L and K
[2004] FMCAfam 3
•6 February 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| L & K | [2004] FMCAfam 3 |
| FAMILY LAW – Property – superannuation – consequences of application to adjourn final hearing pursuant to s.79(5) Family Law Act – nature of hearing following s.79(5) adjournment – assessment of contributions in period following parties’ separation – assessment of factors pursuant to s.75(2) Family Law Act – prospective needs of both parties – whether appropriate one party receives majority of entitlement in liquid assets rather than by way of superannuation split – just and equitable. Family Law Act 1975, ss.72, 75, 79, 90MC, 90NC L & K [2002] FMCAfam 149 |
| Applicant: | C E L |
| Respondent: | M K |
| File No: | DNM 2008 of 2002 |
| Delivered on: | 6 February 2004 |
| Delivered at: | D |
| Hearing date: | 17 December 2003 |
| Judgment of: | Brown FM |
REPRESENTATION
| Counsel for the Applicant: | Ms J H |
| Solicitors for the Applicant: | Northern Territory Legal Aid Commission |
| The Respondent in person: | Mr M K |
ORDERS
That within forty two days of the date of these Orders the husband pay to the wife the sum of $45, 626.85.
That pursuant to section 90 MT (1) (a) of the Family Law Act 1975, whenever a splittable payment becomes payable in respect of the interest of the husband, M K (AGS number ********) in the Northern Territory Government and Public Authority Superannuation Scheme (“NTGPASS”) and the Northern Territory Supplementary Superannuation Scheme (“NTSSS”), the wife is entitled to paid an amount calculated in accordance with part VI of the Family Law (Superannuation) Regulations 2001, using a base amount, at the operative time in the sum of $20,000.00 and there be a corresponding reduction based on one half of the figure calculated being deducted from each of the two funds, in the entitlement that the husband would have had in the NTGPASS and NTSSS funds but for these orders.
That the operative time shall be the fourth business day after the day on which a sealed copy of these Orders is served on the Trustee of NTGPASS and NTSSS.
That the Trustees of NTGPASS and NTSSS are bound the above Orders in relation to superannuation and the Trustee, the husband and the wife, do all such things as may be necessary for the Trustee to calculate the entitlement of, and make payment to the wife in accordance with the above Orders.
That in order to secure the payment referred to in Order 1 hereof, that the wife be entitled to register a caveat on the husband’s interest in the property situate at 24 E Street, S P in the Northern Territory of Australia being more particularly described as the whole of the land comprised in Certificate of Title Register Book Volume *** F *** (“the E Street property”).
That in the event the husband fails to pay the amount due to the wife referred to in Order 1 hereof within the time limited by that Order, the husband forthwith do all acts and things and sign all documents necessary to effect the sale of his interest in the E Street property. Upon the sale of the husband’s interest in the E Street 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 and any other encumbrances effecting the husband’s interest in the E Street property;
(c)Thirdly to pay the sum of $45,626.85 to the wife;
(d)Fourthly the balance to be paid to the husband.
That except as otherwise specified in these Orders:
(a)That each party otherwise retain all property currently in their possession;
(b)That the husband indemnify the wife in relation to the personal loan to the Commonwealth Bank in the joint names of the parties and each party indemnify the other party in respect of all other liabilities effecting any property to which they are entitled pursuant to these Orders.
That pursuant to section 106A(1) of the Family Law Act 1975 a Registrar or Deputy Registrar of the Family Court of Australia or a Federal Magistrate is hereby authorised to execute all deeds and documents in the name of the husband and to do all acts and things necessary to give full validity and effect to these Orders in the event that the husband refuses, omits or otherwise fails to do so.
That all other applications be otherwise dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT D |
DNM 2008 of 2002
| C E L |
Applicant
And
| M K |
Respondent
REASONS FOR JUDGMENT
Introduction
The parties to these proceedings are C E L “the wife” and M K “the husband”. The proceedings relate to the division of matrimonial property.
The proceedings have been on foot since the 19th of April 2001, when the wife filed an application in the Family Court at D seeking orders in respect of both property and parenting arrangements for the parties’ two children. These proceedings were subsequently transferred to the Federal Magistrates Court at D and came on for final hearing on the 16th of May 2002.
At that date, it was the wife’s application for the property aspects of the proceedings to be adjourned pursuant to section 79(5) of the Family Law Act. Her application was predicated on the basis that, in order for the Court to make property orders that were just and equitable as required by section 79(2) of the Act, it was essential for the proceedings to be adjourned to a date after the Family Law Legislation Amendment (Superannuation) Act 2001 came into force. This Act came into force on 29 December 2002. As is well known, the amendments to the Family Law Act created by this legislation, expanded the definition of property to include superannuation and also enabled the Court to make orders splitting personal superannuation entitlements between the parties to a marriage.
It was the wife’s position, in May of 2002, that there were insufficient assets of the parties available to be distributed between them to enable her to receive an appropriate sum of money or property to do justice between the parties, as required by section 79(2) of the Family Law Act, unless some sort of superannuation splitting order was made in respect of the husband’s superannuation entitlements. Accordingly, in the absence of this power by the Court and given that the legislation allowing such a split was imminent, justice demanded that the proceedings be adjourned. This application was vehemently opposed by the husband, who took the view that there were sufficient assets available to the parties in May of 2002 to make the appropriate just and equitable orders and it would be unduly oppressive to him to prolong the proceedings further.
On 24 May 2002, judgment[1] was delivered in respect of the wife’s application to adjourn the property aspects of the proceedings and in respect of the competing parenting applications. For reasons already provided to the parties, it was determined that the proceedings should be adjourned until January of 2003, when it was anticipated that the Family Law Superannuation legislation would be in force. The current proceedings relate to the finalisation of the parties’ competing applications for property proceedings following that adjournment.
[1] See L & K [2003] FMCAfam 149
In May of 2002, in order for there to be a proper basis on which to determine whether it was appropriate or not for the proceedings to be adjourned, it was necessary for the Court to embark on an investigation of the extent of the property pool available at that time and make some preliminary findings as to the respective contributions of the parties to the acquisition and preservation of those assets, as well as some assessment of their prospective needs. The basis of the exercise being to see whether there were indeed sufficient assets available to the parties at that time, independent of their superannuation entitlements, to do justice to the parties, after an assessment of their respective contributions and likely prospective needs had been made.
In May of 2002, the parties agreed that the assets available for distribution between them amounted to a sum equal to $168,783.87. However, these assets were subject to liabilities in the sum of $139,400.00, leaving the modest sum of $29,383.87 available for division between them. The husband is and was a ff in the employ of the Northern Territory Government. As a result he has been a member of the relevant Northern Territory government employees superannuation scheme for some years. As at May of 2002, he had an entitlement to superannuation of at least $36,000.00 in two separate government funds or a sum slightly more than the then net assets of the parties.
In May of 2002, I also determined that the parties’ two children, F K born the 15th of September 1995 and P A K born the 15th of October 1996, should continue to live predominantly with the wife. At that time, it was also apparent that the husband was likely to be in a position to earn a substantially higher income than the wife for some time to come. Predominantly, for those two reasons, it was adjudged that, if orders for division of property were made at that stage, the wife should receive a greater proportion of the parties’ net assets than the husband. However, given that the husband was far better placed than the wife in respect of superannuation, to divide the parties’ available assets in June of 2002, without that superannuation being taken into account, would have resulted in substantial injustice to the wife. Therefore the wife’s application for adjournment was allowed.
In May of 2002, the parties’ most substantial asset was the husband’s half share in a piece of real property situated at 24 E Street, S P. At that time, the parties agreed that this interest was worth $150,000.00 and was subject to a mortgage to the Commonwealth Bank of $128,000.00. As a result of this agreement, the Court made findings of fact regarding the size of the asset pool, which ultimately strongly influenced the decision to adjourn the proceedings.
It is now the wife’s position that the E Street property was worth appreciably more than $150,000.00 in May of 2002 and is worth more again now. In short, she has resiled from her earlier agreement with the husband as to the value of this property. No formal evidence was provided to the Court as to the value of the E Street property in May of 2002, other than what the parties’ agreed to in respect of it.
The husband disputes that the property had a different value to $150,000.00 in May of 2002 and disagrees that it is worth considerably more again now. He argues that he has been placed at a considerable disadvantage, both by the wife’s change of heart in respect of the value of the E Street property in May of 2002 and the adjournment of the proceedings generally.
The parties had few assets of any value at the time they married on the 29th of April 1995. The marriage between them was a short one, of less than five years. Accordingly, a period of four years has now elapsed since the parties separated, during which time the value of the E Street property has increased and the husband has continued to make contributions to his superannuation fund. The wife has had nothing directly to do with the E Street property since the parties separated and the husband has made his contributions to his superannuation fund independently of the wife. Accordingly, given the period of time which has elapsed since May of 2002 and the changes in the parties’ circumstances since that time, it may be necessary for the Court to reassess the respective contributions of the parties, pursuant to section 79(4) of the Family Law Act, to the pool of assets as it currently stands and revisit the factors as set out in section 75(2) of the Act, which were found to be applicable in May of 2002.
In May of 2002, having found the asset pool amounted to the modest sum of $29,383.87, I assessed the contributions of the parties to the acquisition and preservation of the assets represented by that sum as being essentially equal. As the wife had the care of P and F and earned a considerably lesser salary than the husband, I determined that, as a result of those factors, she should receive a further proportion of the assets to a value of 20% of the asset pool, if it was to be distributed at that time.
