Kent and Kent
[2008] FMCAfam 7
•24 January 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KENT & KENT | [2008] FMCAfam 7 |
| FAMILY LAW – Alteration of property interests – pool of assets– legal fees as add-back – disparity in earning capacity – future needs – periodic spousal maintenance. |
| Family Law Act 1975, s.72, s.74 (1), s.75(2), s.77A, s.79. s.81, s.106A, s.117 |
| Hickey & Hickey and Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 92 - 143 Ferraro & Ferraro (1993) FLC 92 - 335 AJO & GRO (2005) FLC 93 - 218 Biltoft & Biltoft (1995) FLC 92-614 C & C [1998] FamCA 143 Milankov & Milankov (2002) FLC 93-095 DJM & JLM (1998) FLC 92-816 Rosati & Rosati (1998) FLC 92-804 Clauson & Clauson (1995) FLC 92-595 Marinko & Marinko (1985) FLC 91-609 Plut & Plut (1987) FLC 91-834 Nutting & Nutting (1978) FLC 90-410 Bevan & Bevan (1995) FLC 92-600 Mitchell & Mitchell (1995) FLC 92-601 Hope & Hope (1977) FLC 90-294 Gyoper & Gyoper (1986) FLC 91-769 Wilson & Wilson (1989) FLC 92-033 Sapir & Sapir (No 2) (1989) FLC 92-047 Murkin & Murkin (1980) FLC 90-806 Jacobson & Jacobson (1989) FLC 92-003 Best & Best (1993) FLC 92-418 Bailey & Bailey (1978) FLC 90-424 |
| Applicant: | MS KENT |
| Respondent: | MR KENT |
| File Number: | BRM 7880 of 2006 |
| Judgment of: | Orchiston FM |
| Hearing date: | 19 November 2007 |
| Date of Last Submission: | 19 November 2007 |
| Delivered at: | Sydney |
| Delivered on: | 24 January 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Bourke |
| Solicitors for the Applicant: | Kennedy Spanner Lawyers |
| Counsel for the Respondent: | Mr T F Jordan |
| Solicitors for the Respondent: | Myer Pigdon Lawyers |
IT IS NOTED that publication of this judgment under the pseudonym Kent & Kent is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRM 7880 of 2006
| MS KENT |
Applicant
And
| MR KENT |
Respondent
REASONS FOR JUDGMENT
The Application
In these proceedings, the Applicant Ms Kent (the wife) seeks alteration of property interests pursuant to s.79 of the Family Law Act (the Act) and spousal maintenance pursuant to s.74(1) of the Act against the Respondent Mr Kent (the husband).
Background
The wife was born in 1970 and the husband in 1970. Both are now aged 37 years. The parties commenced cohabitation in March 1989 and were married in 1992. They lived continuously together for a period of 17 years from March 1989 until they separated on or about
1 May 2006.
There are 4 children of the marriage, [A] aged 12, [B] aged 10, [C] aged 8 and [D] aged 6.
The wife and 4 children currently reside at the former matrimonial home situated at Toowoomba (the Toowoomba property). The husband currently resides in a rented unit at [T]. The husband pays child support pursuant to an assessment of the Child Support Agency, and also pays spousal maintenance pursuant to an Interim Order of
11 December 2006. The wife is not cohabiting with any other person.
At the commencement of their cohabitation in 1989, the parties lived in Gladstone. The husband worked full-time for [Z] and the wife worked part-time for [Y]. The parties moved to Brisbane later in 1989 and then within a year to Townsville, with the husband becoming Assistant Manager of [Z] and the wife obtaining cleaning jobs and working as a nanny. In 1992 the husband became Second-in-Charge of [Z] in Rockhampton and the wife obtained private cleaning jobs. In 1993 the husband became Manager of [Z] in Gladstone, and the wife worked for a scalloping company.
In 1995 the wife gave birth to the first of the four children of the marriage, after which she ceased full-time employment and thereafter did some part-time work. In 1997 the husband became the Retail Property Manager for a real estate firm at Rockhampton, and in March 1998 began working for [X] in Gladstone, and then subsequently in Rockhampton.
In February 2002 the husband became a junior franchise manager in the Toowoomba [X] store and in November 2005 he became the sole franchise owner for the [X] Carinda store. He continues to hold the franchise for the Carinda store.
The Issues
The husband, in his affidavit sworn 15 November 2007 (the husband’s affidavit) and the wife in her affidavit sworn 24 October 2007 (the wife’s affidavit), refer to matters concerning the matrimonial relationship, including a domestic violence order, the relationship with the children, and the children’s contact with the husband. However these matters, including parenting orders, are not in issue in this case.
The issues in dispute between the parties are:
a)identification of the property comprising the matrimonial property pool;
b)valuation of certain assets within the pool;
c)the appropriate split of the net matrimonial property pool when considered against s.79(4) and s.75(2) factors;
d)whether, as part of that split the title to the Toowoomba property should be transferred to the wife;
e)whether, as part of that split, the title to the 1992 Toyota Tarago motor vehicle registration number [2] (the Tarago) should be transferred to the wife;
f)whether the wife’s claim for spousal maintenance should be granted.
Issues (a), (b), and (c): Alteration of matrimonial property interests
Property orders sought by the husband:
(i) that the net pool of matrimonial assets be divided as to 75% to the wife and 25 % to the husband by way of final property settlement and that this division of the net asset pool include provision for lump sum spousal maintenance to the wife, pursuant to s.77A of the Family Law Act.
(ii) that within 7 days from the date of these orders, the husband do all acts and things and sign all documents necessary to transfer to the wife all his right, title and interest in the 1992 Toyota Tarago motor vehicle registration number [2].
(iii) that other than as provided for above, the husband and the wife be solely entitled to the exclusion of the other party to all property and chattels of whatsoever nature and kind in the possession, ownership and/or control of each party as at the date of these orders, including but not limited to all monies on deposit, motor vehicles, shares, businesses, furniture and contents and superannuation entitlements.
(iv) that other than as provided for above, the husband and wife be responsible for and indemnify the other party in relation to any debts incurred in their respective names, including but not limited to any tax liabilities, credit card debts, loans, and any other debts.
