Kerrigan and Janes

FAMILY COURT OF AUSTRALIA

KERRIGAN & JANES

[2018] FamCA 219

FAMILY LAW – PROPERTY – Initial contributions-where it is agreed contributions during the marriage and post separation were equal – where the husband owned more property at co-habitation which now forms a significant part of the pool – what weight should be given to the parties’ initial contributions-add-backs for legal fees-where the wife has an ongoing responsibility for the child of the marriage – significant difference in incomes of the parties – where the husband has a greater earning capacity than the wife-final property orders made as to a 57.5/42.5 split in the wife’s favour

Family Law Act 1975 (Cth)

Evidence Act 1995 (Cth)

Chorn & Hopkins (2004) FLC 93-204
In the Marriage of Money & Money (1994) FLC 92-485
Omacini & Omacini (2005) FLC 93-218
Pierce v Pierce (1999) FLC 92-844
Stanford & Stanford (2012) 247 CLR 108

Vass & Vass (2015) 53 Fam LR 373

APPLICANT:

Ms Kerrigan

RESPONDENT:

Mr Janes

FILE NUMBER:

MLC

2591

2016

DATE DELIVERED:

20 March 2018

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

Macmillan J

HEARING DATE:

21-23 November 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Ms Smallwood

SOLICITOR FOR THE APPLICANT:

Westminster Lawyers

COUNSEL FOR THE RESPONDENT:

Ms Stoikovska

SOLICITOR FOR THE RESPONDENT:

Berger Kordos

Orders

All extant applications for final orders be adjourned for mention before Justice Macmillan at 10.00 am on 22 March 2018 to hear submissions from the parties as to the form of the final property orders set out in my reasons for judgment delivered this day.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Kerrigan & Janes has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 2591 of 2016

Ms Kerrigan

Applicant

And

Mr Janes

Respondent

REASONS FOR JUDGMENT

The husband and the wife in this case commenced co-habitation in 2003. They were married in 2004 and separated on 24 September 2015 ending a relationship of approximately 12 years.
At the commencement of the hearing before me, the parties were seeking parenting orders, orders adjusting their property interests and the wife was seeking a departure from the current child support assessment, including an order for the payment of education expenses for the child of the marriage and extracurricular and incidental expenses.
The parties spent some time prior to the commencement of the hearing resolving their parenting dispute and I made final parenting orders by consent. During the course of the hearing they also resolved their dispute with respect to child support.
Although the parties were unable to reach agreement on the adjustment of their property interests, they were able to narrow the area of dispute leaving the following issues to be determined by the Court:
·    what, if any, add backs should be included in the property available for division;
·    what weight should be given to the husband and wife’s initial contributions;
·    what adjustment should be made in the wife’s favour having regard to her ongoing responsibility for the child of the marriage and the differences between the current incomes of the husband and the wife and their respective income earning capacities in the future.
The husband’s case, in summary, is that the parties should each be entitled to property representing 50 per cent of the asset pool on his estimate of that pool. Counsel for the husband submitted that the husband’s initial contribution was significantly greater than that made by the wife and giving that contribution appropriate weight, his contribution based entitlement as a consequence of those initial contributions would amount to 60 per cent of that asset pool. On that basis a 10 per cent adjustment in the wife’s favour after consideration of the matters in s 75(2) of the Family Law Act 1975 (Cth) (“the Act”) as proposed by the husband would result in an equal division of the pool of assets.
The wife’s case is that a 50 per cent split would not be reasonable in circumstances where the husband has a far greater earning capacity and having regard to her responsibility for the child, who has significant vulnerabilities. The wife submitted that her entitlements based upon her contributions should be 45 per cent of the asset pool on her estimate of that pool and that there should be a 20 per cent adjustment in her favour having regard to the s 75(2) factors, taking her entitlements to 65 per cent of that pool.

Background

The husband was born in 1971 and is 46 years old. At the commencement of the relationship the husband was employed by Company B. The parties relocated to Country C in 2004 to enable the husband to take up a position with Company B-Asia. The husband was made redundant from his positon in Country C on 5 December 2016 and on 14 December 2016 received a redundancy payment of $221,233, the equivalent of a year’s salary.
The husband was unemployed between December 2016 and July 2017 before signing a six month contract, for the period ending 11 January 2018 with Company B. He deposed in his Trial Affidavit to being in receipt of a gross income of $189,600, a car allowance of $12,000 and a potential bonus of $47,400 which is dependent upon performance and is not guaranteed. Although there was some cross examination of the husband in relation to the possible extension of his contract, his evidence as to his income was not the subject of challenge.
The husband also conceded in cross examination that although his contract was for six months, that contract also allowed for his employment to be extended for a further six months. The husband also said and I accept that any renewal would be subject to his performance and whether the company proposed a continuation of his role in the company.
Although there was some cross examination of the husband with respect to the terms of his employment, as submitted by counsel for the husband, his contract of employment was produced to the wife’s solicitors and there is no evidence to suggest that he is in receipt of income in excess of the terms of that contract. In all of the circumstances, I accept the husband’s evidence with respect to his current income and the nature of his employment.
The wife was born in 1970 and is 47 years old. She is currently employed on a full time basis in an administrative position. She deposes to being in receipt of a gross annual salary of $48,000. The wife’s evidence as to her income was not the subject of challenge and I accept that evidence.
The parties’ daughter was born in Country C in 2005. She is now 12 years of age. In or about March/April 2013, following disclosures by the child of sexual abuse and assault on a school bus in Country C, the wife relocated with the child to Melbourne. The husband remained in Country C until June 2016, returning to Melbourne on a regular basis, his work permitting, to spend time with the wife and the child until separation in September 2015. In June 2016 the husband took long service leave and returned to live in Melbourne so as to spend time with the child in Melbourne and to spend time with his father, who was unwell.