In the reasons for judgment of 24 May 2002, I said as follows:
“…At the present time, the net assets available for distribution are small, amounting to some $29,383.87. Half of this sum is $14,691.94. The wife has already received assets to the value of $14,455.48 comprised of the furniture and her share of the proceeds of sale of M Street, W. Although, I note in real terms that she received only a small proportion of these monies, the vast majority of them being expended on legal fees. By reason of her lesser salary and the fact that she has had and will have in future the substantial responsibility for the care of the two children of the marriage, it is necessary that there be a further adjustment in her favour pursuant to section 75(2). I would assess this further adjustment as being twenty percent. However, given the smallness of the pool of assets, this is a somewhat artificial figure. In any event, it would require a payment to the wife of the sum of $20,568.70 or, after taking into account the sum she has already received, $6,113.22.
The husband says he has no capacity for borrowing any further sums to pay the wife. I accept his evidence in this regard. The only conceivable way in which he would be able to raise some funds would be if he abandons the proposal to purchase his father’s share of E Street, S P. This is for all intensive purposes impossible given that the settlement of the transaction is imminent.
Nor do I think that such an order would be just and equitable as far as the wife is concerned, as it would fail to take into account the parties entitlement in future to superannuation.
The marked disparity of the parties’ entitlement to superannuation calls for some further adjustment in favour of the wife. However, there is currently no property available in respect of which to make such a further adjustment or indeed any capacity on the part of the husband to borrow any money.”[2]
[2] See L & K (supra) at paragraphs 127 – 130
As a result of these factors I concluded as follows:
“...in order to do justice and equity to both parties the superannuation of the husband needs to be divided or accessed in some way. This is not possible at the present time. There is no other way that the wife may receive an appropriate sum from the current assets of the parties. The period of the adjournment is comparatively brief, being approximately seven months.”[3]
[3] See L & K (supra) at paragraphs 140
Unfortunately, the period of the adjournment has proved to be longer than anticipated. This delay has been in part attributable to difficulties the wife has had in obtaining a valuation of the husband’s superannuation pursuant to the relevant legislation and her desire to revisit the value of the E Street property.
Although section 79(5) speaks in terms of an adjournment of proceedings, it is clear that this term is not meant in a purely procedural sense but is rather analogous to a deferral of the entire process required to be undertaken by the Court pursuant to section 79(2) and (4). That is to say that the proceedings commenced and then adjourned pursuant to section 79(5) should not be regarded as being part heard. That being so, I am not constrained by any previous findings, on the basis of which, the decision to adjourn the proceedings pursuant to section 79 (5) was made in May of 2002. The Full Court of the Family Court has made comment about the nature of an “adjournment” ordered pursuant to section 79(5). In Grace & Grace[4] the Full Court said:
“The term “adjournment” connotes that the hearing has commenced or is due to commence within a relatively short time. Accordingly, the property identified as forming the basis of the hearing when commenced before adjournment would usually remain the subject matter for orders. Yet, clearly, the purpose of s 79(5) is to not give rise to an expectation among the parties or the Court that they are concerned with the property available for distribution at the time of the s79(5) application. Rather, the purpose of an order under s79(5) is to defer the step of ascertaining the property pool for distribution to a defined future point in time.”
[4] See Grace & Grace (1998) FLC 92-792
Accordingly, it is clear that the first exercise for the Court is to ascertain the extent and value of the parties’ property, including their respective entitlements to superannuation, as at the present time. It will be then necessary for the Court to once again turn to evaluate the contributions of the parties as defined by section 79(4)(a) – (c) of the Act, before turning once again to evaluate the relevant matters contained in section 75(2). I have already set out the applicable legal principles to the determination of applications for property settlement in the reasons for judgment in this matter of the 24th of May 2002.[5] Those principles remain applicable to these proceedings, however the operative time for each of the necessary steps is at the date of the hearing and, as a result, a different result may follow in respect of the evaluation of each of those steps.
[5] See L & K (supra) at paragraphs 23 - 27
The applications
The wife has filed an amended application in these proceedings.[6] In that application, the wife seeks the following orders:
[6] Wife’s amended application for final orders filed 8 December 2003
(1)That in accordance with the orders below, the husband make a cash payment to the wife and that the husband’s superannuation be split in the wife’s favour to achieve an adjustment of the net value of the parties property in the proportion of 70% to the wife and 30% to the husband.
(2)That is:
(a)That the within 28 days of the date of these orders the husband pay the wife $64,000; and
(b)That pursuant to s. 90MT(1)(a) of the Family Law Act 1975, whenever a splitable payment becomes payable in respect of the interest of the husband, M K AGS number ********, in the Northern Territory Government and Public Authorities Superannuation Scheme (“NTGPASS”) and the Northern Territory Supplementary Superannuation Scheme (“NTSSS”), the wife is entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001, using a base amount, at the operative time in the sum $10,000 and there be a corresponding reduction based on one half of the figure calculated being deducted from each of the two funds, in the entitlement that the husband would have had in the NTGPASS and NTSSS Funds but for these orders;
(c)That the operative time shall be the fourth business day after the day on which a sealed copy of these orders is served on the Trustee of NTGPASS and NTSSS.
(d)That the Trustee of NTGPASS and NTSSS are bound by the above orders in relation to superannuation and the Trustee, the husband and the wife, do all such things as may be necessary for the Trustee to calculate the entitlement of, and make payment to the wife in accordance with the above orders.
3.That in order to secure the payment referred to in paragraph 2(a) hereof, that the wife be entitled to register a caveat on the husband’s interest the property situate at 24 E Street, S P in the Northern Territory of Australia being more particularly described as the whole of the land comprised in Certificate of Title Register Book Volume *** F *** (“the E Street property”).
4.That in the event that the husband fails to pay the amount due to the wife referred to in paragraph 2(a) within the time limited by that order, the husband forthwith do all acts and things and sign all documents necessary to effect the sale of his interest in the E Street property. Upon the sale of the husband’s interest in the E Street 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 and any other encumbrances effecting the husband’s interest in the E Street property;
(c)thirdly, the sum of $64,000 to the wife;
(d)fourthly, the balance to the husband.
5.That in the event that the Court is unwilling to make the order sought in order 2 above, that the wife’s share as set out in order 1, be made up of a cash payment by the husband to the wife and a split of the husband’s superannuation in the wife’s favour following the pattern contained in order 2 with substituted figures as the Court considers just and equitable and in this event that order 3 and 4 also apply.
6.That except as otherwise specified in these orders:
(a)That each party otherwise retain all property currently in their possession;
(b)That the husband indemnify the wife in relation to the personal loan from the Commonwealth Bank in the joint names of the parties and each party indemnify the other party in respect of all other liabilities effecting any property to which they are entitled pursuant to these orders.
7.That pursuant to section 84 of the Family Law Act 1975 a Registrar or Deputy Registrar of the Family Court of Australia or a Federal Magistrate is hereby appointed to execute all deeds and documents in the name of the husband and do all acts and things necessary to give full validity and effect to these orders in the event that the husband refuses, omits or otherwise fails to do so.
Although he was legally represented at the earlier proceedings in May of 2002, the husband acted on his own behalf in respect of the proceedings before me on the 17th of December 2003. In a minute of order filed by him[7], the husband indicated that he sought the following orders:
(1)That the property be divided in such a manner where each party keeps what is currently in their possession in regards to assets.
(2)That all debts in the joint names of M and C K are to be deemed to be debts of myself M K only.
This was essentially the position the husband had taken at the earlier hearing on the 16th of May 2002.
[7] See minute of orders sought by the husband filed the 13th of October 2003
The issues
One of the major issues, so far as the husband is concerned, is the value of the E Street property, both at the date of hearing and in May of 2002. In this regard, there is no doubt that he was placed at some disadvantage by reason of his lack of legal representation.
Following the adjournment of the proceedings pursuant to section 79(5) on the 24th of May 2002, the matter came on for further directions on the 21st of January 2003. At that stage, both parties requested that they be referred to a conciliation conference. However, that conciliation conference failed to resolve the matters between the parties and on the 27th of May 2003, the matter was fixed for final hearing on the 15th of October 2003. However, on that date, the wife requested that the final hearing be vacated. The reasons on which she relied for vacating this hearing date were that she did not have access to a valuation in respect of the husband’s superannuation or an up to date valuation of the E Street property. Because of the absence of that material it was apparent that the matter could not proceed to hearing on the 15th of October 2003, and accordingly, in spite of the opposition of the husband, the proceedings were adjourned until the 17th of December 2003.
On the 15th of October 2003 an order was made directing the husband to allow a registered valuer, as nominated by the solicitor for the wife, to enter the property at 26 E Street, S P, in order to value the property.
On 26th November 2003 the wife filed an affidavit sworn by M S, who is a certified practising valuer. Mr S conducted an inspection of the E Street property on the 13th of November 2003 and provided a report in respect of its value. In his report, Mr S indicated his opinion that the value of the E Street property at the present time is $410,000.00 and if valued between October of 1999 and February of 2000 was likely to have been $395,000.00. This latter sum was considerably more than the agreed value of the property in May of 2002. As has already been indicated, the husband does not accept either of these valuations. It is his position that he has been placed at a considerable disadvantage by reason of the wife’s change of view in respect of the value of this property.
In order to safeguard his position, the husband arranged for his own valuation of the property to be conducted. This valuation was undertaken by Mr A M, a registered valuer. The husband sought to tender a copy of Mr M’s valuation in an affidavit sworn by himself on the 16th of December 2003, to which the report was attached. When the matter came on for hearing on the 17th of December 2003, Ms H, counsel for the wife objected to the tender of the valuation report in this form. Subsequently it transpired that Mr M was unable to attend Court on the date of the hearing to give evidence in respect of his opinion as to the value of the E Street property.
As a result of these difficulties, I inquired of the husband whether he wished to apply for an adjournment of the proceedings to a time when Mr M was available. I informed the husband that I could not consider Mr M’s report or accept his opinion as to the value of the E Street property if he was not available to be cross-examined. The husband indicated that he did not wish to seek an adjournment of the proceedings but rather wished for them to be concluded as expeditiously as possible. On that basis, I embarked on the hearing of the matter on the 17th of December 2003.