Property orders sought by the wife
(v) that the matrimonial assets, liabilities and financial resources be divided as to 85% to the wife and 15 % to the husband
(vi) that as part of the property entitlement she receive the former matrimonial home situated at Toowoomba (the Toowoomba property).
(vii) that the husband do all things necessary and required of him to transfer the Toowoomba property into the wife’s name.
The relevant law
The preferred approach in determining an application under s.79 of the Act is the well defined, inter-related 4 step process: Hickey and Hickey and Attorney-General of the Commonwealth of Australia (Intervener) [2003] FamCA 395; (2003) FLC 93-143 at 39; Ferraro and Ferraro (1993) FLC 92-335 at 76,560; AJO & GRO (2005) FLC 93-218 at 79,619
Step 1: identify and value the property, liabilities and financial resources of the parties (usually as at the date of the hearing);
Step 2: identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b), and (c) and determine the contribution based on entitlements of the parties expressed as a percentage of the net value of the property;
Step 3 : identify and assess the other relevant factors under s.79(4)(d),(e), (f), and (g), including s.75(2) factors so far as they are relevant, and determine the adjustment, if any, that should be made to the contribution entitlements at Step 2 above; and
Step 4: consider the effect of the above and resolve what order is just and equitable in all the circumstances of the case.
Step 1: identifying and valuing the net matrimonial property pool
The parties were not able to agree upon a settled list of assets and liabilities.
Assets owned or possessed by the husband.
The parties agree that the following assets, presently owned and/or possessed by the husband, form part of the matrimonial pool:
Assets owned or in the possession of the husband
The Toowoomba property
The Toowoomba property was purchased during the marriage in the husband’s name. Its value is not in dispute. The parties agree that its current market value is $342,500 and that it is subject to a mortgage of $213,173. Applying the usual practice in regard to encumbered assets of deducting the amount of the secured liability from the gross value of the asset: (Biltoft & Biltoft (1995) FLC 92-614), I value the Toowoomba property for the purpose of determining the net matrimonial property pool at $129,327.
The Rockhampton property (situated at Rockhampton which is presently rented out)
The Rockhampton property purchased during the marriage is in the husband’s name. Its value is not in dispute. The parties agreed that its current market value is $223,000, and that it is subject to a mortgage over it of $58,224. Applying the same approach as above, I value the Rockhampton property for the purpose of determining the net matrimonial property pool at $164,776.
The Tarago
The Tarago motor vehicle was purchased in the husband’s name. The wife currently has possession of it.
The parties dispute its current value. The husband values the vehicle at $10,000. The husband has not sought to justify his assertion by the provision of independent valuation evidence.
The wife has put on evidence from a registered vehicle valuer Mr Brian Hanson, (by affidavit, sworn 14 November 2007), who expressed his opinion that the value of the Tarago was in the order of $2,500, given what he considered to be its “poor condition” and that “several mechanical jobs would have to be done to make the vehicle roadworthy”. His evidence remains unchallenged. I accept his valuation of $2,500.
The Mustang
A 1973 Ford Mustang Coupe motor vehicle, registration number [1], (the Mustang) was purchased in the husband’s name in May 2006. The Mustang is currently in the husband’s possession.
The husband values this motor vehicle at $15,000. Mr Jordan, counsel for the husband, submits that in the circumstances where the Court did not admit into evidence the value given to the vehicle by Undercover Cars (as set out in paragraph 71 of the husband’s affidavit), the best the court is able to do is to attribute to the vehicle, its purchase price value of $18,000.
Mr Bourke, counsel for the wife, submits that in the present circumstances where the husband has declined to produce a valuation satisfactory to the Court, it would be disadvantageous to the wife to ignore the additional $8,000 that the husband has spent on improvements to the vehicle. He submits therefore that the appropriate value of the Mustang is $26,000. I accept his submission to the extent that some additional figure for the costs of improvements should be taken into account. In the absence of any further evidence on the matter, I value the Mustang at $20,000.
Furniture in the husband’s possession
The wife values the furniture held by the husband at his rental property at [T] at $8,000. The husband values this furniture at $10,000, based on its purchase price as new furniture (see paragraphs 67 and 69 of the husband’s affidavit).
Neither party has sought to justify their assertions by the provision of independent valuation evidence. I consider that the furniture should be valued at its current market price, not its purchase price as provided by the husband, and noting the generally lower market value for second-hand household furniture, I value the furniture currently in the husband’s possession at $7,000.
[K] Pty Ltd account (the [K] account)
The [K] account is in the husband’s name. He attributes a value of $23,922 to it. The wife attributes a value to it of $40,137.
Mr Jordan submits that while at the date of separation there was some $50,000 in the [K] account, regard must be had to the husband’s affidavit, (at paragraph 66), that he drew from this account:
a)$18,000 towards the purchase of the Mustang motor vehicle,
b)some $15,000 to the ATO for tax liabilities incurred during the 2005 financial year, and
c)some $15,000 in payment of joint credit card debts incurred during the marriage.
In regard to the Mustang, I accept the submission by Mr Jordan on this point, given that I have already considered the Mustang as a separate item in the asset pool.
In regard to the payments to the ATO for tax liabilities, I note that, in addition to the $15,000 withdrawn from that account for tax liabilities (referred to at paragraph 66 of the husband’s affidavit), he also states that he “recently” withdrew $16,560 from the [K] account to pay tax liabilities (at paragraph 76 of his affidavit), but he does not state for what financial year or years these funds were directed. In these circumstances, I consider that the Court is entitled to draw the conclusion that the withdrawal of this $16,560 is in addition to the $15,000 withdrawal referred to at paragraph 66 of the husband’s affidavit. These amounts will be taken into account when considering the tax liabilities (see post).
In regard to the payment of the joint credit card debts incurred during the marriage, the husband asserts, (in paragraph 66 of his affidavit), that following the separation, he paid $15,000 towards those debts. However he also states, (in paragraph 64 of that affidavit) that in March 2006 (some two months prior to the separation) $18,000 was withdrawn from the joint home loan account to pay for credit card debts accumulated during the marriage. The husband, in effect, is asserting that even though $18,000 was paid on credit cards in March 2006 for debts incurred during the marriage, there still remained $15,000 to be paid on those cards for further debts incurred during the marriage, totalling $33,000.
