Kendrick and Kendrick
[2012] FMCAfam 1032
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KENDRICK & KENDRICK | [2012] FMCAfam 1032 |
| FAMILY LAW – Property – add backs – notional asset pool – financial contribution from wife’s parents during marriage – portion of funds spent by husband notionally added back into asset pool – s.75(2) future needs. |
| Family Law Act 1975, ss.75(2), 79 |
| Lee Steere & Lee Steere (1985) FLC 91-626 Kessey & Kessey (1994) FLC 92-495 |
| Applicant: | MS KENDRICK |
| Respondent: | MR KENDRICK |
| File Number: | ADC 2649 of 2011 |
| Judgment of: | Kelly FM |
| Hearing dates: | 14, 15, 27 June, 26 July 2012 |
| Date of Last Submission: | 26 July 2012 |
| Delivered at: | Adelaide |
| Delivered on: | 28 September 2012 |
REPRESENTATION
| Counsel for the Applicant: | Ms H Tinning |
| Solicitors for the Applicant: | Adey Lawyers |
| Counsel for the Respondent: | Mr Campton |
| Solicitors for the Respondent: | Andrew R Ford |
ORDERS
In full and final settlement of any claim that either party may have against the other now or at any time in the future for settlement of property
The funds presently held in NAB Account no [1] be disbursed as follows:
(a)to the wife the sum of $207,418;
(b)to the husband the sum of $518,926.
Within 28 days the husband shall transfer to the wife his estate and interest in the following:
(a)the Voyager and Mercedes motor vehicles;
(b)his shareholding in [D] Investment Group Pty Ltd (“the company”) and shall resign as a director of that company;
(c)his interest as a beneficiary or other object, or his units in both the [D] Trust and the [D] Investment Trust;
with the wife to prepare all necessary documentation at her expense to give effect to the relevant transfers.
Thereafter the wife shall be responsible for and pay all claims, actions, demands and liabilities arising from or relating to the husband’s interest in the [D] Investment Group Pty Ltd (whether as a shareholder or director of the company), the [D] Investment Trust and the [D] Trust and shall indemnify the husband in relation to same.
Thereafter the husband shall forego any claim against the [D] Investment Group Pty Ltd, the [D] Trust and the [D] Investment Trust or any claim against the wife in relation to any of these entities.
The determination of the husband’s involvement, holding or capacity with respect to the company and the Trusts shall be deemed to have fully ended on 30 June 2011.
As and from 30 June 2011 the wife shall hereby be deemed at all times from that date to have had the sole conduct and running of the company and Trusts without any claim by the husband.
In accordance with section 90MT(1) of the Family Law Act 1975 as amended:
(a)the wife shall be paid the specified percentage being 100% of all splittable payments of the husband’s superannuation member interest in the [Kendrick] Superannuation Fund; and
(b)the husband’s interest in the [Kendrick] Superannuation Fund is correspondingly reduced.
The husband and wife as trustees of the [Kendrick] Superannuation Fund shall do all acts and things necessary to:
(a)calculate the entitlement of the wife created in the above paragraph in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001;
(b)pay the entitlement whenever the trustees make a splittable payment out of the husband’s interest in the [Kendrick] Superannuation Fund.
Paragraphs 7 and 8 have effect from the operative time being twenty one business days after the service of this order on [B] Chartered Accountants on behalf of the trustees.
Thereafter in accordance with section 90MT(1) of the Family Law Act1975 as amended:
(a)the husband is entitled to be paid the specified percentage being 50% of the splittable payments of the wife’s superannuation member interest in the [Kendrick] Superannuation Fund;
(b)the wife’s entitlement to payment from the [Kendrick] Superannuation Fund is correspondingly reduced.
The husband and wife as trustees of the [Kendrick] Superannuation Fund shall do all acts and things necessary to:
(i)calculate the entitlement of the husband created in the above paragraph in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations2001;
(ii)pay the entitlement whenever the trustees make a splittable payment out of the wife’s interest in the [Kendrick] Superannuation Fund.
Paragraph 10 shall have effect from the operative time being seven business days after compliance with paragraph (7) of these orders.
The parties in their capacity as trustees of the [Kendrick] Superannuation Fund shall do all things necessary to ensure that the transferable benefit due to the husband is paid in cash from bank accounts held to the benefit of the [Kendrick] Superannuation Fund to the intent that the [Kendrick] Superannuation Fund and the wife’s remaining interest in the [Kendrick] Superannuation Fund shall be retained in specie in the real estate interest held by the Fund.
Upon the superannuation splitting order in the husband’s favour being implemented the husband shall within 14 days thereafter sign all documents and do all things necessary to transfer or rollover his transferable benefit to a discrete superannuation fund of his choosing (“the husband’s superannuation fund”).
Upon compliance with paragraphs 7-13 above the husband shall do all such acts and things and sign all documents as may be necessary to:
(a)resign as a trustee of the [Kendrick] Superannuation Fund and as a member of the [Kendrick] Superannuation Fund;
(b)transfer his estate and interest in the whole of the land comprised and described in Certificate of Title Register Book Volume [omitted] to the wife;
(c)transfer his estate and interest in the whole of the land comprised and described in Certificate of Title Register Book Volume [omitted] to the wife.
Thereafter the wife retain as her sole property free from any further claim, right or entitlement by the husband the following:
(a)the Mercedes Benz and Voyager motor vehicles;
(b)furnishings and personal effects in her possession;
(c)all jewellery in her possession;
(d)any monies standing to her credit in any financial institution;
(e)her interest in the [D] Investment Group Pty Ltd, the [D] Investment Trust and the [D] Trust;
(f)her interest in the [Kendrick] Superannuation Fund;
(g)all other items of property presently in her possession.
Thereafter the husband retain as his sole property free from any further claim, right or entitlement by the wife the following:
(a)any monies standing to his credit in any financial institution;
(b)his investment in [R];
(c)all furnishings and personal effects in his possession;
(d)his superannuation interests;
(e)all other items of property presently in his possession.
The husband indemnifies the wife with respect to all personal debts and liabilities of the husband, whether in his sole name or jointly with others.