Another issue that has arisen as a result of the adjournment of the proceedings concerns the effect of improvements that the husband has carried out at the E Street property since May of 2002. The husband asserts that these improvements, which he has largely carried out himself, have markedly increased the value of the property.
The current value of the husband’s superannuation, in the two Northern Territory Government funds of which he is a member, is in total $61,245.00. In May of 2002, the total figure was said to be $36,974.00. A large proportion of this sum has presumably been accumulated in the period of time since the parties separated. On that basis, it is the husband’s position that the wife has not contributed to the acquisition of that superannuation.
Clearly, at the present time, the husband’s superannuation represents a significant portion of the parties’ assets. Pursuant to section 90MC of the Family Law Act, the husband’s superannuation is to be treated as property and is an eligible superannuation interest that the provisions of Part VIII B of the Act enable to be split between the parties. Although it is not entirely clear from the evidence, I imagine that the husband’s superannuation is preserved until he reaches his applicable preservation age and satisfies the condition of release (usually permanent retirement from the work force). Accordingly, at the present time, the cash sum that is represented by the superannuation, is not available to be distributed directly to the parties. It remains contingent upon the husband’s retirement from the work force, which at this stage is not likely to be until he reaches the age of 55 years.
Given the value of the other assets available to the parties – albeit that there is considerable dispute about the value of the E Street property – it is the wife’s position that she should receive the vast majority of her entitlement pursuant to these proceedings in the form of cash, rather than in the form of a share of the husband’s superannuation. It is her position that due to her current circumstances she has a pressing need for cash rather than another form of entitlement, which will make provision for her retirement. It is the husband’s position that if he is unsuccessful in the position that he has adopted in these proceedings to date, the wife should receive a significant amount of her entitlement in the form of a split of his superannuation.
These are some of the significant matters in issue between the parties. However, as is obvious, the major issue remains the assessment of the parties’ respective contributions to the asset pool as it currently stands and the assessment of the relevant matters as set out in section 72(2) of the Act.
The applicable law
In the previous reasons for judgment I set out the legal principles applicable to property proceedings such as these.[8] It is not necessary to repeat those principles at this stage as they remain the relevant considerations which have to be applied now. As indicated earlier, the process requires a four-part procedure. Firstly, the identification of the property, liabilities and financial resources of the parties’ at the time of hearing. Secondly, an evaluation of the contributions made by the parties as defined in section 79(4)(a) to (c) inclusive. Thirdly, an evaluation of the matters contained in section 75(2) in so far as they are relevant. Finally, in determining what order the Court should make under section 79, the Court must be satisfied that in all the circumstances, it is just and equitable to make the relevant orders.
[8] See L & K (supra) at paragraphs 23 - 27
As the extent of the parties property and liabilities have changed since May of 2002, so the parameters in which their contributions to the acquisition and preserving of that property must be assessed have also changed. The relevant time for assessing those contributions and indeed the relevant section 75(2) factors is the present. Finally, I must be satisfied as to the justice and equity of the orders that are made at the time of their making.
The evidence
In the previous proceedings, I found that both parties gave their evidence in a clear and forthright manner and were essentially truthful witnesses. In the current proceedings I found no reason to change my assessment of either of the parties. There is however no doubt that the proceedings and particularly their protraction since May of 2002 have occasioned a great deal of hostility between the parties and as a result they each have a very different view as to the appropriate outcome from them. The husband in particular feels that he is at a considerable disadvantage because of the wife’s change of stance in respect of the E Street property. He is somewhat embittered that the property, which he feels he was instrumental in purchasing and maintaining, particularly since separation and to which he has a strong sentimental attachment, has become central to the proceedings.
As I have previously noted, the husband has been at somewhat of a disadvantage by being self-represented in these proceedings. He prepared his own recent affidavit material, which was brief and consisted chiefly of annexed documents without any explanation. As a result, his documents did not provide any helpful chronology or narrative of events and it was difficult to precisely glean what his case was. The wife is critical of him for not being more forthcoming about his current financial position. As the case proceeded, it became apparent that the husband had failed to disclose an interest he held in an investment property in D with a colleague in the F D. This unit was purchased recently and its purchase price of $120,000.00 was entirely borrowed. The husband and his colleague intend to let the property and obtain a tax advantage through negative gearing. I am prepared to accept that it was an oversight on the husband’s part that this property was not included in his material rather than a deliberate attempt to mislead either the Court or the wife.
Prior to becoming a ff, the husband studied economics at a tertiary level, although he did not complete his degree. He wants to return to U when he is older and it becomes too physically demanding for him to continue to be a ff. At this stage, he wishes to obtain qualifications, which will enable him to undertake an administrative position. The husband is clearly an intelligent person with something of an eye for business and a head for figures. Although I did not think him a dishonest witness, I formed the view that he did not wish his financial affairs to be subject to too much scrutiny by either the wife or the Court. This was particularly so in respect of the somewhat complicated rental arrangements for the E Street property. In May of 2002, I noted that no evidence was provided as to the amount of rent received by the husband from the E Street property.[9] This issue has been more thoroughly examined in the current proceedings, although the wife continues to be sceptical about the full extent of the rental, which the husband receives from the property. In fact, in the past, she has caused the Australian Tax Office to audit the husband’s financial affairs. However, as I noted in May of 2002, nothing untoward was found by the Australian Tax Office in respect of the husband’s financial affairs.[10]
[9] See L & K (supra) at paragraph 107
[10] See L & K (supra) at paragraph 120
In the light of the fact that the husband was able to borrow the money for the D investment property and has access to a regular flow of cash in the form of the rent of the E Street property, as well as being in regular paid employment, I formed the view that his financial position was not as dire as the husband sought to paint it. Similarly, his position was not as grim in May of 2002, as he would have the Court then believe.
The wife no longer engages in paid work. This is a cause of some dissatisfaction to the husband. As is common in cases involving former marital partners, although both the husband and the wife are pleasant, honest and law abiding citizens, they each view the other and his or her evidence of past and current events through a distorting prism of hostility. The wife regards the husband as currently “doing it easy” because of his secure employment and the rental income from E Street and believes that he is concealing his real financial position from both her and the Court. On the other hand, the husband believes the wife is wishing to unfairly exploit his endeavour and business acumen in respect of the E Street property, when she disapproved of its purchase during the marriage and thereafter failed to contribute directly to its upkeep and the work necessary to support the tenants which it housed.
The husband is deeply suspicious of the evidence of Mr S in respect of both the current and past value of E Street. At the heart of his case, is his conviction that he has been ambushed by, from his point of view, the grossly inflated value to which Mr S ascribes to the property and his fear that his endeavours in respect of the improvements to the E Street property will be undervalued. These fears were compounded by the delay in the proceedings being finalised and the wife’s change of heart in respect of the previously agreed value of the property. Because of his fears in these regards, I consider that there is a real basis for the wife’s view that the husband has not been as forthcoming about his financial affairs as he might have been. In particular, I believe that the husband has magnified the difficulties he is likely to experience if he approaches a bank or other leading institution for a loan. As a result of my views in this regard, I have had cause to revise my opinion of the husband’s financial viability in May of 2002.
In May of 2002, I was told that the husband had arranged to acquire his father’s interests in the E Street property. I was also told that the husband had obtained the necessary finance from the National Australia Bank to purchase his father’s interests and that the settlement of this transaction was imminent. As a result of the extent of his borrowings from the National Australia Bank, which I was told amounted to some $280,000.00, the husband asserted that he had no capacity to borrow any further sums and was stretched to the greatest possible financial extent. In essence, I was told that this transaction was to all intents and purposes a concluded one. This was not the case. The transaction was not completed and the E Street property remains jointly registered in the names of the husband and his father, M K.
Neither party has sought to join Mr M K to these proceedings and his attitude to them is not known to the Court. If the husband is unable to borrow sufficient funds to pay the wife her just entitlement and so wishes to liquidate his interest in the E Street property, the interests of Mr K Senior will clearly be affected. However it was the evidence of the husband that his father, who is now approaching retirement age and finding it more physically demanding to carry on his occupation as a c, is wishing to apply for an aged pension and in such circumstances finds the income from the property as being disadvantageous. In the light of the history of the matter to date, the wife is very sceptical about the husband’s claims, which he has previously made, that he is unable to borrow funds to pay her any monies by way of property settlement. I share the wife’s scepticism in this regard.
Because of these various factors, where there is a dispute between the husband and the wife, I prefer the evidence of the wife. In these reasons for judgment, findings are made on the balance of probabilities, having regard to the evidence and my observations to the demeanour of the parties concerned. In what follows, statements of fact constitute findings of fact.
a) Background
Although some of these matters were set out in the earlier reasons for judgment, for the sake of completeness, I will set out the important matters which bring the parties to this point.
The husband was born in D on the 8th of April, 1972. The wife was born in P on the 8th of October, 1974. The parties met in D in 1994 and were married in D on the 29th of April, 1995. They did not live together prior to their marriage.
The husband has lived in D all his life. His parents and brother and sister also live in D, as well as his aunt and uncle and several cousins. By occupation he is a ff. He joined the N T F S in 1995. As a consequence of his work, he is required to work shifts, including regular night shifts. His employment gives him regular scope to have time off in which to pursue other interests.
Both F and P were born in D and have lived here all their lives. They are both currently attending primary school where they are in grade 1 and 2 respectively. Both children are in good health and are progressing well at school. Neither child has any special needs which are relevant to the matters currently before the Court. Pursuant to the orders that were made on the 24th of May 2002, the husband has contact to the children from 5.00pm on Friday until 8.30am the following Monday on each alternate weekend during school terms and for half of all school holidays. The orders also allowed for the husband to have contact to the children overnight on Wednesdays during the school term. However this was apparently unsettling to the children and has been stopped.