Legal Principles

The husband and the wife both seek orders which would result in an alteration of their interests in property. The power of this Court to alter interests in property is found in s 79 of the Family Law Act 1975 (Cth) (“the Act”). Subsection 79(2) of the Act requires the Court to be satisfied that it is “just and equitable” to make an order altering the parties’ interests in property. As French CJ, Hayne, Kiefel and Bell JJ of the High Court said in Stanford & Stanford (2012) 247 CLR 108 (“Stanford”) at paragraph 42:
…the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).The parties separated in September 2015 and I am satisfied that the financial arrangements they made during their relationship and in particular with respect to the ownership and use of their property are no longer appropriate for the circumstances in which they now find themselves. I am satisfied that the requirement that it be “just and equitable” to make orders adjusting the parties’ interests in property is readily satisfied in this case.
The Court has power to make orders adjusting the parties’ interests in property. That being said, the exercise of this power as the High Court majority observed in Stanford at paragraph 40 is not an unfettered discretion and “… the power to make a property settlement order must be exercised ‘in accordance with legal principles, including the principles which the Act itself lays down’”.

Material Relied Upon

The wife is the applicant in this case and relied upon the following documents:
·Further Amended Initiating Application filed 21 August 2017;
·her Trial Affidavit filed 21 August 2017 (“the wife’s Trial Affidavit”);
·her Financial Statement filed 21 August 2017;
·her Affidavit in Reply filed 18 September 2017 (“the wife’s Affidavit in Reply”);
·Outline of Case filed 17 November 2017.
The husband is the respondent and relied upon the following documents in support of his case:
·Further Amended Response to Initiating Application filed 11 September 2017;
·his Trial Affidavit filed 11 September 2017 (“the husband’s Trial Affidavit”);
·his Financial Statement filed 11 September 2017;
·Affidavit of Mr D filed 15 November 2017;
·Outline of Case filed 15 November 2017.

Standard of Proof

The standard of proof in this case is the balance of probabilities (s 140 of the Evidence Act 1995 (Cth)). In applying that standard the Court must have regard to the nature of the cause of action or defence, the subject matter and the gravity of what is alleged.

The Evidence

At times during her evidence the wife was quite emotional and her negative view of the husband was clear from both her affidavit evidence and in cross examination. However, although I have some reservations about the wife’s evidence, I am satisfied that this is more likely the result of her desire to retain the property in which she and the child currently reside, rather than a deliberate attempt on her part to mislead the Court. Although the husband was at times quite emotional he was generally a more balanced witness and was able to make concessions when it was appropriate to do so. To that extent, where there is a dispute between the evidence of the husband and the wife, I generally prefer the evidence of the husband.
That being said, this is not a case which ultimately rests to any significant extent upon the credit of the parties.

Property for Division (The legal and Equitable Interests)

Although at the commencement of the hearing the parties were some distance apart, mostly with respect to those amounts they each sought to have added back to the pool, by the conclusion of the hearing the parties had both made concessions and had resolved many of those outstanding areas of dispute. For the purposes of determining the property pool, the parties relied upon a joint Aide Memoire (the agreed and disagreed pool). However, on a closer analysis of that Aide Memoire it appears that there is an arithmetical error in the calculation of the value attributed to the Suburb E property by the wife. On the figures that were provided regarding the mortgage, selling costs and capital gains tax, the equity would be $911,311, $57,000 less than the figure of $968,311 in the table. For the sake of completeness I have included both figures. The property interests identified by the parties at the commencement of the hearing based upon the Aide Memoire are as follows:

Assets	Legal Owner	Wife’s value	Husband’s value
F Street, Suburb G Less mortgage Net equity	Joint	$1,850,000 ($964,000) $886,000	Agreed
Net proceeds – H Street, Suburb L Less CGT Net equity	Joint	$429,432 ($224,967) $204,465	Agreed
J Street, Suburb E (To be sold) Less mortgage Less selling costs Less CGT Net equity Actual net equity	Husband	$1,265,000 ($54,689) (E$20,000) ($279,000) $968,311 $911,311	$1,025,000 Agreed (E $25,000) ($183,470) $761,841
Telstra Shares (45)	Husband	E $15,885	Agreed
Westpac #..76	Joint	$664	Agreed
K Bank Savings	Joint	$6,229	Agreed
Funds held on trust by Westminster Lawyers	Joint	E$16,800	Agreed
Funds held on trust by Berger Kordos	Joint	E $18,654	Agreed
Motor Vehicle 1	Wife	E$8,450	Agreed
Motor vehicle 2 (paid from Company B lump sum)	Husband	$27,125	Agreed
Westpac “Special Purpose Account”	Husband	$27,418	Agreed
Positive credit card balance for K Bank account	Husband	$4,378	Agreed
Company M withheld dividends	Husband	$6,820	Agreed
Liabilities
Husband’s tax debt	Husband	($118,862)	Agreed
Add-backs
Part property settlement per paragraph 5 of the orders of 6 July 2017 (payout in September of $98,743)	Husband	$61,776	$61,776
Payment to the wife pursuant to agreement in 2015	Wife	Spousal maintenance	$10,000
Credit card used by the wife for legal fees	Wife	Spousal maintenance	$49,000
Husband’s legal fees	Husband	$160,000	$69,614 (excl. $82,500 from termination payment)
Interim Distribution (on legal fees)	Wife	Included above	$20,000
Interim Distribution (on legal fees)	Husband	Included above	$20,000
Long Service Leave	Husband	$40,859	Husband submits should not be included
Cash withdrawals: spent since the redundancy and long service leave	Husband	E$60,000	Dec 2016 (Husband submits should not be included)
TOTAL	$2,394,972 $2,337,972 (Actual total without miscalculation)	$2,096,257
Superannuation
Australian Super	Husband	E$483,000	$475,000
Colonial First State (as at 18 August 2017)	Wife	$89,516	Agreed
TOTAL (including superannuation)	$2,967,488 $2,910,488 (Actual total without miscalculation)	$2,660,773