The wife indemnify the husband and keep him forever indemnified with respect to:
(a)all debts and liabilities with respect to the [D] Investment Group Pty Ltd, the [D] Trust and the [D] Investment Trust;
(b)all personal debts and liabilities of the wife, whether in her sole name or jointly with others.
The wife serves a copy of these orders upon [B] Chartered Accountants within seven (7) days of the date of this order.
Each party shall do all acts and things and sign all documents that shall be necessary to give full effect to the terms of this order and should any party neglect or refuse to execute any document within 14 days after the same shall have been tendered to them or their respective solicitors for that purpose THEN and in such case a Registrar of the Federal Magistrates Court, Adelaide Registry, may sign any such document to give effect to these Orders upon filing of an Affidavit establishing a party has failed to comply with same.
IT IS NOTED that publication of this judgment under the pseudonym Kendrick & Kendrick is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADC 2649 of 2011
| MS KENDRICK |
Applicant
And
| MR KENDRICK |
Respondent
REASONS FOR JUDGMENT
Ms and Mr Kendrick married in 1984 and separated in December 2010. They have been unable to resolve financial matters arising from their separation and it now falls to the Court to determine these issues.
At the time the parties married, the wife was working full time as a [omitted] and the husband was employed by [omitted]. The husband obtained other employment and in 1986 the parties moved to Sydney to further his career.
The parties’ first child [X] was born in 1988 and their second child [Y] was born in 1992. The husband’s career required the parties to move from time to time and they lived in various locations throughout Australia before returning to Adelaide in September 2002. During this time the parties bought and sold numerous properties, including a property at [omitted] which had been owned by the husband prior to the marriage.
In 1998 the parties purchased land adjacent to the wife’s parents’ farm at [B]. In 2003/4, the parties then purchased the wife’s parents’ farming property at [B], for the sum of $416,000. The real estate is located in [omitted], approximately 255 kilometres north of Adelaide. The wife argues the property was worth substantially more than the purchase price, but the husband disagrees. The property was purchased through two separate entities, the [D] Trust and the [D] Investment Trust.
The husband worked full time throughout the parties’ marriage. The wife worked full time until the birth of their children. Subsequently she assumed full time responsibility for managing the family’s domestic life and caring for the children.
In 2003 the husband commenced employment with [omitted], later known as [S]. He travelled extensively interstate and overseas within his employment, most recently in China. The husband earned a very comfortable salary however the demands of his employment took an increasing toll on his health and on the parties’ relationship.
In 2010 the husband commenced negotiations with [S] to secure a termination package. The husband returned to China in September 2010 but by that stage the parties’ relationship had further deteriorated and they separated in December 2010. The husband continued in negotiations with [S] and eventually entered into a termination agreement in May 2011, receiving a termination payment of $235,934.
Following their separation, the parties agreed that the former matrimonial home at Property [W] should be placed on the market for sale. Upon sale of the former matrimonial home the parties received net proceeds in the sum of $1,149,749. They have since negotiated to receive two separate payments from those monies, totalling $225,000 each. The balance of the net proceeds is held in a joint investment account.
The husband has remained living in China and despite his efforts, has not yet secured further employment. He has various physical and emotional health issues that he says affect his capacity for ongoing fulltime employment. In any event, he says there is very little employment on offer in his field and certainly not at the same level of salary. At this stage, the husband is hoping to retrain as a [occupation omitted].
The wife was largely out of the paid workforce during the marriage, aside from occasional part time employment. Following separation in 2010 she has commenced part time employment as a [omitted] and earns a very modest income from that position. She does not consider her previous employment as a [omitted] remains open to her, given changes within that industry.
These proceedings commenced with the wife’s application for property settlement and spousal maintenance filed 21 July 2011, as subsequently amended on 30 May 2012. The husband filed his response on 3 August 2011. The parties attended a conciliation conference in October 2011 and entered into further informal negotiations, but were unable to resolve the financial issues in dispute between them.
The trial
The trial commenced before me on 14 June 2012. Unfortunately, it did not conclude in the two days allocated and resumed again before me on 27 June 2012. Final submissions were heard on 26 July 2012.
The wife relied upon the following documents:
a)Amended Application filed 30 May 2012;
b)Trial Affidavit filed 4 May 2012;
c)Financial Statement filed 4 May 2012;
d)Affidavit of Mr S filed 24 May 2012;
e)Further Trial Affidavit filed 5 June 2012;
f)Affidavit of Mr A filed 9 May 2012 annexing interim Financial Statements of [Kendrick] Superannuation Fund as at 2 May 2012;
g)Affidavit of Mr D filed 8 June 2012.
The wife sought to rely on two further Affidavits of Mr A annexing other material, which the Court declined to receive.
The husband relied upon the following documents:
a)Trial Affidavit filed 15 May 2012 (noting he did not seek to rely upon the following paragraphs: 249, 262, 269(a), 269(b), 270, 271, 274, 277, 279, 285, 286 and 287);
b)Financial Statement filed 15 May 2012;
c)Affidavit of Mr W filed 15 May 2012;
d)Affidavit of Mr K filed 8 June 2012.
On 26 March 2012, the husband filed an Affidavit from his counsellor in Shanghai, Dr P. The wife objected to this evidence and ultimately the husband did not rely upon Dr P’s evidence.
The parties had jointly instructed Mr L to value the real estate owned by them through the [D] Trust, the [D] Investment Trust and the [Kendrick] Superannuation Fund. In addition, the wife sought to rely upon an earlier valuation prepared by Mr L in 2003. The husband objected to this valuation coming before the Court but I was satisfied to receive it. Both parties raised various objections on the evidence contained within their affidavits which were dealt with at the commencement of the hearing.
I accept that both parties gave their evidence honestly and to the best of their recollection regarding their joint financial history and financial arrangements during their relationship. The husband argues that the wife was less than frank in the witness box, but I disagree. The wife made appropriate concessions in the course of cross examination, particularly in relation to her claimed original contributions. For example, she conceded she had no documentary evidence in relation to the funds claimed by her. She conceded that she could not be sure about the exact figures, but based her estimate on her recollection of a long service leave payout that she received in 1986 or so.
