Larkins and Beckman
[2009] FMCAfam 642
•2 July 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LARKINS & BECKMAN | [2009] FMCAfam 642 |
| FAMILY LAW – Property – valuation dispute – indexed pension – inheritance – depression and alcohol problems – superannuation in payment phase and in growth phase – orders sought contrary to public policy – adjustment to be made from non-superannuation assets. |
| Family Law Act 1975 (Cth) ss.75, 79 State Superannuation Act 1988 (Vic) s.59AC |
| Lee Steere and Lee Steere (1985) FLC 91-626 Ferraro and Ferraro (1993) FLC 92-335 Clauson and Clauson (1995) FLC 92-595 Hickey and Hickey (2003) FLC 93-143 C v C (2005) FLC 93-220 Russell v Russell (1999) FLC 92-877 JEL and DDF (2001) FLC 93-075 Phillips and Phillips (2002) FLC 93-104 Milankov and Milankov (2002) FLC 93-095 Hayne and Hayne (1977) FLC 90-265 Garrett and Garrett (1984) FLC 91-539 Poulos and Poulos (1984) FLC 91-515 Bremner and Bremner (1995) FLC 92-560 Clives and Clives (2008) FLC 93-385 |
| Applicant: | MR LARKINS |
| Respondent: | MS BECKMAN |
| File Number: | DGC 3682 of 2008 |
| Judgment of: | Roberts FM |
| Hearing dates: | 25, 26 & 27 March 2009 |
| Date of Last Submission: | 27 March 2009 |
| Delivered at: | Dandenong |
| Delivered on: | 2 July 2009 |
REPRESENTATION
| Counsel for the Applicant: | Ms H Gordon |
| Solicitors for the Applicant: | Meier Denison Guymer Pty Ltd |
| Counsel for the Respondent: | Ms R Wheeler |
| Solicitors for the Respondent: | Hayes & Associates |
ORDERS
That within sixty (60) days of the date of this MR LARKINS (“the husband”) must pay to MS BECKMAN (“the wife”) the sum of sixty thousand dollars ($60,000.00) (“the payment”).
That contemporaneously with the payment:
(a)the wife must transfer to the husband, at the expense of the husband, all her right title and interest in the property situate and known as Property M, in Victoria being the land more particularly described in Certificate of Title Volume [1] Folio [4] (“the home”);
(b)the husband must transfer to the wife, at the expense of the wife, all his right title and interest (if any) in Boatshed [9], Property R, M in Victoria; and
(c)the husband must transfer to the wife all his right title and interest in the entirety of the funds invested with RetireInvest.
That unless specified in these Orders:
(a)each party is solely entitled to the exclusion of the other to all other property in possession of that party as at the date of these Orders;
(b)any claim that either party may have to any superannuation benefit belonging to or earned by the other is extinguished;
(c)all insurance policies become the sole property of the person in whose name the policy stands as owner;
(d)each party will be solely liable for and must indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders; and
(e)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
That all extant applications are otherwise dismissed, save as to costs.
IT IS NOTED that publication of this judgment under the pseudonym Larkins & Beckman is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT DANDENONG |
DGC 3682 of 2008
| MR LARKINS |
Applicant
And
| MS BECKMAN |
Respondent
REASONS FOR JUDGMENT
The Applications
The Applicant, MR LARKINS (“the husband”) filed an application in the Dandenong Registry on 23 October 2008. At that time he simply sought “such property settlement order as this honourable court deems just and equitable.” He also sought to be relieved from particularising his claim until after all assets, liabilities and resources had been ascertained and valued.
In that application, the husband also sought orders for spousal maintenance but when the matter came to hearing he was no longer seeking any spousal maintenance.
At the start of the hearing, I commented that I was not really aware of what the husband was seeking because a Case Outline had not been filed on his behalf. I was then provided with handwritten notes prepared by both his counsel and his solicitor. Although those notes were somewhat confusing, it became clearer during the hearing that the husband is seeking a division of all assets (including superannuation) on the basis of 55% to him and 45% to the wife. If I accept the arguments put forward on his behalf, he will retain the former matrimonial home subject to a cash adjustment to the wife in relation to the non-superannuation assets to provide for a 55/45 division and there would also be splitting orders in relation to both parties’ superannuation on a 55/45 basis.[1]
[1] An incomplete Case Outline was provided by the husband’s counsel at the time of making her closing submissions. That document does not set out or particularise the orders sough by him.
