JUAREZ & JUAREZ (No.2)
[2009] FMCAfam 1188
•13 November 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| JUAREZ & JUAREZ (No.2) | [2009] FMCAfam 1188 |
| FAMILY LAW – Property and maintenance – 29 year marriage – 3 children over the age of 18 years at trial – net pool just under $3M – delay of 5 years between separation and trial – where husband made redundant following trial and before judgment – where value of shares and superannuation decreases following economic downturn – where parties given leave to reopen and adduce further evidence – where argument on add-backs – whether leave entitlements and retention bonus should be included in pool – how to treat payments made during marriage to husband’s mistress without knowledge and consent of wife – assessment of contributions – where wife seeks adjustment for her role being more onerous because of husband’s affair – where husband seeks adjustment for increasing net worth of parties post-separation – whether wife made contributions to redundancy payment – where argument over what adjustment should be made to wife under s.75(2) – where wife suffers poor health and ceased work on medical advice – where husband’s future employment prospects uncertain – where husband has 8 year old child, not of marriage, with special needs. Where husband’s leave entitlements and retention bonus included in net pool – where payments to mistress treated as add-back – where court found contributions overall to be equal – no Kennon adjustment in favour of wife – where wife was found to have contributed to redundancy, leave and retention payments – where no extra adjustment made for husband’s post-separation contributions – where wife received 10% adjustment under s.75 (2). |
| Family Law Act 1975 (Cth), ss.75, 79 |
| AJO v GRO (2005) FLC 93-218 Challen & Challen [2007] FamCA 1292 In the Marriage of Kowaliw (1981) FLC 91-092 Kennon & Kennon (1997) FLC 92-757 R v Industrial Commission (SA); Ex parte Adelaide Milk Supply Cooperative Ltd (1977) 44 SAIR 1202 Russell & Russell (1999) FLC 92-877 Phipson & Phipson [2009] FamCAFC 28 Clauson & Clauson (1995) FLC 92-595 |
| Applicant: | MS JUAREZ |
| Respondent: | MR JUAREZ |
| File Number: | BRC 11607 of 2007 |
| Judgment of: | Purdon-Sully FM |
| Hearing dates: | 21-22 August 2008, 27 April 2009 |
| Date of Last Submission: | 21 May 2009 |
| Delivered at: | Brisbane |
| Delivered on: | 13 November 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr Page SC |
| Solicitors for the Applicant: | Jones Mitchell Lawyers |
| Counsel for the Respondent: | Mr Thistleton |
| Solicitors for the Respondent: | Frazi Lawyers |
ORDERS
That within seven (7) days of today’s date the wife’s legal representatives prepare a Draft Minute of Orders reflecting the judgment.
IT IS NOTED that publication of this judgment under the pseudonym Juarez & Juarez (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRC 11607 of 2007
| MS JUAREZ |
Applicant
And
| MR JUAREZ |
Respondent
REASONS FOR JUDGMENT
Introduction
The husband and the wife, who were married for 29 years, are unable to agree on their property entitlements.
The husband had a successful career in the insurance industry. Throughout their marriage his employment required him to travel extensively, including overseas. The family lived in Auckland, Singapore, Sydney, Kuala Lumpur and Brisbane.
The wife’s main role was that of homemaker and primary carer of the three children of the marriage. She worked from time to time outside of the home however her evidence was that “throughout the marriage (I) supported the advancement of [Mr Juarez]’s career. This included periods of study when [Mr Juarez] has been able to gain additional qualifications…. I have left employment where I had prospects of advancement and also where I enjoyed significant job satisfaction to support [Mr Juarez]’s prospects.”
Orders sought
The wife seeks a settlement representing 65% of a net pool of $2,991,391 (inclusive of superannuation) or $1,944,404.[1]
[1] See para.28 of written submissions of Mr Page dated 6 May 2009 however the calculation of the net pool recorded therein does not accord with the additions in the document headed “Parties Contend for the Calculation of the Pool” handed up at the second trial.
The husband seeks that the wife receive a settlement in her favour of $1,199,355 (inclusive of superannuation) which is just under 41% of a net pool of $2,926,781. [2]
[2] See pages 5 & 10 of written submissions of Mr Thistleton dated 15 May 2009
The issues
Whilst there are a number of issues which I shall identify in the course of my discussion of the evidence and relevant principles, the principal issues for determination are:
a)What should or should not be included in the net pool for division between the parties including add-backs and a retention bonus and leave entitlements received by the husband.
b)What assessment should be made of the parties’ contribution-based entitlements, in particular:
i)Should the wife receive an adjustment in her favour as a consequence of what she contends was the husband’s negative contribution in conducting an extra-martial relationship for 40% of the marriage resulting in the husband being unavailable to the family and her role being more onerous; and
ii)Should the husband receive an adjustment in his favour for his contributions post-separation in increasing the value of the net pool.
c)What assessment should be made under s.75 (2) given the wife’s poor health and the impact of the marriage upon her ability to earn an income and given the husband’s retrenchment and responsibility to support his eight year old son.
Background
The wife is aged 57 years, having been born [in] 1951 in the United Kingdom. She has ongoing health problems associated with deep vein thrombosis, musculoskeletal pain, cholesterol and depression.[3]
[3] Affidavit of Dr G filed 1 August 2008; para 29 Wife’s Affidavit filed 1 August 2008
The husband is aged 57 years, having been born [in] 1952 in New Zealand. Save for some health issues, he enjoys good health.
The parties married [in] 1974 in the United Kingdom. There was no period of cohabitation prior to marriage.
The parties separated on 10 February 2003.[4] The duration of their marriage was accordingly 29 years.
[4] Para 7 Wife’s Affidavit of Evidence in Chief filed 1 August 2008
A decree nisi of dissolution of the marriage was pronounced on
13 November 2007.
There are three children of the marriage, [V] - aged 33 years, [Y] - aged 32 years and [Z] - aged 26 years. All live independently.
The wife has not re-partnered. She resides in Brisbane in a property purchased in the parties’ joint names in October 2006.
The wife has worked in administrative positions however she is currently not working on medical advice. When employed she was able to derive an income of about $23,000 to $55,000.