Suburb E Property

Although the parties could not agree upon the value of the Suburb E property, there was agreement that it should be sold. The parties also agreed that the property should be dealt with by a percentage division of the net proceeds of sale of that property.
As the property was to be auctioned on 6 December 2017 the matter was adjourned part heard for mention before me on 13 December 2017 on the basis that the auction would determine the value of the property. However on 13 December 2017 after the property failed to sell at auction, I made orders by consent which provided, inter alia, that the reserve price be fixed at $1 million or as otherwise recommended by the selling agent. On that basis, I propose to include the property in the pool at $1 million for the purposes of the issues I must determine. I also propose to rely upon the husband’s estimate of the likely capital gains tax upon sale, it having been based upon a likely value of $1,025,000 as against the wife’s higher estimated value of $1,265,000.

Husband’s Tax Liability

On 13 December 2017 the husband and the wife also consented to an order directing Westminster Lawyers to pay the sum of $118,862.60 of the proceeds of sale of the Suburb L property to the Australian Taxation Office (“ATO”) in respect of the husband’s tax liability for the financial year ending 30 June 2017. I have included the remaining balance of the proceeds of sale of Suburb L in the sum of $310,569 in the list of assets.

Add Backs

For the Court to be satisfied that it is just and equitable to make orders adjusting the parties’ interests in property and to determine what orders should be made, it first needs to identify and value the parties’ legal and equitable interests in property. That step is relatively straightforward when the property is in existence and able to be valued. However, it may be appropriate in some circumstances to also take into account property which is no longer in existence and notionally “add-back” that property into the asset pool, thereafter adjusting the existing property interests having regard to those “add-backs”.
In Vass & Vass (2015) 53 Fam LR 373, the Full Court at paragraphs 138 to 139 said as follows:
There is no error committed per se in adjusting the parties’ actual property interests by a calculation involving notionally adding back into the pool sums which have been dissipated by the parties. We reject any suggestion that the decision of Bevan v Bevan (2013) 49 Fam LR 387; [2013] FamCAFC 116 — or, more particularly, the decision of the High Court in Stanford v Stanford (2012) 247 CLR 108 ; 293 ALR 70 ; 47 Fam LR 481 ; [2012] HCA 52 — is authority for any necessary contrary solution. Some statements made by the High Court may lead to the conclusion that references to “notional property” as have been referred to in decisions of this court and at first instance may need to be reconsidered (emphasis in original).
The decisions referred to seek to remind the Court that, however the exercise of discretion might seek to deal with property that is said to be the subject of “add back”, proper consideration must be given to existing interests in property, and the question posed by s 79(2) as a separate inquiry from any adjustment to property interests by reference to s 79(4) if a consideration of s 79(2) reveals that it is just and equitable to alter existing interests in property.
There are three categories of cases in which the Court has considered it appropriate to add back assets which no longer exist into the asset pool. In Omacini & Omacini (2005) FLC 93-218 they were identified in paragraph 30 and are summarised as follows:
(a)where one or both of the parties have expended money on legal fees that might otherwise have been available;
(b)where there has been a premature distribution of matrimonial property; and
(c)where one of the parties has embarked on a course of conduct designed to reduce or minimise the value of the property or has acted recklessly or negligently having the same effect (as was described by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092).
Although the husband was cross examined about his expenditure, neither party submitted that this was a case in which it was said that either party had embarked on a course of conduct designed to reduce or minimise the value of their property or acted recklessly or negligently having the same effect.

Company M Dividends

Although the parties agreed as to the amount of the dividends withheld by Company M, they did not agree upon how those withheld dividends, which it became clear during the course of the hearing and I am satisfied had been applied to the payment of accountant fees, should be treated.
The husband’s evidence was that he had been made aware of the withheld dividends by their accountant in or about September 2017 after that accountant had received a subpoena to produce documents and that thereafter he had authorised his accountant to take the Company M dividends as payment for the preparation and lodgement of the parties’ tax returns for the financial years ending 2010 to 2015. The husband also said that the accountant had given him the account for the preparation and lodgement of those tax returns some time before 28 September 2017. It was common ground that the husband had authorised this payment without the knowledge or consent of the wife. The husband also conceded in cross examination that he should have asked the wife’s permission for the Company M dividends to be paid to the accountant in payment of the accounting bill.
Counsel for the wife submitted that in circumstances where the accountant’s fees were for work performed in excess of two years ago and the husband was earning a comfortable income during that period, it should not have been necessary for the husband to pay the accountant’s fees out of capital as he had done and that the value of the withheld dividends should be an “add-back”. However, as submitted by counsel for the husband, although the husband was cross examined in relation to the payment of the accountant’s fees, it was not put to him or submitted that either the work the fees related to had not been performed, that the fees incurred were not reasonably incurred or that the accountant was not entitled to be paid. I also accept the husband’s evidence that he had on a previous occasion during the marriage authorised the accountant to deduct his fees from monies he held on behalf of the parties as he had in this instance. It is also not possible to conclude on the basis of the evidence before me whether the husband had or did not have the means to pay the accountant out of income at the time the accountant provided his services to the parties.
Ultimately, I am not satisfied in circumstances where the professional services provided by the accountant were for the benefit of both parties that I should exercise my discretion and treat the Company M dividends used to pay for his services as an “add-back”.

