (as relayed to him) is wrong. In my view, the argument advanced on behalf of the husband before me is also wrong.
By reason of the amendments to the Act which introduced Part VIIIB, what matters is whether a particular interest (in this case a prospective interest) is a “superannuation interest” within the meaning of the Act. Section 90MD provides a definition for the purposes of the Act:-
Superannuation Interest means an interest that a person has as a member of an eligible superannuation plan, but does not include a reversionary interest.
In his report Mr B outlines what he describes as the “definitional trail” by which he concludes, with respect correctly in my view, that the scheme for the payment for Public Official pensions pursuant to the Victorian Act earlier referred to is an “eligible superannuation plan” under the Family Law Act 1975 (Cth). As Mr B says (again, with respect, correctly in my view), “it follows that an interest within the plan is a splittable interest” (as defined).
Once it is established that a spouse has a “superannuation interest” (as defined) it is clear that a court may make orders in relation to that interest, or those interests, in proceedings under section 79 in accordance with Division 3 of Part VIIIB of the Act (see section 90MS). In exercising the power given under the Act in respect of superannuation interests, the court may make orders in accordance with section 90MT of the Act (“splitting orders”).
The distinction between “superannuation interests” and “property” has led to discussion, both by the Full Court and commentators, as to the applicability of either or both of the “global approach” or the “two pools approach” to the assessment of contributions. Discussion has also ensued about the proper place of superannuation interests within what has been described as “the traditional four-step approach” to section 79 of the Act (compare eg. In the Marriage of Hickey, above at [75], with the majority in Coghlan at [61], [64]).
The majority of the Full Court in Coghlan indicated that the treatment of superannuation interests separately from property as defined in section 4(1) is “the preferred approach to the determination of property settlement cases”.
Earlier suggestions that there was “an air of artificiality” about treating a future income stream as having a present capital value have, it would appear, given way to a preferred view (in my opinion, with great respect, the better view) that this is not right (see e.g. the discussion of the authorities referred to by Watts J in T and T (Pension Splitting) (2006) FLC 93-263 at pars 108-117).
In meeting the assertions of the husband, then, it is centrally important to appreciate that, first s 90MT(2A) mandates that an amount arrived at in accordance with the methodology provided for in the Act (and, thereunder, the Regulations) “is taken to be the value of the interest”.
Secondly, notwithstanding the nature or breadth of the debate just referred to, superannuation interests, as defined, are now a creature of statute in respect of which a particular form of order can be made when altering property interests pursuant to s 79 (superannuation interests are to be “treated as property” in respect of same – see eg s 90MC).
It should also perhaps be noted that there is no doubt that it is within discretion to not order a split of a superannuation interest or, conversely, to order a split when neither party has sought it, provided, in each case, such a conclusion is based on clear findings about the justice and equity of such an order (or lack of order) in the particular circumstances of the case.
Leaving aside the issue of superannuation interests, it has long been recognised, as a result of decisions of the High Court, that in arriving at a just and equitable settlement of property either a “global” or “asset by asset” approach is permissible (see e.g. Norbis v Norbis (1986) 161 CLR 513 at 523-524 per Mason and Deane JJ). In that respect the High Court approved earlier comments by Nygh J in G and G (1984) FLC 91-582, at 79,697:-
In my view, despite what was said [by the Full Court] in Norbis, both approaches are legitimate unless the High Court rules otherwise provided that those who take the global approach heed the warning that the origin and nature of the different assets ought to be considered and that those who favour the more precise approach do not mistake the trees for the forest, i.e. add up their individual items without standing back at the end to review the overall result in the light of the needs of the parties.
It seems to me that, twenty-five years later, his Honour’s views are equally apposite to adopting a “two pools” approach with one of the pools comprising a superannuation interest, or interests, and the other property.
The Importance of “Nature, Form and Characteristics”
The majority in Coghlan in referring to a “two pools” approach being a “preferred approach” held that doing so will allow:-
…contributions, both direct and indirect, by either party to such superannuation interests [to] be more likely to be given proper recognition that the real nature of the superannuation interests in question can also be taken into account, both in consideration of the s 75(2) matters and in the final assessment of whether the ultimate order is just and equitable.
With the greatest respect to their Honours, it is by no means clear to me why this should be so. It has always been the task of courts making orders pursuant to section 79 to properly examine the nature, form and characteristics of the property forming part of the pool for division. Variety in the nature of such property is by no means uncommon. That is neither more nor less so because there can now be, as part of the “pool”, a particular item, or items, of a statutorily-defined type.
There has never been a requirement for different types of property to be treated the same as other types of property, nor has there ever been a requirement for different types of property to be treated differently. The nature, form and characteristics of the property has always been recognised. (See, as but three examples, In the Marriage of Best (1993) FLC 92-418; In the Marriage of Bonnici (1991) 15 FamLR 138; Farmer and Bramley (2000) 27 FamLR 316). I can see no reason why that should be different with respect to a “superannuation interest” which is defined by statute for a statutory purpose.
What is crucial is that the nature, form and characteristics of all components (or groups of components) of the “pool” to which s 79 orders might apply are considered. That is neither more nor less true of “superannuation interests”. “Superannuation interests” – particularly unvested superannuation interests – can be seen as being of a nature, and having a form and characteristics, markedly different from, say, real property.
Particular forms of superannuation interests, for example unvested pensions, have their own nature, form and characteristics and that consideration, too, is important. (See e.g. Gibbonsv Gibbons [2007] FamCA 26; T and T (Pension Splitting), above at pp. 24, 25, and see the reference by the majority in Coghlan to “the real nature” of the superannuation interest at [67]).
Mr B first explains that:-
The husband has an entitlement under the [State legislation]. His superannuation interest is paid entirely as a pension. The pension is determined based on his years of service and final salary.
