Keegan and Webber

[2016] FCCA 2685

FEDERAL CIRCUIT COURT OF AUSTRALIA

KEEGAN & WEBBER [2016] FCCA 2685

Catchwords:
FAMILY LAW – Property – setting aside orders – West and Green formula used to calculate wife’s share in husband’s superannuation in 1999 – superannuation trustee claims orders inconsistent with Part VIIIB of the Family Law Act – orders set aside as “impracticable” pursuant to section 79A of the Family Law Act.

Legislation:

Family Law Act 1975, pt. VIIIB, ss.75, 79, 79A, 117

Federal Circuit Court Rules 2001, sch. 1, pt. 1

Cases cited:

White & White [1999] FamCA 29

West and Green (1993) FLC 92-395

BAR v JMR (No 2) (2005) FLC 93-231
R v R [2005] FamCA 1097
M v M [2006] FamCA 913
Hickey & Hickey & Attorney General for the Commonwealth of Australia (2003) FLC 93-143
Cahill & Cahill [2003] FamCA 172
Fields v Smith [2015] FamCAFC 57

Applicant: MS KEEGAN

Respondent: MR WEBBER

File Number: DNC 214 of 2015

Judgment of: Judge Young

Hearing date: 17 May 2016

Date of Last Submission: 17 May 2016

Delivered at: Darwin

Delivered on: 18 October 2016

REPRESENTATION

Solicitors for the Applicant: Ms L Morgan of Hunt & Hunt

No appearance by or for the Respondent

ORDERS

1. That the applicant provide a minute of order reflecting the reasons for judgment.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DARWIN

DNC 214 of 2015

MS KEEGAN

Applicant

And

MR WEBBER

Respondent

REASONS FOR JUDGMENT

1. This is an application by the wife for an order setting aside some property orders made on 5 February 1999 by Moore J in the Family Court of Australia[1]. The wife does not seek to set aside all the orders but only the orders about superannuation. The relevant orders were:

   9.  That upon the husband’s resignation or retirement from his employment he is to forthwith pay to the wife the sum calculated in accordance with the following formula:

   A x ^B/_C x 40% = Wife’s share

   [1] White & White [1999] FamCA 29

   Where:

   A = the lump sum net of taxation payable to the husband

   B = 10 years

   C = years elapsed between the date the husband joined the superannuation fund and the date of his retirement.

   10. That the husband give immediate notice in writing to the wife of his intention to resign from his employment and/or take his entitlement to superannuation in the (omitted) fund and the (omitted) fund.

2. The wife relies on section 79A(1)(b) and (c) of the Family Law Act1975 to set aside the orders but as I am not satisfied that (c) applies I will proceed on the basis that (b) is the appropriate justification for the orders sought.

3. The section relevantly provides that a court may vary or set aside the order and, if it considers appropriate, make another order under section 79 in substitution for the order if:

   …in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out;…

4. Here the circumstances relied on are that the form of order made by the Family Court of Australia, which is still to be complied with in part, is no longer consistent with Pt VIIIB of the Act and the husband’s superannuation fund trustee (then, in effect, the (omitted)) has indicated it does not believe the orders are binding on it. The trustee indicated that it believed the 1999 superannuation orders, and ancillary orders made in 2004, should be set aside and splitting orders obtained in substitution.

5. I was not provided with any submissions on whether the trustee’s view is the correct one. Obviously enough the trustee is not directly bound by the existing orders in the sense that it would be with a splitting order under Pt VIIIB. Still, the trustee could well be liable if it paid out the husband’s superannuation entitlement in circumstances which it knew constituted a breach of orders by the husband. It may be that the wife could go to the trouble and expense of persuading the trustee to co-operate or persuading it that it is wrong. However, this would be an expensive and potentially futile course. I do not propose to enter into any consideration of this complex area because the trustee’s unwillingness to co-operate constitutes, in my view, a circumstance that has arisen since the order was made that make it impracticable for the order to be carried out.

