Jessop and Draper

[2007] FamCA 205

FAMILY COURT OF AUSTRALIA

JESSOP & DRAPER [2007] FamCA 205

FAMILY LAW - Property settlement, spouse maintenance and departure from child support – Argument about many proposed add backs

Family Law Act 1975 (Cth)

Chorn and Hopkins (2004) FLC 93-204;
M & M [1998] FamCA 42;
Farnell (1996) FLC 92-681;

APPLICANT: Mr Jessop

RESPONDENT: Ms Draper

FILE NUMBER: SYF 3573 of 2005

DATE DELIVERED: 16 February 2007

PLACE DELIVERED: Sydney

JUDGMENT OF: Moore J

HEARING DATE: 12, 13 & 14 February 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Lloyd

SOLICITOR FOR THE APPLICANT: Paul & Paul Lawyers

COUNSEL FOR THE RESPONDENT: Mr Lethbridge SC

SOLICITOR FOR THE RESPONDENT: Pearson Family Lawyers

Orders

1. That within 7 days of the date of these Orders the parties are to do all acts and things and sign all documents necessary to list the property at N for sale at the best price reasonably obtainable as follows:

   (a)instruct solicitors to act in respect of the proposed sale and appoint an agent for sale by agreement and failing agreement the appointment is to be made by the nominee of the Law Society and the Real Estate Institute, the costs related to the appointments if any to be shared equally;

   (b)list the N property for sale by public auction within 6 weeks from the date of appointment of the agent;

   (c)set a reserve price for the purpose of the auction as agreed in writing and failing agreement at a price nominated to be the fair market value by the President of the New South Wales Division of the Australian Property Institute, the costs related to the nomination to be shared equally;

   (d)if the bid at auction does not reach the reserve price the parties may negotiate with the highest bidder or any other interested person and sell the property at a price which is not more than 2 ½% below the reserve price or at such other price as they agree in writing;

   (e)if the property is not sold at the auction the parties are to do all acts and things and sign all documents necessary so as to list tit for sale by private treaty with the appointed agent;

   (f)the property is to be listed for sale at a price agreed in writing or failing agreement at the price nominated by the valuer referred to in (c) hereof;

1. Upon completion of the sale the Wife the proceeds of sale are to be applied in the following order and priority:

   (a)discharge of all liabilities as shown in the schedule of liabilities referred to in paragraph 44 of Reasons for Judgment delivered 16 February 2007;

   (b)payment of the sum of $7,568.50 to each of the parties;

   (c)the balance remaining to be distributed 1/3 to the husband and 2/3 to the wife. 

1. From the amounts received pursuant to 2 (b) hereof, each party is to be responsible for paying one half of any amount owing with respect to pool maintenance and/or landscaping work carried out at the N property if satisfied there is unpaid debt and if not so satisfied each will be at liberty to retain the amount received to the exclusion of the other provided there are mutual indemnities provided with respect to any claims for unpaid amounts. 

1. The husband is to assign to the wife the whole of his right, title and interest in the contents of the N home including the artworks with the exception of the following items:

   (i).      the Pewter-mounted glass carafe and jug

   (ii).     a painting

   (iii)     framed display of ten keys

   (iv)     … signed cricket bat in glazed display case

   (v)      the husband’s tool box and power tools

   (vi)Kettler 'Royal Garden' tubular metal outdoor dining suite comprising oblong table (length 190cm, width 104cm) and six chairs plus 2 additional chairs from one of the other 2 settings

   (vii)     … signed bat, signed rugby jersey and rugby ball

   (viii)    boogie board and bag

   (ix)one half of the wine referred to the in the G’s Report and located at the N property

   and the wife is to assign to the husband all her right, title and interest in these items and make them available to the husband for collection by his agent within seven (7) days of the husband giving seven (7) days notice of his intention to remove them. 

1. On or before one (1) month from this day the wife is to transfer to the husband title to the M boat and

   (i)the husband is to forthwith place the boat on the market for sale;

   (ii)sell the boat for $120,000 or at a price agreed with the wife in writing;

   (iii)if not sold on or before three (3) months from the date of these orders the boat is to be offered for sale by public auction at the best price obtainable; and

   (iv)the proceeds of sale of the boat after deduction of any reasonable costs of sale are to be distributed in the proportions of 1/3 to the husband and 2/3 to the wife

   provided the husband is to keep the wife informed of particulars of the sale process including but not limited to any offers to purchase and provided further the wife is to make available to the husband on request the inflatable dingy and motor presently located at the N property.

2. The wife is to do all acts and things so as to cause the monies held by her in trust for the parties’ children to be transferred to an account in the names of herself and the husband and invested by them as trustees for the children to be held upon trust for the children as follows:

   (a)as to one half for their elder son upon and subject to him accumulating savings on his own account in the sum of $5,000;

   (b)as to the remaining half for the provision of a suitable motor vehicle for their younger son upon him obtaining his drivers licence.

3. From any further funds received by the wife from the realisation of the I Limited investment the wife is entitled to deduct the amount agreed by the parties to be payable as capital gains tax as a result of the receipt and failing agreement the amount certified by an accountant appointed by the parties for that purpose and the wife is to pay to the husband on or before 14 days from the receipt of the funds 1/3 of the balance remaining. 