By training the wife is a hairdresser. At the time of the hearing in May of 2002, she was employed as a f a with A N. She had held this position since January of 2001. However, in August of 2003, she resigned from A N. It is her position that her employment with A N, which required her to work irregular shifts and travel overseas from time to time, was incompatible with her responsibilities for F and P, particularly because she had difficulty obtaining reliable childcare. Since her resignation from A N, her only source of income has been social security payments. However, she is currently enrolled in a batchelor of education degree at CD U. This is a four-year full time course and at the end of it, the wife hopes to become a primary school teacher.
The parties are unable to agree as to precisely when the marriage between them broke down. The wife asserts that it was in October of 1999. However, the husband says that although there were grave difficulties in respect of the marriage at this time and periods of earlier separation between the parties, the marriage did not irretrievably break down until late April of 2000.
The wife is currently unpartnered. The husband continues to be in a relationship with C G. The husband and Ms G are currently living together at 26 E Street, S P, next door to the property, which is subject to these proceedings. They are renting this property. Ms G has two children from an earlier relationship, Y C aged 13 and N C. Only N lives with the husband and Ms G currently. Ms G is not in the paid work force at present. In a financial sense she is totally dependent on the husband. After the parties separated, the husband purchased a Kia motor vehicle on finance through Esanda for about $23,000.00. This was a source of some annoyance to the wife. The car is currently worth about $18,000.00 but $20,000.00 continues to be owed to Esanda. Ms G uses this vehicle. The husband has purchased a cheap Datsun ute for his own use, particularly for getting to and from work and performing maintenance on the E Street property.
At the time the parties married neither of them had any substantial items of property. The parties agree that the husband had no assets that are relevant to these proceedings and that the wife had a personal loan between six thousand and seven thousand dollars. This loan was paid out during the course of the marriage, from pooled income.
Both parties worked on a full time basis during the majority of the marriage. The husband was a fire fighter. Initially the wife was employed as hairdresser. Following the birth of F she was away from work for about six weeks but thereafter resumed work as a shop assistant in a chemist working for approximately 30 hours per week. Once again she stopped work for two months following P’s birth but then returned to work as a hairdresser on a full time basis. As has already been indicated, she began work as a f a in January of 2001. It is clear that during the marriage both parties were hard working individuals and that they pooled their income for joint family purposes.
The parties purchased a Toyota Camry motor vehicle for $17,700.00, shortly after their marriage. They themselves provided $7,700.00 towards the purchase price and the husband’s parents contributed the remaining $10,000.00. This sum was a loan and the parties accept that it must be repaid. The husband retained this vehicle following separation and has traded it in on another vehicle. When the Camry was traded in, it was given a value of $3,000.00. The parties both accept that this vehicle should be notionally included in the pool of assets available to be divided between them at this value of $3,000.00 and that the loan associated with it to the husband’s parents should also be included.
In 1997 the parties acquired the former matrimonial home situated at 6 M Street, W. The parties borrowed the entire amount of the purchase price. Following separation, it was necessary for this property to be sold in October of 2000. It is common ground between the parties that the net proceeds of sale amounted to $13,283.87. Following the parties’ separation, there were extensive proceedings between them in the Family Court at D regarding arrangements for the care of F and P. As a result, the wife had incurred substantial legal costs. The wife’s former solicitor registered a caveat on the M Street property in respect of unpaid legal fees. Accordingly a sum of $10,000.00 from the proceeds of sale had to be directed towards the legal fees in order for the caveat to be removed and the settlement to take place. The remaining balance of the proceeds were divided as to $1,955.48 to the wife and $1,328.39 to the husband. Accordingly, of the proceeds of sale, the wife has received the benefit of the sum of $11,955.48. The parties agree that the proceeds of the sale of the former matrimonial home should also be included in the pool of assets available to be distributed between them.
Following separation, the wife planned to move to Western Australia. She had retained a number of pieces of furniture and other household goods. When she was planning to move to Western Australia, she negotiated with a second hand dealer to sell some of these items. She also held a lawn sale. She received the sum of $2,500.00 from the second hand dealer and the lawn sale for these items. It is the husband’s position that this sum represents a “fire sale” value for the items. However he is not in a position to put forward any other evidence in respect of their value and reluctantly accepts that this sum must be attributed as their value. The wife retained this sum of money.
At the time of their separation, the parties also indebted to AGC in the sum of $400.00 in respect of the purchase of a bed. The husband assumed responsibility for this debt. The parties agree that it should be factored in to their list of assets and liabilities available for distribution. In addition, in preparing the M Street property for sale, it was necessary for it to be treated for termite infestation. The pest control company that did this work were not able to be paid from the proceeds of sale. Accordingly, they instituted proceedings against the husband in the Local Court at D and gained a judgment against him in the sum of $5,000.00. The husband subsequently settled this judgment debt by payment of the sum of $1,000.00. The parties acknowledge that this is a joint debt and should also be included.
b) The E Street property
Both the husband and Mr S describe the E Street property as being unique. It is to say the least, highly unusual. The elevated house on the property was constructed for the Northern Territory Housing Commission in 1965. It was originally occupied by the husband’s grandfather, who at some later stage purchased the property. The property was the family home, not only for the husband’s grandfather but also for his father and uncle. During the early 1970s, the husband’s grandfather, father and uncle constructed extensive improvements on the property. Four bed-sitters were built, which could be rented out, as well as a cyclone shelter and store room. All these were reconstructed following the Cyclone in 1974. On the death of the grandfather, the property was inherited by the husband’s father and uncle. They continued to rent out the bed-sitters and various members of the family lived in the house.
As a result of his connections to it, the property has great sentimental significance for the husband. It has been in his family for all of his life and essentially grew up there.
In the mid 1990’s, the husband’s father and uncle decided it was time to sell. One of the catalysts for the sale was that their financial affairs were audited by the Tax Office, apparently to their financial detriment. In umbrage, the uncle began to demolish some of the bed-sitters. As a result of these difficulties, the property was placed on the open market, with a real estate agent, for a selling price of approximately $270,000.00.
It is the husband’s position that this was a bona fide market price and that purchasers were interested in the property at this price. However, before it was sold, he elected to purchase his uncle’s share in the property. He purchased his uncle’s half share for $135,800.00 and he and his father remain registered on the title as tenants in common in equal shares to this time.
In 1996, when the husband purchased his share in the E Street property, he was only recently married and had only recently begun his employment as a fire fighter. He did not have any significant sums of capital behind him. As a result, it was necessary for him to borrow the entire amount of the purchase price. The husband borrowed a total sum of $150,300.00 from the Commonwealth Bank to purchase this interest, paying stamp duty and legal fees on the purchase and discharging some other minor debts that he and the wife had at the time from the balance of the monies advanced. Due to the extent of the loan and no doubt as a result of the lack of security in respect of it, the Bank required the wife to guarantee the loan.
Initially, following the purchase of the interest in the E Street property, the husband and wife moved into the elevated house there. The husband and his father continued to rent out the bed-sitters on the property at a weekly rental of between $65.00 and $70.00 per unit. The wife did not find living at E Street amenable to her and as a result, the parties later purchased the former matrimonial home at M Street, W.
Prior to the time the husband purchased his uncle’s half share in the E Street property, it seemed that the most likely outcome for the property, if it was sold, was for it to be demolished and the vacant land redeveloped. The husband describes his decision to purchase his uncle’s half share as an “investment based on sentiment”. However, he considered that there were also sound commercial reasons for purchasing the property, as it is located close to the city of D and in D there is a demand for casual rental property at the lower end of the market. Because the tenants of such accommodation come and go regularly, it is desirable for the landlord to live either on the property itself or in close vicinity. The bed-sitter units are semi-furnished and electricity is included in the rental. When he purchased his half share in the property, it suited the husband and his father for the husband to live on the property, in order to collect rent and perform routine maintenance. As a ff, the husband works a 42 hour
8 day rotating shift. In this shift he works two days of day shifts, two days of night shifts and then has four days off. On night shifts, although he is required to be at the Fire Station, the husband can go to sleep as normal and is woken only in the event of a call out. The consequence of this is that during the days that he is on night shift, the husband is free to pursue other interests. Accordingly, the rotating nature of his work gives the husband much free time. This is very convenient to him, as it enables him to devote much time to the E Street property.
The wife acknowledges that she did not want the husband to purchase the half interest in the E Street property and that thereafter, she had little interest in it and made no contribution towards either its upkeep or the accommodation business, which was associated with it. These duties fell squarely on the husband. He completed the necessary accounts of the business and shared the income as appropriate with his father. After the parties moved out of the house at E Street, it was rented out at approximately $150.00 per week. On the figures provided by the husband therefore, his half share entitlement to the rental from the property was about $200.00 per week. This calculation makes no allowance for regular vacancies or other expenses incurred in respect of the property. The mortgage repayments in respect of the loan on the property were $320.00 per week. In these circumstances, it seems likely that most of the rent collected on behalf of the husband was utilised to pay the mortgage. As has already been indicated, the wife has long held suspicions about the manner in which the husband has accounted for the rents received by him. However an audit of his affairs by the Tax Office for the years ending 30 June 1998, 1999 and 2000 revealed no discrepancies, although it seems that the husband did improve his standard of record keeping during the review.[11]
[11] See letter from the Australian Tax Office to the husband dated the 13th of August 2001 being Annexure F to the husband’s affidavit filed the 20th of November 2003.
It is unclear what the balance outstanding on the mortgage on the E Street property was at the time the parties separated. However, at the time of the hearing in May of 2002, it stood at $128,000.00. At the present time it stands at $120,628.63. There is no dispute between the parties that, since they separated, the wife has made no direct or indirect contributions towards the acquisition of the E Street property. It is her case however that during the parties marriage that her efforts, in part, contributed towards this property.