The husband was employed with the [P], a member of [S]. The husband’s taxable income for the financial year ended 30 June 2008 was $375,772.[5]
[5] Exhibit R to Husband’s affidavit filed 21 April 2009
On 21 October 2008 the husband was informed by his employer that his position was to be made redundant effective 28 November 2008. He was retained until 31 March 2009 however that was extended to
30 June 2009.
He is to receive a termination payout of $216,000 (rounded) including a redundancy payout and leave entitlements. He is to receive a retention bonus of $25,000.
The husband’s retrenchment triggered the payment of novated leases on three motor vehicles owned by him and a requirement to take up shares held in trust with his employer.
The husband has re-partnered. He resides in Sydney with Ms T and their son, [X], aged 8 years. Ms T is a full time homemaker.
[X] attends primary school. He has a mild intellectual disability with some autistic tendencies.[6] He also has some language disorder.[7]
[6] Exhibit 1 – report of Dr C dated 8 April 2008
[7] Para 48 Husband’s Affidavit of Evidence in Chief filed 5 August 2008
The husband commenced his relationship with Ms T during the marriage. He bought her and [X] to Australia in February 2003, informing the wife of the relationship at that time. The parties separated shortly thereafter.
At separation the wife agreed that the husband would handle their finances and property for their mutual benefit.[8] By 2006, the wife was seeking to effect a division of the parties’ property and by 2007 she had instituted property proceedings.
[8] Para 28 Wife’s Affidavit (supra); Para 16 and Annexure D Wife’s Affidavit of Evidence in Chief (supra); para 28 Husband’s Affidavit of Evidence in Chief Ibid
Evidence
The trial proceeded on 21 and 22 August 2008.
On 27 October 2008, before I had handed down my judgment, the husband notified his intention to seek leave to adduce further evidence.
The basis of the husband seeking to reopen was firstly, the impact of the volatility of the share market on the value of the parties’ shares and the husband’s superannuation fund and secondly, that since the trial he had been given notice of retrenchment.
On 29 January 2009 I gave both parties leave to reopen their case and adduce fresh evidence.
The matter was listed for further hearing on 27 April 2009.
At the first trial both parties gave evidence and were cross-examined.
The wife relied upon the material detailed in her Case Outline filed on 18 August 2008 together with her further affidavit and Financial Statement filed on 24 April 2009.
Dr G, her medical practitioner, was not required for cross-examination. Mr B, a Director of the Litigation & Forensic Accounting Division of [omitted], Chartered Accountants was required for cross-examination.
Mr B was engaged by the wife to prepare a report in relation to the parties’ shareholdings.
The husband relied upon the material detailed in his Case Outline document, an unsworn letter from [X]’s paediatrician, Dr C (Exhibit 1) dated 8 April 2008, his updated affidavit and an affidavit of his accountant, Mr R filed on 21 April 2009. Neither Dr C nor Mr R were required for cross-examination.
There were some 3 exhibits for my consideration.
I do not propose to make any general comments about the credibility of the parties. Insofar as I need to make findings of fact I will make any comments I need to make on credit during the course of my discussion about the matters relevant to my considerations.
I do not propose to address every submission made but in reaching my decision I have considered all submissions.
Objections to evidence
The husband and wife each raised objections to evidence and rulings were made, save for two objections taken by the wife to the evidence of the husband in his affidavit filed on 5 August 2008.
In relation to the objection to paragraph 35, Counsel for the husband submits that the husband has an obligation to disclose his financial affairs and that his evidence is purporting to say what the value of property would have been in 2008 had that been left in the manner in which it was at the date of separation in 2003. However I uphold the objection of the wife on the basis of it being opinion and having no probative value.
In relation to the objection to paragraph 37, Counsel for the husband submits that whilst the first sentence of that paragraph is an opinion or conclusion it is there to assist the court and does the arithmetic and makes the conclusion that is available from the balance of the paragraph. However I find the first sentence to be inadmissible for the reasons advanced by Senior Counsel for the wife. I find that balance of the paragraph to be relevant and admissible evidence as the husband sets out what he did in terms of the parties’ investment mix post-separation.
Legal principles
In AJO v GRO (2005) FLC 93-218 at 79,619 the Full Court outlined the four steps that a Court is required to take in determining property proceedings.
These steps involve identifying the net property of the parties, considering the contributions of the parties under section 79(4) of the Family Law Act 1975 (“the Act”) expressed as a percentage of the net value of the property, and considering any relevant section 75(2) factors to determine whether any adjustment should be made to the contribution based entitlements of the parties.
Finally, the Court must consider if the orders it proposes to make are just and equitable.
Applying the law to the circumstances of the case
What is the value of the net pool?
The issues for my determination in assessing the value of the net pool of property are numerous and I propose to deal with them under the following headings:
a)What value should be ascribed to the shares held by the parties at the date of the second trial?
b)Should the QBE shares owned by the wife at the first trial be included in the net pool?
c)Should the wife’s estimate of CGT in the sum of $13,362 on the sale of 4,056 QBE shares be included as a liability?
d)Should the legal fees paid by the wife from the sale of QBE shares and by credit card be treated as an add-back?
e)What value should be ascribed to motor vehicles on lease?
f)Should the husband’s leave entitlements be included in the pool?
g)Should the husband’s retention bonus of $25,000 be included in the pool?
h)Should the husband’s MasterCard debt in the sum of $6,000 be taken into account?
i)Should the estimated tax in the sum of $80,640 on disposal of [S] shares be included as a liability?
j)Should the payments to Ms T be treated as an add-back?
I will now proceed to consider each of these matters.
What value should be ascribed to the shares held by the parties at the second trial?
Save for a parcel of QBE shares which I propose to deal with separately, I find the value of the shares to be as ascribed by the husband, that being the value as at 24 April, 2009, the last working day before trial.[9]
[9] The wife had ascribed a value as at 20 April 2009
Should QBE shares owned by the wife at the first trial be included in the net pool?
By consent orders made on 15 February 2008 the husband transferred to the wife QBE shares to a value of $100,000.
At the first trial the wife owned QBE shares to the value of $54,428, the balance having been expended by her on legal fees. By the second trial however, the wife had disposed of further QBE shares, the remaining shares having a value of $631.
Counsel for the husband submits that the court would include the sum of $54,428 in the pool as the wife has not adequately explained what she did with the money she received from the proceeds of the sale of further QBE shares. However justice and equity considerations require that they be included in the pool at a value of $631 as contended by the wife.