1. On or before one (1) month from the date of these orders the wife is to do all things and sign all documents presented to her by the husband as are necessary for her to:

   (i)resign from any and all positions she currently holds as director or office holder in D Pty Limited;

   (ii).transfer to the husband the whole of her right, title and interest in the shares in D subject to existing encumbrances;

   (iii)assign to the husband the whole of her right, title and interest or liability (if any) in any loan account she has with D;

   (iv)resign all from any and all positions she currently holds as director or officer holder in K Pty Limited;

   (v)transfer to the husband the whole of her right, title and interest in the shares in K Pty Limited subject to existing encumbrances;

   (vi)assign to the husband the whole of her right, title and interest or liability (if any) in any loan account she has with K Pty Limited;

   (vii)assign to the husband the whole of her right, title and interest or liability (if any) in any loan account she has with the O Family Trust;

   (viii)transfer to the husband al her right title and interest in TC, TT Unit Trust and the agricultural Investment subject to any encumbrances. 

1. In the event that the Wife commences proceedings against B, the husband is to give such assistance to the wife and join with her in instructing solicitors and counsel and giving evidence in respect of the wife's claim as is necessary to enable the wife to prosecute the claim.

1. That save as provided in these orders each party is entitled to retain absolutely the ownership of all other property, real and personal, in the ownership and possession of that party at the date of these orders. 

1. The application of the wife for spouse maintenance is dismissed. 

1. There be departure from the current child support assessment pursuant to Section 117 of the Child Support Assessment Act 1989 for the period of the current assessment and the husband pay child support for that period as follows:

(i)the sum of $1885 per month;

(ii)all educational expenses in respect of the attendance by the child at the private school the child presently attends or such other private school as the parties agree upon in writing and such expense shall mean and include all tuition fees, and incidental sporting costs, the cost of text books, school uniforms and such amount towards reasonable extra curricular activities and excursion fees as the parties from time to time agree;

(iii)all instalments for the child at the highest scale to the Health Insurance Fund to be selected by the father and of which he is also a member, including cover for private hospital, optical, physiotherapy, chiropractic, dental and orthodontic expenses in respect of the child and in addition thereto pay one half of any such expenses incurred in respect of the child as are not recoverable from the fund as shall be incurred with the consent of the father except in the case of an emergency.

FAMILY COURT OF AUSTRALIA AT  SYDNEY

FILE NUMBER:   SYF3573/2005

MR JESSOP

Applicant

And

MS DRAPER

Respondent

REASONS FOR JUDGMENT

Proceedings

1. The proceedings relate to property settlement, spouse maintenance and departure from child support which will be addressed in that order.  To provide anonymity the parties will be referred to as Jessop & Draper. 

Evidence

1. The evidence is not extensive.  Apart from that given by each party, the wife called evidence from her sister.  There was also evidence from experts, none of whom were required for cross-examination.  Mr L, accountant, reported as a single expert on the value of various entities and entitlements; Mr A, valuer, reported in a similar capacity on the value of various chattels; Mr G’s report on the value of wine was tendered without objection; there is a report from Professor J, oncologist, concerning the wife’s health; and finally there is a report from Associate Professor H concerning her hearing capacity. 

2. Contrary to the position put for the wife in opening, it was agreed when the evidence closed that contributions to the date of hearing should be assessed as equal.  So far as property settlement is concerned, unresolved differences relate to the assessment of the value of net assets and to the magnitude of the s 75(2) adjustment in the wife’s favour.  There are three points of difference about child support departure: the period it should run; if it runs until the younger son is 18 whether the amount is adjusted according to the CPI each year in October; and the amount of the cash component.  In her spouse maintenance claim the wife seeks $4,000 per month and payment of medical insurance until the first of three specified events occurs.  The husband asks that it be dismissed. 

3. A summary account of the background follows. 

Background

1. The husband (52) and wife (49) began living together in December 1979 and they married in April 1981.  They have two children: the older son (18) was born in October 1988 and the younger son (13) was born in May 1993.  They separated in November 2004 when the husband left the family home at N and moved to rented premises.  The wife and the children have remained living at the family home.  They have since been divorced. 

1. When their relationship began the husbnad was a qualified accountant in employment with a large accounting firm earning $12,000 per annum.  He owned various assets about which there is no contention:

   (a)a half interest in land at S worth about $15,000 which is the price it was sold for about a year later. 

   (b)VW motor vehicle; and  

   (c)some savings. 

1. The wife had some furniture and savings. 

1. When their relationship began the wife has an arts degree with a major in history and a diploma of information management.  In the early 1980’s she worked as a project coordinator in the engineering field and later elsewhere as a public relations manager.  She moved in 1986 to a legal firm where she managed client relations.  She left there before the older son’s birth in 1988.  She later received $15,000 from the firm and used it to buy some chattels.  In 1991 she returned to part time work three days a week as marketing director for another legal firm and this lasted for about six months.  She has not been in paid work since December 1991.  The younger son was born in 1993.  There is an issue about her capacity for work which I shall return to discuss shortly. 

1. The husband’s career has taken quite a different path.  At the time they married he was qualified as an accountant and he was working in that capacity.  In the following year he left to take a position as senior lecturer in taxation law where he remained for almost three years.  In the meantime, in 1983 he began a Masters of Law degree which he pursued in conjunction with his full time employment.  In 1985 he joined a large firm of accountants and that is where his career has kept him since.  He became a partner of the firm in 1987 after almost two years spent on secondment in the political arena as taxation advisor.  Since 2001 he has held his current senior position with the firm.  Over time he has sat on boards related to his field of expertise and he currently holds a senior board position.  He is obliged by the partnership agreement to retire from the firm in June 2012 at the age of 58.  Along the way he became a member of the Executive superannuation fund offered by the firm.  Aspects of his income and entitlements were the subject of submissions and I shall also return to discuss them shortly. 