Mr Bourke points out that the husband did not produce any evidence concerning his claim that the $18,000 withdrawn in March 2006 and the subsequent withdrawal of $15,000 were both applied to the payment of credit card debts incurred during the marriage. I also note that according to paragraph 65 of the husband’s affidavit, he purchased the Mustang motor vehicle in May 2006 for $18,000. He treats this as a separate item from the $15,000 credit card payment.
While I have some reservations in accepting the husband’s assertion that the payment of credit card debts incurred during the marriage amounted to $33,000, in the absence of any further evidence on the point, I am prepared to accept the husband on this point.
In summary, taking all the above matters into account, I adopt the value of the [K] account given by the husband of $23,922.
[Z] shares
The wife attributes a value of $ 8,070 to these shares. Mr Jordan submits that their current value is $7,625. In the absence of any further evidence on the point, I accept his submission that the shares should be valued at their current market value of $7,625.
Husband’s bank account (un-nominated)
The husband attributes a value of $3,281 to funds held in his bank account. In the absence of contrary evidence, I accept that sum.
Husband’s superannuation
The parties agree that $20,222 is held in the husband’s superannuation fund.
Neither party submits that the Court should assess each party's percentage entitlement to the superannuation assets in any different way than from the non-superannuation assets.
In C & C [2005] FamCA 429, the majority of the Full Court said that:
Nothing we have said in this judgment would prevent a Court in the exercise of its discretion from including a superannuation interest as an item of property in the list of property which is drawn as ‘the first step’ in the determination of proceedings under s 79, whether or not a splitting order is sought in those proceedings.
Appling this discretion, I adopt a one-list approach and include the $20,222 in the list of matrimonial assets.
Assets owned or in the possession of the wife
The Tarago
This asset, in the wife’s possession, has already been dealt with above.
Furniture in the wife’s possession
The wife values the furniture at the Toowoomba property at $4,000. The husband values this same furniture at $30,000.
Neither party has sought to justify their assertions by the provision of independent valuation evidence. Adopting the same approach as taken in regard to the furniture in the husband’s possession at his [T] residence, and in the absence of any further evidence on the point, I find the husband’s figure excessive and the wife’s figure to be closer to the true market value. I place a value of $7,000 on the furniture in the wife’s possession.
Suncorp savings account
The wife attributes a value of $10,000 to her Suncorp savings account, currently comprising $10,000, placed in a term deposit, from a tax refund to the wife of $ 20,310 pursuant to the Family Trust.
The husband attributes the value of the account as $20,310, being the $10,000 referred to above, and the remaining $10,310 from the tax refund to the wife which was deposited in this account and which he claims should be an add-back.
I consider that the $10,000 from the tax refund banked into the wife’s Suncorp saving account should be treated as a matrimonial asset. The remaining $10,310 which was deposited in the account is dealt with under the heading: Add –backs: ATO payments to the wife (see post).
Suncorp working account
The husband attributes a value of $2,000 to the wife’s Suncorp working account.
The wife gives that account a nominal value only. Without further evidence on the point, I accept the wife’s value which, for all practical purposes, I value at $0.
Wife’s superannuation
The wife states that she has $31 is in her superannuation account. The husband accords it a value of $105. Without further evidence on the point, I accept the wife’s figure of $31.
For the same reasons as with the husband’s superannuation, I include the wife’s superannuation in the list of assets.
Add-back claims
The parties put in issue whether the following items should be ‘add-backs’, to be included within the property pool:
a)legal fees already paid by the husband
b)a donation by the wife to the [W] Church
c)ATO payments to the wife
a): The husband’s legal fees
The general principle is clear that some items which no longer exist, in order to do justice and equity to the parties may need to be notionally considered in determining what a fair share of the existing pool of assets should be. (Milankov & Milankov (2002) FLC 93-095). In this regard, funds to be added back into the pool may include monies that a party has already expended in respect of his or her legal costs regarding the matrimonial proceedings: (DJM & JLM (1998) FLC 92-816; Milankov & Milankov (2002) FLC 93-095). As stated by the Full Court in DJM & JLM at 85,262:
Failing to add back monies expended by parties on costs frequently has the effect of defeating the policy of s.117 by permitting the pool of available assets for distribution between the parties to be diminished by any monies that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought be to add costs already paid back into the pool.
Subsequently the Full Court in NHC v RCH [2004] FamCA 633 at [56]-[59], (quoted with approval by the Full Court in Gollings v Scott (2007) 37 Fam LR 428 at [46] and in Wilde & Wilde [2007] FamCA 1044 at [201], cited in that case as Chorn and Hopkins [2004] FamCA 633 at [57]-[58]), after an extensive examination of the authorities relating to the treatment of paid legal fees, concluded that ultimately whether or not paid legal fees were to be added back into the pool of assets was a matter of discretion for the court, but that:
….in determining how to exercise that discretion, regard should he had to the source of the funds.
If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the party, who has had the benefit of them.
If funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift on inheritance), they would generally not be added back as a notional asset…..
Outstanding legal fees themselves are generally not taken into account as a liability
Mr Bourke submits that it would be inequitable, having regard to the fact that assets are taken into account as at trial, for the husband to have expended up to $70,000 on his own legal fees and for these not to be added back into the asset pool, in circumstances where the wife still has to pay her legal fees. He contends that the wife would be penalized by diminution of the asset pool if the husband’s legal fees are not taken into account.
Mr Jordan contends, however, that the husband has paid his legal fees of $70,000 “along the way” and “out of income that he has earnt”, and that therefore to add back his legal fees would work “an injustice in the circumstances of the case, because otherwise there would have been more money around for him to spend on a week to week basis, that is, [he] had to deny himself to be able to pay his legal fees” (Transcript 19 November 2007, page 47). This submission clearly falls short of a positive assertion that all the $70,000 was generated by the husband after the parties separated.