Pursuant to regulation 38 of the Family Law (Superannuation) Regulation 2001 the Attorney-General approved scheme specific methods and factors for the valuation of superannuation interests under the [State legislation]…
Using that method, the trustee has provided a statement of the amount to be taken as the value of the husband’s entitlements at the following dates:
·20 June 2006 $547,930.00
·31 December 2007 $919,258.00
·30 June 2008 $1,030,782.00
·24 March 2009 $1,242,024.00
The superannuation interest commenced to accrue when the husband was appointed a Public Official in 2002. The conditions of release will be met, at the earliest, in 2012. Until 2012, the husband has (in the absence of a permanent disability or death) no entitlement pursuant to the scheme.
The amount “taken to be the value” of the husband’s interest within the meaning of the Act (s 90MT), as at the last date of calculation prior to the trial (24 March 2009) is $1,242,024.
If a global approach is adopted, that figure would be taken into account (at step one of “the four-step process”) and added to the value of all other property the subject of the proceedings. There would be, in my view, a distortive effect if the assessment of contributions was made in respect of such a total (distortive in the sense that the potential for an unjust and inequitable result is significantly increased).
The lump sum “value” (or, more accurately, “amount”) is arrived at based on a number of actuarial calculations. They make assumptions, for example, about life expectancy and discount for the fact that the whole of the lump sum will never be received as such. Because there is no entitlement of the husband to any lump sum as at the date of calculation (or ever) there is an obvious potential for injustice: the “value” adopted will be too small where the member significantly outlives the actuarial expectations, but, equally, too great if the member falls significantly short of the assumption (for example, if the member was to die the following week).
If the mandated “value” is included in a global pool, that sum, as compared with other items in the pool, has a markedly different nature and form to that of the prospective superannuation interest. As one important example, other property is immediately realisable. And, there is the potential for significantly different arguments and considerations to attend a pool comprising the prospective pension than what might attend a pool comprising assets.
Although the accumulation superannuation in the names of each of the parties is, also, unvested and will not become vested (in the usual course of events) for some years, it does not, in my view share the same unusual characteristics. Further, the amounts each of the parties have accumulated in their respective funds over the course of the relationship are not significantly different and the respective contributions of each can be assessed accordingly.
But, the considerations discussed above in respect of the prospective pension provide a solid foundation – as was urged here - for the adoption of a “two pools” approach in circumstances where one pool consists of a superannuation interest in the form of a non-commutable pension in the growth phase and the other the accumulation superannuation interests (also in the growth phase) and the assets.
The Property of the Parties or Either of Them
Subject to some matters about to be discussed, a Balance Sheet containing agreed values was produced at the trial and can, with some amendment, be reproduced here.
First, that balance sheet needs to be amended because it includes in the totals column the “amount” of the husband’s pension interest as at the date of separation and if that amount is included in the total of superannuation interests, it would be shown as $1,941,416. When the amount of the pension interest at separation is removed (as it must be if it is not to be counted twice), the correct total of all superannuation interests is $1,393,485. The total of the net assets, accumulation superannuation interests and the pension is, then, $3,981,999.
As explained earlier, I consider the appropriate approach is to include the accumulation superannuation interests with the assets in one pool and the pension in another pool. The balance sheet has been changed to reflect that.
With those amendments, then, the agreed balance sheet can be expressed as follows:
ASSETS VALUE Former matrimonial home
§ Registered in name of husband
§ Agreed value
$1,100,000
C property
§ Registered in name of husband and wife
§ Agreed value
§ Insurance proceeds (yet to be received)
§ Contents claim (Kenna Teasdale Lawyers trust account in joint names of the parties)
§ Contribution towards clean-up costs (yet to be received)
§ Grant from Department of Human Services
§ Potential Class Action re bushfires
$420,000
$152,000
$32,256[1]$3,000
$5,000[2]
Not knownP property
§ Agreed value
$740,000
Shares in various publicly listed companies (as at 14 May 2009)
§ Husband’s name
$20,758 TP Project
§ Husband’s name
Not known Motor vehicle
§ Husband’s name
$17,000 Motor vehicle
§ Wife’s name
$6,000 Shares sold by wife $9,492 AMP Life Insurance Policy (surrender value)
§ Wife’s name
$10,000 Contribution by husband to purchase of his interest in K property $100,000[3] TOTAL GROSS ASSETS
$2,615,506 LIABILITIES Overdraft secured on C property
§ Current balance (approximately)
$27,000[4] TOTAL NET ASSETS
$2,588,506 SUPERANNUATION INTERESTS AMOUNT AXA Superannuation Fund
§ Husband’s name
§ As at 5 May 2009
$62,319 Unisuper
§ Wife’s name
§ As at 28 May 2009
$60,873.76 Colonial
§ Wife’s name
§ As at December 2008
$12,000 AMP
§ Wife’s name
§ As at 14 May 2009
$16,269 TOTAL ACCUMULATION SUPER
$151,461 TOTAL ASSETS AND SUPER
$2,739,967 PENSION Pension
§ Husband’s name
§ Value pursuant to Family Law Act as at 20 June 2002 - $547, 930[5]
§ As at 24 March 2009
$1,242,024
TOTAL PENSION AMOUNT $1,242, 024[6] [1] Contents at C property asserted to be owned by the husband
[2] Receipt is conditional upon being used for recovery following effects of bushfire
[3] Not conceded by husband
[4] Balance at separation $115,000
[5] This amount has been removed from the amount column
[6] This total is altered from the original by the removal of the separation amount of $547,930 from the totals column.
P property
The balance sheet includes a property at P. That property was acquired by the husband after separation from the proceeds of sale of a property at N, that was gifted to him by his parents about 7 years before separation.
The argument, as I apprehend it, is that this property should be treated differently, by reason of the facts just mentioned (related, it might be thought, to an assessment of contributions), from other property in the “non-pension pool”. I disagree, and will deal with the reasons why when considering contributions to that “pool”.
Cash Contribution to K property
A comparison between the balance sheet and the contentions on behalf of the husband earlier outlined, reveals that the husband does not include as an asset the $100,000 shown as a cash contribution to the K property.
That property was acquired by the husband with his partner approximately two years post-separation in July 2008. He deposes in his affidavit of evidence in chief to it being acquired “in joint names”. He swears:
The purchase price was $440,000. We each contributed the sum of $100,000 and jointly borrowed the sum of approximately $280,000 from the Teachers Union Credit Co-operative. I presently pay the mortgage repayments on the mortgage of $3,532 per month. The current mortgage balance is approximately $267,000.