The wife’s reluctance to abandon her claim for spousal maintenance, or her limited allowance of the husband’s “reasonable post separation expenditure” provide some insight into her resentment towards the husband, but they are not matters that undermine her credibility as a witness.
While the husband no doubt endeavoured to present his evidence accurately, it became clear in the course of cross examination that he had failed to disclose a number of relevant matters in relation to his post separation financial arrangements. For example, he had not disclosed his “investment” in the [R] in Shanghai, nor that Dr P is a part owner [R]. It also became clear that he had not yet produced statements for all of his bank accounts although it must be noted that most of the relevant financial records had been produced by the time of the trial.
The husband was cross examined at some length regarding his post separation expenditure and his apparent “investment” in the [R]. I consider the husband’s evidence on this topic was uncertain and at times somewhat disingenuous. His failure to fully disclose all of his financial arrangements in a clear and coherent manner places a cloud over the reliability of his evidence relating to his post separation financial arrangements.
The wife’s father, Mr S, gave his evidence in an honest and straightforward manner. I do not consider there is any basis to impugn his evidence regarding the transfer. The husband’s witness, Mr W, presented his evidence in a direct and professional manner.
Legal principles
Section 79 of the Family Law Act 1975 sets out the factors that the Court must consider when deciding an application for property settlement. Various Full Court authorities have confirmed that the Court must follow a number of discrete steps when determining any adjustment of matrimonial property[1].
[1] Lee Steere & Lee Steere (1985) FLC 91-626
First the Court must identify the assets and liabilities arising from the parties’ marriage, as at the date of trial. The law does not require that assets held by the parties at separation must be preserved pending a final property settlement. In NHC & RCH[2] the Full Court quoted favourably from a previous decision, M & M[3], where an earlier Full Court said:
“There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of the financial arrangements. Parties are entitled to continue to provide for their own support.”
[2] NHC & RCH (2004) FLC93-204
[3] M & M [1998] FamCA 42
The Court then referred to C & C[4] in which a differently constituted Full Court expressed a similar view, saying:
“Whilst not seeking to place a fetter upon the exercise of discretion of a trial Judge in individual cases, it seems to us that the concept of adding moneys reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives.”
[4] C & C [1998] FamCA 143
Equally, the case law has identified a number of areas where it is appropriate to add back into the asset pool as “notional property” assets that are no longer available to the parties. Those areas include where assets held at separation have been used to pay one party’s legal fees[5], where assets have been disposed of wantonly or recklessly, or where one party has had the benefit of “a premature distribution of a proportion of the matrimonial assets”[6]. The latter two areas may require the Court to consider whether the funds or assets expended were “reasonably disposed of” or directed to what could be described as “reasonably incurred necessary living expenses”, or not.
[5] D J M & J L M (1998) FLC 92-816; NHC & RCH (supra)
[6] Townsend & Townsend (1995) FLC 92-569
Once the asset pool has been identified, the Court must then assess each party’s contribution during the marriage. The relevant factors pursuant to s.79(4)(a)-(c) include the parties’ direct and indirect financial contributions, any other contribution the parties may have made to the “acquisition, conservation or improvement of the matrimonial assets” and their respective contribution to the overall welfare of the family as a whole – what is often described as the “homemaker or parent” contribution.
The third step requires the Court to consider a range of factors set out in s.79(4)(d)-(g) including the matters set out in s.75(2) and the parties’ future needs. Finally the Court must be satisfied that the orders to be made are just and equitable as between the parties in accordance with s.79(2). As was noted by the Full Court in D & D[7]:
“… the task of the court in proceedings under s.79 is not akin to an accounting exercise. The task is to examine the facts of each case carefully to decide what is appropriate and just and equitable in the circumstances. There cannot be expected to be a universal answer to that question on any given set of facts. It is of the essence of judicial discretion that different minds may comfortably arrive at different conclusions.”
[7] D & D (2003) FamCA 473 at 49
Asset pool
To their credit, the parties have been able to reach agreement about most of the items within the asset pool and presented a Joint Balance Sheet in that regard.[8]
[8] Joint Balance Sheet tendered on 27 July 2012 and marked “MFI 15”
The parties have also agreed to deal with their superannuation interests separately and consent to an equal division of their superannuation entitlements. I agree that a two pool approach with respect to superannuation and tangible assets is appropriate. I am also satisfied that an equal division of the superannuation interest represents a just and equitable outcome between the parties and have taken this outcome into account in my overall determinations.
The parties have agreed to exclude the original interim property settlement payment of $150,000 they received on 1 August 2011, on the basis that any savings held by them at trial should be included in the asset pool, as should monies paid towards their legal fees. They remain in dispute about the amount of the husband’s investment in [R] and whether other funds received by the husband post separation should be notionally “added back” into the asset pool, specifically the husband’s redundancy payment and a taxation refund received by him.
The wife argued that the bulk of those funds received by the husband should be added back into the asset pool. The husband argues that each party is entitled to conduct their own financial affairs as they see fit and provide for their own reasonable support, without providing a detailed audit of their expenditure.[9] As mentioned, the husband concedes that his legal fees and current savings should be added back into the asset pool. Otherwise, he argues that the funds have been spent by him and that his expenditure was reasonable and has been fully accounted for.
[9] NHC & RCH (2004) FLC 93-204
[R]
The husband gave evidence in cross examination about a “loan” or “investment” he has made to [R] in Shanghai. These transactions had not been previously disclosed by the husband. They were not listed in his Financial Statement. They were not listed in the spreadsheet analysis of his expenditure.[10] The wife is entitled to be critical of the husband’s failure to disclose these transactions earlier. This failure affects my assessment of the husband’s evidence regarding his post separation financial arrangements.
[10] Annexure GK8 to the husband’s trial affidavit sworn 9 May 2012
In the course of closing submissions the husband conceded that the sum of $15,000 loaned to [R] should be included within the asset pool. The wife argues that the figure is closer to $40,000. The husband’s bank statements for his NAB Account number [2] show debit transactions in the sum of $15,022 on 25 August 2011, the sum of $10,022 on 26 August 2011 and the sum of $15,022 on 1 September 2011, described respectively as “investment”, “investment [omitted]” and “[R] invest”.