In the absence of any evidence from the husband as to when the source of funds for payment of his legal fees is said to have been generated, the Court is not prepared to accept that all the monies paid on legal fees by the husband were in fact generated by him post separation, in particular, given the amount of the fees involved in a post separation period of only 18 months. In these circumstances, while I accept that the major proportion of this amount reflects post separation income, I nonetheless consider that the Court should, in the exercise of its discretion, add back into the pool an amount of $25,000 referable to pre-separation funds.
b) Donation to church and c) ATO payments to wife
In considering whether each of items b) and c) should be added back to the pool, I take as the starting point the general proposition by the Full Court in C & C [1998] FamCA 143at [46] that:
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 monies 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.
This approach in C & C was cited with approval by the Full Court in NHC & RCH [2004] FamCA 633 at [24]; (2004) FLC 93-204 and by the Full Court in Gollings v Scott (2007) 37 Fam L R 428 at [69] and in Wilde & Wilde [2007] FamCA 1044 at [184]. In Wilde & Wilde, the Full Court also observed, at [185] that:
where a party incurs reasonable living expenses whether from income or, if necessary, from capital post separation, as a general rule, the sums so expended will not be added back to the pool of assets to be divided between the parties.
[W] Church donation
Mr Jordan submits that while the wife is entitled to make a donation of $2,050 to the [W] Church, (as referred to in paragraph 60 of her affidavit), the husband should not thereby be prejudiced. He submits that the donation should be added back into the pool.
I consider that this donation can be included within reasonable living expenses, as contemplated in the approach taken in C & C (supra) and Wilde & Wilde (supra), and should not be added back into the pool of assets. In this regard, the wife (in paragraph 19 of her affidavit) indicates the circumstances behind her involvement in the church, and her role in it as a Youth Leader. While the size of the donation might seem somewhat generous in view of her overall financial circumstance, I consider that her church involvement, and the donation to it, is part of the process of her ‘properly getting on with’ her life.
ATO payments to the wife
In regard to the ATO payment to the wife, Mr Jordan refers to paragraphs 33 and 60 of the wife’s affidavit that she received a $20,310 tax refund pursuant to the Family Trust. He submits that this should be added back into the pool.
I note, however, that in paragraph 60, the wife states that $10,000 from that refund was placed in a term deposit. This amount has already been counted as an asset under the Suncorp savings account. She also states in paragraph 60 that $2,050 from that refund was donated to the [W] church. This donation has already been considered
In regard to the remaining $8,260 from the $20,310 tax refund, the wife identifies (in paragraph 60 of her affidavit) a list of the items on which the money was expended, including registration of the motor vehicle, school fees, and a computer.
Applying the principles set out in C & C (supra) and Wilde & Wilde (supra), I consider that the $8,260 was reasonably disposed of by the wife for reasonable living expenses and in a manner consistent with her properly getting on with her life. Accordingly, the sum of $8,260 should not be added back into the pool.
Liabilities
Tax liability
It is not disputed that the $15,000 payable to the ATO for the 2004-05 financial year is a legitimate debt of the marriage. The husband estimates his tax liability for the 2005-06 financial year as $55,000, making a total tax liability of $70,000 for the two financial years.
However, I am satisfied that this amount should be reduced by an amount of $31,560 already paid by the husband towards the tax debt. As previously indicated in this regard, I consider that the Court is entitled to draw the conclusion that the withdrawal by the husband of $16,560 from [K] Pty Ltd (for the payment of tax referred to in paragraph 76 of the husband’s affidavit) is separate from, and in addition to, the $15,000 he withdrew from that account for the payment of tax (referred to in paragraph 66 of the husband’s affidavit).
I consider that these combined amounts can be attributed to the payment of tax liabilities for the 2004-05 and the 2005-06 financial years.
I therefore consider that the net outstanding tax liability as at the date of hearing is $38,440.
Credit Cards
It is not disputed that the total debt on the Virgin MasterCard and the [Z] card, as at the time of separation, was $5,728
The husband states that the current debt of the Virgin MasterCard is $8,806. In the absence of other evidence on the point, I accept this figure of $8,806.
GE Creditline
The husband states that the current debt on the GE creditline is $550. In the absence of other evidence on the point, I accept this figure.
Other payments
Mr Jordan also refers to other expenses incurred by the husband since separation (set out in paragraph 72 of the husband’s affidavit), including periodic mortgage payments to Suncorp Metway in relation to both properties and council rates. However the matters referred to in this paragraph, include items dealt with elsewhere and which would not be appropriate to treat as a liability of the matrimonial property, such as the child support and interim spousal maintenance payments. Also, it is not in dispute that the wife is paying in effect half of the mortgage payments on the Toowoomba property. In these circumstances, I do not consider it appropriate to reduce the net asset pool by any further amount.
Final Schedule of Assets and Liabilities
Based on the findings made above, the following summary of the property pool is set out:
Assets Title Value The Toowoomba property Husband $129,327 (net) The Rockhampton property Husband $164,776 (net) The Tarago Husband $2,500 The Mustang Husband $20,000 Furniture (Toowoomba property) Joint$7,000 Furniture ([T] unit) Husband $7,000 The [K] account Husband $23,922 [Z] shares Husband $7,625 Bank account Husband $3,281 The Suncorp savings account Wife $10,000 Suncorp working account Wife $0 Superannuation Husband $20,222 Superannuation Wife $31 Add- back: Husband’s
legal fees $25,000
Residual liabilities
Mortgages (over the Toowoomba and Rockhampton properties) have been already deducted under Assets above
Tax liability $38,440
Credit cards $8,806
GE Creditline $550
Summary of Pool (from the above Final Schedule)
Assets: $420,684
Residual liabilities: $47,796
Net property pool: $372,888
Step 2: Contributions of the parties
The second step requires the Court to consider the matters in s.79(4)(a)-(c).
The parties are agreed that each has contributed equally to the asset pool. In this regard, Mr Jordan submits that the contribution of the husband and wife over the 17 years of the relationship can be considered as equal. He states that neither party came to the relationship with any substantial assets and both worked throughout the period of the relationship. The wife worked until the birth of the first child, and subsequently did some part-time work and also has been responsible for the parent and homemaker contribution. Mr. Jordan also submits that there is nothing post-separation to change that equal contribution, taking into account that the husband has been maintaining matrimonial assets post-separation.