No argument was addressed specifically by either counsel as to why the husband’s interest in the K property was not included as part of the “property of the parties or either of them”. That expression, used in s 79, makes it clear both that there is no such thing as “matrimonial property” (however frequently – or conveniently – that expression may be used) and, also, that property belonging in whole or part to one party is not excluded by reason of the manner or timing of its acquisition.
I note, however, that the husband deposes to a purchase price of $440,000 a little more than two years ago and a current mortgage of $267,000. No current value of the husband’s (presumed) half interest in the property is given. Using the figures just quoted produces an equity of about $173,000, a half share of which is $85,500. The argument as expressed centres on the $100,000 which the husband swears he contributed to the purchase of the property. It probably matters little, then, if the argument is expressed that way as distinct from an argument about the net value of the husband’s equity in the property.
The wife contends that there is no evidence as to where the purchase funds came from, other than that they came from the husband. The husband submits (in effect) that it is clear that the funds came from post-separation income. Mr Geddes SC cites paragraph 22 of the husband’s affidavit. That makes it clear, it is submitted, that there was only $3000 in credit funds in the husband’s bank accounts and, it follows, given that the parties had by then been separated for two years, that the $100,000 came from post-separation sources.
It is submitted on behalf of the wife that, although the property was acquired post-separation, it cannot be said that the wife has not made a contribution to it, although no specific factors are pointed to in that respect by counsel for the wife.
Shortly after separation, a property at N was sold and, subsequent upon the purchase of the P property, from its proceeds, there remained about $69,000 in the husband’s name in his solicitor’s trust account (see Exhibit “JG2” to the Affidavit of the husband). Since separation, it appears uncontroversial that the husband’s overdraft has reduced from between $109,000 and $115,000 to the figure of $27,000 contained in the above balance sheet. Had the overdraft not been reduced by the husband, I can see no reason why it would not have been taken in as a liability at its then figure. It does not appear to be controversial that the overdraft was reduced by the husband post-separation.
Doing the best I can with the evidence available to me, it seems to be the case, then, that there was at, or shortly after, separation, cash funds emanating from the sale of the N property and subsequent purchase of the P property of about $69,000 and a bank account balance of about $3,000 – a total of about $72,000. The purchase of the share in the K property required $100,000 in cash and the reduction in the overdraft required in the region of $73,000. The only evidence of any capital sums (as distinct from income) available at, or very shortly after, separation to effect both is the $72,000 earlier identified.
It seems to me that, consistent with principle (including that, as a general rule, the property of the parties or either of them should be ascertained as at the date of trial – see eg. In the Marriage of Warne (1982) FLC 91-247; In the Marriage of Zappacosta (1976) FLC 90-089) - that I should include the $100,000 in the balance sheet (as, in effect, the equity in the K property) and take up the matters just referred to in the assessment of contributions (which will include any post-separation contributions).
C property Chattels
There is a dispute as to the entitlement/s to the cash proceeds of an insurance payout in respect of the contents of the property at C lost in the February 2009 fires, currently held in the trust account of the wife’s solicitors.
The husband deposes to having spent increasing periods of time at the property on weekends toward the end of the marriage and, as a result, to maintaining and preserving the property so as to ensure it “was in a liveable condition to facilitate [his] residence there”. In respect of the disputed items, he deposes that a list of the contents was prepared consequent upon their loss in the fire (Exhibit “JG4” to his affidavit). The husband deposes: “… the items referred to … are my items and personal to me. [The wife] claims they are jointly owned items…”.
It was contended on the husband’s behalf in opening that there was “very little” in the list of chattels and they were “personal effects”. I do not agree with the former phrase if for no reason other than the amount of the insurance proceeds by which they are now represented. I am not sure what is meant by the expression “personal effects” in the context of the “first step” in a s 79 application. The items, now represented by cash, are, in my view, “property of the parties or either of them” and are neither more nor less so by reason of their location, or their association with one party, including their classification as “personal”. I do not, in any event, consider that the totality of the items contained in Exhibit “JG 4” fit that description.
I propose to include the proceeds in the balance sheet and, thereby, include them as part of the property to which any assessment of contributions will be made.
Unknowns
It will be seen that the balance sheet includes two items to which an unknown value attaches. Little or no evidence attends these items. It seems unlikely that, by their nature, and given the circumstances pertaining to each, any real certainty could attend their value.
To the extent that either should – or can – impact on the overall assessment of just and equitable orders, that should occur in the assessment of relevant s 75(2) matters.
The “Non-Pension Pool”
When the parties commenced co-habitation over twenty-three years ago, the husband was a self employed professional and the wife was working as an employed professional. The parties separated in June 2006. There is, then, a period of about three years post separation in which their financial relationship has remained unresolved.
The wife deposes to having “no assets of significance other than some furniture and some minimal savings” at the commencement of the relationship.
The husband had been married before and had effected a settlement of property with his former partner via a s 87 agreement which was approved by order of the court on 14 July 1986.
The husband deposes that, at the commencement of the co-habitation with the wife, and consequent upon the settlement of property just referred to, he had equity in a property at E which the s 87 agreement records as $115,000. The property was transferred to him pursuant to that agreement. He deposes to having, additionally, between $40,000 and $50,000 in cash which, he says, was “applied to family finances”.
He was cross examined about each of those matters. In particular he was asked about the fact that no such capital sum as alleged was contained in a sworn Statement of Financial Circumstances then filed (as was required) in support of the approval of the s 87 agreement. That document reveals about $10,000 in savings and cheque account balances.
Whilst the recitals in the s 87 agreement refer to a mortgage of $35,000 on the E property, (there agreed to be valued at $150,000 - hence the equity of $115,000 referred to earlier), the sworn Statement of Financial Circumstances refers to two mortgages (of $35,000 and $40,000 respectively) and an overdraft of $2,000.
That same document splits the weekly expenses in respect of mortgage payments into two and designates the payments to the first and second mortgages respectively.