Since the parties separated, the husband has continued to utilise a significant proportion of his time towards maintaining the E Street property and tending to the affairs of the tenants, who live there. This is the major reason that he and Ms G have elected to live next door at 26 E Street, S P. In particular, the husband has renovated the cyclone shelter and storeroom so that they too are self-contained accommodation, which can be rented out. The husband’s father is nearing retirement. As Mr K Senior wishes to apply for a pension, he is less interested in the property itself and the income it produces. It is the husband’s case that the major burden in respect of the E Street property has fallen on him. These duties include collecting the rent from the tenants; routine maintenance; accounting duties; advertising; interviewing prospective tenants; cleaning; and gardening and lawn mowing.
In his affidavit material, the husband has provided an estimate of the work he has performed at the E Street property in the approximately four years since the parties separated. This work includes the following: painting; tiling; installation of solar hot water systems; replacement of bathroom fixtures; and the provision of furniture, air conditioners and whitegoods for the furnished units. The husband estimates that between the 1st of January 2000 until the 30th of June 2003, he expended the sum of $38,332.00 on the property and a further $9,800.00 since the 30th of June 2003. These expenses are calculated by the husband by reference to his tax returns for the relevant periods. The wife does not accept any of these figures on the basis of the valuation evidence provided by Mr S. It being Mr S opinion that the work done by the husband has added only approximately $10,000.00 to the value of the E Street property.
The husband accepts that the E Street property was worth $300,000.00 at the time of the hearing in May of 2002. This being an increase in value of $28,400.00 since the time he purchased his interest in it. As has already been indicated, it is his evidence, which is uncontroverted by the wife, that he purchased his uncle’s half share in the property for its market value at the time. The husband does not accept that the property has increased in value by $138,400.00 since the time he bought his share in it, as the wife asserts, on the basis of Mr S evidence.
The husband continues to believe that the E Street property provides considerable commercial opportunities for him and his father. His mortgage to the Commonwealth Bank on the property is fixed for 20 years and accordingly the weekly repayments remain at $320.00. At the present time, the various types of accommodation available on the property are rented out at a total value of $1,030.00 per week.[12] The husband’s share of this income would be $513.00 per week, somewhat in excess of the monies due on the mortgage. However, an analysis of the husband’s taxation returns indicate that from a taxation point of view, the property has been running at a loss.
[12] See page 7 of Mr S’ valuation report and note that each of the rentals for the various bed-sitters and the converted storage room and cyclone shelter, as well as the elevated house were provided to Mr S by the husband.
As has already been indicated, the husband’s taxation returns are annexed to his affidavit of the 20th of November 2003, without comment except as justification for the amount of work the husband has conducted on the E Street property. The taxation returns indicate the following:
Husband’s taxation return for year ending 30 June 2003
Gross salary as a ff
$55,463.00
Interest
$ 11.00
Less deductions for work related expenses
$11,441.00
Gross income from employment
$44,033.00
Gross rent from E Street
$15,396.00
Less interest deductions
$ 8,235.00
Less capital work deductions
$10,050.00
Less other rental deductions
$17,943.00
Net loss from E Street
$11,832.00
TOTAL INCOME
$32,201.00
Husband’s taxation return for year ending 30 June 2002
Gross salary as a ff
$54,276.00
Interest
$ 7.00
Less deductions for work related expenses
$11,557.00
Gross income from employment
$42,726.00
Gross rent from E Street
$27,170.00
Less interest deductions
$12,862.00
Less capital work deductions
$ 650.00
Less other rental deductions
$25,774.00
Net loss from E Street
$12,116.00
TOTAL INCOME
$30,610.00
Husband’s taxation return for year ending 30 June 2000
Gross salary as a ff
$47,423.00
Interest
$ 32.00
Less deductions for work related expenses
$ 1,563.00
Gross income from employment
$45,892.00
Gross rent from E Street
$13,194.00
Less interest deductions
$11,213.00
Less other rental deductions
$19,235.00
Net loss from E Street
$17,254.00
TOTAL INCOME
$28,638.00
For reasons that have not been explained, the husband did not provide a copy of his 2001 taxation return, so the detailed figures are not available to me in respect of that particular year. However I have no reason to believe that the pattern from that year would be greatly different from the pattern in the other three years. Accordingly,
I believe that I can safely conclude that the husband has gained considerable tax benefits from the E Street property. Even the most cursory examination of the figures indicates that the husband’s interest in the property has the effect of substantially reducing his tax liability.
In this regard, the husband has not provided either to the wife or the Court, detailed calculations or documents in respect of the capital works or other rental deductions in respect of the E Street property. In addition, the husband has not provided copies of any tax assessment notices or in particular, details of any tax refunds he has received in the past few years.
Neither party has provided a copy of any recent or current child support assessment in respect of F and P, other than that both parties agree that the husband is currently assessed to pay child support at a weekly rate of $120.00 or $6,240.00 per annum. As I have not been provided with such an assessment, I have no way of ascertaining whether the Child Support Agency has made any allowance is the assessment for supplementary income earned by the husband by way of rental property loss pursuant to section 38A of the Child Support (Assessment) Act.
I accept that the husband was motivated by sentiment when he purchased his uncle’s half share in the E Street property, however I have no doubt that the property represents a good investment for him, which is perfectly suited to his personal situation. I accept that E Street is the type of rental property that requires much investment of time from its owners. Due to the level of temporary accommodation it provides, at the lower end of the market, some of the tenants of E Street are likely to be unreliable in respect of the payment of rent and to require to be monitored in that regard. Because of the intensity of the work required and the low level of remuneration involved, it is not the type of property that is attractive to a real estate agent for management. In addition as the units are furnished, there is a high level of maintenance required. However, the husband’s work regime is perfectly suited to various requirements of the property. He has ample free time. He is also able to minimise actual expenses by doing much of the work required himself. Clearly, it is no accident that he chooses to live next door to the property. Accordingly I am not prepared to believe that the E Street property is a financial albatross around his neck.
c) The value of the E Street property and the evidence of Mr S
Mr S is a certified practicing valuer. He has been a valuer since 1969. Between 1990 and 2003, he was a valuer employed by the Australian Valuation Office and the majority of his work involved residential, commercial and industrial valuations, primarily for the Northern Territory Government. Accordingly, he has extensive experience of property values in the Northern Territory. In particular, he was involved in valuing residential property values for the Northern Territory Housing Commission between 1999 and 2003. This work related to the privatisation of the Northern Territory Housing Commission’s stock of public housing. I accept his qualifications to provide valuation evidence and found him to be a well qualified and capable witness. I accept his evidence. In particular, because of his experience between 1999 and 2003, Mr S has ample experience and knowledge to assess the value of a property, such as E Street, which is used to provide accommodation, on the private rental market in D, although he did concede in his evidence that he had never previously valued a property of a type similar to the E Street property.
On the figures provided to him by Mr K, Mr S found the income produced by the E Street property was $53,560.00 per annum and the annual outgoings were $9,250.00, composed as follows:
Rates
$ 3,725.00
Insurance
$ 968.00
Repairs and maintenance
$ 2,500.00
Water and Sewage
$ 2,057.00
Mr S did not include an amount of expenses related to agent’s fees for collection of rental, as in his experience, the E Street property was of a type that real estate agents were reluctant to take on. Accordingly, it was invariably the type of property that was managed by an owner/occupier. This is clearly the case here.
The husband believes that Mr S has set the figure for repairs and maintenance in respect of the E Street property unduly low. Mr S concedes the property is an older one and so would require more maintenance, however he believed that the figure of $11,000.00 per annum for maintenance, as proposed by the husband, was unduly excessive. Certainly, he did not think that each individual unit would require extensive repairs each year, but rather the repairs required to each unit would even out from year to year. As the husband has not provided specific documentary evidence as to how he calculates the annual costs of maintenance and Mr S has experience of assessing the amount of maintenance required for rental property in the Northern Territory on a commercial basis, I prefer the evidence of Mr S in this regard.
The issue of the valuation of the improvements added by Mr K to the property is a vexed one and difficult to resolve because of the paucity of figures and evidence. In Mr S view, much of the work done by the husband, should be regarded as routine maintenance and so can not be held to have increased the capital value of the property overall.
Obviously, Mr S physically inspected the E Street property, prior to preparing his valuation report. He was provided with a list of the work, which Mr K claimed he had done on the property over the past four years. After reconciling this list with his inspection of the property, Mr S concluded that the value of this work added approximately $10,000.00 to the value of the property overall. The husband believes that this is a gross underestimation of the capital improvements he has performed at E Street, since the parties separated. In support of his submission, he points to his taxation returns. However, he has not provided any detailed invoices or other documentary evidence in respect of these improvements. Although the Taxation Office may accept these figures for taxation purposes, I am not bound by them. I am somewhat dubious at the extent of the capital deductions, as claimed by the husband and suspicious that there are not more detailed records. Accordingly, I prefer the evidence of Mr S in this regard, who personally inspected the property concerned and who has the necessary expertise to assess the value of the improvements. I accept his opinion that much of the work done by the husband at E Street is more properly described as maintenance, rather than capital improvements. I am fortified in this view, when I consider the nature of the property, which is described by Mr S as providing “very basic accommodation for the lower tier residential rental market” and that “overall the structural improvements on the site are poorly presented and generally only in fair to good condition”.[13]
[13] See pages 7 and 8 of Mr S’ report dated the 25th of November 2003 annexed to his affidavit filed the 26th of November 2003.
As has been previously described, the various units at E Street are leased out furnished and include electricity in the cost of the rental. Accordingly, Mr K argued that electricity should be included in the annual outgoings, prior to any assessment of the value of the property being made. Mr S deposed that under normal valuation methodology, electricity was not a factor that would be taken into account and so he had not done so. To that extent, the cost of the electricity provided at E Street is an imponderable. However, the husband himself did not provide any evidence of the cost of the electricity and accordingly, I do not believe that it is open to me to tamper with Mr S valuation in respect of the property.