The basis upon which I reach this conclusion is as follows:
a)The wife’s evidence is that she applied the sale proceeds towards the payment of further legal fees and her living expenses. She adduced evidence of her weekly expenditure and prior to the second trial the wife adduced up-dated evidence in relation to her income and earning capacity, her health issues and the impact of that on her ability to derive an income. Part N of her Financial Statement filed on 24 April 2009 included a schedule of her average weekly expenses. Part I adduced evidence of her property including shares and funds held by her on deposit.
b)There was no real challenge at the first trial to the particularity or reasonableness of her expenses or her disclosure in relation to same and no challenge was made to her expenditure or disposal of monies or the level of disclosure at the second trial.
c)There is no evidence to suggest that the wife’s weekly expenditure as deposed to by her in either of her Financial Statements was unreasonable.
d)Given the evidence as to her health and employment there is no evidence to suggest that the wife could support herself adequately at least from May 2008 and at the second trial she had ceased work on medical advice.
e)I accept that her circumstances would have justified an order for interim spouse maintenance and the transfer of the shares enabled her to provide the means to support herself adequately.
Should the wife’s estimate of CGT in the sum of $13,362 on the sale of 4,056 QBE shares be included as a liability?
Counsel for the wife submits that there is evidence of the wife’s GCT on the sale of shares and that that is found in:
a)the unchallenged evidence of the wife at para.54 of her affidavit filed on 1 August 2008;
b)the unchallenged evidence of the wife at para.24 of her affidavit filed on 12 December 2008; and
c)the evidence of Mr B at para.12 of his report annexed to his affidavit filed on 8 August 2008.
However there is no admissible evidence that would enable the amount of $13,362.11 which the wife claims as a liability to be taken into account against the sale of her QBE shares.
The evidence of Mr B does not deal with the consequences of the sale of 4,025 QBE shares. Nor does he give evidence of a CGT liability of $13,362.11. His evidence at para.12 does not relate to this issue and his evidence at para.13 relates to the tax consequences to the wife of a sale of 4,500 QBE shares which he put at $7,301.
Whilst I accept that there is a likely tax consequence to the wife of the sale of the shares, in circumstances where she adduced evidence in her case from Mr B at the first trial, inter alia, on issues to do with tax consequences of the sale of QBE shares, where Mr B’s calculations at para.13 of his report had been calculated on a sale of only 1,029 shares and a notional calculation for the unsold shares, where those calculations were based on further assumptions and where the husband had raised objection at the first trial to what he contended were unproven underlying assumptions made by Mr B, it was incumbent on the wife to adduce further expert evidence on this matter at the second trial.
I accordingly propose to exclude as a liability the sum of $13,362.11 calculated by the wife as payable by her on the sale of the shares.
Should the legal fees paid by the wife from the sale of QBE shares and by credit card be treated as an add-back?
During the course of oral submissions on 22 August 2008,
Mr Thistleton for the husband sought that the sum of $42,300 (in lieu of $35,935) representing the value of the QBE shares sold by the wife to meet her legal costs and the sum of $31,901 (in lieu of $26,901) paid by the wife for her legal fees by accessing the joint credit card should be included as an add-back.
The source of those figures was the evidence of the wife under cross-examination and the additions in Exhibit 3.
The husband contends that the policy of the Family Law Act1975 is that parties should pay their own legal fees and that by the husband paying the wife’s fees he has made a distribution of assets in her favour. He contends that if the advance of the monies is not to be treated as an add-back it would amount to an order or provision requiring the husband to pay the wife’s costs. However, as Murphy J observed in Challen & Challen [2007] FamCA 1292 at para.75 whether fees are added back is “part of the s.79 exercise and is accordingly governed by the principles of justice and equity” and in my discretion I do not propose to treat the payments as an add-back.
The basis upon which I have reached this conclusion is as follows:
a)There was a significant disparity in the financial circumstances of the parties following separation notwithstanding the wife having the use of rent/mortgage free accommodation and a fully maintained motor vehicle.
b)Following separation and the parties entering into an agreement on the management of their property and finances, the husband was able to access a significant income to which the wife had indirectly contributed over a long marriage and from which he was able to pay his own legal fees.
c)There was nothing improper or unreasonable in the wife using these funds from the sale of shares or the credit card to meet payment of legal costs and there was no challenge to the reasonableness of the quantum of the sum applied.
d)Further, the payment of the legal fees by the wife from the credit card was with the consent in writing of the husband and it was not part of that agreement that the legal fees be accounted for or characterised in the proceedings in a particular way.
What value should be ascribed to motor vehicles on lease?
The unchallenged evidence of the husband is that the payout on the three motor vehicles exceeds their value and he will incur a loss in the sum of $54,318 on a trade-in scenario or $35,468 if the vehicles are sold by private sale. He contends that in determining the quantum of liability the Court should accept that the value of the vehicles lie between the best private sale and lowest trade-in value.
However given the magnitude of the differential in the quantum of loss on the two scenarios I do not accept that it is reasonable for the husband not to seek to maximise what he is able to secure for the vehicles which on his evidence would require the vehicles to be sold by private sale.
Further the evidence of the husband is that he has previously sold his Holden Calais privately, albeit before the credit crunch and the wife’s unchallenged evidence is that he also privately sold the motor vehicle formerly driven by her at the conclusion of its lease.
I accordingly propose to fix the motor vehicle short fall at $35,468.
Should the husband’s leave entitlements be included in the pool?
The husband contends that his termination payment in the sum of $216,174.01, which includes a redundancy payment and annual and long service leave entitlements should be broken into its component parts and that whilst the redundancy component in the sum of $126,384 should be included in the pool the leave components are not property, but wages and should be treated as a resource, not property. However in the circumstances of this case the better course is to include the full amount of the termination payment, without segregation, in the pool and consider its receipt in the context of the parties’ pre and post-separation contributions.
The basis of my reaching this conclusion is as follows:
a)It would be contrary to justice and equity principles, in the circumstances of this case (including the history and nature of the husband’s executive employment), to draw “a line in the sand” at January 2003 and assert that because the parties separated a month later that the wife’s pre-February 2003 contributions should be ignored in considering any employment benefits, including leave entitlements that accrued to husband post-February 2003.
b)The husband’s annual and long service leave entitlements are an entitlement of his employment and an indirect remuneration arising from his employment. Whilst the particular employment arose shortly before separation and the period of the marriage did not cover the whole of the period of the accrual of either leave entitlement, I am not prepared to ignore the circumstances and history of the husband’s executive employment, and the wife’s significant indirect contribution to that. Nor am I prepared to ignore the agreement reached following separation relating to the pooling and use of matrimonial property and resources.
c)The husband’s entitlements to annual and long service leave are not insignificant in quantum and he will receive these as a capital sum.