6. I should say that the husband himself made no submissions of any kind about the matter and refused to participate in proceedings. I am satisfied that he could not be expected to co-operate with the wife in a way which would make it practicable for the order to be carried out. After many difficulties in serving the husband he was eventually served pursuant to an order for substituted service. He appeared in person on 17 December 2015. I explained to him the issue and suggested to him that if he were prepared to negotiate with the wife things might be resolved to everyone’s satisfaction. I also ordered him to file responding documents and adjourned the matter to 17 May 2016 for hearing, noting that if he did not comply with that order the matter would proceed on an undefended basis on that day. The husband did not file any documents or appear and the matter proceeded as an undefended hearing.

7. The general background to the orders of the Family Court of Australia is set out in the reasons for judgement of Moore J. At that time the wife was 36 years old and the husband was 41 years old. The wife was employed earning about $38,000 a year and the husband was employed earning about $56,000 a year. There were four children of the relationship, about 12, 10, 5 and 2 years old. The children lived with the mother.

8. The net value of the assets of the parties, primarily the former matrimonial home subject to mortgage and a block of vacant land was $54,700. Her Honour made orders that resulted in the wife receiving 65% of the net value of the assets.

9. The husband had superannuation worth $114,940 in two related (omitted) funds. These appear to have been accumulation funds. The husband joined the fund (or funds) on 23 March 1987. Her Honour found that the wife’s contribution to the husband’s superannuation was 40% during the period of cohabitation. The wife had superannuation worth $13,796 in two private funds. She joined these funds in 1990. Her Honour made no findings about the husband’s contribution to the wife’s superannuation.

10. The order made by her Honour was based on the approach adopted by Kay J in West and Green[2]. At the time of trial in 1999 the husband had been a member of the fund for 10 years and the parties had cohabited for 12 years. So the formula, if applied at that time, would have produced the following result:

    $114,940 x ^10/₁₂ x 40% = $38,313.33

    [2] (1993) FLC 92-395.

The husband withdraws part of his superannuation  

1. The husband took part of his superannuation entitlement in 2004. The evidence is unclear but the wife says that he could only withdraw his own contributions. As he was below his preservation age this is likely to be correct. The husband did not, as was required by the orders of the court, notify the wife. She was able to apply to the court and orders were made on 25 May 2004 by consent that the husband pay the wife the sum of $21,406.42 “in satisfaction of the orders made in the Family Court of Australia by Justice Moore”, the sum of $174.53 in interest and the sum of $750 for costs.

2. In the current application the wife relied on a report from a superannuation consultant that asserted that the sum paid to the wife in 2004 was wrongly calculated. The consultant relied on information in his letter of instructions that “the sum of $140,547.56 (gross)”[3] was withdrawn by the husband. The consultant produced the following calculation which, he said, was the correct calculation:

   $140, 548 x ^10/₁₇ x 40% = $33,070

   [3] The source of this figure was not in evidence.

3. I am not satisfied that there was a wrong calculation. The consultant’s calculation appears to overlook that the $140,548 was a “gross” figure. As the husband was then about 47 years old and had not reached his preservation age I assume the figure withdrawn by the husband would have been subject to taxation. I assume this explains the discrepancy. Further, the wife in her affidavit filed 11 May 2015 says that the withdrawal was based on the husband’s own contributions up to that point and was based on the formula in the 1999 orders. I see no reason to doubt her statement.

Should another order be made and, if so, what other order?

1. Another order is required to do justice to the wife. It was submitted by the wife that in making another order I should not follow the West and Green approach in identifying a base amount for a splitting order. She submitted that the adoption of such a formula was inappropriate following the introduction of PartVIIIB of the Act. She relied on the discussion of West and Green by Young J in BAR v JMR (No 2)[4], a decision subsequently affirmed by the Full Court[5], and the Full Court decision in M v M[6].

   [4] (2005) FLC 93-231 at [262] – [279].

   [5] [2005] FamCA 1097.

   [6] [2006] FamCA 913 at [112] – [123].