After inspecting the property and ascertaining the annual rental and outgoings in respect of it, Mr S concluded that the most appropriate method of valuation of the E Street property was the “income capitalisation approach”. By this method a net rental is calculated for the property and capitalised at an appropriate rate, in this case at 10.75%. The net rental is assessed by making allowance for all the normal outgoings normally borne by the owner or landlord. As has been previously indicated, Mr K does the outgoings as assessed by Mr S.
In my view, given the nature of the property involved, this was clearly the most appropriate method to use to value the property. For reasons already provided, I believe the annual expenses as calculated by Mr S are the appropriate ones. Using this valuation method, Mr S concluded that the E Street property was valued at $410,000.00. When pressed, he conceded that the range of sale prices that would be realised if the property was placed on the market and purchased by a bona fide purchaser for proper value was in the range of $400,000.00 to $420,000.00.
The husband does not accept this value. In his statement of financial circumstances, he ascribes the value of $175,000.00 to his half share or $350,000.00 in total. For reasons already provided, I am not able to make any reference to the valuation obtained by the husband from Mr M, as Mr M was not available to give oral evidence in this matter or to be cross-examined. The husband himself, although clearly interested in the value of the E Street property, is not qualified to give expert evidence in respect of its value. In those circumstances, the valuation of Mr S is unrebutted. I accept his valuation.
One of the difficulties in coming to a valuation of the E Street property is that it is unusual and there are few properties in the area of S P and indeed the wider D area with which a ready comparison can be made. For this reason, Mr S preferred to use the “income capitalisation approach”, as the prime method of valuation in this case. However, as a check, he did analyse sales of older properties in other D suburbs, which were broadly similar to the E Street property. This reconciliation, although not completely reliable, did not cause him to change his opinion in respect of the E Street property.
In Mr S opinion, rental levels for the type of accommodation typified by the E Street property had remained stable in D over the past three years. Because of this, Mr S was of the view that, if he had performed the same valuation method in respect of the E Street property between October 1999 and February of 2000, he would have come to a similar result. Accordingly, it was his opinion that the E Street property was worth $395,000.00, between October 1999 and February 2000. This being the period when the parties separated.
Mr S was not asked to perform a valuation of the property at the time of its acquisition by the husband. When he was giving his evidence in Court on the 17th of December 2003, he did not have access to the relevant rental figures for this type of accommodation in D at that time and accordingly was not able to calculate a value for the property. Accordingly, the evidence of the husband that the property was worth $271,600.00, when he purchased his half share in it, is not open to challenge. Accordingly, it is clear that the property has increased in value markedly in the time during which the husband has owned his portion of it. Mr S conceded that in recent times there had been something of a boom in the D property market due to economic factors in the Top End of the Northern Territory.
d) The parties superannuation
At the time of the hearing in May of 2002, the parties agreed that the following figures should be used to calculate the husband’s future entitlement to superannuation: $27,020.58 in the Northern Territory Government and Public Authority Superannuation Scheme (NTGPASS) and $9,953.42 in the Northern Territory Supplementary Superannuation Scheme (NTSSS) – a total of $36,974.00. These figures were current as at the 30th of June 2001.
Since those valuations were obtained, the Family Law Legislation Amendment (Superannuation) Act 2001 has come into force and with it has come a change in the methodology of superannuation valuation. As at the 6th of October 2003, pursuant to the valuation methodology provided by the Family Law Superannuation Regulations 2001, the husband had superannuation to the value of $55,205.25 in the NTGPASS scheme and $6,040.17 in the NTSSS scheme, a total of $61,245.42. These sums are subject to taxation at the time of payment.
These valuations were provided by the Northern Territory Commissioner of Superannuation. In a covering letter attached to the relevant information regarding Mr K’ superannuation entitlements, the Commissioner advises that the trustee of the two funds of which Mr K is a member, has applied to the Attorney-General for approval to apply its own methodology to the calculation of the value of the various monies held by it on behalf of members of the relevant superannuation schemes. That approval has not as yet been granted and, as a result, in this particular case, the trustee has applied the default methodology provided by Schedule 2 of the Family Law Superannuation Regulations 2001. Accordingly, the Commissioner places a proviso on the valuation, indicating that its own valuation method may result in a significantly different value to that provided by the current default regulation. However, at this juncture, I am bound by the valuation, which has been provided to me. At the time of the hearing in May of 2002, it was estimated that the wife had superannuation entitlements that amounted to $6,118.96. As at the 27th of August 2003 the wife’s entitlement to superannuation in the Aviation Industry Superannuation Trust was estimated to be $9,040.82. This valuation was not prepared pursuant to the Family Law Superannuation Regulations.
I am not able to ascertain what the exact value of the husband’s superannuation would have been at the time the parties separated. Similarly I am not able to calculate the value of that superannuation pursuant to the current valuation methodology as at the 30th of June 2001, the date of the earlier valuation. However, in the 28 months since the two valuations, the husband’s entitlement has apparently increased by approximately $24,000.00 or about 40%. Accordingly, a significant proportion of the husband’s superannuation has been accrued after the parties separated. Mr K has been a member of the two relevant funds since the 19th of June 1995, shortly after the parties married.
e) Events between May of 2002 and the present
As already indicated, the most significant event that has occurred since the hearing of May 2002 is that the wife has left the paid work force. She resigned from her position as a f a with A N in August of 2003 and has no plans to resume full time paid employment. In the latter part of 2003, she enrolled in a batchelor of education degree at the CD U. She has completed two external units at the U and starts the course proper in 2004. At the end of four years full time study, she hopes to have a qualification that will enable her to be a primary school teacher. At the present time, the wife receives a parenting allowance of $357.00 per week and child support from the husband of $120.00, amounting to a total income for her of $477.00 per week. She has approximately $4,000.00 in the bank and owns a modest motor vehicle worth $2,500.00. She values her household effects at $1,000.00. She is funding her tertiary studies through the Higher Education Scheme and estimates she owes $4,000.00 pursuant to this scheme. She also has a personal loan of a little under $19,000.00.
In October of 2002, she purchased a unit in B. She was able to save a small deposit from a tax refund cheque and savings. However, in the middle of 2003, she sold this property as she was unable to manage the mortgage payments. She and the children are currently living in rented premises, in respect of which the wife is paying rent of $170.00 per week.
The husband continues to be employed as a ff. Since the parties separated, his annual salary has increased modestly. From this employment he earns a little over $1,000.00 gross per week. He too is living in rented accommodation with Ms G and her daughter N. The rent for his accommodation at 26 E Street, S P is $180.00 per week. The wife deposes that it is her apprehension that the husband lives materially much better than she does and has access to more money than she does. She describes her economic circumstances as “scrapping”.[14] Given the husband’s overall financial circumstances, which have been described at length, I have no difficulty accepting the wife’s assessment of the situation in this regard.
[14] See paragraph 12 of the wife’s affidavit of evidence filed the 19th of November 2003.
The asset pool available for division between the parties
In my estimation, the assets and liabilities of the parties available to be distributed between them are as follows:
Assets
The proceeds of sale of the former matrimonial home at 6 M Street, W
$ 13,283.87
Husband’s half share in 24 E Street, S P
$205,000.00
Toyota Camry motor vehicle (retained by husband)
$ 3,000.00
Furniture (sold by wife)
$ 2,500.00
Husband’s superannuation
$ 61,245.42
Wife’s superannuation
$ 9,040.00
TOTAL
$294,069.29
LIABILITIES
Mortgage to the Commonwealth Bank in respect of the husband’s half share in 24 E Street, S P
$120,628.63
Debt to the husband’s parents in respect of the Toyota Camry motor vehicle
$ 10,000.00
Debt to AGC re purchase of bed
$ 400.00
Debt to pest controllers re sale of 6 M Street, W
$ 1,000.00
TOTAL
$132,028.63
Accordingly, in a nominal sense, a sum of $162,040.66 is available to be divided between the parties. However, of this sum, approximately $70,000.00 or approximately 42% of the asset pool is represented by assets that are not immediately realisable in the form of the parties’ future entitlement to superannuation. Pursuant to section 90NC of the Family Law Act, the parties’ superannuation is to be treated as property and is an eligible superannuation interest that the provisions of Part VIII B of the Act enable to be split between the parties. Although it is not entirely clear from the evidence, I imagine that both parties’ superannuation is preserved until they reach the applicable preservation age and satisfy the conditions of release (usually permanent retirement from the work force). The current value of the husband’s superannuation in particular is at a gross value and does not take into account taxation. Taxes are payable when a superannuation benefit becomes available. At this time, it is not possible to quantify the amount of tax that will be levied. Accordingly, at the present time, the cash sum that is represented by the superannuation is not available to be distributed directly to the parties. It remains contingent upon their retirement from the work force, which at this stage is not likely to be until they each obtain the age of 55 years.
However, it is the wife’s position that she should only receive $10,000.00 by way of a superannuation split from the husband’s superannuation entitlement. She has been advised by the trustee of the husband’s superannuation fund that this is the maximum amount, which she may apply to withdraw from the fund on the grounds of hardship, any additional sums having to be held until retirement. It is her position that her current situation is one which requires payment to her of an immediate sum of cash. It is the husband’s position that he does not have the means to raise such a large sum of money, without a significant degree of difficulty. He has no wish to sell his interest in the E Street property and doubts that a purchaser could be found for his half share alone. The precise attitude of Mr K Senior to the sale of the entire property is not known to me. Accordingly, the difficulty that this case presents therefore is readily apparent. Both parties wish to receive a significant proportion of the cash assets available to tide them through this period of financial austerity. In addition, it is the husband’s position that it is only fair that the wife should take a significant proportion of the assets in the form of a superannuation split.
Assessment of contributions – section 79(4)(a) to (c)
I now turn to the second of the steps in the exercise under section 79, namely an assessment of the parties’ contributions within the context of section 79(4)(a) to (c). These provisions are as follows:
Section 79(4) In considering what order (if any) should be made under this section in proceedings with respect to any property of the parties to a marriage or either of them, the court shall take into account –
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them;
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them;
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of home maker or parent.