Should the husband’s retention bonus of $25,000 be included in the pool?
The husband contends that the retention bonus was to be paid to him over and above his normal salary to keep him with his employer and thus should not be included in the net pool. However the interests of justice and equity require it to be included in the circumstances of this case.
In the context of the nature of this payment which was to encourage the husband who had a skill set of value to his employer (the husband’s evidence being that it was to enable him to “close out a number of key matters I’m personally and currently handling”), a skill set in executive employment to which the wife made significant contributions over 29 years it would be unjust to the wife to not treat this once off payment associated with the husband’s employment as property and exclude it from the pool.
Further there is no question that the payment would crystallise on the husband remaining in continuous employment until 31 March 2009, which was the case.
Should the husband’s MasterCard debt in the sum of $6,000 be included in the pool?
Whilst further written submissions were made by both counsel with respect to this liability following the April 2009 trial, it was conceded during submissions at the first trial that the liability of $6,000 to MasterCard had already been taken into account in the figure for legal fees of $31,901 and represented a double accounting and for that reason it was not pressed by the husband.
Should the estimated tax in the sum of $80,640 on disposal of [S] shares be included as a liability?
Senior Counsel for the wife submits that the tax benefits arising from the pre-payment of tax will lie solely with the husband and that nothing has been put before the Court by the husband to show the tax effect of the pre-payment and without that the Court cannot assume that the liability will remain at all. However the husband’s employment was terminated, the shares have been transferred from the trust, there is no issue that the transfer triggers a liability and no challenge was made by the wife to Mr R’s estimate or otherwise.
Whilst Senior Counsel submitted there was controversy on this issue he did not respond to the submissions in reply of Counsel for the husband on this matter which appear at para.45 of his written submissions dated 15 May 2009. Nor did he seek to cross-examine the husband or Mr E at the second trial on the benefits that would likely accrue to the husband.
I accordingly propose to include this sum as a liability in assessing the net pool.
Should the payments to Ms T be treated as an add-back?
The wife contends that without her knowledge or consent the husband provided financial support to Ms T which money was not otherwise available to the household and which monies represented something in the order of about 2.5% of the value of the net pool at separation based on the husband’s evidence that the net pool was worth about $1,311,075 and that had those monies not been expended in that fashion and been available at separation the monies could have been invested by the parties before and following separation. She seeks some contribution based adjustment for the amount expended by the husband. However in my view it is more appropriate to treat the payments to Ms T as an add-back.
The basis upon which I have reached this conclusion is as follows:
a)
The husband’s evidence is that he did not financially support
Ms T, save for the period from June 2000 to February 2003, this being at the rate of about $10,000 per annum. He estimates that all up he paid her no more than $30,000 by way of direct financial support. He produced no documentary evidence by way of corroboration to support this evidence however given that the relationship was clandestine it was probably unsurprising that he did not keep records. His evidence was that he also, on one occasion, spent some of his holidays travelling to Malaysia to spend time with Ms T;
b)There was no evidence before the court from Ms T.
c)No evidence was adduced at trial of the value, at trial, of a sum of $30,000 had that been invested on a particular basis in 2003.
d)The best evidence is that provided by the husband.
e)I find that as a result of the husband’s actions not less that $30,000 was disposed of by him without the wife’s knowledge and consent in circumstances where had the wife’s consent been sought it would be more likely than not that it would have been refused. The effect of the payments made was to minimise the value of the net pool of property in a fashion that I am unable to determine on the evidence.[10]
[10]See In the Marriage of Kowaliw (1981) FLC 91-092
In my view the principles of justice and equity require that those funds be brought to account as an add-back.[11]
[11] See Challen & Challen [2007] FamCA 1292
Conclusions on the value of net pool
I accordingly find the net pool to have a value of $2,982,465 (rounded) as follows.
| DESCRIPTION | OWNER | VALUE |
| REAL PROPERTY | ||
| Property E | Joint | $674,000 |
| Property E mortgage | Joint | ($55,000) |
| Property E mortgage | Joint | ($221,992) |
| Property T | Husband | $788,000 |
| Property T mortgage | Husband | ($231,317) |
| Property W | Husband | $454,000 |
| Property W mortgage | Husband | ($268,871) |
| TOTAL | $1,138,820 | |
| EQUITIES & CASH | ||
| 35,000 QBE shares | Husband | $727,650 |
| 3,000 QBE shares | Husband | $62,370 |
| 3,000 QBE shares | Wife | $62,370 |
| 100,000 Paladine | Husband | $403,000 |
| [S] | Husband | $6,674 |
| [S] transferred 16.4.08 | Husband | $3,275 |
| [S] transferred 27.8.08 | Husband | $29,400 |
| [S] transferred 22.12.08 | Husband | $58,800 |
| [S] transferred 15.2.09 | Husband | $43,518 |
| QBE shares | Wife | $631 |
| Add-back QBE shares disposed of by wife | Wife | $22,226 |
| Tax on disposal of [S] shares | Husband | ($80,640) |
| Westpac Account [2] | Husband | $5,628.41 |
| Westpac account [8] | Joint | $104.31 |
| ING account | Wife | $46 |
| Suncorp account [7] | Husband | $4,316 |
| GE Credit | Wife | ($3,087) |
| Add-back payments to Ms T | Husband | $30,000 |
| TOTAL | $1,376,281.72 | |
| FURNITURE/MOTOR VEHICLES | ||
| Property E furniture | Wife | $13,350 |
| Property T furniture | Husband | $5,480 |
| Motorcycle | Husband | $5,000 |
| Motor vehicles on lease (private sale) | Husband | $142,200[12] |
| Leases | Husband | ($177,668)[13] |
| TOTAL | ($11,638) | |
| MISCELLANEOUS | ||
| Stamp Collection | Husband | $25,000 |
| Redundancy & leave payout | Husband | $216,174 |
| Retention bonus | Husband | $25,000 |
| TOTAL | $266,174 | |
| SUPERANNUATION | ||
| BT Superannuation | Wife | $33,588 |
| Optimum Superannuation Master Plan | Husband | $179,240 |
| TOTAL | $212,828 |
[12] Para.32 Affidavit of husband filed 21 April 2009
[13] Ibid.
| DESCRIPTION | VALUE |
| SUMMARY | |
| Real Property | $1,138,820 |
| Equities & Cash | $1,376,281 |
| Furniture and Motor Vehicles | ($11,638) |
| Miscellaneous | $266,174 |
| Superannuation | $212,828 |
| TOTAL NET PROPERTY | $2,982,465 |
How are the parties’ contributions to be assessed?