The Respondent is MS BECKMAN (“the wife”). She filed her Response on 5 December 2008, in which she also sought rather vague orders. However, by the time this matter came on for hearing, an amended Case Outline was provided on her behalf. That document shows that she is content for the former matrimonial home to be transferred to the husband if she retains a boat shed and some invested funds, and the husband pays her an additional $192,416. However, if that sum is not paid, she wants the former matrimonial home to be sold and that sum paid to her from the proceeds.
Background
As the wife was hardly cross examined at all, it seems to me that her affidavit evidence is unchallenged. Consequently, I have relied primarily upon her affidavit in order to set out the background to this matter.
The wife is aged 58 years and the husband is aged 55 years.
The parties started living together in 1979, at which time the husband was working [in the Education Industry] and the wife was [employed in the Health Industry].
In 1982 the husband was employed by the [omitted].
The parties married in 1983. There are no children of the marriage.
In or about 1987 the parties purchased a property at Property F for $78,000. They provided the deposit of $10,000 and paid the stamp duty and legal fees from their joint savings. The balance of $68,000 was provided by way of a mortgage loan.
In 1993 the parties purchased the property that was their home in M at the time of their separation. The husband continues to live there. I shall refer to it simply as “the former matrimonial home”.
The parties funded the purchase of the former matrimonial home with a loan secured by mortgages over their Property F property and the former matrimonial home. The Property F property was retained initially as an investment property. The parties then owed approximately $136,000. They both applied their incomes to the reduction of the mortgage loan as quickly as they could.
In 1992 the husband received an inheritance from an aunt, which consisted of a half share in 190 acres of land, and the other half share was inherited by his brother. He and his brother received income from that property from agistment until it was sold in 2001. The husband received $88,000 from that sale. He used $57,000 to reduce the parties’ mortgage liability and the balance was used to pay various other expenses.
In 2002 they sold the investment property at Property F and after the mortgage and a capital gains tax liability had been paid, the net amount available to them was approximately $119,000. They agreed that $70,000 should be invested with RetireInvest in Property F in the husband’s sole name.
The husband suffered from depression, which was triggered or exacerbated by the fact that, when his job at [omitted] ceased to be available, he was required to return to [the Education Industry]. His depression led to drinking and it was clear that he suffered from serious alcohol problems at times. However, to his credit, he abstained from alcohol consumption between 1995 and 2002.
The parties separated in 2004, initially under one roof. Subsequently, the wife moved to Queensland and she has purchased a house there, subject to a substantial mortgage debt.
Relevant law
Section 79 of the Family Law Act 1975 (“the Act”) sets out the matters that the court must take into account when considering what orders should be made for the alteration of the property interests of parties. They include:
a)the financial and non-financial contributions made directly or indirectly by or on behalf of each party or by a child to the acquisition, conservation or improvement of any property of the parties;
b)the contribution made by a party to the welfare of the family including any contribution made in the capacity of homemaker or parent;
c)the effect of any proposed order upon the earning capacity of either party; and
d)the matters referred to in sub-section 75(2) as far as they are relevant.
The general approach to the determination of a property settlement application has been well established by authority[2]. It is essentially a multi-step process. The first step is to identify the property, liabilities and financial resources of the parties (generally at the time of the hearing). The second step is to evaluate the contributions made by the parties as defined in section 79(4) of the Act and the third step is to consider those matters contained in section 75(2) that are relevant.
[2] See Lee Steere and Lee Steere (1985) FLC 91-626; Ferraro and Ferraro (1993) FLC 92-335; Clauson and Clauson (1995) FLC 92-595, Hickey (2003) FLC 93-143 and C v C (2005) FLC 93-220
In determining what order the court should make under section 79, the court must be satisfied in all the circumstances that it is just and equitable to do so[3]. It is the justice and equity of the actual orders that the court must consider and this has been referred to as “the fourth step”.[4] In Russell v Russell, the Full court said:
Furthermore, it must be remembered in this regard that under s79(2) of the Act, the Court is required to be satisfied that it is the order to be made which is just and equitable, not just the underlying percentage division of the net value of the parties' assets. Indeed we take the opportunity to emphasise that in what his Honour has termed ''the fourth stage'', that is, the consideration of whether the result is just and equitable, it is the justice and equity of the actual orders not of the percentage distribution which must be considered.[5]
[3] See Sub-section 79(2)
[4] Russell v Russell (1999) FLC 92-877, JEL and DDF (2001) FLC 93-075, Phillips and Phillips (2002) FLC 93-104 and Hickey and Hickey (2003) FLC 93-143
[5] See (1999) FLC 92-877 at page 86,439
Since the end of 2002 courts have been required to treat superannuation interests as “property” for the purposes of property settlements between parties to a marriage and in appropriate cases courts may “split” superannuation interests. [6]
[6] See sections 90MC and 90MT of the Act
Valuation issues
Upon reading the papers in this matter, it became quickly apparent that the parties were unable to agree upon the value of the former matrimonial home.