The husband was cross examined on these transactions but only conceded an investment/loan to [R] in the sum of $15,000, saying the other debits were to cover his rent or ongoing monthly expenses. It is difficult to understand why the husband would record such payments as “investments” if they were for other specific purposes. On balance I find that the husband’s bank account entries accurately reflect the nature of these transactions and I find that he has invested approximately $40,000 in [R]. This amount should be included in the asset pool.
The husband’s redundancy payment
The husband was employed with [S] (or its precursor) for approximately eight years. The company was experiencing financial difficulties and in mid 2010 the husband commenced negotiations with [S] to formally terminate his employment. Both parties supported this decision at the time.
The termination payment was not received by the husband until May 2011 when he finally ceased employment with [S]. The termination payment of $235,934 consisted of accrued leave and long service leave entitlements in the sum of $139,300 and termination funds in the sum of $96,633. Insofar as both portions of the termination payment are related to the length of the husband’s employment with [S], both parties have made a contribution to these funds, directly or indirectly, across their married life together.
Taking into account his redundancy and the partial property settlement of $150,000 received by each party in August 2011, the husband received lump sum payments in excess of $385,000 across 2011. Of those funds, he has invested $40,000 in [R], has paid approximately $84,000 towards his legal fees and still retains approximately $25,000 in savings.
When those figures are deducted from the total lump sum funds received by him in 2011, the husband is asking the Court to accept that his reasonable expenditure over the intervening 12 months between May 2011 and June 2012 exceeded $230,000.
The husband is entitled to enjoy a reasonably comfortable lifestyle and should not be denied the benefit of his past labours in the form of his redundancy payment. He was unable to obtain other employment and therefore had no ongoing income available to meet his support. The husband has certainly had access to far greater funds for his support than has the wife, but there is no legal principle that a party should be restricted to expenditure equivalent to that enjoyed by their former spouse.
However, where those expenses are paid from funds that would otherwise be considered matrimonial assets, the authorities are clear that there is an element of “reasonableness” to be considered when assessing a party’s post separation expenditure. Parties are “entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives”,[11] but the Court may need to determine whether a party’s expenditure was indeed reasonable, or may otherwise be seen to have been reckless or negligent.[12] This process does not require the Court to conduct a detailed audit of the husband’s expenditure, however.
[11] NHC & RCH (2004) FLC 93-204 @ para.24, citing C & C [1998] FamCA @ para.46
[12] Kowaliw & Kowaliw (1981) FLC 91-092 @ 76,644
The husband has provided various summaries of his post separation expenditure, including a spreadsheet in which he sets out his claimed expenditure between February 2011 and February 2012.[13] He has provided a further “Flowchart” which has been drawn from the spreadsheet.[14]
[13] Annexure GK8 to the husband’s trial affidavit filed 15 May 2012
[14] Exhibit H10
These documents were apparently drawn from transactions in the parties’ joint NAB Account no [3],[15] which the husband had marked to identify expenses for [Y] and the wife, together with deposits made by him which he identified as being for the wife’s benefit.
[15] Exhibit H7
I note the spreadsheet does not provide any analysis of the husband’s claimed expenditure for the period February to June 2012. Insofar as the spreadsheet and Flowchart relate to the period prior to May 2011, they are of no great assistance to the Court, as the husband was meeting his expenses from income earned by him. There is no doubt that the husband was making a substantial contribution to the wife’s support and household expenses across this period, but this was appropriate. The wife was clearly in need of financial support, given her modest income. His expenditure prior to May 2011 is not relevant to his use of the redundancy payment.
The wife presented her own analysis of the transactions within the NAB Account no [3].[16] The wife concedes that the husband was meeting expenses relating to the family home at [W] following separation and continued to do so until the property was sold in August 2011. She further agrees that the husband provided ongoing support to [Y] and made an ongoing modest contribution to her benefit as well. However I accept that the wife also paid funds into this account across the same period of time. It is not the case that the husband alone provided all of the funds deposited into this account.
[16] MFI “W4”
The wife further argues that between May 2011 and June 2012 the husband withdrew or accessed funds in excess of $120,000 from this account. While some of the specific entries may be in dispute, I am satisfied that, from the funds deposited by him into this account, the husband then withdrew significant funds for his own use.
Counsel for the husband criticised the wife for not having undertaken such an analysis prior to the trial, but this criticism misses the point. Whether the husband’s expenditure is reasonable, or not, is a matter for evidence. Both parties are responsible to establish their own case before the Court, either justifying the husband’s claimed reasonable expenditure, or challenging it. The husband chose to present his case in a particular way which the wife then challenged as unreliable.
The husband was cross examined at some length about his post separation expenditure and financial arrangements. It is clear that the main expense incurred by the husband between May 2011 and June 2012 was the rent for his accommodation in Shanghai. The husband was paying $7,258 per month until April 2012, an amount which the wife argues was excessive.
This figure does appear to be extraordinarily high, but I note the husband’s evidence regarding the other facilities available to him at the premises, such as meeting rooms, reception facilities and so on. There is no other evidence that could indicate what reasonable rental costs in Shanghai might otherwise be. I note the husband is now paying substantially lower rent, albeit he says the accommodation brings with it substantially fewer amenities.
The husband was entitled to choose to remain living in China and to rent very expensive accommodation. He was entitled to invest in [R]. However, these decisions may bring with them the need to “tighten his belt” in other areas. It is unreasonable for the husband to expect that his former wife should effectively subsidise all of his choices by foregoing any claim against his redundancy payment.
Taking into account all of the evidence before me, I do not consider the husband’s evidence establishes that his total claimed expenditure was reasonable. I accept the husband contributed approximately $7,000 towards the mortgage repayments between May and August 2011, as well as other outgoings associated with the former matrimonial home. He has also made a significant ongoing contribution to [Y]’s support.