The Statement of Financial Circumstances also deposes to the ownership of a property at D valued (then) at $25,000 to which the husband also deposes in his affidavit of evidence in chief.
It was put to the husband that his net property at the commencement of the relationship was significantly less than the approximately $155,000 - $165,000 indicated by his affidavit material. Ultimately, the husband effectively accepted that this was likely to be the case.
In my view, the husband’s sworn Statement of Financial Circumstances provides the most reliable evidence of the husband’s capital position at the commencement of the relationship. I reject the submission of counsel for the husband that the Statement of Financial Circumstances is “ambiguous”.
The husband deposes additionally to a gift of $40,000 from his parents at that time used to meet his obligations to his former wife pursuant to the Deed. That gift reduced the burden on the part of the husband but, in so far as it related to this marriage, its effect was to maximise the initial contribution made by the husband which (presumably) would, in some way, have been reduced had there been a need for him to fund personally the $40,000. The assessment of contributions will take account of his initial contributions; to “credit” him with a contribution of $40,000 is to “double count”.
It is submitted on behalf of the wife that, when regard is had to the true value of the initial contribution it has been, as it were, subsumed by a miscellany of differing contributions made by each of the parties in the period since so that a result of equality is arrived at when assessing contributions. I reject that submission.
The Full Court said in Williams & Williams [2007] FamCA 313 at para 26:-
We think there is force in the proposition that a reference to the value of an item at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution towards the parties. Thus, where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing or the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in so doing, it is equally important to give recognition to myriad other contributions that each of the parties has made during the course of their relationship.
The task, then, is to balance the matters there referred to. Fogarty J’s judgment in In the Marriage of Money (1994) FLC-485, was ultimately approved by the Full Court in Bremner & Bremner (1994) 18 FamLR 407 at 411-412. His Honour said:-
In an appropriate case, in my view, an initial substantial contribution by one party may be “eroded” to a greater or lesser extent by the later contributions of the other party even though those later contributions did not necessarily at any particular point outstrip those of the other party…
In In the Marriage of Pearce (1998) 24 FamLR 377, the Full Court said:-
28. In our opinion it is not so much an erosion of contribution but a question what weight is to be attached, in all the circumstances, to the initial contributions. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case, that of the husband, regard must be had to the use made by the parties of that contribution…
And, in my view, this Court must always take account of what was said now more than twenty years ago by the High Court in Norbis v Norbis (1986) 161 CLR 513 and, in particular, per Mason and Deane JJ at 524:-
The Family Court has rightly criticized the practice of giving over-zealous attention to the ascertainment of the parties’ contributions, and we take this opportunity of expressing our unqualified agreement with that criticism, noting at the same time that the ascertainment of the parties’ financial contributions necessarily entails reference to particular assets in the manner already indicated.
Here, the E property was used by the parties as the former matrimonial home for the length of their relationship. The husband vacated that home upon separation so as to permit its continued use as a family home for the wife and children. At the start of the relationship, it had a modest value (in 1986 dollars) and an even more modest equity. In 2009 it is unencumbered and valued at $1.1million, but each of the parties have made contributions over the course of the ensuing significant number of years.
The property also provided a home for the mother’s child of her previous relationship (and the father’s children of his previous relationship from time to time, including periods of time when they resided with he and the wife full time). It has been preserved as a family home by the contributions of each of the parties during the course of twenty-three years but their use of it as a home came about, from “day one”, by the introduction of it through the husband.
Other properties were bought and sold during the relationship using savings and borrowed funds. Profits generated were used to fund further purchases which ultimately find reflection in the now balance sheet.
The husband continued to work throughout the relationship as a self employed professional until he was appointed a Public Official in 2002. Plainly enough, the husband enjoyed a successful career. …. I have no doubt that carving a successful career came at the cost of very significant amounts of stress and hard and time consuming work.
The burden taken on by a marriage partner (in the absence of behaviour not asserted in this case) is, commensurately, great. That is no less so – and arguably more so – when the role of the other partner is predominantly devoted to the parties’ children and the maintenance of a home for the husband and those children. No suggestion is made that the wife carried out those tasks in anything other than a perfectly appropriate way.
The wife ceased remunerative employment when pregnant with the parties’ first child in 1987. Until about 1995 her contributions arose predominantly through her role as a homemaker and parent. During that time, the wife commenced, in 1992, a Masters degree which she completed in 1995. Subsequently, in 1999, the wife commenced a thesis for a Doctorate. At the time of swearing her affidavit of evidence in chief, she was “at the point of completion” of that thesis.
The husband asserts that the contributions made by him assisted in the wife attaining those qualifications. I accept that he made indirect contributions of that type within the confines of his running a successful and stressful practice.
The wife is now working full-time at a tertiary institution in Melbourne. She has attained tenure. Her current income is about $83,000 per year. She was cross examined about the prospects of that increasing, particularly when she is awarded her doctorate. Her evidence, which I accept, is to the effect that, rather than improving her prospects of advancement, or income, the degree was needed to maintain, and, as it were, strengthen, her current position.
Each of the parties received during the course of the relationship gifts from third parties. In the wife’s case, her first husband died in 1991 and, by reason of intestacy, their child R (who was eleven months old at the time and their only child) inherited his father’s estate. Specifically, he inherited a piece of real property which the wife subsequently sold on his behalf.
The money was used to fund R’s private school education. The balance was used to purchase real property as tenants in common with the wife’s sister. She acquired a one quarter share and the other three quarters were held on trust by the wife for R. The property was sold in May of 2009 for $421,000 and the approximate $300,000 constituting R’s share will be applied toward the purchase of a property solely in his name.
For present purposes, then, the gift received by way of inheritance provided a capital sum which provided for R’s education. R was aged about six when the parties’ commenced co-habitation. He resided with them during the whole of his primary and secondary education. Whilst the husband, of course, had no legal obligation to maintain R, the contribution of the capital sum from which school fees were paid constituted a saving of what might otherwise have been met from funds emanating from the marriage, noting in that respect that the husband was, overwhelmingly, the sole income earner.