1. In the course of the marriage they purchased three homes:

   (a)Their first home, at R, was bought in March 1982 for $90,000 and registered in joint names.  The purchase price came from a variety of sources.  This included a secured loan of $50,000, the proceeds of sale of the husband’s S land of $15,000, savings provided by the wife of $5,000, her father provided $10,000, and her grandmother gave them an interest free loan of $10,000.  The balance and related costs came from their own resources.  Renovations were subsequently carried out and they both had a hand in that work in one way or another.  They sold the home in October 1985 for $113,000.

   (b)They then purchased a home in M for $220,000, also registered in their joint names.  The purchase price came from the net proceeds of sale of the R property of $60,000, secured loans of $140,000 secured by mortgage and the balance from their own resources.  Renovations were carried out and landscaping work undertaken in 1990.  Around this time the husband transferred his interest to the wife as part of a strategy to limit exposure to creditors.  In late 1997 they sold the M home for $920,000. 

   (c)Around this time they acquired the home at N for $1,780,000.  This came from various sources: the net proceeds of sale of the M home, a secured loan of $880,000, and the balance from their own savings.  Landscaping work was done at the home in 2001.  A dispute arose with the contractor, Mr B, and rectification ultimately cost over $200,000.  Legal advice was sought about a claim and legal fees were incurred but the wife, as the registered owner of the home, has declined to pursue litigation. 

2. Over the years a number of entities were established for financial planning and investment purposes: 

(a)At some point the J Family Trust was established to receive distributions from the husband’s firm.  The beneficiaries are the husband and persons related to him, including his spouse to whom funds have been distributed each year.  Distributions to her have continued since separation. 

(b)In 1996 the L Superannuation Fund was established.  It is a self managed fund with the husband as the sole member.  The trustee is K Pty Limited of which the parties are directors and the husband holds the two issued shares.  The Fund’s principal asset is investment in a unit trust, the NS Investment Trust.  D Pty Limited is the trustee.  The husband holds the two issued shares.  L Superannuation holds all of the units and receives annual distributions from the Trust which is the net rental income from a residential unit at C. 

(c)In 1996 the D Family Trust was established.  The wife is the trustee and the husband the appointor.  It is a discretionary trust, of which the husband and persons related to him are beneficiaries.  It holds units in a Trust connected with his firm and receives income from interest. 

(d)In March 2003 the T Unit Trust was established.  For a subscription of over $33,700 the wife acquired A and B class units.  It is a vehicle for investment in a company subsequently listed on the ASX, since placed in voluntary liquidation. 

1. There have been a variety of transactions over the years, either related to their investments or from family sources:

   (a)In 1987 the husband received $75,000.00 in settlement of a negligence claim against lawyers who had acted for him in a workers compensation matter resulting from injuries he sustained from a work accident in 1976.  He applied it towards repayment of the mortgage over the M property. 

   (b)In late 1990 a property at F was transferred by the wife’s mother to her and her sister, subject to her mother’s life tenancy. 

   (c)In July 1996 the unit at C, referred to earlier, was acquired by the NS Trust for $291,844.  The funds came from a secured loan and the balance from the L Superannuation Fund which acquired units from funds contributed to the Fund by the husband.  He also guaranteed the loan.  The loan was later reduced by a roll over from the husband’s work related Superannuation Fund.  Improvements were made to the unit during 2003. 

   (d)In 1998 the husband received $65,000 inheritance from his mother.  He put it towards the mortgage over the N home. 

   (e)In September 1999 the wife paid $200,000 for shares in I Pty Limited Ltd which provides investment advice. 

   (f)In December 1999 an investment was made in the wife’s name in a company trading as TC for $25,000 or $30,000.  The money came from an overdraft account in the husband’s name. 

   (g)In June 2002 a long term investment was made in the wife’s name in hardwood timber via a Forestry Management Agreement for payment of around $184,000.  This also came from an overdraft account in the husband’s name. 

   (h)In July 2002 the wife received a gift from her grandfather of $50,000.  She put the money towards repayment of the N mortgage. 

   (i)In July 2002 a property at P was purchased in the wife’s name for $278,929 which came from a secured loan of $270,000 and the balance from savings.  It is rented.

   (j)In December 2003 a property was acquired at A in the wife’s name for $261,180.  The funds came from a secured loan of over $259,000 and the balance from their own funds.  The husband is guarantor of the loan. 

   (k)In mid 2003 the wife received a legacy of $125,000 from her grandfather’s estate and she gave this money to her sister unbeknown to her husband.  Her sister received a bequest at the same time for an equivalent amount. 

   (l)In April 2002 a boat was purchased in the wife’s name for $178,000.  The money came from funds given to the husband by a friend.  There is a yacht club membership in the husband’s name. 

2. At times during the marriage people were employed to assist with cleaning the home, washing windows, gardening and ironing.  The wife also did considerable work in the garden, including design, at N. 

1. In 2001 the older son was diagnosed with cancer.  His treatment and recovery extended over some time.  This was followed by a family holiday for five weeks in Europe. 

1. At the end of 2002 the wife was diagnosed with breast cancer and later underwent an operation followed by chemotherapy and further operations. 

1. Just prior to separation the wife bought a BMW motor vehicle for $96,000 by drawing down $50,000 from the home loan account.  She later sold the BMW for $90,000 and purchased a replacement vehicle for $22,000.  She retained the difference. 

1. Since separation the husband has paid a cash sum to the wife of $3,800 or $4,000 as well as paying a multitude of other expenses more particularly set out in annexure “A” to his affidavit.  These payments have been accounted for from distributions made to the husband from the J Family Trust.  He has also paid expenses related to the investment properties and met the shortfall in income derived from those properties. 