The particular issues for my determination are:
a)Should the wife receive an adjustment in her favour for the impact upon her role as a consequence of the husband’s relationship with Ms T?
b)Should the husband be given an additional weighting for his efforts post-separation in increasing the value of the net pool?
Before I turn to those issues, as at 6 April 2009, the unchallenged evidence is that the value of the husband’s superannuation interest was $179,420 (rounded).
It is common ground that when the parties separated the husband had superannuation of $70,000.[14]
[14] Para.6 Husband’s Affidavit of Evidence in Chief (supra); Para.8 Affidavit of wife (supra)
The husband contended at the first trial that as his superannuation entitlements, with a then value of some $205,000 (rounded), had grown as a result of his post-separation contributions, the fairest approach was that the wife receive one-third of that fund, being in effect the amount that existed at separation.
The husband contended that it would be manifestly unjust for all of his superannuation to go to the wife’s side and it would not reflect the contributions or the circumstances in which the parties found themselves. He accordingly sought that I adopt a “two-pools” approach to my consideration of superannuation. However in the circumstances of this case, it would be not be just and equitable for me to exclude the husband’s superannuation from the net pool and consider that separately. I accordingly propose to adopt a “global” approach in my consideration of superannuation.
My reasons for reaching this conclusion are as follows.
As Murphy J noted in Challen & Challen (supra) in considering whether to use the “global” approach or “two-pools approach” it is necessary for the Court “to consider the particular nature, form and characteristics of the superannuation interests in arriving at a s.79 conclusion.”
In circumstances where:
a)the husband’s superannuation at separation was accumulated over the period of a long relationship and the wife made significant indirect contributions to that;
b)the husband rolled out his entitlements at separation into his current fund and the value of that fund was the amount to which further contributions were added by him, the final value at trial being therefore reflective of not only the post-separation contributions but the contributions held by the husband at separation to which the wife had indirectly contributed during the marriage;[15]
c)the parties’ agreement at separation was to pool their resources to enable the husband to use his skill to effectively manage and increase property for their mutual benefit using, on his evidence, the appropriate investment mix, timing, tax management and the application of his income and benefits to assets;[16]
d)Counsel for the husband conceded some “arbitrariness” about the husband’s proposed approach in the treatment of superannuation; and
e)I am satisfied that I am able to appropriately assess the husband’s contributions without the need to exclude one specie of property from the pool.
it would do an injustice to the wife to adopt other than a “global approach”.
[15] Annexure G Husband’s Affidavit of Evidence in Chief (supra)
[16] Paras. 38 and 44 Husband’s Affidavit of Evidence in Chief
I will now proceed to discuss the issues identified in paragraph 75.
Should the wife receive an adjustment in her favour for the impact upon her role as a consequence of the husband’s relationship with Ms T?
The wife seeks 55% of the net pool based on an assessment of her pre and post-separations contributions, with an adjustment in her favour as a result of the husband’s negative contribution arising from his extra-marital relationship over a period of some 11 years which resulted in the wife assuming, she contends, a more onerous role due to the husband not being available to the family her evidence being that he was often away and that the family did not holiday together as frequently as other families.[17] However, I am unable to find on the evidence, that this is an “exceptional case” or that the wife’s contributions were made “significantly more arduous” such as to warrant the adjustment sought by the wife.
[17] Para.27 Wife’s Affidavit filed 17 December 2007
The wife’s evidence is that her significant homemaker and other contributions arose in part as a consequence of the husband’s work responsibilities which involved extensive travel commitments associated with his employment and her assuming responsibility for the family’s relocations.[18] Save for one holiday which on the husband’s evidence he took overseas specifically to continue his relationship with Ms T, his evidence is that the other trips were associated with his work.
[18] Para.109 Wife’s Affidavit (supra); see para.7(b) & (c) Wife’s Case Outline (supra)
I am unable on the evidence to assess the extent of any additional burden to the wife arising from the husband’s relationship in the context of her otherwise significant contributions to the welfare of the family.[19] Nor am I able to find that the conduct complained of resulted in, as the Full Court majority (Nicholson CJ and Fogarty J) in Kennon & Kennon (1997) FLC 92-757 observed, a “significant adverse impact” upon the wife’s contributions or made her contributions “significantly more arduous.”
Should the husband be given an additional weighting for his efforts post-separation in increasing the value of the net pool?
[19] Para.14 Wife’s Affidavit of Evidence in Chief (supra)
Counsel for the husband submits that the husband should receive 64.5% to reflect his significant contributions post-separation to the acquisition of property and the increase of the parties’ net worth following separation and the addition of the redundancy to the net pool.[20] He submits that whilst the wife’s contributions during the marriage were equal to those of the husband the wife made no matching contributions to the acquisition of assets post-separation including the redundancy payment.
[20] Para.47 Written submissions of husband dated 15 May 2009
However, I find that the wife’s contributions post-separation were significant and threefold:
a)firstly, as a consequence of the wife’s agreement the parties’ property at date of separation was used post-separation for the purpose of the acquisition of shares or as a “springboard” to acquire other shares;
b)secondly, the parties’ property was used for borrowings to acquire property; and
c)thirdly, the wife continued to make primary contributions to the welfare of the children.
The basis upon which I have reached this conclusion is as follows.
Following separation the parties agreed that the husband would continue to manage their assets and their finances. Both saw this as providing them with benefits. Both made contributions to this end, the husband in applying his skill, acumen and income and the wife in exposing herself to debt, constraining her lifestyle and decision-making to achieve that outcome.