Even taking these outgoings into account, and allowing for the husband’s very high accommodation expenses,[17] I conclude the husband’s total claimed expenditure (in excess of $250,000 between May 2011 and February 2012 according to his spreadsheet and in excess of $230,000 between May 2011 and June 2012, according to my calculations) falls well outside any definition of reasonableness. I conclude the husband was reckless or at best, recklessly indifferent to the implications of such a high level of expenditure upon the matrimonial asset pool.
[17] 12 months at $7,258 per month, but excluding the bond, which presumably was repaid to the husband at the end of his lease
I conclude that a significant portion of the husband’s redundancy payment should be added back into the asset pool. I do not consider it is necessary for the Court to undertake a detailed analysis of the husband’s expenses in order to resolve this issue. I will allocate to the husband the sum of $135,000, which sum I consider makes ample allowance for the husband’s expenditure in the region of approximately $10,000 per month (on average) over the period May 2011 to June 2012. This allocation takes into account the husband’s high accommodation expenses and makes some allowance for his contribution to expenses that benefitted the wife and [Y].
I consider this is a generous allocation for the husband’s self support. The wife will no doubt consider this amount to be excessively generous, but I repeat, there is no legal principle that the husband’s reasonable expenditure should reflect that incurred by the wife.
On that basis I will notionally add back the sum of $100,000 into the asset pool on account of the husband’s redundancy payment. I reach this conclusion bearing in mind the husband also had the benefit of monies received from his tax refund for the relevant financial year, as discussed below.
The husband’s 2010 taxation refund
In April 2011 the husband received a taxation refund in the sum of $13,969 relating to the 2010 financial year. Clearly this taxation refund relates to the period prior to the parties’ separation. To that extent, the wife says that she contributed towards the refund monies that have since been retained and utilised by the husband. She argues these funds should be added back into the asset pool.
The Court has already made a generous allowance toward the husband’s reasonable post separation expenditure. I agree that the funds received by him as a tax refund should be added back into the asset pool.
The parties’ Mastercard liabilities at trial
The husband argues that the parties’ current Mastercard liabilities should be included to accurately reflect the parties’ financial circumstances, as at the date of trial. The wife argues that these liabilities would have been accrued by each of the parties since separation and should be excluded when determining the asset pool.
Given that the amounts in question are very small and roughly equivalent, I am inclined to exclude the Mastercard debts, as a matter of convenience.
Taking into account the above discussion, I find the parties’ matrimonial asset pool is as follows:
Assets
Remaining proceeds of sale of Property [W]
$726,345
2007 Mercedes Benz C180 Kompressor motor vehicle (in wife’s possession)
$30,000
1999 Chryster Grand Voyager LE LTD GS motor vehicle (in wife’s possession)
$4,000
Husband’s [T] shares
$2,564
Wife’s [T] shares
$945
Parties’ interest in [D] Trust
$214,139
Parties’ interest in [D] Investment Trust
$527,443
Wife’s savings
$86,934
Husband’s savings
$25,000
Husband’s investment to [R]
$40,000
Monies received by the wife from net proceeds of sale in June 2012
$75,000
Monies received by the husband from the net proceeds of sale in June 2012
$75,000
Funds notionally added back
Portion of husband’s redundancy payment
$100,000
Husband’s taxation refund
$13,969
Wife’s legal fees
$41,510
Husband’s legal fees
$84,375
Total matrimonial asset pool
$2,047,224
Superannuation
Wife’s interest in [Kendrick] Super Fund
$23,241
Wife’s interest in [C] Superannuation
$994
Husband’s interest in [Kendrick] Super Fund
$326,185
Total superannuation
$350,420
The net tangible asset pool available for distribution between the parties is $2,047,224, together with superannuation interests valued at $350,420.
Contributions
The wife agreed that the husband worked hard during their marriage and earned a very good income to support the family. Equally, the husband agreed that the wife bore the primary responsibility as home maker and parent, a responsibility that was made more onerous by the demanding nature of his working life. The wife was often solely responsible for the children’s care and welfare while the husband was working away either interstate or overseas.
I am satisfied both parties devoted their efforts to the welfare of their family, albeit in very different ways. The areas of disagreement related more to the parties’ direct financial contributions and can be summarised as follows:
(i) the direct contribution made by each of the parties at the commencement of cohabitation;
(ii)whether there was an indirect financial contribution made by the wife’s parents at the time the parties purchased the [B] farming property now held by them through the [D] Trust and [D] Investment Trust;
(iii)whether there was an indirect non financial contribution by the wife on account of unpaid management and labouring work undertaken by her father with respect to the farming property;
(iv)the significance of each party’s post separation contributions.
Initial Financial Contributions
Both parties claim they owned assets of significant value at the time of their marriage, but neither party has any documentation to support their claim. This is hardly surprising, given that the parties married in 1984. Any contemporaneous bank accounts or other records would be over 25 years old now.
The wife sought to rely upon a document prepared by the husband in 1988, when the parties purchased land at [omitted], jointly with the wife’s parents.[18] This document summarises the parties’ assets, bank accounts, income and liabilities, in support of their application for finance. The document itself does not equate to evidence of either party’s claimed initial financial contributions, but I consider the wife’s evidence describing the source of funds held by the parties in various bank accounts was entirely plausible.
[18] Annexure D, wife’s trial affidavit filed 4 May 2012
I conclude that each party brought significant assets into the marriage, by way of equity in property and/or savings. It seems likely that the husband’s initial financial contribution was greater than that of the wife, but given the length of the parties’ marriage and the uncertainty about the value of each party’s direct financial contribution, this does not affect my overall assessment of the parties’ contributions.
The purchase of the “[D]” property
In 2003 the parties established various entities including the [D] Investment Trust, the [D] Trust and the [Kendrick] Superannuation Fund. At the same time the parties agreed to purchase the farming properties at [B] from the wife’s parents.