Initially, the parties had jointly instructed a valuer (Mr M) to value the former matrimonial home and a boat shed at M. He provided his valuation report on 23 January 2009, which valued the former matrimonial home at $410,000 and the boat shed at $50,000.
The husband accepts that the boat shed is valued at $50,000 but he is clearly unhappy with Mr M’s valuation of the former matrimonial home. On 24 February 2009 his solicitor wrote to ValueIt Pty Ltd to obtain a further valuation. The letter of instruction shows that his solicitor had already made contact with that company because a quotation for the cost of the valuation had been obtained. On 12 March 2009 a valuer from ValueIt Pty Ltd (Mr P) provided a valuation report. He valued the former matrimonial home at $295,000.
That valuation by Mr P is approximately 30% less than the valuation by Mr M. As I commented during the hearing, that is the largest percentage difference in relation to competing valuations of a single property that I can recall in 28 years of experience in family law matters.
The two valuers held a telephone conference shortly prior to the hearing, but they were not able to reach agreement. Neither valuer was prepared to alter his opinion.
Both valuers gave oral evidence and, after considering their reports and their oral evidence, I find that the evidence and opinion of Mr M is much more persuasive than that of Mr P. I say that for the reasons set out below.
In his oral evidence Mr P indicated that he had used the “4, 3, 2, 1 Rule” to assist him in arriving at his opinion and his notes, that are Exhibit “H3”, show that he appears to have applied that “4, 3, 2, 1 Rule”.
I consider that the “4, 3, 2, 1 Rule” adopted by Mr P was not an appropriate valuation method to apply to a large residential block. I accept Mr M’s evidence that it was a valuation method adopted 30 or more years ago by local councils for rating purposes in relation to small parcels of land or easements.
I also accept Mr M’s evidence that Mr P wrongly applied the “4, 3, 2, 1 Rule”, in any event. He said that, if it had been applied properly, it would have produced a value of more than $600,000. Mr M clearly thought that was a “ridiculous value” for the property.
However, because I find that the “4, 3, 2, 1 Rule” was not an appropriate valuation method to apply, it is somewhat irrelevant whether Mr P applied it correctly or not.
Further, I find that Mr M gave consideration to comparable sales that were more properly “comparable” than the comparable sales considered by Mr P. In this regard, two of the sales referred to by Mr P were in a different part of M and were difference types of property. On the other hand, the sales considered by Mr M were sales of similar properties in the same area.
I also accept Mr M is correct in his view that the property should be valued for its land content only.
Somewhat surprisingly, Mr P reported that:
On the day of inspection, the property was in a severely deteriorating condition due to age, weathering and lack of repair although it has had some restumping. It was noted that the building could be beyond any economical repair or restoration. Consideration could be given to its demolition and construction of a new building.
Notwithstanding this, Mr P adopted a value for the building that was quite obviously unrealistic. In this regard, I accept Mr M’s view that the value per square applied by Mr P was a value more properly applicable to new buildings rather than to buildings that “could be beyond any economical repair or restoration”.
I also note that Mr M has lived in the M area for many years and is very familiar with the area. Further, his reference to REIV sale trends related to sales in M, whereas Mr P inappropriately referred to REIV sale trends for the whole of the Melbourne metropolitan area.
In view of all these factors, I find that Mr M’s evidence was much more persuasive than that of Mr P and I conclude that $410,000 is the correct value to adopt for the former matrimonia home.
The Asset Pool
It appeared to me that both parties accepted that their assets (and attendant liabilities) acquired after separation should not be brought into account. In my view, that is a sensible approach for me to adopt, particularly because the husband has played no part in the wife’s purchase of a home in Queensland subject to a substantial mortgage liability. Consequently, the non-superannuation assets are as follows:
Former Matrimonial Home (Joint) $410,000 Boatshed in wife’s name $ 50,000 RetireInvest Investment in husband’s name $ 79,000 Total $539,000
I have also not included the husband’s motor vehicle in the list above. Its value is negligible in comparison with the total value of the other assets, so I intend to apply the principle of de minimis non curat lex in relation to that vehicle.[7]
[7] For a discussion of the application of the de minimis principle see Milankov and Milankov (2002) FLC 93-095
I calculate that if the husband was to retain the former matrimonial home, and the wife was to retain the boatshed and the RetireInvest investment, that would be a division of the non-superannuation asset on the basis of 76% to the husband and 24% to the wife.