Legal Fees

In Chorn & Hopkins (2004) FLC 93-204, Finn, Kay and May JJ said at paragraphs 56 to 60 with respect to the treatment of legal costs as follows:
[56] In summary, we consider that the above mentioned decisions of the Full Court establish that, while the treatment of funds used to pay legal costs remains ultimately a matter for the discretion of the trial judge, in determining how to exercise that discretion, regard should be had to the source of the funds (emphasis added).
[57] 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.
[58] 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 or inheritance), they would generally not be added back as a notional asset; nor would any borrowing undertaken by a party post-separation to pay legal fees be taken into account as a liability in the calculation of the net property of the parties. Funds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.
[59] Outstanding legal fees themselves are generally not taken into account as a liability.
[60] If in the exercise of the discretion, it is determined that legal fees already paid should be taken into account as a notional asset, then normally any liability associated with the acquisition of the moneys used to pay the legal fees should also be taken into account.
Both the husband and the wife submitted that funds applied by the other to the payment of their respective legal fees should be notionally added back to the asset pool and taken into account in the determination of their respective entitlements.
The wife acknowledged having used a credit card which was paid for out of the Viridian Line of Credit account in the sum of $49,300 and a further sum of $10,000 withdrawn from a NAB account to pay legal fees, a total of $59,300. Although counsel for the wife conceded that it was open to the Court to treat these amounts spent by the wife on legal fees as an “add-back” it was the wife’s case that given her limited financial circumstances both at the time she paid those legal fees and currently, that it would be unduly burdensome if the Court were to do so.
Counsel for the husband submitted that in circumstances where he was meeting his obligations to support both the wife and the child, including meeting outgoings on the Suburb G property occupied by the wife, educational expenses and after the wife applied for an assessment, child support, that those amounts used by the wife out of what were effectively joint funds should be treated as an “add-back”.
It is common ground that the husband used the Viridian Line of Credit as his primary account, both for depositing his income and using it to meet the family’s expenses. Although the husband conceded that the sum of $25,700 he withdrew from that Viridian Line of Credit in his name and applied to the payment of his legal fees should be an “add back” there was a dispute as to whether or not the $82,500 he paid to his solicitors rather than depositing that part of his redundancy package in the Viridian account in accordance with his usual practice, should be treated in the same manner.
In summary, counsel for the husband submitted that the redundancy payment was income, and having met his financial obligations to the wife and the child, it was thereafter a matter for the husband to do what he chose with that income, including meeting his legal fees. He submitted that on that basis, the Court should exercise its discretion in his favour and not treat the $82,500 as an “add-back”. As further submitted by counsel for the husband, it was not put to the husband, albeit the wife might be of the view that he should have paid more, that he had not paid what he was required to pay for her support or that of the child.
Whilst in this case it appears to be accepted that the husband’s redundancy payment was based upon one year’s salary, the evidence I have in relation to that redundancy payment is limited. Whilst a redundancy payment may be calculated on the basis of income it is in my view not strictly income as that word is usually understood. Even if it were income, as counsel for the wife submitted in circumstances where: it was the husband’s practice to deposit his income into the Viridian account; at that time the Viridian account balance was increasing; and that the outstanding balance of that account has since been paid for out of the proceeds of sale of a jointly owned property; it would not be just and equitable for the amount expended by the husband on payment of his legal fees not to be treated as an “add-back”. In my view counsel for the wife’s submission has some force. This view is reinforced by the fact that the husband did return to full time employment and was in receipt of income from that employment within six months of being made redundant.
Both counsel for the husband and the wife made submissions to the effect that to treat the monies their respective clients had applied to legal fees as notional property but not those amounts applied by the other party, would not be just and equitable. I tend to agree and I am satisfied that a just and equitable outcome will be best achieved by treating the $59,300 applied by the wife to the payment of her legal fees, the $82,500 from the husband’s redundancy package and the further $25,700 he withdrew from the Viridian account as “add-backs” for the purposes of adjusting the parties’ property interests.

Long service leave

Counsel for the wife opened her client’s case on the basis that an amount of $40,859 that the husband received as long service leave should be treated as an “add-back”. However counsel ultimately conceded, appropriately so in my view, that the Court should not do so in circumstances where the husband had used his long service leave entitlements, in lieu of income, in order to spend time with the child, attend counselling appointments in Australia and to enable him to visit his father who was unwell at that time. I am satisfied that it would not be just and equitable to treat the husband’s long service leave entitlements as an “add-back”.

Cash Withdrawals

Counsel for the wife also opened her case on the basis that a sum of $60,000, described in the joint Aide Memoire as cash withdrawals, be treated as an “add-back” and cross examined the husband about his expenditure and in particular the fact that he withdrew $1,500 per week for living expenses notwithstanding he had already made provision for rent and other outgoings. Counsel for the wife ultimately conceded that the evidence did not support that “add-back”. I agree. In my view, the basis upon which the $60,000 was calculated was not only not clear but in any event was not supported by the evidence. Even if it was possible to find that the husband’s expenditure had been extravagant, that expenditure was out of income in circumstances where I am satisfied that the husband was meeting his obligations to contribute to the support of the wife and the child. Nor in my view is it appropriate to analyse the husband’s expenditure in detail, which would be necessary if the Court were required to make findings as to the appropriateness or otherwise of that expenditure.
However, although counsel for the wife conceded that the sum of $60,000 should not be treated as an “add-back”, she did submit in the alternative that his lifestyle was a relevant factor in determining an appropriate adjustment having regard to the s 75(2) factors.