In May of 2002, I came to the conclusion that the contributions of the parties’ to the acquisition of their then assets were essentially equal. However, at that time, the asset pool was a comparatively modest $29,383.87. It is now more than five times that sum and twenty months has elapsed since that original assessment. The parties have now been separated for almost as long as they were married. These circumstances clearly call for a reappraisal of the contributions of the parties to the current asset pool.
In these circumstances, the husband interest in the E Street property constitutes something of a conundrum. It is the major asset available for distribution between the parties. I accept the husband’s evidence that he bought his interest, for market value, in 1996, for the sum of $135,800.00. Accordingly, in about eight years its value has increased by approximately 50 percent. In that regard, it can be certainly regarded as a prudent investment. In a direct sense the wife has had little to do with the property since its acquisition. She did not approve of its purchase in the first place. She concedes that she was not involved with any work in respect of the property or in regards to its management. The E Street property has been very much the husband’s project from its inception, inspired by both sentiment and financial opportunism on his part. There is also no doubt that the husband has expended a great deal of time and effort in respect of the property itself, in management, renovations and maintenance. He has also reduced the mortgage by at least $8,000.00 since the parties separated.
During the parties’ marriage, they pooled their income and it was applied to joint family purposes. In the past, these purposes also included the fixed mortgage of $320.00 per calender month on the E Street property. However, a significant proportion of this was offset by the rent received from the property and the substantial reduction in the husband’s taxable income, because of the losses related to the rental of the property itself. This reduction in the husband’s taxable income was a benefit that flowed back to the family as a whole. In many ways, in my view, the E Street property was a discreet investment personal to the husband. There is no doubt that this has been the case since separation. Accordingly, I have reached the view that, to a significant degree, the substantial increase in the parties’ worth in the form of the E Street property, is attributable to the efforts of the husband alone. He saw the opportunity the property presented and pursued it. He has in effect worked two jobs, both during the marriage and afterwards - albeit two jobs perfectly tailored to fit with one another.
The other major source of wealth available for distribution between the parties is the husband’s superannuation. Again, at least half of this has been acquired during the time after the parties separated and, in a direct sense, the wife has made no contributions towards it. The husband’s salary has increased since the parties separated and as a result, his accumulation of superannuation has been greater. I accept that comparing the May 2002 estimation of the husband’s superannuation with the valuation prepared in October 2003, maybe a case of comparing apples and oranges. However, I think that I can safely conclude that since the hearing of May 2002, the husband has acquired a substantial amount of his present entitlement to superannuation. This is a significant matter.
In May of 2002, I found that the wife was responsible for the majority of the household duties including cooking, cleaning, washing and ironing during the marriage. I also found that the husband was significantly involved in caring for F and P during the marriage, particularly when he was on his rostered days off. This was particularly important given that the wife was in the paid work force at the time. There can be no doubt that since the parties separated, the vast majority of the responsibility for caring for F and P has fallen on the wife’s shoulders. This is also a very significant matter. During this period, the husband has paid regular amounts of child support to the wife pursuant to a child support assessment. As I have already indicated, I have not been provided with a copy of any assessments in this regard and do not know what allowance, if any, has been made in respect of the significant reduction in the husband’s taxable income due to the losses he has incurred from the E Street property. I must also bear in mind that the payment of child support itself can not been seen as compensation for the wife’s “loss of career opportunity, lack of employment mobility and the restriction upon an independent lifestyle which the obligation to care for children usually entails…”.[15]
[15] See Clauson & Clauson (1995) FLC 92-595 at page 81,911
It is the wife’s position that her efforts in respect of caring for the children alone, when compared with the increase in the parties’ wealth in the period between separation and now, which is almost exclusively due to the efforts of the husband alone, essentially cancel one another out and, at the end of the day, the Court will be compelled to come to the conclusion that the parties’ contributions to the acquisition and accumulation of the wealth currently available for distribution between them, must still be regarded as being essentially equal. It being the case that the husband has retained all the benefits of the rental income from the E Street property and all of the tax benefits. I do not agree.
The parties’ contributions made by them since separation, which must be assessed according to the provisions of section 79 (4) (a) – (c) have, by reason of circumstances, been necessarily made entirely independently of one another. The parties have essentially led separate lives since about the end of 1999. I must also bear in mind that the principle delay in the proceedings being finalised, is that the wife sought to adjourn them pursuant to section 79(5) of the Act, a course strongly opposed by the husband. In these unusual circumstances, the Court is called upon to weigh the disparate contributions of the parties to reach a conclusion that is just and equitable. I must also bear in mind that the parties’ marriage was a comparatively short one. In my view, the particular contributions of the husband to the present asset pool, in the form of his interest in the E Street property and the increase in the value of his superannuation since separation, are so disproportionate to the other contributions, as to merit special weight. These various matters lead me to the conclusion that the assessment of the contributions of the parties, pursuant to section 79(4) (a) – (c), should be assessed as being 70/30 percent in favour of the husband.
Section 75(2) factors – the prospective needs of the parties
I am now required to consider the various matters set out in section 75(2) and in particular to consider whether any further adjustment should be made in favour of either party. The section 75(2) factors are as follows:
a)the age and state of health of each of the parties;
b)the income, property and financial resources of each of the parties;
c)the physical and mental capacity of each of them to obtain meaningful and gainful employment;
d)whether either party has the care or control of a child of the marriage who is not attained the age of 18 years;
e)commitments of each of the parties that are necessary to enable the party to support;
i) himself or herself;
ii) and a child or another person that the party has a duty to maintain;
f)the responsibilities of either party to support any other person;
g)the eligibility of either party for a pension, allowance or benefit;
h)where the parties have separated or the marriage has been dissolved, a standard of living in all the circumstances is reasonable;
i)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of eduction or training;
j)the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
l)the need to protect a party who wishes to continue that party’s role as a parent;
m)if either party is cohabiting with another person – the financial circumstances relating to the cohabitation;
n)the terms of any order made or proposed to be made under section 79 in relation to the property of the parties;
na) any child support under the Child Support (Assessment) Act that a party to the marriage has provide, is to provide, or might be liable to provide in the future, for a child of the marriage;
o)any other fact or circumstance;
p)the terms of any financial agreement that is binding on the parties.
The husband is a aged 31. The wife is aged 29. Both parties are in good health. The husband is a Senior Fire Fighter, who is currently earning an annual salary of approximately $55,000.00. Given his age and current state of health, I anticipate that he will be able to remain in this occupation for some years to come. Certainly, it seems to be an occupation, which he enjoys and which gives him opportunities to pursue other financial interests. In the future, he wishes to undertake tertiary study, which will enable him to move to a senior administrative position. I have little doubt that he has the necessary attributes to complete such a course of study successfully. In addition, in the form of the E Street property, the husband has a significant asset, which provides him with a significant stream of income and substantial taxation benefits. Recently, he has been able to borrow a significant amount of money to purchase another investment property with a work colleague. This purchase indicates that a lending institution shares my confidence in the husband's financial security in the medium to long term. The husband left the marriage with his ability to earn a substantial and reliable income in tact. This has been described as the most useful “asset” a party can take from a marriage.[16]
[16] See Clauson & Clauson (Supra) at page 81,911
The wife is not currently so well placed. Her major source of income is social security payments. She has no plans to return to the paid work force in the foreseeable future, her intention being to complete a Bachelor of Education degree, which will enable her to become a primary school teacher. The husband is suspicious about the wife’s true motivation for stopping work and believes that she has the capacity to earn a reasonable income for herself. The wife is a qualified hairdresser. For a number of years she was a f a earning an income of about $30,000.00 per annum. She left this employment purportedly because of difficulties she experienced in obtaining care for F and P. In essence, it is her position that she was compelled to leave the work force because of the needs of the parties’ children and their incompatibility with the requirements of her employment.
In my view, the evidence indicates that the wife has a significant ability to earn income. During the parties’ marriage, they both elected to work in order to maximise their financial opportunities. In large part, they were able to do this because of the husband’s flexible work schedule and the availability of other family members to care for F and P from time to time. After the parties separated, the wife was briefly involved in a relationship and her then partner also assisted with childcare. I accept that the wife’s previous occupation as a f a involved irregular hours and the necessity to travel overseas. This must have been a particularly difficult occupation for her to follow as the parent with the responsibility to care for two children of the ages of P and F. Accordingly, I do not believe that the wife can be criticised for leaving the employment of A N. However, I also consider that the wife has other employment opportunities, which she could pursue in D, if she wished. In the short to medium term, she has chosen to embark on a course of tertiary study, which in the long term will provide her with secure and better paid employment, tailored to fit in with the needs of P and F. To this extent, the wife has voluntarily chosen to leave the work force and so allow her capacity to obtain employment to lie fallow for the next four years.
The assessment of a person’s capacity to obtain gainful employment, within the meaning of section 75 (2) (c) is often a difficult one. In DJM v JLM[17] the Full Court said as follows:
“In property proceedings, the Act empowers the court to make “such order as it considers appropriate”. A party’s capacity to earn income is clearly relevant to that question. It is open to a court to give weight to the ability of a party to earn income especially where the opportunity clearly exists to utilise that ability. Whether it is or is not appropriate to require a party to work particular hours or work in a particular occupation is a question peculiarly within the province of a trial judge and needs to be measured on a case by case basis.”
In this case, the wife has the care of the parties’ two children aged and eight and seven. They are both attending primary school. The wife’s responsibilities to the two children significantly curtail her employment opportunities. If she returns to work, she must obtain some form of childcare for them. Apart from her skills as a hairdresser, she has no special skills to speak of. In these circumstances, it does not appear unreasonable that the wife is no longer seeking either part time or full time work. Her decision to obtain tertiary qualifications for herself, although necessarily involving a high degree of sacrifice on her part, seems to be a prudent one in terms of her long term financial security. These are relevant considerations pursuant to section 75(2) (i) of the Act. At this juncture, the wife has need of funds, which will enable her to undertake successfully this course of study, which will almost certainly increase her earning capacity in the long term.