Mr Bourke equally submits that a consideration of the s.79(4) contribution factors would result in the Court concluding that the parties contributed equally to the acquisition of the asset pool from a financial and a non-financial point of view.
I accept their submissions on these matters. During the lengthy period of cohabitation, I accept that it is clear that the husband made a greater financial contribution. However the wife also worked during the period of cohabitation, initially full-time and then some part-time work, in conjunction with her role as home maker and parent to the
4 children. I accept that the husband also assisted in these roles, but that the wife clearly made the greater non-financial contribution.
In the circumstances, I accept that the parties to the marriage contributed equally to the asset pool and that there is no evidence of any contribution, post separation, which alters this position. I accept the submissions of the parties on these matters.
Accordingly, I consider that it is appropriate to apportion the matrimonial property pool 50/50%.
Step 3: ss.79(4)(d)-(g) and 75(2) factors
The third step for the Court to consider are the factors in s.79(4)(d)-(g), including subsection (4)(e), which requires the Court to take into account the matters referred to in s.75(2), so far as they are relevant.
Mr Jordan submits that the relevant s.75(2) factors in this case are:
a)the level of child support paid by the father;
b)the care and control of the children;
c)the disparity in earning capacity; as well as
d)a capital gains tax factor related to any sale of the Rockhampton property (under s.75(2)(o)).
It is not disputed that:
a)the husband pays child support at the highest level required by the Child Support Agency, taking into account that his gross income of $270,400 for the 2006-07 financial year is in excess of the maximum child support gross income of $109,135. According to the certificate of the Child Support Agency of 4 June 2007 (annexed to the wife’s affidavit), the amount required to be paid by the husband for child support in the period from 1 July 2007 to 30 September 2008 is $2,677.17 per month.
b)the wife will have the primary future responsibility for the care of the children, being at all times other than every third weekend (as reflected in the Consent Orders of 3 May 2007)
c)the husband has a much greater income and earning capacity than the wife. In the 2005-06 financial year he earned $197,770 (gross), and in the 2006-07 financial year he earned $270,400 (gross).
d)by contrast, the wife receives:
i)Child Support of $2,677.17 per month (being $32,126 per annum)
ii)a Family Assistance payment of $147 per week
iii)an income for herself and the children from folding and delivering pamphlets, estimated in her affidavit at about $120 per week
iv)spousal maintenance of $207.00 per week, pursuant to Interim Orders of 11 December 2006
v)$70 per week from [Mr L], aged 16, during such times as he resides with her and the children
vi)an insignificant income from Avon and Mary Kay (cosmetic outlets), estimated in her affidavit as about $50 over a six month period
vii)nil distribution from the [Mr Kent] Family Trust for the 2007 financial year (see letter from McDonald Ross, Chartered Accountants dated 26 June 2006, annexed to the wife’s affidavit).
e)the wife has no objection to the husband keeping the Rockhampton property if he so wishes.
The following matter remains in dispute:
a)Capital gains tax (in the event of the sale of the Rockhampton property)
In regard to the Rockhampton property, Mr Jordan argues that although the husband plans to retain the property, if he should sell it in the future, he would be subject to capital gains tax, given that it is not his principal place of residence and hence this should be taken into account.
Mr Bourke submits that there was no evidence before the Court about the level of any such capital gains tax.
The Full Court in Rosati & Rosati (1998) FLC 92-804 at 85,043 identified various factors in determining whether capital gains should be taken into account in valuing a particular asset, including the likelihood or otherwise of that asset being realized in the foreseeable future.
In the present case, there is simply no evidence of an intention on the part of the husband to sell the property now or in the foreseeable future. Indeed, the above submission from Mr Jordan points to the opposite view. Nor is there any evidence to indicate that the property would need to be sold in order for the husband to meet any financial obligation created by any order of this Court.
Further, on the evidence before me, not only may the husband never sell the Rockhampton property, it is also impossible to estimate the amount of any such tax at the present time, which would be based on the sale price of the property, only if and when sold.
Accordingly, I do not consider that the Court should allow a deduction for such unassessed and unpaid capital gains tax.
s.75(2) future needs
Mr Jordan contends that taking the relevant s.75(2) factors into account there should be a 15% loading on top of the 50/50% split for the wife, together with a further 10% loading or lump-sum maintenance to the wife, resulting in a 75/25% split in favour of the wife.
Mr Jordan further submits (and equally relevant to Step 4), that it would be unjust and inequitable at the end of 17 years of cohabitation, in which both parties have worked very hard, that the husband receive anything less than 25% of the pool. He further points to the potential insecurity in the husband’s franchise business.
Mr Bourke submits that the appropriate order would be to make an adjustment of 35% to the property division so that the wife receives 85% and the husband 15%, taking into account all of the circumstances, including:
a)the disparity in incomes between the parties
b)that the wife’s ability to earn an income is severely restricted by the on-going care of the four children, currently aged 12, 10, 8 and 6
c)the period of cohabitation and marriage has affected the wife’s earning capacity as she did not at the outset have any trade or vocational skills and has been restricted from acquiring those skills during the relationship because of the birth of the four children and her parental responsibilities to them
d)the wife’s standard of living has already, and will continue to be, materially affected
e)the husband’s standard of living will not be materially affected in a similar way, given his capacity to generate a substantial income and provide superannuation for himself and that his disposable income, even taking into account Child Support payments, will far exceed that of the wife.
I have carefully considered the above respective submissions of the parties on the relevant s.75(2) factors in this case. In this regard, both the husband and wife are relatively young. Neither has re-partnered at this point in time. Both appear in good health. The husband has demonstrated a continuing capacity to maintain a high level of income. Whilst I accept that one can never guarantee the success of any business endeavour as Mr Jordan points out, nonetheless it is the case that the husband has a franchise with [X], a large and successful Australian retailer.
In contrast, the wife’s present and future earning capacities are modest. She gave evidence that the Toowoomba residence is a rural property, at least half an hour’s drive from the nearest town. Further, she does not presently have any skills that can readily assist her in obtaining gainful employment. I accept the submissions by Mr Bourke on these matters.