Husband’s Savings

Counsel for the wife submitted that the husband’s current bank balance of $8,114.25 as at 16 November 2017 should also be included in the pool. In my view, it is the husband’s property and I propose to include it, albeit I am mindful of and will have regard to the fact that it derives from income earned by the husband post separation and am also mindful that it is the account out of which he meets his ongoing expenses and the balance of that account is likely to go up and down.

Asset Pool For The Purpose Of Adjusting The Parties’ Property Interests

The asset pool based upon my findings is as follows:

Assets	Legal Owner	Value
F Street, Suburb G Less mortgage Net equity	Joint	$1,850,000 ($964,000) $886,000
Net proceeds – H Street, Suburb L Less Payment of Husband’s Income Tax Liability Pursuant to Orders Made 13 December 2017 Less Estimated CGT Net equity	Joint	$429,432 ($118,862) ($224,967) $85,603
J Street, Suburb E (To be sold) Less mortgage Less selling costs Less CGT Net equity	Husband	$1,000,000 ($54,689) (E$20,000) ($183,000) $742,311
Telstra Shares (45)	Husband	E $15,885
Westpac #...76	Joint	$664
K Bank Savings	Joint	$6,229
ANZ Access Advantage Account	Husband	$8,114
Funds held on trust by Westminster Lawyers	Joint	E$16,800
Funds held on trust by Berger Kordos	Joint	E $18,654
Motor Vehicle 1	Wife	E$8,450
Motor vehicle 2 (paid from Company B lump sum)	Husband	$27,125
Westpac “Special Purpose Account”	Husband	$27,418
Positive credit card balance for K Bank account	Husband	$4,378
Add-backs
Part property settlement per paragraph 5 of the orders of 6 July 2017 (payout in September of $98,743)	Husband	$61,776
Wife’s legal fees Credit card used by the wife for legal fees	Wife	$59,300
Husband’s legal fees	Husband	$108,200
Interim Distribution (on legal fees)	Wife	Included above
Interim Distribution (on legal fees)	Husband	Included above
TOTAL	$2,076,907
Superannuation
Australian Super	Husband	E$483,000
Colonial First State (as at 18 August 2017)	Wife	$89,516
TOTAL (including superannuation)	$2,649,423

Contributions

It is the husband’s case that, apart from the period of approximately six months after being made redundant, he was engaged in full time employment throughout the marriage applying his income for the benefit of himself, the wife and their daughter. That is not disputed by the wife. There is also no dispute that the wife was in employment until the husband accepted the offer of employment in Country C and that thereafter, apart from a brief period working in Country C, the wife was both the child’s primary carer and a homemaker. The wife remained out of the workforce until June 2016 after her return to Australia with the child and after the parties had separated.
Although there was some evidence given with respect to the wife’s care of the child following her return to Australia and the contribution she made to the preparation and sale of real estate she and the husband owned in Australia, following separation both counsel for the husband and the wife ultimately conceded that the parties’ contributions throughout the relationship and following separation should be treated as being equal. This being the case, whether those contributions were financial or as in the case of the wife as a parent and homemaker, the distinction is irrelevant. I am satisfied on the balance of probabilities that the parties’ contributions during the relationship were equal.

Initial Contributions

That means that the dispute in this case with respect to the parties’ respective contributions is limited to the property they each brought to the relationship and the weight that should be afforded to those contributions, given the difference between their respective contributions at that time.
The husband’s case is that at the commencement of cohabitation he had assets of some $576,161 comprised as follows:
·    Suburb G, Melbourne valued at $330,000
·    J Street, Suburb E valued at $500,000
o   Subject to mortgage of $395,000
o   Net equity: $105,000
·    4500 Telstra Shares valued at $18,000
·    Shares owned by Janes Nominees Pty Ltd valued at $30,000
·    643 Company B Shares valued at $20,201
·    Cash savings of $3,000
·    Motor vehicle 3 valued at $10,504
·    Superannuation: $59,456
The wife opened her case on the basis that the N Street property was still subject to a mortgage of $45,000 at the commencement of cohabitation. However the wife ultimately conceded that the mortgage was discharged shortly thereafter using commissions received by the husband. The husband gave evidence that even if those commissions were received after the parties commenced cohabitation, they were attributable to his employment prior to the commencement of cohabitation. The wife did not produce any evidence to contradict the husband’s evidence and in all of the circumstances I accept his evidence. In those circumstances, I am satisfied that it matters little whether or not the property was unencumbered at the commencement of cohabitation.
Counsel for the wife also submitted that although the husband’s Company B shares may have been valued at $20,201 at the commencement of cohabitation they were ultimately sold on 17 August 2012 for $4,038.68.
There was no other significant challenge to the husband’s evidence and I am satisfied in those circumstances that at the commencement of cohabitation or shortly thereafter he had assets of some $576,000 including his superannuation entitlements as he deposed in his Trial Affidavit.
The wife’s case is that at the commencement of cohabitation she had assets of $181,344 which was made up as follows:
·    Her equity in the property at O Street, Suburb P which she estimated to be approximately $120,000
·    Superannuation: which the husband says was worth $31,344
·    Motor vehicle with net equity of approximately $30,000 (wife’s estimate)
There was some dispute as to the value of the wife’s car and what equity she had in that vehicle. It is not possible on the evidence before me to either attribute a value to the car or the equity. However, doing the best I can on the evidence, I am satisfied that the wife having only recently purchased the vehicle, her equity in that vehicle was of limited value.
I am satisfied that the difference between the parties’ respective asset positions at the commencement of cohabitation was in those circumstances approximately $425,000. That difference is equivalent to approximately 20 per cent of their current asset position.
Counsel for the wife conceded that the difference between the asset positon of the husband and the wife was not insignificant. However she also submitted and I agree, that the exercise of discretion is not a mathematical exercise. It was in those circumstances that counsel for the wife submitted that it would be proper for the parties’ entitlements based upon their respective contributions to be 55/45 in the husband’s favour making an allowance in his favour based upon his significantly larger initial financial contributions of 5 per cent.
Counsel for the husband submitted that in order to give proper recognition to the husband’s significantly greater financial contributions at the commencement of cohabitation, those entitlements should be 60/40 in the husband’s favour. Counsel for the husband relied not only upon the difference in the amount of those contributions at the time, but also the length of the marriage, what that contribution represents in terms of the value of the current asset pool and that although subject to a mortgage, the husband owned the Suburb E property, which now represents a significant part of the pool.
It has long been recognised by this Court that initial financial contributions must be assessed in the context of all other relevant contributions. In Pierce v Pierce (1999) FLC 92-844 the Full Court noted at paragraph 28
In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution…
Similarly, In the Marriage of Money & Money (1994) FLC 92-485, Fogarty J indicated at 81,054 that
[R]espective contributions of the parties over a long period of marriage may “offset” the significance which might otherwise be attached to a greater initial contribution by one party…The longer the marriage the more likely it is that there will be later factors of significance, and in the ultimate the exercise is to weigh the original contribution with all other, later, factors and those later factors, whether equal or not, may in the circumstances of the individual case reduce the significance of the original contribution.
Although the Court is not required to attribute a value to the various elements of the parties’ respective contributions, it is in this case the parties’ initial financial contributions which are the point of difference between them. Whereas the parties in this case agree that their contributions, other than their initial contributions, should be treated as being of equal weight, those initial financial contributions must also be assessed in the context of all relevant contributions. The pool in this case is not by community standards (and given current real estate values) large and although this is not a mathematical exercise, in my view the 5 per cent allowance to the husband proposed by the wife is not a sufficient allowance having regard to the significance of the financial contribution made by the husband at the commencement of cohabitation compared to that of the wife in the context of that pool. However, I am also mindful that the 10 per cent adjustment in the husband’s favour based upon his initial financial contributions results in a differential of 20 per cent or in real terms approximately $415,381 depending upon the ultimate sale price of the Suburb E property.