2. I accept the wife’s submission that the West and Green approach is not appropriate. She submitted that I should consider afresh the appropriate orders. This appears to follow from section 79A which, if the court decides to vary or set aside the order, permits it to “make another order under section 79”. It would seem that the issue must be addressed by considering all relevant parts of section 79, including subsection 79(4), and the matters referred to in subsection 75(2) so far as they are relevant[7]. The wife pointed to her contributions to the accumulation of the husband’s superannuation identified in the 1999 decision and, in addition, to her ongoing financial and non-financial contribution to welfare of the family constituted by the parties to the marriage and any children of the marriage. She said that the husband has failed to comply with his Child Support obligations and that should be taken into account in assessing her ongoing contributions. As of 26 April 2016, the husband was $28,471 in arrears in child support. The children are now adults aged about 29, 27, 22 and 18 years.

   [7] A point emphasised by Young J in BAR and JMR at [71], relying on Hickey & Hickey & Attorney General for the Commonwealth of Australia (2003) FLC 93-143.

3. The wife also relied on a report from the superannuation consultant mentioned above. The report contains a number of observations and remarks, largely in the nature of legal submissions. It contained the assertion mentioned above, which I have rejected, that the amount paid to the wife in 2004 was erroneously calculated. It goes on to suggest that the splitting order should be based on the amount calculated under the formula used in the 1999 decision. It imagines that Part VIIIB of the Act existed in 1999 and the sum calculated as due to the wife then was subject to a splitting order. It takes this sum as $45,976 calculated as follows:

   $114,940 x 40% = $45,976

4. It can be seen that the calculation contains a simple error: it omits the multiplier based on years of cohabitation divided by years of membership of the fund. This multiplier was ¹⁰/₁₂ in the 1999 calculation. The correct figure is in fact $38,313.33. The report then goes on to calculate what $45,976 would be worth today using an imputed rate of return of 6.5%[8] a year for 19[9] years. It then takes the result ($152,115) and deducts the amount paid to the wife in 2004 ($21,406) and says that the resulting amount ($130,709) should constitute the base amount for a splitting order. The base amount would be more than 49% of the husband’s superannuation interest of $263,846 at 20 August 2015. The report goes on to say that there may be other factors that may justify a higher percentage.

   [8] Said to be based on actuarial knowledge.

   [9] The origin of the figure of 19 years is unclear. The period from the time of the order (1999) to the time of calculation (2016) is 17 years.

5. Leaving aside basic arithmetical errors, there appears to me to be no basis for the application of this approach to a section 79 order. There is, in my view, no warrant in the terms of section 79 for such an approach. Further, there is no evidence that the imputed rate of return of 6.5% per annum was the actual rate of return of the husband’s fund.

6. I found this report to be of little assistance.

The property of the parties in 2016

1. The husband refused to participate in the proceedings. He filed no documents. The only asset or superannuation interest of the husband’s of which there is evidence is the superannuation interest mentioned above: $263,846 at 20 August 2015. That interest was transferred to the (omitted) Superannuation Fund in early 2016, apparently as part of a privatisation of the (omitted) fund. The husband resigned from his (occupation omitted) position in 2004. There is no evidence to say whether or not the husband is presently employed. There is no other information about the husband’s circumstances, although he seemed to be in good health when he appeared before me in December 2015. He is 59 years old.

2. The wife is 54 years old. She is in full-time employment in the (omitted) industry. She deposes that she has a superannuation interest, presumably an accumulation fund, of $304,149. She deposes that she owns a home worth about $350,000 subject to a mortgage of about $227,000. She deposes that she recently purchased duplex residential units as an investment. She says that the properties are worth, in total, about $500,000 and are subject to a mortgage of “over $534,000”. She says there is no equity in the investment property.

Contributions and section 75(2) factors

1. I see no reason to depart from the assessment of contributions reached by Moore J in relation to the period to the time of trial in 1999. It was not submitted that I should or could reach any different conclusion about those contributions. However, the wife suggested that I should consider the contributions of the parties since 1999 and, in particular, take into account her greater contributions by reason of her care of the children with little financial or other support from the husband. There is evidence of this lack of financial support, at least, in the husband’s arrears of child support.