A year after her former husband’s death in 1991, the wife received the proceeds of an insurance policy on his life of about $65,000. She deposes to those funds being used specifically to construct a pool and undertake renovations to the home including a kitchen and laundry. She says the balance was paid in reduction of the mortgage.
In November 1999 the husband purchased a property in G for $187,000. That property was sold in 2001 for $250,000 and the net proceeds were introduced to the marriage. In 1990, the husband purchased a property at W on vendor’s finance for $47,000 and sold the property in 1993 for either $95,000 (as alleged by him) or $100,000 (as alleged by the wife). When that property was sold the proceeds were used to purchase a property at C which forms part of the assets of the parties to be divided. The property was purchased for $121,000 of which $120,000 was borrowed over five years in the joint names of the parties.
It is asserted that at separation the value of that property was $875,000 over which there was an overdraft in excess of $100,000. The property was lost in the horrific fires that engulfed that area in early 2009. The property is now represented by the agreed value of the land ($420,000); the insurance proceeds (yet to be received, of $152,000) together with relatively small amounts to be received by way of government grants and the like totalling $8,000. The furniture also lost in the fire is the subject of the separate claim earlier referred to.
Thus, the property which was alleged to have been valued at $875,000 at separation is now, subsequent to those awful events, represented by a total value of about $580,000.
The husband refers in affidavit material to alleged actions by the wife in rejecting overtures about the purchase of the property. Although the husband says that actions (or inaction) on the part of the wife “resulted in the loss of a potential sale”, his evidence amounts only to the following assertion:
There were not many offers for its purchase save for interest by prospective purchasers in the region of $700,000. [The wife] authorised my lawyers to prepare a Vendor’s Statement in preparation for a sale, and authorising me to deal with Agents regarding the sale. However, she refused to respond to offers to purchase and/or assist in the negotiations for its sale in September / October 2008 in a timely manner which resulted in the loss of a potential sale in the region of $700,000.
Although the statement refers to “a potential sale”, no particulars of any such sale are referred to, much less a contract. There is nothing deposed to specifically to which it could reasonably be said the wife ought have responded. The purpose of the passage referred to would appear to be to suggest that some “loss” should be attributed to her alleged inaction. As the balance sheet makes clear, no formal claim for any “add-back” is made in respect of that property. It is to be noted that the Full Court of this court has eschewed specifically the notion of “negative contributions” (see eg. In the Marriage of Browne and Greene (1999) FLC 92-873).
In 1999, the husband’s parents transferred to him a property in N. This commercial property was tenanted, returning about $2,000 per month. In addition, at the same time, a gift about $45,000 in cash was received from his parents. The husband deposes to the rental income being used to fund his children’s private school fees.
The N property was sold shortly after separation for $750,000. Those proceeds of sale were used to acquire the property at P to serve as a home for the husband. He currently resides there. Documents exhibited to the husband’s affidavit show that about $615,600 was expended in the acquisition of that property (whose purchase price was $580,000).
It is said by the husband that the P property should, in effect, be “quarantined” from any assessment otherwise arrived at in respect of the property. It is said that the wife has made no direct or indirect contribution to it.
There is, in my view, no licence in the circumstances of this case to either “quarantine” the property or to assert that the wife has made no contributions to it. For example, she contributed directly to its purchase so much of the funds emanating from the sale of the N property as any assessment of her contributions (in the s 79 sense) to that point would have given her. That is, the contribution of the purchase funds from the sale of the N property was a contribution by both parties (although, not necessarily, an equal contribution).
The preservation of the property is a post-separation contribution on the part of the husband to be taken into the mix along with all other contributions of all types made by each of the parties across the whole of the time from cohabitation to trial.
I have already dealt with the properties acquired by the husband after separation. As referred to, the evidence in my view points to about $72,000 of moneys to which each of the parties had an entitlement at separation being used to acquire equity and pay down debt, together totalling $173,000. I infer that $100,000 came from post-separation sources (principally savings from income). As such, it ought be treated as a post-separation contribution by him. Having regard to those characteristics, then, it has significance in the overall assessment of contributions.
Although not specifically dealt with in the material, it seems plain that the employment by the wife involved compulsory superannuation contributions from her employer resulting in the accumulation of modest amounts in the funds in her name. The husband was self-employed and did not receive the benefit of compulsory contributions. His was the primary source of day to day support of the parties and, unsurprisingly, there is a modest amount in his accumulation fund.
“The Pension Pool”
As has been seen, I respectfully agree with Mr B about the importance of the nature, form and characteristics of the superannuation interests the subject of these proceedings.
In seeking to underscore the importance of the nature, form and characteristics of the superannuation interest, Mr B goes on:-
The key in any superannuation matter under the Family Law Act 1975 is to look beyond the valuation amount and consider the nature, form and characteristics of the superannuation interest. The Full Court in Gibbons v Gibbons [2007] FamCA 26 dismissed an appeal on the basis that the trial judge had properly considered the nature, form and characteristics of the superannuation. The court said (at paragraph 120) that the trial Judge’s approach in “having regard to the nature of the superannuation interests, the form of such interests and their characteristics”… was “logical, sensible and fair to both parties”.
In this case, the Husband’s superannuation interest is an interest in the growth phase (see r.7 of the Family Law (Superannuation) Regulations 2001). The Husband’s entitlements are a defined benefit entitlement and that entitlement is payable as a pension. [The relevant State legislation] provides that upon reaching the necessary conditions of [Public Official] service, the Husband is entitled to be paid a fortnightly pension at the rate of 60% of the annual salary of a [Public Official].
It is important to set out Mr B’s (unchallenged) evidence which explains that, and the ramifications of a splitting order, more fully. That explanation is, in my view, important to a determination of justice and equity in this case because that depends, in part, on an understanding of the impact upon each of the parties of any superannuation splitting order (or, indeed, the impact upon the parties of not making a splitting order).