I have considered all of the evidence with respect to their initial financial contributions and weighed up those initial financial contributions with their contributions both during the marriage and post separation and it is my assessment that 57.5/42.5 per cent in the husband’s favour just and equitably recognises the parties’ respective contributions.
In real terms the husband, based upon his contributions, would be entitled to receive $1,194,222 of the pool, $311,537 more than the wife. Those percentages are somewhat less if the superannuation which the parties agree is to be equally split is included in the pool.

Section 75(2) factors

The husband is 47 years of age and is in good health. It is common ground that he is employed by Company B on a six month contract with a possible further extension of six months. I am satisfied on the evidence before me that he was not the first choice for the position and that there is no guarantee that he will be offered permanent employment at the end of the contract period. As previously referred to the husband currently earns an income of $189,600, a car allowance of $12,000 and a potential bonus of $47,400 per annum.
The husband has been in employment since separation save for the time when he took his long service leave and a period of approximately six months when he was unemployed. Whilst he has had the benefit of his income during that period, he has contributed to the support of the wife and the child. Although the wife submitted that the Court should take into account the $60,000 the wife asserts was unnecessary expenditure, I cannot on the evidence before me make any findings with respect to the reasonableness or otherwise of the husband’s expenditure. In all of the circumstances, I am not satisfied that this is a matter to which I should have regard in this case other than by reference to the fact that the husband earned greater income than the wife.
I am satisfied that the husband’s future employment is uncertain. It is this evidence with respect to the terms of the husband’s employment, in particular his limited contract, which resulted in the parties sensibly reaching agreement in relation to the child support. The parties agreed and I made orders to that effect that the husband would continue to pay child support as assessed and that he would pay the private school fees for the child for the 2018 school year, together with payments for school related extracurricular activities, books and stationary and that he will continue the current medical cover including any gap payments on agreed medical expenses.
However, I am also satisfied that the husband is actively seeking alternative employment and that he is committed, subject to having the financial capacity to meet the fees, to the child continuing her education at her current school and otherwise providing appropriate financial support for her.
The wife is 47 years of age. Although she says she suffers from back pain, she is in full time employment and the evidence did not suggest that she would not be able to continue in full time employment. The wife is employed as an administrative assistant and earns $48,000 gross per annum.
Although the wife was cross examined at some length about her employment and career choices during the marriage, I am satisfied that these are choices and decisions the parties made during the marriage and are not relevant for the purposes of the decision I must make, save and except to the extent that I am satisfied that although the wife is now working full time, her income earning capacity now and in the future is inferior to the husband’s, whether that is because of their decisions and choices during the marriage, the wife’s role as the child’s primary carer and homemaker or may always have been the case albeit to a lesser degree, even if the wife had pursued her career. For the purposes of the decision I must make, the wife earns substantially less than the husband and the evidence does not suggest that this is likely to change, assuming he is able to find ongoing employment.
Although I am satisfied that the husband will do his best to find suitable employment and is committed to supporting the child, his future employment and income are uncertain. Notwithstanding that uncertainty, I am satisfied that the husband has a greater income earning capacity and is more likely than not to be in a superior financial position to the wife in the years ahead. The wife also has the primary care of the child. However, the difference between their respective positions and the greater responsibility the wife is likely to have with respect to the child’s care, both financially and generally and how that might impact upon her income earning capacity, is likely to be ameliorated by the child support the husband is assessed to pay and the school fees which I accept he is committed to paying subject to him being able to find employment generating a similar level of income to that of his current contract. It is also the case that as a result of my assessment of his contributions, the husband is entitled to approximately $311,537 more than the wife.
It is the wife’s case that she wishes to retain the property in Suburb G in which she currently resides with the child, she says, because she wishes to provide stability for the child. Whilst I cannot question her motives, that may not be realistic in all of the circumstances of this case. Notwithstanding the wife’s desire to retain the property, her case was not put on the basis that this should determine the outcome of the case nor was there evidence to support such an outcome. Whilst it is clear from the evidence that the child has had some very unfortunate experiences in her young life, there is also evidence to suggest that she is making some progress at least in some aspects of her life. There is no evidence to the effect that her welfare depends upon her remaining in the Suburb G property. Appropriately in my view, the wife’s case was put on the basis that she should have the opportunity based upon what the Court determined to be her entitlements to do so.
The husband is living in rented accommodation and he wishes to purchase a home suitable for he and the child, within reasonable proximity to where the child is living with the wife.
The parties each have superannuation entitlements and it is agreed that those entitlements should be equalised. However although the parties agreed upon the wife’s superannuation entitlements, they did not have an agreed figure for the husband’s entitlements and that figure will either need to be agreed or a date be fixed at which their respective entitlements are to be valued.
The parties agreed that it was appropriate for there to be an adjustment in the wife’s favour based upon the s 75(2) factors. The husband’s case was that that should be a 10 per cent adjustment with the ultimate result being an equal division of property interests. In real terms this would result in the husband and the wife on his case each being entitled to $1,038,454. The wife proposed an adjustment of 20 per cent in her favour resulting overall in a 65/35 per cent split in her favour. On the wife’s case she would be entitled to $1,349,990, $623,073 more than the husband’s entitlements of $726,917.
In all of the circumstances of this case, I am not satisfied that the adjustment proposed by the wife would be just and equitable. There is some uncertainty about the husband’s ongoing employment and even if he remains in employment or obtains a similar position, his financial circumstances, whilst superior to the wife’s financial circumstances are not such as to warrant the magnitude of the adjustment sought by the wife. Having regard to all of these matters I am satisfied that there should be an adjustment of 15 per cent in the wife’s favour. In dollar terms that adjustment will be approximately $311,537.
Based upon both their respective contribution based entitlements and the s 75(2) adjustment, the wife is entitled to property to the value of 57.5 per cent of the asset pool or an amount of approximately $1,194,222. This would leave the husband with approximately $882,685. These figures are based upon Suburb E selling at the reserve price of $1 million.