The wife gave evidence that she wishes to undertake studies to complete Year 12 of secondary education to assist her future prospects in the workplace, when she is able to do so, given the constraints of looking after and transporting the children. I accept that she clearly has the primary responsibility for the care for the four children and the significant constraints which this imposes on her time and availability for both work and study.
I accept that there is significant disparity in the income of the husband and wife, and in their earning capacity. The husband is in a much better position than the wife to generate future income and provide for his superannuation. The wife has a very minimal superannuation entitlement with a modest prospect in this regard when compared to the husband. As recognized by the Full Court in Clauson & Clauson (1995) FLC 92-595 at 81,911:
It has long been recognized that in most cases the most valuable “asset” which a party can take out of the marriage is a substantial, reliable, income-earning capacity: see Best & Best (1993) FLC 92-418 at 80,295.
Even after alteration of the property interests in what is a reasonably modest pool of assets in this case, and maximum mandatory Child Support payments, I am satisfied that the husband will still be in a far stronger financial position than the wife and will continue to enjoy a standard of living reasonably similar to that he has previously enjoyed. An example is that I have previously accepted that the husband has paid the major proportion of his $70,000 legal fees from monies generated post separation. This is some indication of his considerable disposable income.
In contrast, I consider that there has been and will continue to be a material diminution in the standard of living from that previously enjoyed by the wife, where much of the lump sum received by her from the alteration of property interests, after paying her legal fees, may be expended on reducing the mortgage over the Toowoomba property (see post: Issue (d)). The affidavit evidence provided by
Mr Malcolm Vincent Kennedy, of Kennedy, Spanner, Lawyers, indicates that the wife will have to pay her legal fees from the matrimonial property distribution.
I also note that while the husband pays child support for the four children at the highest level required by the Child Support Agency, being $2,677.17 per month, this amount is relatively modest compared with his income, given that Child Support is assessed on a maximum gross income of $109,135, which is less than half his gross income of $270,400 for the 2006-07 financial year. Also, under the consent orders the husband has access to the children every third weekend, which will do little to reduce the on-going costs to the wife in raising the children.
For these reasons, I consider that an adjustment of 32% in favour of the wife is appropriate in all the circumstances. I do not consider that the Court should include in this adjustment any loading or lump-sum maintenance to the wife. The issue of spousal maintenance is dealt with below.
Step 4: Just and equitable: s.79(2)
The role of the Court is to consider, and be satisfied, that any proposed order concerning alteration to the proportional interest of each party to the net matrimonial property is just and equitable in all the circumstances. According to the court in Marinko & Marinko (1985) FLC 91-609 at 79,944:
All the circumstances of each case require consideration and upon such consideration a judicial exercise of discretion should be made to achieve a result which is just in all those circumstances.
I have carefully considered the submission by Mr Jordan that it would be unjust and inequitable at the end of 17 years of cohabitation and marriage, in which both parties have worked very hard, that the husband receive anything less than 25% of the pool. I consider, however, that taking into account all the matters raised by both parties, particularly in Step 3 above, and having regard to the matters identified earlier in this judgment as to the direct and indirect contributions of the parties, their present circumstances and future needs and resources, and the reasonably modest pool of matrimonial assets, that a split of 82/18% in favour of the wife of the net matrimonial assets is just and equitable in all the circumstances.
Issue (d): Whether title to the Toowoomba property should be granted to the Wife
The wife has indicated her wish to retain the Toowoomba property. She refers to various benefits, including to the children, in their continuing to reside at that property (see paragraphs 16 – 19 of her affidavit). The mortgage payment on the property is $1,447 per month.
Mr Jordan queries whether the wife would be in the position to service the mortgage payments on the property.
Mr Bourke noted that the husband, (in paragraph 78 of his affidavit), concedes that the wife continued to pay her half-share of the on-going mortgage payments on the Toowoomba property by permitting the husband to deduct $190 per week, (being one half of the mortgage payments on that property), out of the Child Support entitlement of $611 per week he paid to her.
The effect of granting the order sought by the wife would be that henceforth the husband would not be under any obligation to pay any part of the mortgage payments on the Toowoomba property. That obligation would rest solely on the wife. In consequence, however, the husband would no longer divert $190 per week of Child Support to the mortgage, and this amount would now be provided to the wife.
In regard to future mortgage payments, Mr Bradley John Spanner, an accredited mortgage broker, (in his affidavit of 14 November 2007), states that he would not be in a position to submit any application for finance on behalf of the wife given that her financial circumstances were dependent upon the outcome of this family law case. However, he goes on to say that:
It is not a case that I would be able to positively rule out [the wife] having any prospect of successfully obtaining finance to secure the [Toowoomba property].
There are strong considerations concerning the welfare of the children in their being able to remain in their familiar surroundings. Whilst clearly the ongoing mortgage payments will stretch the wife’s financial resources, at least in the shorter term, I consider that she should be in a position to obtain and service a satisfactory mortgage on the Toowoomba property, given, in particular, the lump sum payment for the adjustment of the net asset pool granted to her from the matrimonial property, which may allow her to reduce the size of the mortgage to make it more serviceable in light of her income.
I am satisfied that, in all the circumstances, as part of the distribution of the net pool of matrimonial assets, the Court should order the transfer of the Toowoomba property to the wife.
Issue (e): Whether title to the Tarago should be transferred to the wife
The husband seeks that, as part of the distribution of the net pool of matrimonial assets, the Court should order the transfer of title in the Tarago to the wife. The wife has not sought any order in this regard. Given that the vehicle is presently in the possession of the wife, and in any event, a modest value has been placed on it of $2,500, I do not consider that it would be unjust to make the order sought by the husband in these circumstances. Furthermore, as a matter of commonsense, it may be useful to the wife in the event that she seeks to use it as a trade-in on another vehicle at some time in the future.
I am satisfied therefore, in all the circumstances, that the Tarago should be transferred to the wife.
Conclusion on alteration of property interests
In conclusion, I find the property pool has a net value of $372,888
The wife is entitled to 82% and the husband to 18 % of that pool, being $305,768 and $67,120, respectively.
The assets from the Final Schedule of Assets and Liabilities (set out earlier), to be transferred to or retained by the wife are:
the Toowoomba property: $129,327 (net value).