The wife’s evidence in this regard, which I accept, is, inter alia as follows:
·[Mr Juarez] proposed at separation and since that he should continue to handle our finances which he stated at all times that he was doing for our mutual benefit. [Mr Juarez] commented that my cooperation enabled the asset pool to be increased.[21]
·At separation [Mr Juarez] requested and I agreed initially that he continue to manage the asset pool for our mutual benefit… I have been constrained in my lifestyle since separation and foregone being able to make and enjoy my own choices in this regard.[22]
·I consented to [Mr Juarez] remaining in control of assets after separation on the basis that I would benefit equitably….[23]
·[Mr Juarez] insisted on maintaining control of the assets representing to me by emails, letters and personally, that this would be for our mutual benefit.[24]
[21] Para.16 Wife’s Affidavit of Evidence in Chief (supra)
[22] Para.102 Ibid
[23] Para.28 Wife’s Affidavit filed 17 December 2007
[24] Para.15 Ibid
The wife’s further evidence, which I accept, is that inter alia, her lifestyle became “very controlled” by the husband, that she was unable to purchase Property E in her own name, that the husband reneged on an agreement to take over the “interest only” loan on the purchase of the Property T property and that he kept minimal balances in the parties’ joint account. By 2006 and thereafter the wife’s evidence is that she was seeking to effect a settlement with the husband, however without success.
Pursuant to the parties agreement, the husband purchased real property (being the Property W property which was purchased in his sole name shortly after separation utilising the sale proceeds of the matrimonial property, this property being the residence where he and Ms T thereafter resided,[25] the Property E property which was purchased in joint names utilising the sale proceeds of the former matrimonial home at [omitted] where the wife had resided following separation,[26] and the Property T property, utilising the sale proceeds of the former matrimonial home.[27]) He traded in shares. He received and managed rental, interest and dividend income and he applied his income in a tax effective way to avail himself of investment opportunities and to increase the parties asset position.
[25] Para.29 Ibid
[26] Para.30 Ibid
[27] Para.31 Ibid
In an email to the wife dated 6 April 2007 the husband recognised the wife’s cooperation in this regard when he said:
Over the four years we’ve been apart that position has grown considerably, (some fourfold). In the last 9 months alone that wealth has increased by $1.5m and I have every expectation the momentum will continue. This position has been achieved through a combination of my current earning capacity, targeting borrowings and effective tax minimisation. My ability to do this has been underpinned by a settled relationship with you that kept those assets in tack…
…… I understand that you have felt inhibited in doing some things but, equally, I am also constrained.
So long as I am able, I want to continue providing that support s part of my commitment to you and to our family. At the same time I want to be in a position to maximise our assets in preparation for the time when I will eventually pass through my maximum earning period and head into retirement. And you should also note that I’m able to provide tax effective support to you through, for example, the novated lease on your car……
However I do have a problem if, along with divorce you wish to split our assets in a way that will limit my ability to maximise our position – a particularly important point while I remain at the peak of my earning capacity……
Over the past four years I have been pursuing every dollar I could to reinvestment opportunities e.g. the Property W apartment and the [P] shares. This has included more borrowings to take maximum advantage of those opportunities because deductions for interest on loans for investment purposes at my current marginal rate are a highly effective strategy. As long as I’m earning good money I want to continue to do this as this period will be the last in my corporate working life I’ll have to do so.”[28]
[28] Annexure D Wife’s Affidavit of Evidence in Chief (supra)
The husband and wife achieved what they sought to achieve in 2003, namely an increase in their wealth, by pooling their resources during a time of economic prosperity.
In the end the parties appear to have differed on the use of the
Property E property, occupied by the wife, for borrowings, the wife seeking to be mortgage-free and the husband seeking to robustly pursue investment opportunities.
Mr Thistleton for the husband in support of his submissions on contribution referred to the acquisition of particular property post-separation and the circumstances of that. However the property owned by the parties at trial had their genesis in or was otherwise referrable to the parties’ cohabitation, to the property in existence at the date of their separation and the contributions they each made to that property over a lengthy marriage.
For example, whilst [S] shares were acquired post-separation they were acquired by reason of the husband’s occupation, it being an occupation that he had assumed prior to separation, an occupation that he had not only acquired and improved himself in during the period of the marriage but it had been at the expense of the wife’s own career advancement.
Whilst the husband’s post-separation contributions should be acknowledged, there was no special contribution by him for which he should receive an adjustment in his favour, the parties’ respective contributions pre and post-separation being part of the “matrix” of this marriage, the facts of this case not falling into that small category of cases where a party’s particular entrepreneurial skills warranted an adjustment in their favour.
Further, during this period, the wife’s evidence is, and I accept, that post-separation she “continued to contribute all my earnings towards my (and the adult children’s) living expenses and conservation/maintenance of property held in the asset pool, to the extent of my ability”[29] and that the husband “contributed his income and management of the asset pool not solely for the benefit of us both, but also for the benefit of his household with Ms T and their 7 year old child.”[30]
[29] Para.103 Ibid
[30] Para.104 Ibid
In addition to her contribution to her household and her efforts by way of preservation of the Property E property the wife also made significant contributions to the children, two of whom lived with her for periods of time following separation and one of whom was studying and only moved out of her home to live independently shortly before trial. The wife’s contributions in attending to the interests of the children must be appreciated in the context of little evidence of input from the husband who was residing interstate.
The decline in the value of shares post the first trial does not impact on my assessment of the contributions of each of the parties.
Redundancy and leave payments
With regard to the redundancy payment in the sum of $126,384, the husband contends that as that is referable to the husband’s employment with a start date at 1 January 2003, and as the parties separated in February 2003, the wife made no contributions to that. However, the redundancy payment was a benefit received by the husband from his employment. Whilst received after separation it related to employment to which the wife contributed over a long marriage, including the husband’s ability to pursue a career, earn an income and receive benefits from the company that paid the redundancy.
Further I accept the submission that the relativity of that total payment to the total asset pool, does not support a finding that the contributions of the husband should be increased by the redundancy payment.
I do not accept the husband’s contention that the wife made no contribution to the leave entitlements and retention payment. These payments arose, again, from the husband’s employment to which the wife made a significant contribution.
Conclusions on contribution
Having regard to the evidence and to the factors that I have outlined, I assess the parties’ overall contribution as being equal. This would entitle each of the husband and the wife to $1,491,232 (rounded).