The Orders

Counsel for the wife submitted that the wife should be allowed 30 days from the date of judgment in which to nominate whether or not she wishes to retain the Suburb G property and a further 30 days to refinance and pay out the husband. Subject to there being a sale of the Suburb E property, the wife’s position should be relatively clear. If the Suburb E property has not sold, it is reasonable to assume that it is not likely to be sold for $1 million and if sold for less, based on the figures I do have, the wife is unlikely to be able to retain the property. However in all of the circumstances I propose to accede to the wife’s request and allow her 30 days after judgment is delivered in which to nominate whether or not she proposes to retain the property and thereafter 30 days in which to pay out the husband. The obvious difficulty for the wife is that if the Suburb E property has not sold, she will have to not only maintain the mortgage over Suburb G but also find the funds to pay the husband until she receives her share of the proceeds of sale of Suburb E.
As I propose to make orders dealing separately with the proceeds of sale of the Suburb E property and the capital gains tax, the effect if they are not included is as follows:

Assets	Husband	Wife
F Street, Suburb G Less mortgage Net equity	$1,850,000 ($964,000) $886,000
Net proceeds – H Street, Suburb L Less payment of Husband’s Income Tax Liability Net equity	$429,432 $118,862 $310,570
Telstra Shares (45)	E $15,885
Westpac #...76	$664
K Bank Savings	$6,229
Husband’s ANZ Access Advantage account	$8,114
Funds held on trust by Westminster Lawyers	E$16,800
Funds held on trust by Berger Kordos	E $18,654
Motor Vehicle 1	$8,450
Motor vehicle 2 (paid from Company B lump sum)	$27,125
Westpac “Special Purpose Account”	$27,418
Positive credit card balance for K Bank account	$4,378
Add-backs
Part property settlement per paragraph 5 of the orders of 6 July 2017 (payout in September of $98,743)	$61,776
Wife’s legal fees Credit card used by the wife for legal fees	$59,300
Husband’s legal fees	$108,200
$605,813	$953,750
Cash Payment to Husband by Wife	$55,966	(55,966)
TOTAL	$661,779	$897,784