The Tarago: $2,500.
the furniture in the Toowoomba property: $7,000
the Suncorp savings account: $10,000
her superannuation: $31
Total: $148,858
In addition to the assets set out above, the wife is entitled to receive the sum of $156,910 from the husband, to give her a total of $305,768 from the net asset pool.
Issue (f): Application for spousal maintenance:
Spousal maintenance orders sought by the husband
(i) that the orders made on 11 December 2006 in relation to interim spousal maintenance be discharged
(ii) that the wife’s application for final periodic spousal maintenance be dismissed
Spousal maintenance orders sought by the wife
(iii) that by way of spousal maintenance the husband pay to the wife the sum of $350.00 per week
The Issues
It is not disputed by the parties that:
a)there is a significant disparity in earning capacity between the parties.
b)the husband has the financial capacity to pay up to the amount of spousal maintenance sought by the wife.
The following matters remain in issue:
a)whether an order for spousal maintenance in the present case would impugn the ‘clean break’ philosophy of s.81
b)If not, whether the Court should exercise its discretion under s.74(1) to make a spousal maintenance order in the light of the ss.72 and 75(2) factors:
c)If so, what is a proper provision of spousal maintenance in this case.
Issue: Whether an order for spousal maintenance in the present case would impugn the ‘clean break’ philosophy of s.81
Section 81 of the Act provides that, as far as practicable, the court should make orders that will finally determine the financial relationship between the parties to the marriage and avoid further proceedings between them (the so-called “clean break” philosophy).
Mr Jordan submits that, in light of s.81, it is only in a very unique and special circumstance where spousal maintenance should be awarded, which, he contends, does not apply in the present case for the following reasons:
a)a loading of the property distribution in the wife’s favour from the s.75(2) factors would be reflective of the disparity in earning capacity of the parties. To go further therefore and also make a periodic payment for spousal maintenance would effectively be “double dipping’
b)the wife has not attempted to discharge the spousal maintenance need herself by seeking employment since the separation
c)the wife is not able to discharge the requisite standard to justify the personal expenses claimed by her
d)the order sought is indefinite.
Mr Bourke submits that the circumstances of the case take it outside the terms of s.81, based on the following factors:
a)the wife’s low income
b)her parental responsibilities and the restrictions that this places on her ability to find employment, given her location at [G] (some half-hour drive from Toowoomba), and her need to re-skill
c)an 85/15% division of the marriage assets in favour of the wife would only provide her with a house (subject to a mortgage), together with an additional amount to pay for, amongst other things, her legal fees. According to Mr Kennedy, of Kennedy Spanner, Lawyers, who has carriage of the matter on behalf of the wife, the legal costs and outlays incurred by her with the firm in regard to the present family law matter (including up to a one- day hearing, with Counsel’s fees), would be approximately $50,000. He states that the firm would carry these costs until the matter is finalised by way of Agreement or Court Order, but that it would not provide her with any substantial further capital. (see the Annexure to his affidavit of 13 November 2007)
d)the wife’s projected future expenditure, (as stated in paragraph 39, as amended, of her affidavit), is $592 per week, excluding expenditure for the children, and some other items, in particular mortgage payments
e)Mr Jordan cross-examined the wife on the details of some of these future expenses set out in her affidavit. I consider, however, that the concerns raised were of a more minor nature and that her future expenses are justified and are not materially less than the amount claimed in her affidavit.
f)the amount sought of $350 per week is not a large amount, compared with the husband’s considerable income
g)if an order for spousal maintenance is made and the husband’s (or wife’s) financial circumstances were to change dramatically, he could apply to have the maintenance order varied.
In this context, I accept the submission from Mr Bourke that the circumstances of the case take it outside the terms of s.81, taking into account, in particular, the amount the wife will receive out of the reasonably modest pool of assets, the wife’s low income relative to her projected expenses, her parental responsibilities for four relatively young children, the restrictions that this and her rural location place on her ability to find employment, and her need to re-train. I consider these are good reasons why the wife has not sought to obtain employment since the separation and that she should not be criticized for not having done so in the past.
Issue: Whether the Court should exercise its discretion under s.74(1) to make a spousal maintenance order in the light of the ss.72 and 75(2) factors
In an appropriate case, s.74(1) gives the court a discretion to make such order in spousal maintenance proceedings “as it considers proper for the provision of maintenance in accordance with this Part.” In exercising its discretion, the court is limited to the criteria set out in ss.72 and 75(2): (Plut & Plut (1987) FLC 91-834)
Subsection 72(1) factors
Subsection 72(1) provides that:
A party to a marriage is liable to maintain the other party, to the extent that the first-mentioned party is reasonably able to do so, if and only if, that other party is unable to support herself or himself adequately whether:
(a) by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b) by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c) for any other adequate reason,
having regard to any relevant matter referred to in subsection 75(2).
“reasonably able to do so”
The question of the extent to which the husband is “reasonably able” to maintain the wife is not in contention in the present case. As indicated above, the husband does not dispute that he has the financial capacity to pay the amount of spousal maintenance sought by the wife, even on a 85/15 % property distribution. He is, of course, all the more “reasonably able” to maintain the wife where the Court has now made a 80/20% split.
“adequately”
The word “adequately” imports a standard of living that is reasonable in the circumstances: (Nutting & Nutting (1978) FLC 90-410). This does not necessarily mean maintaining the pre-separation standard of living of the applicant spouse: (Bevan & Bevan (1995) FLC 92-600 at 81,980-82), and the standard of living will vary between families: (Mitchell & Mitchell (1995) FLC 92-601).
The case law on the comparable s.75(2)(g) factor, also indicates that often both parties must reduce their standards of living, at least for a time after separation, although the primary income earner will usually recover his or her standard of living faster: (Hope & Hope (1977) FLC 90-294). I consider that the standard of living of both the husband and wife has reduced in consequence of the separation, although as previously indicated, much more so for the wife. I consider that it is likely that the husband will recover his standard of living more readily, given his much greater income and earning capacity.