1. In 2006 their older son had an accident and wrote off the motor vehicle that had been given to him.  Ultimately $10,700 was received from the insurance claim and the wife deposited $10,000 to accounts in trust for both boys. 

1. Last December the wife received $210,000 from the compulsory acquisition of I shares.  She has retained these funds. 

1. The wife has paid $73,027 for legal costs and disbursements [exhibit 3] related to these proceedings.  This has come from savings she retained at separation, the sale of the motor vehicle and shares. 

1. The husband has paid $96,800 in legal costs and disbursements [exhibit 2].  That has come from his income earned since separation. 

Property settlement

1. Most of the items and amounts comprising their current assets, liabilities and resources are agreed.  But there are disagreements about various matters and it will be convenient to determine them now. 

   Wine

2. Mr Lloyd removed this item as an add-back to the wife’s assets in light of her evidence that the ‘missing wine’ dispute had resolved to the extent that 200-300 bottles of the wine stock had been consumed since separation.  Instead, he submitted the consumption could be considered as a ‘small’ s 75(2) factor.  Sensibly, he did not elaborate because the proposition is without merit. 

Claim against landscape contractor

1. Mr Lloyd also removed this item as an add-back to the wife’s assets.  Quite apart from the fact that the wife does not intend as owner of the home to make a claim, its removal acknowledges there is no evidence to substantiate any merit if made and nor is there anything to support $200,000 as the probable outcome.  Mr Lloyd proposed, instead, a form of order drafted in a contingent terms which drew no opposition from Mr Lethbridge. 

Gift to sister

1. It was initially submitted by Mr Lloyd that the $125,000 gift should be added back as an asset of the wife’s, but this position was revised and it is accepted by both counsel that the issue should be approached by regarding the amount as notionally retained by the wife when considering the s 75(2) factors. 

Deposit to Visa

1. In December 2006 the wife paid $30,000 from funds available to her to her gold Visa card.  As exhibit 12 reveals, the debit charges for the month were $21,950 which, when added to the opening balance of $5,470, brought total debt to $27,420 and that was less than the deposit.  Mr Lloyd’s argument for adding it back as a notional asset flowed largely from what he called her ‘spirited acquisitions’ of various household items at an earlier time.  Perhaps so, but I do not accept the add-back argument.  It is clear she paid more into the card account than was necessary, though only by relatively small amount, but there was expenditure almost sufficient to match it and it is simply not possible to say the expenditure reflected in the transaction sheets was unreasonable or wasteful or something of that kind.  Any analysis of her spending up to the point she incurred debt of over $27,000 would necessarily mean a corresponding analysis of the husband’s discretionary expenditure.  There is neither the means or need to do either. 

Further I payment

1. Following upon the acquisition of I late last year there are two further potential payments to shareholders.  The amount anticipated is uncertain and ranges between 57 cents and $2.27 per share [see exhibit 14].  Mr Lloyd proposes this uncertainty be dealt with by a separate order distributing the funds ultimately received in the proportions determined after deduction of the capital gains tax payable.  Mr Lethbridge does not argue against that, but proposes some reworking of the draft proposed order. 

1. The terms of the orders set out herein represent what I consider to be a fair and reasonable way of resolving the issue. 

Selling costs of home

1. It is common ground the home is to be sold.  Mr Lloyd’s proposal is that the issue of selling costs be dealt with by a re-drafting of the orders which would provide for entitlements to be met from the net proceeds after payment of all the parties’ liabilities, including the costs associated with the sale.  I agree the issue is capable of being fairly met by drafting of the orders. 

Boat & selling costs

1. The boat has been on the market for some time but has not sold.  It has an agreed value for the purpose of these proceedings of $120,000.  Contrary to the husband’s earlier position seeking a transfer of the boat, it was proposed late in the piece that the boat be transferred to him for sale at the best price obtainable [[the wife] to be kept informed of progress] and the net proceeds distributed in the proportions of their entitlements.  There is an inflatable dingy and outboard at the home to be included in the sale. 

1. This change in direction is resisted.  Mr Lethbridge argued the boat has been valued, it has an agreed value, the husband is the yacht club member, and he can take the boat and do what he wants with it.  Furthermore, it might not be sold for an indefinite period and there are other flaws in the proposal as drafted.

1. All of this is correct.  But if one party does not want to retain an item and intends to sell it, then it should be sold.  In this case there could hardly be any complaint about a late shift in position as reflected in draft orders, for reasons not necessary to discuss.  Account also has to be taken of the fact that the wife has had the boat on the market for some time now, without success.  Whether a sale has not been achieved for reasons related to the market or price or method or some other factor, I could not say.  But if it is to be sold, and in my view the orders should provide for that, then it seems to be time for the other party to have a go at moving it in the market for the best obtainable price.  The orders can see to it that the wife is kept informed of developments and include a time limit for private sale before a default mechanism such as public auction brings it to an end. 

Legal costs

1. Mr Lloyd argued that the legal costs paid by the wife should be added back as a notional asset of hers but those paid by the husband should not be added back to his assets.  The support for this proposition is that her payment came from assets accumulated during the marriage whereas his came from income earned after separation. 

1. Mr Lethbridge, on the other hand, argued legal costs should be both in or both out, with his preference being the former.  He cites paragraph 42 of the Full Court decision in Chorn and Hopkins (2004) FLC 93-204 [per Finn, Kay and May JJ] in the course of his submissions. That paragraph cites from an earlier Full Court decision of M & M ([1998] FamCA 42 but I think that has no particular utility for the arguments here.