It is vital to understand the distinction between an order which, on the one hand, splits payments and, on the other hand, an order which splits the underlying interests in respect of those payments:-
In summary, while a court has jurisdiction over interests in eligible superannuation plans, its power only extends to splitting payments (see s 90ME of the Family Law Act 1975) that arise out of those splittable interests. The court has no power to split the underlying interest. However, amendments have been made to the [relevant State legislation] which achieve the effect of splitting the underlying interest but the obligation is a trustee obligation under the governing rules rather than a matter that could be ordered by a Court exercising jurisdiction under the Family Law Act 1975.
What Happens Upon a Splitting Order Being Made?
In determining whether a splitting order is necessary or appropriate as part of any orders necessary to do justice and equity between the parties, it is important to understand what occurs upon a splitting order being made. In that respect, it is, I think, important to quote Mr B’s evidence in some detail:-
The Wife is seeking orders in her Amended Response that she receive 50% of the Husband’s superannuation entitlements. For the purposes of this question, we have assumed that the Court will make an order in accordance with s 90MT(1)(b) of the Family Law Act 1975 with the specified percentage being 50%.
[The State legislation] provides that where the non-member spouse has not satisfied a relevant condition of release (see […] and Schedule 1 of the Superannuation Industry (Supervision) Regulations 1994), the entitlement will be paid to the non-member’s nominated superannuation fund. Relevant conditions of release include reaching preservation age and retirement from the workforce. The Wife will therefore become entitled to a lump sum amount on the making of the Order but it is not payable directly to her. It is preserved and paid to her nominated superannuation fund until she reaches a condition of release under superannuation law.
You should note that she will not be entitled to receive a split of the [Public Official] pension under the terms of an order made in accordance with part VIIIB of the Family Law Act 1975. To receive a pension, the Court would need to make an order in personam but this obligation would terminate on the death of the husband.
…
In accordance with [the State legislation], this amount would be paid to a regulated superannuation fund of her choosing. If the Wife did not nominate a regulated superannuation fund, her entitlement would be rolled over to an eligible rollover fund nominated by the minister.
The wife’s entitlement would attract interest on the amount invested in accordance with her investment election and the returns of her nominated superannuation fund. The effect of [the State legislation] is to achieve a clean financial break and the superannuation entitlement would become her own entitlement to which she would be able to make her own contributions. Assuming an even growth rate of 6.5%, the Wife’s entitlement would grow to an amount of $1,182,590 by the age of 56 years.
The Wife’s entitlement may be withdrawn as a lump sum or depending on the governing rules of her nominated superannuation fund, she would be able to obtain a pension in the form of an account based pension. However, tax on the wife’s entitlement is complicated.
What if there is a Splitting Order other than 50%?
It will be recalled that Mr B, by consent of the parties and at my request, prepared a later report referring to the impact of splitting orders at percentages less than 50%.
That report was requested because, while it is possible to ascertain the lump sum amount that will be rolled into the wife’s fund (as a result of a splitting order expressed as a percentage, the amount is arrived at by simply applying the percentage to the s 90MT “amount” of the pension), the impact on the husband’s ultimate pension is not susceptible to so simple a calculation.
Mr B explains:-
When an order is made under the Family Law Act 1975 (Cth) splitting a [Public Official] pension entitlement under the [State legislation], the accrued benefit multiple would be reduced having regard to the terms of the court order ([reference omitted]). While there is no prescribed method, Clause 7, Division 7.2 of Part 7 of the Family law (Superannuation) (Methods and Factors for Valuing Particular Superannuation Interests) 2003 provides for the reduction factor as follows:
… [There then follows the complex definition and formula for calculating the “reduction factor”] …
The effect of the legislative instrument just referred to (and the formula contained within it) is to reduce the husband’s multiplier which, together with his retiring salary, determines his pension.
In the absence of a splitting order, the husband receives 60% of his retiring salary – 60% is the multiplier. But, once there is a splitting order, that multiplier is reduced by the “reduction factor”. The result produced in this case, for splitting orders in 10% increments is set out by Mr B in a table:-
[Mr Guthrie] – Reduction Factor (Division 7.2)
% in Splitting Order
50%
40%
30%
20%
10%
Reduction Factor
20.41%
16.33%
12.25%
8.16%
4.08%
Reduced Multiple
39.59%
43.67%
47.75%
51.84%
55.92%
Thus, if the wife was to receive a splitting order of, say, 40%, she would (using the 24 March, 2009 “amount” of the husband’s prospective pension) receive $496,809. The husband would receive 43.67% of his retiring salary by way of pension. He will pay tax on that amount, but will be eligible for a tax offset.
Mr B illustrates the effect of that tax effect by reference to the 4 June, 2009 salary of a Public Official:
The application of the reduced multiple will have different results depending on the date that the husband retires from [Official] service. In general, the later the husband retires, the higher the pension entitlement by virtue of increases in [Official] salary. For ease of reference we have prepared a summary table for retirement at his first opportunity, being […] 2012 (ignoring a retirement on grounds of ill health or resignation). A complete set of tables for the 10% increments and differing age retirement points with taxation taken into account is annexed to this report.
| [Mr Guthrie] – Splitting Order at 4 June 2012 | ||||
| Age | Gross | Tax | 10% Offset | Total Payable |
| 65.5 | ||||
| 50% | $123,245.68 | $36,404.00 | $3,640.40 | $90,482.08 |
| 40% | $135,953.15 | $41,487.00 | $4,148.70 | $98,614.85 |
| 30% | $148,660.63 | $46,571.00 | $4,657.10 | $106,746.73 |
| 20% | $161,368.10 | $52,223.00 | $5,222.30 | $114,367.40 |
| 10% | $174,075.58 | $57,942.00 | $5,794.20 | $121,927.78 |
| 0% | $186,783.27 | $63,996.00 | $6,399.60 | $129,186.87 |
Contributions Generally
Reference has been made above to some of the principles applicable in the assessment of contributions. In light of the affidavit material filed by the husband, and the submissions made on his instructions, it seems to me appropriate to refer further to other such principles.