I do not consider that the application for spousal maintenance, even if granted towards the upper amount sought by the wife, together with the 80/20% property distribution in her favour, would result in her enjoying a ‘lavish lifestyle’, contrary to the purpose of spousal maintenance: (see Gyoper & Gyoper (1986) FLC 91-769, Wilson & Wilson (1989) FLC 92-033, Sapir & Sapir (No 2) (1989) FLC 92-047)
“unable to support …herself adequately”
The issue in this case is whether the wife has a present inability to support herself adequately, in the sense of her being unable to generate funds from her own resources or earning capacity to support her own needs: (Murkin & Murkin (1980) FLC 90-806).
As previously indicated, apart from the lump sum property settlement, and Child Support payments for the children, the wife is restricted to Family Assistance payments and a minimal income from she and children folding and delivering pamphlets. I consider that in these circumstances she is unable to support herself adequately, given her necessary personal weekly expenditure, as accepted above, and that she would have some mortgage commitment over the Toowoomba property.
“(a) by reason of having the care and control of a child”
As already stated, it is not disputed that the wife has and will continue to have the primary care and control of the four children of the marriage, currently aged 12, 10, 8 and 6, other than every third weekend.
In Clauson & Clauson (1995) FLC 92-595 at 81,911, the Full Court observed that:
the payment of child support in no way compensates the custodial parent for the loss of career opportunity, lack of employment mobility and the restriction upon an independent lifestyle which the obligation to care for children usually entails.
I consider that in this case, by reason of the wife having the care and control of four relatively young children, she has only a very limited earning capacity and is unable to financially support herself adequately.
“(b) by reason of age or physical or mental incapacity for appropriate gainful employment”
The parties raise no issue in regard to subsection 72(1)(b). I accept that it is not relevant in the present case.
“(c) for any other adequate reason, having regard to any relevant matter referred to in subsection 75(2)”
I note at the outset, contrary to the submission by Mr Jordan, that it is not held to be ‘double dipping’ to take into account any relevant matters under s.75(2) in the property settlement and then to again take them into account in the spousal maintenance application: (Jacobson and Jacobson (1989) FLC 92-003).
I consider that it is possible to draw some comparisons between the present case and the decision of Best and Best (1993) FLC 92-418 where the Full Court, in exercising its discretion under s.75(2), awarded the wife periodic spousal maintenance in addition to her receiving 100% of the available matrimonial assets. The Full Court observed that:
The wife had significant responsibilities to support herself and four children and had limited financial means. Although the husband had earned a very substantial income over a number of years…..there was a very small margin between their assets and liabilities. The most striking feature in the case was the husband’s very substantial and continuing earning capacity…[which] gave him a continuing capacity to steadily earn his way out of his then financial position. The wife had no such capacity.
In the present case the net matrimonial assets are reasonably modest, and the husband has a very substantial and continuing earning capacity, unlike the wife.
I consider that s.75(2)(g) is a relevant matter in this case. It provides that
where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
Many of the matters relevant to this factor have already been considered above. However I refer again to the fact that while the husband pays child support for the four children at the highest level required by the Child Support Agency, being $2,677.17 per month, this amount is relatively modest compared with his income, given that Child Support is assessed on a maximum gross income of $109,135, which is less than half his gross income of $270,400 for the 2006-07 financial year.. The wife will therefore have to meet from her income and payments from the husband, the on-going costs in raising the children.
I further consider that the payment of spousal maintenance would considerably assist in ensuring that the standard of living of the wife in all the circumstances is “reasonable”. Conversely, lack of this periodic payment could leave her with an unreasonably low standard of living.
I consider that s.75(2)(h) is also a relevant factor in this case. It provides that:
the extent to which the payment of maintenance to the party …. would increase the earning capacity of that party by enabling that party to undertake a course of education or training, or to establish himself or herself in a business or otherwise to obtain an adequate income;
In Bailey & Bailey (1978) FLC 90-424, the Full Court awarded spousal maintenance to enable a wife to continue her tertiary education. The Full Court held that having regard to the respective incomes of the husband and the wife, her responsibilities towards her children and her desire to increase her earning capacity, she had established that she was unable to support herself adequately for the period covered by the order and that it was reasonable to require the husband to contribute to her maintenance.
I consider that the principles in Bailey & Bailey are applicable to the present case, taking into account the respective incomes of the parties, the responsibilities of the wife to the four children of the marriage, and her desire to increase her earning capacity by completing Year 12 of secondary school. The provision of spousal maintenance will clearly assist the wife in becoming more self-supporting.
Issue: Whether the Court should make a further adjustment or loading to the property settlement in lieu of spousal maintenance
I consider that spousal maintenance, rather than a further adjustment or loading to the wife’s property division, as sought by the husband, is necessary in this case. The lump sum awarded to the wife is relatively limited, (in particular where much of it will need to be applied to the payment of her legal fees and the mortgage over the Toowoomba property), and even with a further adjustment or loading, I am satisfied that this would not satisfy the maintenance needs of the wife over an extended period of time whilst the children are growing up and the wife needs the opportunity to enhance her employment skills. As
Mr Bourke points out, an additional further adjustment to the asset pool of 10%, in lieu of spousal maintenance would only represent some two years of spousal maintenance.
In my view, a further property loading or adjustment would be inappropriate to take into account the circumstances of this case.
In conclusion, I am satisfied that this is an appropriate case in which the Court should exercise its discretion to make an order for the husband to pay spousal maintenance on the basis of:
a)the wife’s on-going role in caring for the 4 children,
b)the significant limitations these responsibilities place on her capacity to obtain meaningful employment taking into account also her location and possible travel times to any work,
c)her lack of any immediate skills to readily re-enter the workforce, and her need to undertake some further course of education,
d)her need to ensure a reasonable standard of living
e)the husband’s conceded capacity to pay spousal maintenance as well as child support, and
f)the capacity of the husband to apply in the future to have the maintenance order varied if his or her financial circumstances were to change materially,
Issue: What is a “proper” provision for spousal maintenance in this case
Taking into account all the above factors, I consider that a provision of spousal maintenance for the wife in the sum of $350 per week, to be paid by the husband, is proper in all the circumstances to ensure her maintenance.
I certify that the preceding one hundred and fifty (150) paragraphs are a true copy of the reasons for judgment of Orchiston FM
Associate: Duncan Maconachie
Date: 24 January 2008
3
1