The parties purchased these properties for an agreed sum of $416,000. The wife argues that the land and improvements were worth substantially more than $416,000 and that the difference between the transfer price and the actual value of the land reflects a significant financial contribution made by her parents on her behalf.[19]
[19] Kessey & Kessey (1994) FLC 92-495
In support of her argument, the wife relied upon a valuation prepared by Mr L dated 23 July 2003.[20] I note in passing a second valuation was undertaken by Mr L in 2003 but that report seems to largely repeat extracts from the substantive 2003 valuation and does not take the issue any further.[21] Mr L was also instructed by the parties to provide a valuation for the purposes of trial and both parties accept his 2011 valuation.[22] Notwithstanding that the husband had also annexed a copy of Mr L’s 2003 valuation to his trial affidavit, he argues that this earlier valuation should be disregarded by the Court.
[20] Wife’s trial Affidavit filed 4 May 2012, Annexure G; Husband’s trial Affidavit filed 15 May 2012, Annexure GK19
[21] MFI H8
[22] Wife’s trial affidavit filed 4 May 2012, Annexure L, pp 86-96
I disagree. Mr L was the parties’ agreed valuer, for trial purposes. If the husband intended to challenge Mr L’s earlier opinion provided in the 2003 valuation, then the obvious way to do so was to require Mr L to attend for cross examination. The husband did not do so.
The husband further challenged the reliability of Mr L’s 2003 valuation by arguing it was not prepared for the purposes of family law proceedings. That is correct. In 2003 Mr L described the purpose of his valuation as:
“To establish market value of the property for the purpose of establishing a base value for possible future capital gains tax assessment.”
He goes on to describe the market value as:
“… the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.”
In the 2011 valuation Mr L described the purpose of the valuation as “to provide an opinion of the current fair market value of the property described in this report.” He then continued with precisely the same definition of “market value”.
I am satisfied that both reports are based on an assessment of market value as defined by Mr L. The fact that the market value of the property was sought for different purposes is irrelevant. Again, if the husband wanted to challenge Mr L’s opinion on this point, Mr L should have been called for cross examination.
The husband further challenged Mr L’s 2003 valuation on the basis of evidence provided by the wife’s father, Mr S. Mr S confirmed that the land involved included approximately 700 hectares suitable for cropping, but that the amount cropped each year was only one-third of that, roughly 250 hectares, allowing the remaining acreage to lie fallow for two years between crops.
In 2003 Mr L noted that there were 745 hectares suitable for cropping, valued at $680 per hectare. The remaining 256 hectares of grazing land was valued at $235 per hectare. The husband seemed to be suggesting that Mr L was in some way confused about the percentage of land suitable for cropping as opposed to grazing. However, Mr L’s report is quite clear. Under the heading “Remarks” Mr L says:
“This property is located in a semi marginal area and the improvements are well presented and have been very well maintained.
The property is very suitable for grazing and cropping with approximately 283 hectares (700 acres) sown to crops annually. Of the total area approximately 745 hectares is suitable for cropping with the balance of the land suitable for grazing.”
Mr L was in no uncertainty about the extent of land suitable for cropping and the amount sown to crop each year, as opposed to the remaining 256 hectares, which were suitable only for grazing. His valuation was based accordingly.
In July 2003 Mr L valued the land and structural improvements purchased by the parties at a value of $721,563. In 2011 he valued all of the land and improvements owned by the Trust and the Superannuation Fund at a value of $775,000, including the adjoining parcel of land purchased by the parties some years earlier.[24] When that property is excluded, the real estate purchased from the wife’s parents appears to have dropped in value.
[24] [location omitted], purchased by the parties in 1998.
This may be explained at page 4 of Mr L’s 2011 report where he notes that cropping results in the last few years in this region have been disappointing, which has seen a change in emphasis from cropping to grazing. [25] He also noted that the market is slow and the selling period is considerably longer when compared to the previous decade. On that basis he values all of the land at $535 per hectare.[26]
[25] Wife’s trial Affidavit, Annexure L, p.90, under heading “Remarks”
[26] Wife’s trial Affidavit, Annexure L, p. 91, under heading “Valuation Rationale”
In the absence of any cross examination by the husband of Mr L, I accept his valuations, both as to the 2003 and 2011 value of the land. Whether or not my calculations are correct and the land value has decreased, there is still an issue to be determined relating to any “Kessey”-style contribution that arose from the acquisition of the wife’s parents’ farming property.
The husband also sought to imply that either the wife or Mr S have sought to obtain some improper advantage, by fraudulently undervaluing the property for the Stamp Duty assessment (in the case of the wife) or to Centrelink (in the case of Mr S). He argues that the wife should not now be able to benefit from the higher valuation in these proceedings.
With respect, I consider the husband is overstating the position. Mr S gave clear evidence that he may have sought a higher sale price if he was selling to someone other than his daughter. He subsequently notified Centrelink that the land had been sold and the sale price, as he was required to do. There is no independent evidence before me to suggest that Mr S has behaved improperly in this regard.
Similarly there is no evidence to suggest the wife has behaved improperly, or gained some improper or fraudulent advantage. The relevant Transfer document notes that stamp duty was to be assessed on the “Consideration/Value/Security” and the document clearly discloses the Consideration exchanged between the purchasers and the vendors. In any event, as the Transfer related to farming property, the wife argues it was exempt from stamp duty.
Finally, the Court was referred to an earlier Affidavit of the wife in which she valued the real estate in 2003 at $566,813, rather than $721,563. With respect, this is clearly an error that seems to have arisen from a misreading of the 2003 valuation report. Mr L valued the land at $566,813 and the land plus structural improvements at $721,563. The latter is clearly the appropriate figure to take into account in the circumstances.
I am satisfied that the wife’s parents made a substantial direct financial contribution to the matrimonial asset pool, by virtue of the difference between the value of the [B] properties and the price paid by the parties. I consider this contribution to have been in the region of approximately $300,000. However, it must be noted that the significance of this contribution is affected by the current value of the real estate. In addition, it seems the farming venture did not generally generate a profit.
I am satisfied that the decision by Mr and Mrs S to sell the property to the parties at a lower price was made out of love and affection for their daughter and was a gift to their daughter, rather than to the parties jointly. This should be taken into account in terms of assessing the parties’ contributions, albeit not on a “dollar for dollar” basis.