Particularly apposite in the current context are comments made by Justice Kay as part of the Full Court in Aleksovski & Aleksovski (1996) FLC 92-705. His Honour held:-
90. What [the trial judge] had to assess by way of contribution was 18 years where each party provided their labours towards the acquisition, conservation and improvement of assets, and towards the welfare of the marriage generally. Additionally, late in the marriage, the wife received the large capital sum arising out of a motor car accident. In my view whether the capital sum was acquired early in the marriage, in the midst of the marriage or late in the marriage, the same principles apply to it. The judge must weigh up various areas of contribution. In a short marriage, significant weight might be given to a large capital contribution. In a long marriage, other factors often assume great significance and ought not be left almost unseen by eyes dazzled by the magnitude of recently acquired capital. A party may enter a marriage with a gold bar which sits in a bank vault for the entirety of the marriage. For twenty years the parties each strive for their mutual support and at the end of the twenty year marriage, they have the gold bar. In another scenario they enter into the marriage with nothing, they strive for twenty years and on the last day the wife inherits a gold bar. In my view it matters little when the gold bar entered the relationship. What is important is to somehow give a reasonable value to all of the elements that go to making up the entirety of the marriage relationship. Just as early capital contribution is diminished by subsequent events during the marriage, late capital contribution which leads to an accelerated improvement in the value of the assets of the parties may also be given something less than directly proportional weight because of those other elements.
There are no health issues of significance deposed to by the wife. She is a tenured university lecturer and there is no evidence to suggest that she will not continue to work for another eight years until the earliest date she can access her superannuation.
Superannuation
The fact that splitting orders can now be made in respect of superannuation interests does not mean that the nature of those same interests are irrelevant to the s 75(2) assessment. Indeed, it is significant to note that s 75(2) remained unamended at the time of the introduction of Part VIIIB of the Act.
Each of the parties must wait some time until receipt of their respective superannuation entitlements. In the foreseeable course of events, the entitlement of each party to their respective vested superannuation interests will be postponed, at the least, for about 8 years in the case of the wife and about 3 years in the case of the husband. I note that the husband’s expressed intention (which I accept) is that he wishes to continue working until he is 70; his entitlement will arise in that circumstance, in about 7 years time.
The wife will ultimately have available to her a not insubstantial lump sum; the husband will ultimately have a pension that is not commutable to a lump sum.
Upon a splitting order being made, the wife’s lump sum will be rolled into a fund of her choice; the husband will need to continue working for at least another three years or so before he receives any entitlement to any pension.
The husband’s entitlement to a pension will arise some years into the future at which time a reduction in his multiple, which occurs now, will take place. The wife will, in all likelihood, continue to receive as a result of her tenured position, superannuation contributions compulsorily made for her by her employer into her fund.
The wife’s fund will grow significantly by virtue of the injection of a lump sum paid into it as a result of any significant splitting order. It will also likely grow, in turn, as Mr B points out, by reason of the investment of that significantly increased addition to it and those subsequent compulsory contributions.
The wife’s Financial Statement reveals additional superannuation contributions made by her. Unsurprisingly, the husband’s Financial Statement reveals no superannuation contributions by him and, of course, his “employer” does not make contributions for him. All else being equal the wife will be able to make voluntary contributions to her fund into the future. The wife’s superannuation interest/s will, then, likely grow; the husband’s multiplier will be reduced in accordance with the mooted splitting order, but (again, all else being equal) his salary will grow and, therefore, his retirement salary is likely to be higher than the figure postulated using the 2009 salary.
The wife’s superannuation entitlement and the reduction in the husband’s pension actually received will take place not earlier than six years beyond the end of the parties’ relationship and, in the case of the pension, as many as 14 years after its cessation.
The wife’s fund/s will be subject to market fluctuations; the husband’s pension is not and is guaranteed as a (now reduced) percentage of his retiring salary. Increases in Public Officials’ salary may be subject to some fluctuation in the sense of not necessarily following a predictable upward curve, but, as recent world events testify, nowhere near to the same extent as invested funds in equity and other markets.
Assets, Resources and Income
The table above sets out the property and superannuation interests each party will receive upon a division in accordance with the findings earlier made.
The wife will have a substantial, unencumbered home. She may need to share it (or any other home) with one or both children in the future due to their respective health needs.
The husband has equity in two properties, a small debt which can be extinguished with available cash and, if that was to occur, over $600,000 remaining thereafter. The husband repartnered in January 2007 with a woman who is employed as a teacher. He and his partner intend cohabiting in the new year when his partner’s youngest child finishes her VCE. The husband deposes to “running two households” and “generally cohabit[ing] on weekends”. His intentions mean that, in the new year, he and his partner will be running one household.
The wife has secure (tenured) employment. She receives an income of about $83,000 gross. She says, and I accept, that her PhD, which she will soon be awarded, will secure her that income (to the extent that any certainty in that respect exists) as distinct from improving it. The husband currently earns about $289,000 per year. Put another way, the husband’s gross current income is about 3.5 times that of the wife. His income net of tax is about double that of the wife.
As has often been remarked, marriage breakdown – particularly after long relationships - has very significant adverse consequences for its participants. An important aspect of the justice and equity of orders for settlement of property at the end of a long relationship is the capacity provided to each of the parties, to, as it were, “trade their way out” of the significant adverse circumstances. Current and future incomes, the prospects of future employment, and future income-earning capacity can be seen to be very important in achieving justice and equity.
Here, each of the parties can be seen to have a secure current and future income – in the husband’s case, a guaranteed income (in the absence of extraordinary and unlikely circumstances). The disparity in the current and likely future incomes of each party is, though, very significant.
Care of Other’s Children
This matter falls to be considered pursuant to s 75(2)(o) by reason of the decision of the Full Court in Robb v Robb (1995) FLC 92-555.
The husband’s children were aged about 10 and 8 when these parties cohabited; the wife’s son was about 6. The husband’s children commenced living with the parties (and their children) each alternate weekend and half the holidays. The husband says that his son commenced residing with the parties full time when he was about 14; the wife says that occurred when he was about 12. In either event, it was not long after the parties commenced cohabitation and at a time when they had two young children of their own. It seems that the husband’s son continued to live with the parties (and their children) for about the next ten years. The wife deposes to the husband’s daughter living with the parties for about a year when she was 18.