1. Plainly the treatment of paid legal fees is discretionary – obviously necessary given the range of sources and circumstances from which they may have been paid – but the approach adopted should be explained.  In this case I propose adding back the wife’s paid fees because the source has been assets that would otherwise be available but for the payment.  I propose also adding back the fees paid by the husband because there is no argument that his assets should include his current savings which have been accumulated from earnings since separation and it is contended on his behalf (successfully) that the liabilities should include the tax payable on that same income.  Consistency and logic suggest there ought to be included also any funds diverted to payment of legal costs because the savings included in his assets would be that much greater but for the payment.  The question of responsibility for costs can be considered more directly on any application after judgment rather than indirectly via construction of the net assets to be distributed. [see Farnell (1996) FLC 92-681].

The husband’s income tax to 2/07

1. There is dispute about whether the estimated unpaid tax payable by the husband on earnings in the current financial year should be brought to account as a debt.  Certainly he has applied his income since separation for his own support, including the support of a certain lifestyle such as overseas holidays, but he has also paid significant amounts of money towards the support of the family and met debt obligations during that period.  The legal fees he has paid and his savings from earnings are included as assets and it follows the tax referable to those earnings should also be included. 

Car insurance proceeds

1. The step taken by the wife to put this $10,000 into a trust account for the two boys was referred to earlier.  She also indicated in the course of her evidence that she had arranged with them to receive a distribution if certain obligations were met.  The husband has no objection to this in principle but he proposes that the money held be paid into a trust account of which they are the joint trustees so that it is a gift to the children from both parents and not only from their mother. 

1. Mr Lethbridge argued against this, mentioning again the lateness of the proposed order, but the substance of his brief submission related to the fact that they would need to communicate with each other about issues related to the fund and the wife could be relied upon to act reasonably in seeing it is given to the boys. 

1. There is no issue about her acting unreasonably, it was never suggested she would do otherwise.  The proposal is more about creating the circumstances in which the children are given the money by both parents.  That is reasonable, in my assessment, because the money belongs to both and constructive communication about an issue directed to their children’s benefit might be a welcome change from their children’s point of view.  The fund will be dealt with as proposed in Mr Lloyd’s submissions. 

Household bills

1. The wife maintains that there is unsecured debt owing totalling $15,137.  This comprises $12,434 for landscape work and $2,703 for pool maintenance.  The invoices suggest this relates to work done quite some time ago.  In the minute of orders provided by Mr Lloyd it is proposed all debts referred to in annexure “A” be paid out of the sale proceeds of the N home.  As pointed out by Mr Lethbridge, “A” includes these two debts but closer attention to the document shows they are asserted there at ‘nil’ by the husband and are marked as not agreed items.  It is also plain that the total debt figure referred to by Mr Lloyd in his submissions of $1.84 million does not include these figures. 

1. The amount involved is relatively small but significant enough nonetheless not to be dismissed as trifling.  I have to say the apparent age of the debt combined with the apparent absence of any demand is less than satisfactory and nor is there any reference to these debts in the wife’s recent financial statement.  Obviously provision should be made for payment of debt where it is found owed, but there is a deal of uncertainty about these.  It seems to me in the final analysis that a fair approach would be to provide for each to receive half of the alleged debt from the proceeds of sale of N and each be responsible for payment of half the amount claimed if satisfied there is debt owing and for there to be mutual indemnities given in respect of any claim for unpaid amounts. 

Retirement benefit

1. As a partner with 20 years service behind him, the husband is entitled on retirement to a year’s income based on average remuneration in the preceding five years to the date of retirement.  For him, this entitlement vests on 1 July 2007 and his compulsory retirement will be in 2012 at age 58.  Obviously there are some contingencies to be factored into assessing the present value of that entitlement and Mr L has undertaken that exercise.  There is no dispute about his methodology or the result.  But there is a difference in result related to one more contingency and that is what the husband does with the benefit when received.  One option is to take the benefit in which case the transitional arrangements of September last for new rules related to superannuation will attract certain rates of tax up to 30 June 2012 to produce an agreed value of $441,000.  The other option is to roll it into a superannuation fund which means it would attract a lower tax rate on the whole amount until 30 June 2012 to produce an agreed value of $495,298.  The question is whether the husband will take advantage of the concessional tax treatment from roll over or take the benefit and pay the higher tax.  Not surprisingly, Mr Lloyd contends for the former and Mr Lethbridge for the latter.  The husband’s own position is that he expects to have to take the benefit rather than roll it over because he will need it to pay debt at the time. 

1. The difference in the figures, referable as they are to a financial resource, is not all that great and therefore it is not an issue of any great magnitude.  But it not without its difficulties because it requires some forecast to be made about events some way into the future and any number of contingencies might come to pass in the meantime.  Nonetheless, in my assessment it should be included at the higher figure.  I accept that the husband will have to re-position himself for the future after this property settlement, as will his former wife, and it is reasonable to see that as including the acquisition of a home in the general area where he now lives, likewise the wife.  In all probability that will involve him borrowing money.  But he will have cash available from this settlement – on either proposed outcome - and he does have a few years ahead yet as a high income earner and very likely a comfortable level of income for a time beyond from the unavoidable change in direction in 2012. 

Assets, liabilities and resources

1. In what follows I have reorganised the lists provided by counsel into a different order that I find more helpful in looking at their different positions. 