Mr S’s ongoing role in “managing” the [B] properties
The wife argues that her father made a further contribution to the parties’ benefit, by virtue of his ongoing efforts in and about the farming property. Having heard the evidence of the wife and Mr S, I reject this submission. There is no doubt Mr S did indeed continue to assist in running the farm but he did so because he “loved the land”. This arrangement suited Mr S and the parties equally and it is inappropriate to now attribute a financial costing to his efforts.
As noted above, there is no suggestion that the [B] farm was a money-making venture for the parties. Indeed, the husband argues that the farming venture ran at a loss. It may be those losses provided some tax relief for the parties, but that is neither here nor there. In circumstances where the property was not producing an income for the family and where the real estate itself appears to have dropped in value, it is hard to see that any ongoing effort from Mr S could be treated as a contribution towards the matrimonial asset pool.
Equally, I reject any suggestion that ongoing ownership of [B] was in some way a contribution by the parties to the quality of life enjoyed by the wife’s parents. Both households benefitted from the arrangements, but not in any way that warrants a formal finding with respect to any indirect contribution to the asset pool.
I note that early in these proceedings the husband had proposed that the farming properties at [B] be sold, arguing that they were a drain upon the parties’ resources. Given that the farm traded profitably in the last financial year, that argument cannot be sustained.
Conclusion regarding Contributions
I am satisfied that the parties’ contributions should be assessed as equal, aside from the gifted value of the [B] real estate. I do not consider any further adjustment on account of the post separation financial arrangements is appropriate, given the notional funds now added back into the asset pool. Taking into account all of the above, I assess the wife’s contribution at 55% and the husband’s contribution at 45%.
Section 75(2) factors
(a) age and state of health of each of the parties
The wife is 53 years old and is in reasonably good health. The husband is 58 years old. He suffers from a range of health issues including chronic diabetes, high blood pressure and [omitted] (a genetic disorder that increases the risk of deep vein thrombosis). The husband also claims he suffers from anxiety and depression.
The Court accepts that the husband has been prescribed a range of medications by his Adelaide based GP, Dr B, including antidepressant medication.[27] The husband did not put any other medical evidence before the Court beyond this list of medications. He did not call Dr B, despite the medication notes indicating he consults with Dr B every three months.
[27] Exhibit H17
The wife concedes that the husband suffers from a number of different health problems but disputes that these conditions affect his capacity for ongoing employment, or at least not to the extent claimed by the husband.
There is no doubt that the husband’s previous working life was demanding and stressful. The husband’s underlying health conditions are of a longstanding nature and it would appear that he has clearly managed these conditions reasonably well, with medication, across the intervening years. In the absence of any medical evidence, it is difficult to assess the impact that the husband’s health problems – including any diagnosis of depression – has had upon his capacity for employment
Taking into account the husband’s age and his underlying conditions, it may be unreasonable to expect that he will continue to endure the same demands and stressors that applied to his position with [S]. He may not seek employment at the same income level, given the extra demands such senior level employment inevitably bring. However, I see no health related reason why the husband could not still maintain very well remunerated employment at an executive level.
(b) the income, property, financial resources and income earning capacity of each of the parties
The property and financial resources available to the parties have already been identified in this judgment. Presently the husband has no ongoing source of income. He says he has been seeking employment but has not yet been successful.
The husband’s previous employment has been within the [omitted] arena and more recently in the [omitted] field. It appears that the husband’s job seeking efforts have been largely confined to enquiries made through Mr W’s company, [omitted].
Mr W’s company focuses on employment opportunities within the [omitted] sector, with about 10% of their listings relating to general [omitted] employment. Mr W gave evidence to the effect that he considered the husband was unlikely to obtain further employment at the level of income previously enjoyed by him. Mr W acknowledged that many of the husband’s skills outlined in his curriculum vitae could be transferred to other fields but noted it would be more difficult to obtain employment in those other fields given the husband’s age and lack of relevant background in the specific area or industry. Mr W considered that the husband could potentially obtain employment based in Australia with a salary in the region of $100,000, plus commissions.
The husband also gave evidence about his own efforts to create new business opportunities within China. The Court has no way of assessing the viability of his efforts in this regard and we know that these efforts have been unsuccessful to date. On balance I conclude that the husband could have been making broader and more diligent enquiries for salaried employment across 2011-12, whether in China or Australia.
The husband gave evidence that he is now considering a new career in the [omitted] industry. His investments in [R] were an effort to consolidate his options in that regard. The husband has not made any real enquiries as to the viability of this as a career path. His only enquiries seem to have arisen through the other staff working at [R]. On that basis he understands he may earn an income in the region of $70,000, once he is established in the field. He views this new career as something of a “sea change”, as he does not wish to continue in the high stress lifestyle of his previous employment.
A party is entitled to change their working life and to pursue less stressful employment, albeit it may bring with it a lower income. However, the husband’s evidence on this topic was unconvincing. I consider the husband’s evidence about his future “career” in the [omitted] industry was more akin to his pursuit of a significant hobby, rather than a realistic future career path.
No doubt the husband has experienced a great deal of stress arising from the breakdown of his marriage and from these proceedings. Nonetheless I am confident that the husband has the capacity to earn an income significantly greater than $70,000 into the future, albeit not to the level of his previous high income with [S]. I conclude the husband has the capacity to earn an income in the range of $100,000 to $150,000, in accordance with Mr W’s evidence on this point.
The wife’s income earning capacity is significantly lower. The husband concedes that she did not participate in the paid workforce during the marriage, aside from occasional part time employment. The wife obtained a permanent part time position as a [omitted] in December 2010 and presently works four days per week with an annual income of $33,000. While the wife may well be able to work full time, there is little to suggest that even full time employment would see a significant increase in her income.
The wife gave evidence that she hopes to augment her salary from the [omitted] activities undertaken through [D]. She says that the Trust returned a profit of approximately $30,000 in the 2012 financial year albeit prior to the rental payment of approximately $11,000 due to the [Kendrick] Superannuation Fund.
The wife conceded that the business had previously traded at a loss, but was hopeful that the better returns in the 2012 financial year would continue. However it is likely that the operational costs may increase once Mr S is unable to assist to the extent he presently does. I am satisfied that the wife may be able to augment her income to a limited extent through the [omitted] enterprise, but these returns are uncertain.