The wife’s son remained with the parties, it seems, during the course of their relationship. There were, then, four children cared for by the parties during the bulk of their relationship – two had by them together and one of each of them from a previous relationship. At least for a short time, there were five children there together full time, when the husband’s daughter joined them for about 12 months.
Each party can in my view properly claim to have played a role in the care of the other party’s children. Fortunately, neither party besmirches the role the other played with their respective children of former relationships.
The financial support of those children was met, in part, from other sources. In the case of the wife’s son, his inheritance provided his school fees and other expenses deposed to by the wife. He now has a significant resource in his own right. Income from the N property, gifted to the husband by his parents, played a similar role in the support of the husband’s children.
But, support is, of course, a much broader concept than financial support. Here, I have found that the bulk of contributions to the family and in the capacity of a parent was provided by the wife; at the same time the vast bulk of the income contributions were made by the husband.
I referred fleetingly above to the “unknowns” in the balance sheet. I note them as a potential future resource for the husband, but place little or no emphasis on them in the overall assessment.
Assessment of s 75(2) Factors
The court makes no pretence that the matters required to be considered by s 79(4)(e) of the Act can be assessed with any sort of mathematical precision. Moreover, a paragraph-by-paragraph attribution of amounts or percentages has been eschewed in favour of a broad assessment of the relevant factors which are sometimes referred to as “the future factors” component of the s 79 assessment.
To my mind, the matters referred to and, in particular, the income disparity between the parties, require an adjustment in favour of the wife.
I observe that the annual difference in gross incomes of the parties is about $200,000. The difference in after-tax income is in the region of $120,000 per year. I note also that the husband is paying about $17,000 per year from net income toward the children.
Here, the property and superannuation interests of the parties total about $4 million. I consider an adjustment of about $200,000 in favour of the wife is required to do justice and equity.
That would see a division of property, superannuation and the pension as follows:
Husband Wife
Asset
Value
Asset
Value
Cash (C property proceeds)
$612256
E property
$1100000
P property
$740,000
Motor vehicle
$6000
Equity K property
$100000
Shares sold
$9492
Motor vehicle
$17000
AMP Life Insurance
$10000
Shares
$20758
TP Project
Nil
Overdraft
($27000)
Total
$1463014
Total
$1125492
Superannuation
Amount
Superannuation
Amount
AXA
$62319
Colonial
$12000
AMP
$16269
Unisuper
$60873
Total
$1525333
Total
$1214634
Adjustment
$50,148
Adjustment
($50,148)
Total
$1,575,481
Total
$1,164,485
Pension
Husband’s pension
$1,242,024
0
($372,600)
Split to wife
$372,600
Notional Amount
$869,424
Amount to wife’s super
$372,600
Total global amount
$2,444,905
Total global amount
$1,537,085
Deduct s.75(2) adjust
($200,000)
Add s. 75(2) adjust
$200,000
Result
$2,244,905
Result
$1,737,085
Result %
56.38%
43.62%
The Justice and Equity of Orders - The So-Called “Fourth Step”
It is first convenient to consider the justice and equity of the result arrived at by reference to what it represents of the totality of the pool of property and superannuation interests. In other words, the result arrived at by reference to the “global” approach might be used as a “cross-check” on the justice and equity of the overall result.
Adding the sum of $200,000 to the entitlement of the wife otherwise arrived at, gives her a total of approximately $1,737,000. As can be seen above, that represents about 43.6% of the “global pool”. That result gives me no cause to reconsider the assessment otherwise arrived at.
Secondly, it is necessary to consider the fact that one component of the interests to be divided is presently-available assets (and some super) and another component is a prospective entitlement to a prospective pension. The difficult question is, do orders which apply to both “pools”, each of which contains “property” with very different characteristics, achieve an overall result which is just and equitable.
Here, there were no submissions made about the “mix” of property that should be reflected in orders save as were made in accordance with the percentage divisions contended for.
There is the possibility of agreement between the parties that would see the approximately $340,000 representing the “split” being met from available assets. For example, the parties might agree that the wife be paid that in cash. That would see the husband having a very modest cash sum at his disposal after payment of the overdraft, but would preserve the entirety of his pension. I am conscious that comparing a “split” of $340,000, which must be paid into a super fund and preserved for a minimum of eight years, with $340,000 in cash is not, as it were, comparing apples with apples. Nevertheless, these sorts of decisions can often have as much to do with personal idiosyncrasies as anything else.
I have considered providing the parties with the opportunity to settle the terms of orders that might give effect to an agreement giving effect to the overall result arrived at by me. However, there has already been a delay of about four months between the receipt of the further evidence from Mr B and these reasons. That delay is longer than is desirable. It is occasioned in part (but not solely) by my need for a medical procedure. Nevertheless, the delay is regretted. There should not be any further delay. Section 79A(1A) can be availed of by the parties if they seek to avail themselves of alternative orders to those indicated.
The ultimate result would see orders affecting both pools and the differing “property” within each. I am satisfied that it is just and equitable in the circumstances of this case. Such a result would see each of the parties with valuable real property and cash; the husband with a larger cash sum, but the wife nevertheless with a reasonable cash sum of $150,000 and a solid superannuation base which can be built on over time. The husband would retain about 83% of the pension he would otherwise be entitled to.
I am, however, concerned that I have no evidence that the trustee of the husband’s superannuation interest is aware of orders effecting a split as proposed by me.
Although not the subject of specific evidence before me, it seems to me likely that the husband’s prospective pension would have a trustee. (For example, s 19 of the Superannuation Industry (Supervision) Act 1993 provides that an eligible superannuation fund must have a trustee of one of the specified types). It seems to me appropriate that the “trustee” of this interest should be accorded procedural fairness in respect of the proposed 70/30 split (see s 90MZD).
I will make orders requiring the parties to formulate the precise terms of orders giving effect to this judgment and to thereafter accord procedural fairness to the trustee of the husband’s superannuation interest.
I certify that the preceding two hundred and four (204) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Murphy.
Associate:
Date: 27 November 2009
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