To be sold

N home  4,900,000

Less debts to be paid from sale proceeds:
Mortgage N   434,896
Mortgage on A property   238,353
Mortgage P                  260,000
Tax payable by the wife to 12/2/07 (est)                     35,700
Loan to pay previous tax   292,004
V Account   399,180
Second quarter PAYG Tax   71,542
Commonwealth Bank MasterCard  8,780                 1,740,455
Net before selling costs:  3,159,545
M M290 Boat (before selling costs)   120,000

Held by the wife
F property   240,000
P property   280,000
Remainder interest in F   225,000
TT Unit Trust    Nil
TC  Nil
Forestry Investment  Nil
Alfa Romao motor vehicle      18,430
Jewellery  8,110
Contents at N including artwork   25,335
Ski Lodge Membership   15,000
Legal costs paid   73,000
Bank account   236,889
Half wine per G report   14,467
Coles Myer shares   21,150                  1,157,381

Held by the husband
Interest in partnership   123,000
Telstra Shares  1,720
AMP Shares     4,315
Legal costs paid   96,800
BMW motor vehicle   58,235
Wine collection   5,787
Contents  7,270
Half wine per G report   14,467
Bank Account   41,175
   352,769
Interest in Executive Super Fund        157,000
L Super Fund       446,000         603,000                     955,769
Net assets [before selling costs & excluding I payment]                  5,392,695

Financial Resource

Anticipated retirement benefit   495,298

Contributions

1. The agreement to evaluate contributions as equal to the time of hearing means each would be entitled to receive assets worth $2,696,347 though of course as it stands the husband’s share would include $603,000 worth of superannuation which will not be available for some time yet and the wife’s share will include $225,000 as a remainder interest that will also not be available for a time. 

Section 75(2) factors

1. As noted, it is agreed there should be an adjustment in favour of the wife to account for relevant s 75(2) factors but the proportion is not agreed.  Mr Lethbridge contends for 20% whereas Mr Lloyd concedes only 10%. 

1. Before coming to the factors argued in submissions, it will be convenient to dispose of one submission from Mr Lethbridge.  That is to the effect that the husband will be in a far better position to ‘recover’ from the financial consequences of the property settlement.  Though he did not say so, that proposition is akin to findings reflected in longitudinal research about the financial consequences of divorce for women compared to men.  In any event, as Mr Lloyd correctly pointed out, the ability to ‘recover’ is not a ‘factor’ of itself to be found anywhere in s 75(2).  What is to be found in the sub-section are a whole range of considerations to support a projected assessment of the parties’ respective futures, including their income, earning capacity, property and resources amongst other often important considerations such as the responsibility for dependent children.  The process entails a weighing of one projection of the future having regard to the probabilities against the other, and while an assessment of the ability to ‘recover’ may broadly underlie the resulting forecast, in my view it is more useful to remain focussed on what the sub-section requires be taken into account. 

1. The equality of contributions concession applied to the net assets as found will result in each party retaining assets to the value noted earlier and as the assessment of relevant s 75(2) factors is to take into account the property of the parties, their contribution entitlements are borne in mind.  That said, naturally the figures set out earlier will not represent the reality because there are assets to be sold - one of them is their major asset - and the actual sale price will very likely differ from the agreed value for present purposes and selling costs have not been brought to account.  There is also the I share proceeds, to be dealt with by a separate order, and that money is not reflected in the figures.  It is also to be borne in mind that the assets each are to retain on either proposal will include assets not immediately available; for example, the wife’s assets include a remainder interest in the F home and the husband’s assets include his interest in the partnership and superannuation.

1. Having said that, the first area that drew submissions is income and earning capacity.  Dealing first with the husband, there is no doubt he is a high income earner measured by any standard in the community.  Of course that fluctuates according to profitability of the partnership from year to year, but a combination of the figures in Mr L’s report [p.64] for the period from 2003 to 2005 and the actual 2006 figures in exhibit 4 demonstrate that to range between $600,000 and over $800,000 gross per annum.  Subject to the usual vicissitudes of life, it can be anticipated the husband will continue to hold his senior position in the partnership until retirement and he will continue to earn a high income around that level in the meantime.  It is clear from Mr L’s assessment of the husband’s level of notional salary that presently he could command from the market in one sector or another [eg law, investment banking, corporate or non-executive director roles] an equivalent or greater remuneration than he receives now.  But beyond retirement his position is a little more opaque.  Even so, at the age of 58 the husband would have a number of years of working life ahead of him and with the wealth of experience he has in a field that is able to command the sort of remuneration he now receives, I think it reasonable to see him as able to earn a very comfortable income beyond 2012 for a number of years.  From his income and earning capacity, therefore, he will be able to support and further his capital position at the end of these proceedings. 

1. The wife’s position is quite different for a number of reasons.  First it can be said without any real controversy, I would have thought, that in assessing her earning capacity some impaired physical capacity has to be taken into account.  One consequence of the operative procedures she underwent is a reduced ability to lift weights.  Perhaps that is no real inhibitor to many fields of employment, but I accept it is a reality for her nonetheless.  The other relates to her hearing which is the subject of Assoc Professor H’s report, which amongst other things finds her to have significant hearing loss in both ears.  His opinion was expressed this way:

   ‘I am of the view that this degree of hearing loss would significantly impair her ability to engage in employment that involved telephone usage communication with clients or significant communication with work colleagues.’

2. Being unchallenged, I accept that assessment and therefore I accept there are limitations on the fields of employment for which the wife would be equipped by reason of her hearing impairment, which clearly must effect functioning.  That said, I do not accept that hearing impairment of itself – even the extent of loss suffered by the wife according to the H report – means an inability to perform paid work.  It may be a matter of changing direction or selecting more limited fields or retraining, but it cannot be accepted that someone cannot do paid work because they are hearing impaired.  That would be plainly contrary to community reality and nor does the opinion above suggest anything to the contrary.

1. The real issue here is not so much these physical disadvantages.  It is the disadvantage that derives from examination of her age, qualifications and experience, which all operate against her, partly because of the role she took within the marriage, apparently by consensus if not agreement, at least from 1991.