On 6 July 2017 the husband and the wife consented to orders for the sale of both the Suburb L and Suburb E properties and orders with respect to how the proceeds of sale of each of those properties were to be applied. Those orders included an order that the sum of $500,000 be placed into an interest bearing account in the name of both parties, held by the wife’s solicitors on account of capital gains tax, as assessed after the husband had lodged his taxation returns for the years ending 30 June 2016, 30 June 2017 and 30 June 2018 albeit I note that the Suburb L was jointly owned by the parties. On 13 December 2017 the husband and wife consented to the following orders:
1.   That upon settlement of the sale of the [Suburb E] property the parties shall forthwith direct sufficient moneys to be paid into the account opened pursuant to order 9(d) of the Orders made 6/7/17 (“the CGT account”) to ensure sufficient funds are held in that account to meet payment for all CGT to be assessed on a result of the sale of both [Suburb L] and [Suburb E] currently estimated at $224,967 for [Suburb L] and [Suburb E] not more than $280,000.
2.   In the event there are any residual funds held in the CGT account they shall be disbursed in accordance with the percentages determined in the anticipated judgement in this matter.
3.   That any CGT be paid from the CGT account immediately upon its assessment.
The Suburb L property was sold during the current financial year. Although at the conclusion of the hearing the Suburb E property had not been sold there is a reasonable likelihood that it will also be sold during the current financial year. It follows that the capital gains tax will not be assessed and payable until the parties lodge their tax returns for the financial year ending 30 June 2018 and the ATO issues assessments. Even if the Suburb E property sells for less than the agreed reserve of $1 million, the proceeds of sale will be sufficient to discharge the mortgage and to pay the capital gains tax as assessed for both properties, as the husband and the wife have agreed. This will free up the estimated capital gains tax of $224,967 on the Suburb L property in the short term. I propose to discharge the orders made on 13 December 2017 and make orders in similar terms to give effect to the parties’ intentions.
The parties also agreed upon a splitting order to equalise their superannuation entitlements. Although I agree that a splitting order should be made which has the effect of equalising their entitlements, the parties did not agree on what that figure should be. In those circumstances unless the parties are able to agree upon the figure it will be necessary to make an order which requires their respective entitlements to be determined as at a specific date upon which that base figure is to be based.
The orders I propose to make subject to submissions as to their form are as follows:
(1)By 4.00pm on [insert date 30 days from the date of the orders] (“the Date”) the wife notify the husband’s solicitor in writing of her intention to retain the property at F Street, Suburb G (“Suburb G”).
(2)In the event that the wife elects to retain Suburb G and has notified the husband in accordance with paragraph 1 of these orders she pay to the husband the sum of $55,966 (“the payment”), such payment to be made by 4.00 pm on [insert date 30 days from the Date].
(3)Contemporaneously with the payment referred to in paragraph 2 of these orders:
(a)the husband do all acts and things required and sign all necessary documents to transfer to the wife all his right, title and interest in Suburb G; and
(b)the wife refinance the mortgage secured against Suburb G in her sole name.
(4)In the event that the wife has not notified the husband of her intention to retain Suburb G in accordance with paragraph 1 hereof or does not make the payment by the due date in accordance with paragraph 2 hereof the husband and wife forthwith do all acts and things required and sign all necessary documents to place Suburb G on the market for sale, and upon settlement of the sale, the proceeds of sale be applied in the following order and priority:
(a)first to pay all costs of the sale, including agent’s fees and commissions;
(b)secondly, to discharge the mortgages registered over Suburb G;
(c)the balance be divided between the parties as follows:
(i)57.5 per cent to the wife; and
(ii)the balance to the husband.
(5)Upon settlement of the sale of the Suburb E property the proceeds of sale be applied as follows:
(a)firstly to pay all costs, commissions and expenses of the sale;
(b)secondly to discharge the mortgage secured over the property;
(c)thirdly the sum of a sum of $224,967 being the estimated capital gains tax (“CGT”) payable on the sale of Suburb L and the estimated CGT payable on the sale of Suburb E based upon the sale price of that property to be held by Westminster Lawyers Pty Ltd (“Westminsters”) in an interest bearing account in the name of or on behalf of the husband and the wife pending assessment of the CGT payable; and
(d)fourthly, the balance thereafter to be divided as follows:
(i)        57.5 per cent to the wife; and
(ii)       the balance to the husband.
(6)Upon receipt of assessments of the CGT payable for the Suburb L and Suburb E properties, the husband and the wife forthwith do all acts and things required and sign all necessary documents as may be required to authorise Westminsters to pay the CGT as assessed to the Australian Taxation Office (“ATO”).
(7)In the event that there are any residual funds held in the CGT account after payment of the CGT as assessed the husband and the wife do all things and sign all necessary documents and give all necessary instructions as may be required to authorise Westminsters to apply those funds as follows:
(a)57.5 per cent to the wife; and
(b)the balance to the husband.
(8)In the event of there being any shortfall the parties shall meet that shortfall as to 57.5 per cent to be met by the wife and the balance by the husband.
(9)The husband and the wife forthwith do all things, sign all documents and give all necessary instructions as may be required to authorise Westminsters:
(a)To pay the balance of the funds they hold in trust on behalf of the husband and the wife together with 42.5 per cent of any interest accrued since the commencement of the hearing to be paid to the husband (“accrued interest”); and
(b)To pay the remaining 57.5 per cent of any accrued interest to be paid to the wife.
(10)The husband and the wife forthwith do all acts and things and sign all necessary documents as may be required to authorise Berger Kordos Lawyers to pay the funds held in trust on behalf of the parties to the husband together with 42.5 per cent of any interest accrued on the sum of $18,654 and the remaining 57.5 per cent of any accrued interest to be paid to the wife.
(11)The wife forthwith do all acts and things and sign all documents as may be required to transfer or assign to the husband her interest in the accounts in the joint names of the parties with Westpac Banking Corporation and K Bank Savings.
(12)Paragraphs 13 to 16 (inclusive) of these orders are binding on the Trustee of the Australian Superannuation Fund (member number …) (“the fund”).
(13)The base amount allocated to the wife out of the interest to the husband in the fund is the sum of $ (“the base amount”).
(14)Pursuant to s 90MT(1)(a) of the Family Law Act 1975 (Cth), whenever a splittable payment becomes payable in respect of the interest of the husband in the fund, the wife shall be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (Cth) using the base amount and there be a corresponding reduction in the entitlement of the person to whom the splittable payment would have been made but for these Orders.
(15)Paragraph 14 take effect from the operative time being the beginning of the fourth business day after the day on which a certified copy of this Order is served on the Trustee of the fund.
I am satisfied that the orders I propose to make are proper and that they will in all of the circumstances produce a just and equitable outcome for the parties.

I certify that the preceding eighty (80) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Macmillan delivered on 20 March 2018

Associate:

Date: 20 March 2018

[2018] FamCA 219

20 March 2018

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