(d) and (e) commitments of each of the parties to support a child or any other person
The parties’ adult son [Y] lives with the wife. While neither party has a legal responsibility to provide for [Y], both parties contribute to his ongoing support.
(g) reasonable standard of living
The parties clearly enjoyed a very comfortable standard of living during their marriage. Since separation the wife has reduced her expenditure significantly and has endeavoured to live within her income, particularly once the husband’s employment ceased. By contrast, the husband has continued to live an expensive lifestyle and the Court has already found that a large proportion of his extent of expenditure was unreasonable.
Both parties will need to manage their future expenditure within the limits of their income and financial resources.
Remaining section 75(2) factors
The parties were married for over 25 years. During that time the husband was able to develop his career, with the wife’s support. He has acquired high level skills and experience which he can still take into the workforce, while the wife remained out of the paid workforce.
Neither party is living with another partner.
There is no doubt that the wife’s income earning capacity is substantially less than that of the husband. The husband’s future employment is uncertain, but it may be that he will engage more effectively in seeking further employment once the stress of these proceedings is behind him.
Taking into account the parties’ future income earning capacity, a further adjustment of 5% in the wife’s favour on account of s.75(2) factors could have been expected. However, the Court must also consider the husband’s age and relatively shorter remaining working life. On balance, I conclude that figure should be discounted and an adjustment of 3% in the wife’s favour is more appropriate.
Conclusion
The net asset pool (excluding superannuation) is valued at $2,047,224. Based on the above findings, the wife is to retain 58% of the net asset pool to the value of $1,187,390. The husband is to retain 42% of the net asset pool to the value of $859,834.
The husband is content for the wife to retain the [D] Trust and the [D] Investment Trust in any final settlement. Accordingly the parties will retain or have had the benefit of the following assets:
| Asset | Wife | Husband |
| [D] Trust | $214,139 | |
| [D] Investment Trust | $527,443 | |
| Savings | $86,934 | |
| Mercedes Benz C180 | $30,000 | |
| 1999 Chrysler | $4,000 | |
| [T] shares | $945 | |
| Partial property settlement received in June 2012 | $75,000 | |
| Notional add back of legal fees | $41,510 | |
| $979,971 | ||
| [T] shares | $2,564 | |
| Investment in [R] | $40,000 | |
| Savings | $25,000 | |
| Partial property settlement received in June 2012 | $75,000 | |
| Notional add backs | ||
| - portion of redundancy | $100,000 | |
| - 2010 tax refund | $13,969 | |
| - legal fees | $84,375 | |
| $340,908 | ||
| Balance due to the wife | $207,418 | |
| Balance due to the husband | $518,926 |
Superannuation
As mentioned, the parties have agreed to an equal division of their superannuation. For the purpose of trial, the parties’ superannuation was valued in the sum of $350,420. An equal division of the superannuation holdings would result in each party retaining superannuation to the value of $175,210, which would require a splitting order in the wife’s favour in the sum of $151,759.
The husband is content for the wife to retain control of the [Kendrick] Superannuation Fund, once the splitting order is implemented. It was acknowledged that the [Kendrick] Superannuation Fund was to receive a further rental payment from the Trust, which the husband argued may alter the amount of the final splitting order. Similarly the wife presented to the Court detailed Minutes of Order seeking to deal with a wide range of issues in relation to the Superannuation Fund, including future liabilities or deferred tax assets that may arise.
In the absence of any clear evidence addressing each party’s position regarding the value of the parties’ interests in the [Kendrick] Superannuation Fund, it seems to me the neatest outcome is to allocate 100% of the husband’s interest in the fund to the wife, the wife’s interest in the fund to then be valued, and the husband to receive a superannuation split to the value of 50% of the wife’s interest in the fund, as valued by the [Kendrick] Superannuation Fund’s accountants, [B]. No doubt the accountants will take all relevant considerations into account when valuing the fund.
The husband will then be required to transfer his superannuation entitlements to a different fund of his own choosing within 28 days thereafter, to transfer his interest in the relevant real estate holdings to the wife and to resign from his position as Trustee of the [Kendrick] Superannuation Fund.
Is this outcome just and equitable?
The wife is retaining real assets and her [D] holdings have the capacity to provide her with an ongoing income, however modest that might be. She is presently renting and may wish to re-enter the property market. While she will have a substantial deposit available to her through her cash settlement, her low income will limit her capacity to obtain further finance.
Of the assets to be retained by the husband, it must be remembered that approximately $180,000 has been notionally added back into the pool. Those funds have been expended and do not represent an asset that the husband will retain into the future. The settlement funds to be retained by him, while significant in value, will not support his current lifestyle for any substantial period of time. Clearly the husband will need to obtain employment if he intends to maintain his present lifestyle.
The wife may feel that she is being required to further subsidise the husband’s extravagant lifestyle, insofar as she has saved the bulk of an earlier partial property settlement distribution received by the parties, now represented in her savings of $86,934. Against that it must be remembered that the wife is retaining a significantly larger share of the asset pool, when measured in dollar terms.
Both parties also have the benefit of their superannuation entitlements, which provide further security for their future financial needs. On balance, I consider this overall outcome to be just and equitable.
Jewellery
One final issue remains in dispute. Both parties agreed that certain items of jewellery should not be taken into account in the asset pool but should be given to their children. However, they disagree about whether the jewellery should be given to both children, or just to their daughter, [X].
I see no reason to exclude one child in this way. It may be that [Y] is not interested at present, but he may have a partner, or a daughter in the future and his views may change. I conclude the jewellery should remain in the wife’s possession, to be given to the children, or either of them, in the future as she determines.
I now make orders as published at the commencement of these Reasons.
I certify that the preceding one hundred and twenty-five (125) paragraphs are a true copy of the reasons for judgment of Kelly FM
Date: 28 September 2012
Hickey & Hickey (2003) FLC 93-143
AJO & GRO (2005) FLC 93-218Edgehill & Edgehill [2007] FamCA 1102
[23] Wife’s trial Affidavit, p.52, Annexure G Valuation Report from Mr L 23/7/03
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