[17] DJM v JLM (1998) FLC 92-816 at page 85,272-3
In the present case, there is a large disparity in the income and financial resources of the parties. Although the marriage between the parties was a short one, I am still required to consider what is an appropriate standard of living for both parties, now the marriage between them is over. In my view, it would not be appropriate for the husband to be able to live in comparative comfort and for the wife and the children of the marriage to live penury.
All these factors call for there to be a further adjustment to be made in the favour of the wife. Most significantly, the wife will continue to have responsibility for providing the vast majority of the day to day care for F and P. Given their ages, this is a responsibility that will reside with her for many years to come. This will mean that she will have to carefully budget her financial resources for the next few years, particularly as she undertakes tertiary study. The wife, of course, will not bear the financial responsibility for maintaining the children alone. She will be entitled to claim child support from the husband, as indeed she has done. There is nothing in the evidence currently before me to indicate that the husband has a poor track so far as the payment of child support is concerned. It is likely that he will continue as a PAYG tax payer for the foreseeable future and as a result, his level of income will be readily ascertainable. So too should be the rate of his rental property loss for the purposes of section 38A of the Child Support (Assessment) Act. Accordingly, it is likely that the husband will continue to pay child support as assessed in future. However, as I have already indicated, the payment of child support in no way compensates the residence providing parent for the loss of career opportunity and the inevitable restrictions upon working hours and choice of work, which the obligation to care for children invariably entails. In this case, the wife will be responsible for most of the necessary arrangements entailed in caring for the children before and after school. These are most significant matters.
Having regard to all these factors and the size of the pool of property now available to be distributed between the parties, I have reached the view that it is appropriate to allow a further distribution of assets of twenty five percent in favour of the wife. In reaching this conclusion,
I bear in mind what was said by the Full Court in Clauson:[18]
“a tendency to assess section 75(2) factors in percentage terms without considering its real impact, and we think there is legitimacy in the views expressed in more recent times that the Court has tended to operate in this area within artificially delineated boundaries. That is, it appears almost to be inevitable that the section 75(2) factors will be assessed in a range between 10% and 20%. A number of cases will justify an assessment outside those parameters and in any event it is the real impact in money terms which is ultimately the critical issue.”
In this particular case the immediate needs of the wife are great. She is in receipt of social security and has the care of two young children. Whereas the husband is in secure employment receiving a comparatively comfortable wage.
[18] See Clauson (supra) at page 81,911
Conclusions – section 79 (2) – is this a just and equitable outcome?
In order to ensure that there is a just and equitable outcome in this case, it is not open to the court to consider what the outcome should be merely in percentage terms. It is necessary for the court to consider the actual effect of the orders that will be made. This is of particular significance in a case such as this one, where a significant amount of the property available to be distributed between the parties is in the form of superannuation. It is the wife’s position that she is in need of immediate funds to provide an adequate standard of living for herself and the children, particularly whilst she undertakes her course of tertiary study. It is the husband’s position that justice dictates that the parties should have a mix of liquid and non-liquid assets.
The intent of Part VIII B of the Family Law Act, which deals with superannuation splitting, was to ensure an equitable division of matrimonial property and avoid the artificial situation that prevailed in the past, whereby one party, commonly the husband had the sole benefit of superannuation and the other party, commonly the wife, was compensated with other assets, which may or may not have had an equal value but who was thus denied the benefit of retirement planning through access to superannuation. Because of the recent superannuation splitting legislation, the non-member party to a superannuation fund, can potentially share the benefits of retirement planning through division of the other spouse’s superannuation. Thus the spectre that in retirement, the non-member spouse is more likely to live in relative poverty can be addressed.
This raises the question as to how the Court is to consider the distribution of assets. In essence, should the findings made pursuant to section 79(4) and section 75(2) be applied in the same way to superannuation and also the available assets of the parties. In my view, the provisions of the Family Law Act enjoin the Court to consider the particular circumstances of each case and deliver individual justice, depending on the circumstances of the particular parties in the case. Thus, it is appropriate for the Court to consider the needs of the parties at the time of orders and, in particular, to consider the relative pressures on the parties concerning retirement planning and the need for superannuation.
These were issues that were considered by Her Honour Justice Moore in Levick and Levick[19]. In that case, Her Honour considered that the relevant factors that should apply to a determination as to what percentage of the actual assets and what percentage of the superannuation were as follows:
·the purchase price of appropriate accommodation and re-housing costs for both parties;
·the need for a financial buffer for ordinary exigencies of independent living;
·the current level of the parties’ superannuation;
·the probability that the wife would be able to acquire appropriate superannuation benefits from her own future income;
·the husband’s substantial earning capacity and ability to borrow significant sums at favourable rates (from his employer).
[19] Levick and Levick unreported decision of Moore J delivered 31 January 2003
Not all these factors apply in this case. Neither party, at this stage, has a pressing need to consider retirement planning. Both parties are likely to have time and ample opportunities to acquire appropriate superannuation benefits from their future employment. If the wife does become a primary school teacher, she is likely to have many years of employment before her. The husband is likely to make a successful transition to a bureaucratic position either with the Northern Territory Public Service or elsewhere in industry or commerce.
In my view, the evidence in this case, indicates that the husband has a significant equity in the E Street property. He also has secure employment on a reasonable salary. Accordingly, he is well placed to borrow funds in future. In contrast, the wife is likely to have significant difficulties in borrowing funds. She has provided no evidence as to whether or not she would be able to service a modest mortgage on her current income, which is provided by social security. Common sense would indicate that she is likely to have difficulty servicing even the most modest of mortgages. Accordingly she may not be able to provide secure accommodation for herself and the children for some years to come. The pressing need of the wife at this stage is for sufficient funds so that she “can provide a better standard of living for myself and the girls”. [20] Whether this includes the purchase of a suitable property for herself and the children to live in is unclear to me.
[20] See paragraph 18 of the wife’s affidavit filed 19th of November, 2003.
The husband is currently living in rented accommodation with Ms Glagakos. This is a situation of his own choosing. It would be open to him to live in the elevated house at E Street, if he wished to and still have the benefit of renting out the six other units. The fact that the husband was able to borrow money to purchase another investment unit indicates that his circumstances are such he has a sufficient financial buffer to protect him from unforeseen financial mishaps. The wife is not in such a happy position.
I accept that, if at all possible, the husband wishes to retain his half interest in the E Street property. This will mean that he will have to borrow sufficient funds in order to pay the wife her entitlement pursuant to these proceedings, using the E Street property as security. If he is unable to raise a sufficient sum in this way, it will be necessary for the property to be sold. Given that his interest in the property is held as a tenancy in common with his father, this may pose unforseen difficulties. In the event that Mr K Senior does not wish to sell, the only potential purchaser of the husband’s interest is likely to be either Mr K Senior himself or another member of the husband’s immediate family.
It is the husband’s evidence that he is likely to find it difficult to borrow a substantial sum against his interest in the E Street property. His evidence was that in May of 2002, his bank was unwilling to lend him $320,000.00, in order to re-finance his existing mortgage with the Commonwealth Bank and to purchase his father’s share of the property. Given Mr Semmets’ view as to the current value of the property, based on its income earning potential, and the extent of the husband’s equity in the property, when coupled with his current level of salary, I have some scepticism about the husband’s trepidation at making an application for a loan. However, I do not believe that it is reasonable for me to fix the amount of money required to be paid immediately to the wife at such a level that it will require the immediate sale of the E Street property. This is so because of the unusual circumstances surrounding the property and the manner in which the husband’s interest is held with his father.
This leads me to the view that it is just and equitable for the wife to receive a significant proportion of the assets due to her by way of these proceedings, in the form of a split of the husband’s superannuation. In my view, given that the parties are a similar period of time away from retirement, it is only just and equitable that there should be a significant split of superannuation to the wife. Although the husband is markedly better off financially than the wife, he still has need for some capital at this stage. Given the time and effort he has expended into the E Street property; his sentimental attachment to it; and the fact that his interest in it is held in a tenancy in common with his father; I can readily understand why he would wish to retain the property, if at all possible.
Fifty five percent of $162,040.00 of the net assets of the parties’ is represented by the sum of $89,122.33. The wife has in her possession, in the form of her superannuation, the proceeds of the sale of the former matrimonial home ($11,955.48) and the proceeds of the sale of the furniture, assets to the value of $23,495.48. This means that the wife will require the assignment to her of property to a value of $65,626.85.
I have formed the view that it appropriate that she receives $20,000.00 of this sum by way of a split from the husband’s superannuation. The remaining sum of $45,626.85 will be paid by the husband in cash. Given the extent of his equity in the E Street property and his current level of remuneration, I do not anticipate that the husband will have any great difficulties in borrowing such a sum of money. However, if he is unable to realise this sum the husband will be compelled to sell his interest in the E Street property. Although, the precise attitude of Mr K Senior to the sale of the property is unknown, given the husband’s evidence that his father is no longer so suited by receiving regular income from the property now that he is contemplating retirement, such a sale should not greatly incommode him.
These orders will provide the wife with a modest amount of superannuation and will give her a significant amount of cash for her immediate needs. The husband too, will still have the basis on which to plan for his retirement.
The evidence indicates that the trustees of the husband’s two superannuation funds have been given the necessary notice in accordance with section 90 MZD of the Family Law Act and been accorded the necessary procedural fairness. There is nothing to indicate that they object to such a splitting order.
For all these reasons, the orders of the Court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and twenty-six (126) paragraphs are a true copy of the reasons for judgment of Brown FM
Associate: L. Chin
Date: 6 February 2004
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