2. I am of the view that if orders under section 79 are to be reconsidered then all factors, including subsection 75(2) factors need to be taken into account. It is evident that the wife has improved her financial position significantly since 1999. She has remained in employment and earns $63,663 a year. She is five years younger than the husband. She indicates she may retire at age 67. She has the resources to invest in real estate and, although there is little equity in the properties at the moment and the rent is taken up in payment of the mortgage and outgoings that may change over time. She has the prospect of receiving rental income in the future.

3. As against this, the husband has refused to participate in the proceedings or to provide any information to the court. While any orders I make must be just and equitable I do not consider that I have to take into account speculative considerations about the husband’s circumstances. In other words, I do not propose to make an adjustment for subsection 75(2) factors in favour of the husband. Having regard to the factors mentioned above, I do not propose to make an adjustment in favour of the wife.

4. I consider there is substance in the wife’s submission that she has made an indirect contribution to the husband’s superannuation interest since 1999 by reason of her care and support, including disproportionate financial support, of the children. The nature of that contribution may be indicated by the arrears of child support although it is not identical to it. Nevertheless, in my view it is relevant to consider the prospects of the wife recovering the arrears of child support. That might offset to some degree the disproportion mentioned. Unfortunately, in the absence of any information from the husband, that can be no more than guesswork. It may be that the Child Support Registrar can take proceedings to attach or garnishee any prospective superannuation payment to the husband. In my view it is no more than a future contingency to which I would ascribe a probability of 50%.

5. The orders sought by the wife are for a splitting order of 55% in favour of the wife. The wife submitted that a:

   …splitting order of 65% or more in favour of the wife is certainly open to the court. Such a percentage split would not be misplaced and would certainly ensure that the wife’s ongoing contributions were given the weight deserved[10].

   No basis for such an order was suggested other than the wife’s contributions constituted by her ongoing care for the children and the husband’s arrears of child support. At one point it was suggested that part of the justification for such a percentage was the wife’s liability for costs but that submission was not pressed. It is one thing to reject a formulaic approach but it appears unrealistic to ignore the fact that the parties have been separated for 19 years, that the bulk of the growth in the fund has happened over that period and that the only direct financial contributions to the superannuation have been made by the husband and/or his employer. A similar point was made by Young J in BAR & JMR (No 2)[11]. This case is not analogous to Fields v Smith[12] where the parties continued post-separation contributions in their different spheres and there was no increase in the value of the principal asset, the family business.

   [10] Written submissions at paragraph 15.

   [11] (2005) FLC 93-231 at [274], referring to remarks of Coleman J in Cahill & Cahill [2003] FamCA 172.

   [12] (2015) 53 Fam LR 1; [2015] FamCAFC 57.

6. If the formula used by Moore J was adopted today for a splitting order the calculation would be as follows:

   $263,846 x ¹⁰/₂₉[13]x .4 = $36,392

   [13] The years from the time the husband joined the fund (1987) to the present (2016).

7. This is equivalent to 13.8% of the husband’s superannuation interest.

8. In my view the wife’s contribution to the husband’s superannuation, taking into account the matters set out above, is 21%. This is equivalent to $55,407. I consider that amount to be just and equitable and I propose to make a splitting order accordingly.

Costs

1. The wife sought an order for costs in the sum of $14,483, including disbursements. Her solicitor provided a schedule of the costs calculated according to Schedule 1, Part 1 of the Federal Circuit Court Rules. Having regard to the section 117 of the Act I consider it is relevant that the husband did not comply with orders to file responding material, that he refused to participate in the proceedings and, in circumstances where the matter called out for a sensible negotiated solution, refused to cooperate or negotiate in a way that might have allowed that to happen. He unreasonably caused the wife to incur unnecessary legal costs. I also take into account the fact that an application to the court was necessary in any event and, even with the husband’s cooperation, the wife would have incurred some legal costs. I also take into account the superannuation consultant’s report which I consider was unnecessary and unhelpful. The disbursement for this report was $1,600. I do not propose to allow any amount for that report. I propose to order the husband to pay the wife’s costs of these proceedings in the sum of $11,000.

2. The wife should bring in a minute of orders reflecting these reasons.

I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Judge Young

Date: 18 October 2016