Section 75(2) factors
Both parties seek an adjustment in favour of the wife under s.75 (2) of the Act, the husband putting that at 5% of the net pool[31] and the wife at 10%.[32]
[31] Para.51 Written submissions of Counsel for husband dated 15 May 2009
[32] Para.25 Written submissions of Senior Counsel for the wife dated 5 May 2009
I have earlier referred to the parties’ personal details when outlining the background to this matter.
Unfortunately the wife has experienced on-going health problems that I find impact upon her quality of life and her ability to pursue employment. At the date of the second trial she had ceased working on medical advice. It is uncertain when or if she will be able to return to employment.
The wife’s episodes of deep vein thrombosis (DVT) have required hospitalisation, including emergency hospitalisation. She has been advised that she has some permanent damage to her lung tissue and is on life long medication. By the second trial she had been referred to a cardiovascular specialist for further investigations following a further serious recurrence of DVT and severe leg pain. On 7 April 2009 she was again admitted hospital following a further embolism episode.
I found the wife to be a witness of credit. She did not seek to embellish her evidence on health matters.
I do not accept that the wife’s health problems have either been dealt with or under control, as submitted by Counsel for the husband. The wife’s unchallenged evidence, at the second trial was that she had only recently been discharged from hospital after being admitted to the Coronary Care Unit by ambulance.
The husband enjoys good health save for some cholesterol and arrhythmia which is monitored and controlled by medication. Whilst his evidence is that that these conditions may lead to further complications in the future he adduced no evidence in this regard at trial.[33] There is no evidence to suggest that the husband’s good health will not continue.
[33] Para.46 Husband’s Affidavit of Evidence in Chief (supra)
The husband’s evidence at the first trial was that he intended to work for the next 10 years provided his health remains good.[34] He acknowledged at the first trial that with the constant restructuring in his industry he could not guarantee that he would be working in his current (or similar) roles past 60 years and that if he became redundant or lost his employment that due to his age he would not be easily re-employed.[35]
[34] Para.45 Ibid
[35] Para.45 Ibid
The husband has been made redundant and whilst still working at the time of the second trial his efforts to obtain work past June 2009 have been unsuccessful. He had not received a response from his employer to his email dated 27 March 2009 seeking to clarify issues relating to his role.[36]
[36](Annexure F to Husband’s affidavit filed on 21 April 2009
Whilst his future employment circumstances are unclear, the redundancy related to his position becoming redundant through no fault of his, not to him (his work skills and knowledge) becoming redundant.[37] He received a retention payment because of his skill and value to his employer.
[37] See letter from Mr N, Executive General Manager to husband dated 29 October 2008 being Annexure C to Affidavit of Husband filed on 21 April 2009; See also dicta of Bray CJ in R v Industrial Commission (SA); Ex parte Adelaide Milk Supply Cooperative Ltd (1977) 44 SAIR 1202 at 1205
I cannot ignore, therefore, that notwithstanding the termination of his employment and the fact that he had not been able to secure employment post June 2009, he has a history of consistent and remunerative employment in the same industry, an industry that he acknowledged was susceptible to change and in which he has forged an impressive career.
As the Full Court observed in Clauson & Clauson (1995) FLC 92-595 at 81,911, it has long been recognised “that in most cases the most valuable “asset” which a party can take out of the marriage is a substantial reliable income-earning capacity.”
The husband impressed me as an intelligent and capable man. By reason of his employment history and skill set I am satisfied that it is more likely than not that he will be able to obtain remunerative employment if any further overtures to [S] prove unsuccessful.
Further his evidence is, and I accept, that since separation he has been a capable manager of the parties’ finances and assets. There is nothing to suggest that he will not continue to manage his property and income wisely and with acumen notwithstanding recent challenges or that he will not otherwise overcome any deficit created by a change in employment or a period of unemployment.
Even if the wife was able to resolve her health problems and resume employment, the income that she would likely earn would be significantly less than the income derived by the husband and with no the ability to access the range of benefits that the husband has been able to access at an executive level.
Further the wife does not have the business acumen and financial management skills of the husband. Whereas the husband has been comfortable in his own ability to pursue a robust financial course, the wife’s concern has been to be debt-free and to have the security of a predictable income stream.
Neither party has the care of a child of the marriage however the husband has a financial commitment to support [X]. He will likely be primarily responsible for his support for at least 10 years.
Ms T is a full time homemaker and she has the primary care of [X].[38] The husband financially supports Ms T.
[38] Para 47 Husband’s Affidavit of Evidence in Chief (supra)
[X] has special needs and for those reasons (along with Ms T’s language difficulties) I accept that she is unable to work outside of the home and that the husband’s financial support of her is necessary in the context of a “necessary” commitment in the support of [X].[39]
[39] Para 47 Ibid
There is no evidence that the cost of responding to [X]’s special needs will be a significant impost on the husband and they are not reflected in his Financial Statement.
Whilst it is more likely than not that Ms T’s language difficulties will improve the longer she resides in Australia, thus making it possible for her to enter the workforce at some stage if she is so minded given that [X] is attending school, I accept that it is more likely than not that the primary care of [X] will continue to fall on Ms T.
The wife has no commitments to support another person.
During their relationship the parties appeared to enjoy a comfortable standard of living.
The wife’s assumption during the marriage of the homemaker role and care of the children and her support of the husband’s career advancement has negatively impacted upon her capacity to support herself.
The wife, at her age, has only been able to accumulate a modest amount of superannuation as opposed to the husband’s ability through his employment to maximise his superannuation benefits.
Conclusions on s.75 (2) factors
Overall I am satisfied that there should be an adjustment to the parties’ contribution based entitlements in favour of the wife and I assess that at 10%.
In Clauson (supra) the Full Court observed at 81,911 that the critical issue was the need to consider “the real impact in money terms” of any adjustment. In Russell & Russell (1999) FLC 92-877 at 86,439 the Full Court also observed that it was “the justice and equity of the actual orders not of the percentage division which must be considered.”
In dollar terms, a 10% percent adjustment amounts to a sum of $298,246 (rounded).
That represents a disparity in the value of property received by the parties of 20% and it is that disparity of $596,493 (rounded) that I must also consider in determining a just and equitable result (see Phipson & Phipson [2009] FamCAFC 28 at 39).
Having considered those matters, in the exercise of my discretion, I am satisfied that a 10% adjustment in favour of the wife is an appropriate adjustment.