1. Now 49 years of age, the wife completed her tertiary education before marriage and that equipped her with an arts degree and a diploma in information management which, as I apprehend it, would qualify her to work as a librarian though it is likely to also include other information management fields.  Whatever that was, it is accepted she had skills that equipped her for the workplace and she used those skills to work in several capacities up until the end of 1991.  The progression of her hearing difficulties is not particularly apparent, but the H report notes her reporting she has been wearing hearing aids since she was about 29 years of age.  Assuming this is correct, that would put it around 1986 and so it can be said that she was in employment beyond the introduction of hearing aids.  Of course there may well have been deterioration since then, but the point is more that some level of hearing impairment did not prohibit work at an earlier time. 

1. A key consideration is more her lack of experience.  It is more than 15 years since she was in the paid workforce and that has to be seen as a real impediment to getting employment now.  That is not to say it is impossible, but in all likelihood it is a substantial obstacle.  I must say her position would have been clearer had she confronted the question of work and income earning capacity at some point prior to this and put to the test such qualifications and experience and interests as she has.  Absent that, one is left with the extrapolation and speculation apparent from this brief discussion.  I should add that Mr Lloyd’s cross-examination canvassed the possibility of her doing landscape gardening, because the wife is a keen gardener with some skills in that area, and interior design.  But it is unrealistic to expect these interests could be converted into paid work without any qualifications or experience to support them, and I also think it unrealistic to suppose she could find work as a librarian given the age of her credentials in information management and the strides plainly made in that area over the last 15 years.  The more realistic path would be for the wife to retrain in some field of her choosing, taking into account at the same time her hearing impairment.  There is no reason she could not do so and I think she ought to be seen here as able to do so, within limits.

1. That leads me to conclude that the wife presently has no discernible earning capacity, but she could equip herself for paid work consistent with her hearing impairment with a period of retraining in some direction of her choice.  That would be a matter for her in the future of course, and she may well choose not to do so, but it should be seen as open to her from the perspective of these proceedings. 

1. All that said, it is also plain that even if she did pursue paid work through retraining in some field it is highly unlikely to give her any more than a relatively modest income and certainly nowhere near the kind of money that the husband can command.  The delay in any ability of the wife to exercise an earning capacity and the huge differential in any future earnings is a substantial and significant factor weighing in her favour here. 

1. Financial resources are also to be brought to account and considered.  Noted earlier was the view that the gift made by the wife to her sister of $125,000 in 2003 should be seen here as a resource in her hands and also noted earlier was the resource available to the husband by means of his future retirement benefit of over $495,000.  This is a fairly large difference. 

1. The husband’s superannuation entitlement has been included in the assets and so does not constitute a separate financial resource to be brought to account here.  I have noted already that by including it in his assets it is recognised that it is not immediately available and that has its disadvantages, but by the same token by being put aside into a fund it will constitute a source of funds for the future and more importantly growth in the fund can be anticipated in the time before it is received.  Similarly, the wife’s remainder interest will be a source of funds in the future.

1. As parents, they have agreed about the younger son’s arrangements for the future and consent orders have been made putting that into effect.  That will mean he will live primarily with his mother and spend regular time with his father during school terms and during school holidays.  This spreads a disproportionate responsibility in terms of time spent.  They will also each have responsibility for meeting his financial needs while he is in their care, subject to the child support paid by the husband.  The departure application is to be addressed shortly but the outcome of that is factored into this consideration.  The younger son is now 13 years of age and therefore he has a few years of dependency before he attains his majority and moves beyond the scope of these proceedings.  Over those years the responsibility related to his care overall favours the wife. 

1. The 20% adjustment proposed by Mr Lethbridge when applied to net assets of $5,392,695 amounts to $1,078,539, whereas the 10% urged by Mr Lloyd amounts to $539,269.  Added to the wife’s contribution entitlement, that would give her assets to the value of $3,774,886 or $3,235,616 compared with the husband retaining assets worth $1,617,808 or $2,157,078.  That would result in an overall differential in what they would take away of $2,157,078 or $1,078,538.  Seen in this light, it is my view that these proportions represent opposite ends of a range that is too wide.

1. In my opinion, the adjustment ought to be 16.66%.  That would result in an overall distribution in the proportions of 2/3:1/3 in the wife’s favour.  Such an adjustment would give her in monetary terms a further $898,422 and take her assets to the value of $3,595,130.  The wife would be left with assets to the value of $1,797,565 and the overall differential of course would be $1,797,565. 

Just and equitable

1. What follows is based on the figures set out in the asset/liabilities lists earlier and assumes, for the purpose of the following analysis, that each will retain the assets they presently hold.  Having said that, it appears to be common ground from the orders proposed by each that the wife will take the interest in the TT Trust, the TC and the Forestry investment, but they are each valued at nil their shift to him from the wife’s assets will have no impact.  The only asset remaining that may be removed from her assets and transferred to him is the ski lodge membership.  The amount involved is relatively small but if that is their common purpose then the figures in the discussion to follow will differ to that extent.  Subject to that, the effect of the apportionment means that the wife would receive cash of around $2,437,749 [$3,595,130 less $1,157,381].  In addition, she would be free of debt [save for any additional legal costs no doubt] and, with additional cash at bank of almost $237,000, this would bring her available cash to almost $2.675 million.  Her other assets would include two income producing properties, both unencumbered, a motor vehicle, household contents, some shares and other minor chattels.  She would also receive 2/3 of the I share payment in the future.  The husband, on the other hand, would receive cash of $841,796.  When his cash savings of $41,175 are added, his cash component rises to $882,971.  He will also receive 1/3 of the I payment in due course.  He would also be free of debt, save for any additional legal costs, and his other assets would include a motor vehicle, some household contents, and shares.  He would also be left with his superannuation entitlements which form by far the greater proportion of the assets he presently holds and of course he would be left with his considerable earning capacity. 