The effect of that is a division of 60% or $1,789,479 (rounded) to the wife and 40% or $1,192,986 (rounded) to the husband.
Is the order just and equitable?
In dividing the total net pool of assets and superannuation as to 60% to the wife and 40% to the husband I am required to consider if such an order then satisfies the requirement of justice and equity under s.79(2) of the Act.
I propose that the wife receive/retain the following property in accordance with my findings as to value:
| DESCRIPTION | VALUE |
| Property E | $674,000 |
| 3,000 QBE shares | $62,370 |
| 31 QBE shares | $631 |
| ING account | $46 |
| Property E furniture | $13,350 |
| BMW | $53,800[40] |
| Superannuation | $33,588 |
| Super split | $147,131 |
| QBE parcel of shares | $727,650 |
| Less GE Credit | ($3,087) |
| Sub total | $1,656,456 |
| Cash adjustment from husband | $80,000 |
| Total property | $1,789,479 |
[40] Private sale value
I find that this mix of property satisfies the demands of justice and equity for the following reasons.
The husband seeks that the wife takes the Property E property subject to two mortgages which total $276,992.[41] However given the wife’s age, health and circumstances and where the parties have sufficient assets otherwise available it would place an unreasonable impost on the wife for her to assume an indebtedness that equates to slightly more than 40% of the value of her home. These liabilities would diminish the amount of income available to her and given her financial circumstances she would not be able to service the mortgages. Further, on the husband’s proposal the only source from which the wife would be able to discharge that liability would be the sale of the shares that he proposes that she receive which would reduce any income she was able to derive from those shares.
[41] Order 1.9 Husband’s Case Outline (supra) page 2
I am further satisfied that the wife should receive the BMW unencumbered as part of her settlement as it is specially configured to suit her back condition. I am not prepared to make the order sought by husband, being order 3 of his Minute of Orders, for the reasons submitted by Senior Counsel for the wife and where, given the value of the net pool, the payment of the debt on the wife’s motor vehicle can be otherwise accommodated.
Whilst the husband seeks that the shares held by him be apportioned as to 36.5% to the wife and in such fashion as to ensure that the cost base of the shares is distributed between the parties in the same proportions, in the circumstances of this case where wife has reduced income, health issues and uncertain employment I accept that she should receive the entire parcel of QBE shares which will enable her to derive a modest fully franked income stream to meet her reasonable needs.
Having sold shares received by her to meet not only her legal costs but her living expenses and maintenance of her home, I accept that she has a proven need for income in order to meet her reasonable needs and there is no evidence to suggest that that will not continue into the future.
Whilst on the wife’s proposal she would receive/retain superannuation with a total value of $211,035 ($33,588 + $177,447)[42] and on the husband’s proposal she would receive $87,360 ($33,588 + $53,772)[43] I am not satisfied that either scenario effects a just and equitable outcome.
[42] Para.27 of Written submission for wife dated 5 May 2009
[43] Order 1.6 Husband’s Case Outline page 2 - as amended during oral submissions
On the wife’s proposal the husband would receive 1% of his superannuation or $1,792. Whilst he proposes to continue to work and has the capacity to earn a high income and build upon his superannuation as a consequence, he is 57 years of age.
On the husband’s proposal the wife would receive superannuation that would not significantly increase given her age, health and employment prospects.
The parties’ superannuation could be apportioned as to 60% to the wife and 40% to the husband. On that basis the wife would receive $127,696 resulting in a superannuation split in her favour of $94,108 and the husband would then retain superannuation of $85,132. On that adjustment the wife would then receive a cash adjustment from the husband of $133,023.
However the wife is seeking a cash adjustment in the sum of $80,000, albeit calculated on a particular division of property.
The husband proposes no cash adjustment to the wife however I accept that as the wife is unable to support herself adequately and will have a need for income unless she returns to the work force and/or utilises her capital it is not unreasonable that she receive cash in the mix of assets that will also provide her with a buffer against the exigencies of life.
Based on a cash adjustment of $80,000 to the wife, she would receive a superannuation split in the sum of $147,131. The husband would retain superannuation in the sum of $32,109.
I am satisfied that a mix of those assets in that proportion would achieve a just and equitable outcome.
On the division proposed by me:
The wife will receive:
Non superannuation assets $1,608,760
Superannuation assets $180,719
The husband will receive:
Non-superannuation assets $1,160,877
Superannuation assets $32,109
In considering this outcome I have taken into account the needs of the wife at her age, the impact of the marriage on her work skills and employment opportunities, her health and the impact of that on her ability to derive an income and her desire to effect a financial settlement that achieves reduced debt levels, income, superannuation and access to cash.
The wife’s evidence is, and the submissions of the husband’s counsel were, that the wife was a person who was interested in being mortgage free and knowing where she stood. This settlement provides her with that outcome.
She should be able to meet any capital gains tax liability arising from the earlier sale of shares.
The effect of my orders will be that the husband will retain real property (one income producing), shares of significant value, redundancy, leave and retention payments and superannuation.
Whilst the husband will assume a greater level of debt, receive modest superannuation and be required to raise funds to pay out the wife, in seeking to service debt access to income and capital, as opposed to the retention of superannuation may be of greater benefit to him at this stage.
He will exit the relationship with professional skills, a work history and financial acumen. This is notwithstanding his age and the general economic position in Australia.
He is intelligent, capable and healthy. There is no reason to assume that he will not be able to obtain employment, continue to earn a good income, (even a very good income if he is able to secure employment at the same level that he has enjoyed) and build upon his superannuation, notwithstanding his age.
He conducted his case on the basis that it was because of his good management and acumen that he was able to grow the parties’ assets from 2003 onwards and that remained his position at the second trial notwithstanding the economic downturn.
His evidence in his Financial Statement showed that over and above the income from his employment he was able to derive an income from managed investments that exceeded the income of the wife.
Notwithstanding the uncertainty at trial with his employment he retains the ability and knowledge to structure his estate in such a way to advance his position.
Orders
Save for the quantum of the superannuation split in favour of the wife I propose to make the orders sought by her in Annexure B to her Counsel’s written submissions.
I propose that within 7 days of today’s date the wife prepare a form of orders consistent with this outcome.
I certify that the preceding one hundred and sixty-five (165) paragraphs are a true copy of the reasons for judgment of Purdon-Sully FM
Associate: M Ledger
Date: 13 November 2009
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