2. It remains to consider whether the apportionment should be satisfied in part by a split of the husband’s superannuation [his application] or whether the distribution should leave the wife with more of the available cash and no split [her application].  Not a lot was said about what there is to put on one side of the sales or the other.  Both are looking to acquire a home in which to live though at this stage there is no way of knowing how much will reasonably be spent for that purpose by either.  Obviously any decision of that kind will have to take account of their available funds and resources.

3. Ultimately I take the view that leaving the husband with his superannuation and the wife with more of the available cash will represent the more just and equitable outcome in the circumstances.  That is largely related to his earning capacity.  It will have ramifications for her spouse maintenance claim which I shall come to next. 

Form of orders

1. The proposed orders are presently in draft form for consideration on publication of this judgment by the parties’ legal representatives who will be given the opportunity to peruse them and make any corrections or amendments to form before they issue under seal.  There were some proposals in the minutes proposed that did not feature in any of the closing submissions, such as the provision of photographs for copying and the like and they can be added if that is common ground.  It may well be also that the ski lodge membership is to go to the husband.  Those matters can be incorporated before orders issue. 

Spouse Maintenance

1. This application falls to be considered pursuant to s 72 of the Act which imposes on a spouse a liability to maintain the other spouse to the extent they are reasonably able to do so if the spouse is unable to support herself/himself adequately whether by reason of having the care of a child under the age of 18 years, incapacity for appropriate gainful employment or any other adequate reason having regard to any relevant s 75(2) matters. 

1. There is a threshold question to be determined and that is whether, in this case, the wife is unable to support herself adequately.  Her needs, according to her financial statement, amount to $2,134 per week, putting aside the expenditure related to payment of mortgages which will be paid out on settlement of the sale of the N home.  This would require an after tax income of $110,968 to support if not curtailed. 

1. The initial consideration is whether the wife has the capacity to adequately support herself.  This has already been discussed and need not be repeated here.  Plainly she presently cannot adequately support herself and she will need the support the husband has provided to continue until at least she receives her property settlement. 

1. The next consideration is whether receipt of her property entitlement will give her the capacity to adequately support herself.  She will have assets worth almost $3.6 million and there will be a cash component, excluding the I receipt, of almost $2.675 million.  From that she will purchase a home for herself which the children will share for so long as they remain living with her.  How much will be put towards that – or is reasonable put towards that - and therefore how much she will have left over is the ever present dilemma when assessing spouse maintenance claims co-incidental with property settlement.  It means a broad view of the situation has to be taken. 

1. On my analysis, even if the wife spends a good proportion of the cash received on a home, it ought to be possible to budget to retain a tidy portion of the cash to invest in such manner as she may be advised to provide an income stream for the future.  In addition to that, assuming she retains them, she will have two unencumbered income producing properties that will provide her with a separate stream of rental income.  That is just under $1,000 per week and of course there are expenses to be deducted from this.  Nonetheless, with cash for investment and these two properties available it ought to be possible to structure her financial arrangements in such a way as to adequately support herself in the future.  She will need ongoing support in the meantime until the sale of the N home is settled and that is best achieved by continuing the arrangement for the husband to pay her additional funds over and above his child support obligation.  I fix that at $2,000 per month.  In addition to this obligation and child support, the husband will be required to continue paying the outgoings related to property, including mortgages on investment properties, until the settlement of the sale. 

Child Support

1. It is not necessary in this case to canvas the law related to the need to establish a ground for departure from child support assessment because the application and response both seek to achieve a departure. 

2. The current assessment is for payment of approximately $1417 per month and the assessment period is from 12 January 2007 to 11 April 2008.  Turning first to quantum, the wife seeks payment of $2000 per month plus all education expenses and payment of private health insurance; the husband proposes the cash component remain at the current assessment and he agrees to pay education and health insurance cover.  Obviously the difference is not great. 

3. H’s needs are set out in Part N of the wife’s financial statement and total $910 per week.  This excludes education expenses which are paid by his father and are around $22,000 per annum.  But review of the particulars suggests some pruning could reasonably be made to the claim for his expenditure, repairs and maintenance and cleaning are examples, because reasonable proportionality has to be maintained.  Even so, the younger son is a 13 year old boy with the usual range of interests and needs, no doubt, and the cost of his support apart from his education expenses and time spent with his father is likely to still be relatively significant.  In my assessment, putting aside his education costs and health insurance, a reasonable figure would be in the order of $435 per week which is $200 each week over and above the weekly household food expense attributed to him from a total weekly expenditure of $680.  That translates to $22,620 per annum or $1885 per month.  In my assessment that is a proper measure of child support to be paid for the younger son, at least so far as his father’s cash contribution is concerned. 

4. As for the duration, I can see no reason to depart from the statutory framework of periodic assessment and nor was any argued.  In saying that, I acknowledge both parents have sought a departure on this occasion and in all probability when the next assessment issues in 2008 they will take a similar view.  But circumstances change and there may be advantages one way or the other for the younger son in the situation being reviewed at that point.  I propose therefore to limit the departure to the period of the current assessment and not project either his needs or parental obligations over the next four or five years until he turns 18 years of age.  It follows there will be no CPI component in the order. 

____________________________________________________________________

I certify that the preceding seventy-four (74) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Moore

Associate: 

Date:    16 February 2007

IT IS NOTED that this judgment for all publication and reporting purposes be referred to as JESSOP & DRAPER