The wife provided an unchallenged affidavit from a financial planner in relation to the value of the parties’ superannuation. The parties accept her expertise in valuing their superannuation, and so do I.
The husband’s superannuation has vested and is in the payment phase as a pension. The accepted valuation is $549,111. The wife’s superannuation has not vested and is still in the growth phase. It has an accepted value of $585,861.
By my calculation, the husband currently retains 48% of the value of the superannuation assets and the wife retains 52%.
Contributions
Neither party had any assets of significance when they started living together in 1979 in rented premises. As already mentioned, the husband was [employed in the Education Industry] and the wife was [employed in the Health Industry].
In 1982 the husband commenced employment at [workplace omitted].
They subsequently purchased a property at Property F in about 1987 for approximately $78,000 by providing a deposit of $10,000 from their joint savings. They also paid the stamp duty and legal fees from those savings and the balance, of approximately $68,000 was borrowed.
In 1990 the husband’s employment at [omitted] ceased and he returned to [the Education Industry]. Unfortunately, he became increasingly depressed with that change in his employment and he commenced some sick leave.
In 1991 he returned to [the Education Industry] and he remained employed [in that field] until 2000. However, his ill health continued and he concedes that he was drinking excessively. On one occasion, the wife returned home to find him difficult to rouse because he had consumed medication and alcohol. It was that incident that caused him to take sick leave again, which eventually culminated in him being granted permanent disability status in November 2002. After the husband ceased his employment, he elected to receive his superannuation as an indexed pension.
It is clear from the evidence that the husband’s difficulties with depression and alcohol continued, and although he abstained for a period of approximately 7 years, he resumed his drinking in 2002 at a time when the wife was away on holiday. Although one of his affidavits appears to contribute some blame to the wife for leaving half a bottle of champagne in the refrigerator, in his oral evidence he denied that he was attributing any blame to her. If anything, I gain the impression that the presence of the wife was of assistance to the husband in maintaining his abstention from consuming alcohol and, unfortunately, when she went away, that support was not available to him.
In 1992 the husband inherited a half share in farming land from his aunt. That property generated an income of approximately $5,000 per annum for him until it was sold.
In 1993 the parties purchased the former matrimonial home for $86,000, which was funded by loans secured by mortgages over the former matrimonial home and the Property F property. The parties then lived in the former matrimonial home and let the Property F property to tenants.
The husband and his brother sold their inherited property in 2001. The husband received approximately $88,000, of which he used $57,000 to reduce the parties’ mortgage debt. The balance was used to pay off the wife’s credit card, repay a loan to her mother, pay Capital Gains Tax and otherwise meet general expenses.
The parties sold the Property F property in 2002, and, after discharging a mortgage and paying Capital Gains Tax, the net amount received was approximately $119,000. The parties used some of that to create the RetireInvest investment in the husband’s name and spent the balance on renovations to the former matrimonial home, general living expenses and other agreed expenses. Those agreed expenses included some expenses for the wife’s mother, however, I accept the wife’s evidence that the husband had a very good relationship with her mother and that in the early years of their marriage her mother had helped them when they struggled financially. The husband says that the financial assistance given by her mother was “willingly given, and gratefully received.”
In view of the above, I conclude the following:
a)The parties’ contributions were equal at the start of cohabitation.
b)From that time in 1979 until the husband returned to the school system in 1990, their direct financial contributions from income should be treated as being equal.
c)The husband’s inheritance was a significant direct financial contribution made by him.
d)During the time that the husband was drinking to excess between 1990 and 1995 and between 2002 and the parties’ separation in 2004, the wife was making greater non-financial contributions.
e)After the husband ceased employment, the wife’s direct financial contributions from her employment were greater than those of the husband from his indexed pension.
It is clear that the assessment of contributions is not an exercise of mathematical precision. In Hayne and Hayne[8], Pawley J said:
In matters such as this one cannot approach the problem with an eye for meticulous detail. It should rather be dealt with broadly so that the end result can be said to be just and equitable.
[8] (1977) FLC 90-265 at p. 76,415
In Garrett and Garrett,[9] the Full Court of the Family Court of Australia held that in long marriages, where the parties have devoted their resources and incomes for the benefit of the family, it is not possible to have a precise accounting of their contributions.[10]
[9] (1984) FLC 91-539
[10] See also Poulos and Poulos (1984) FLC 91-515 at p. 79,184.
In Bremner and Bremner, [11] Nicholson CJ said:
I would also add that when one considers cases of this sort, it should be remembered that they are not decided upon a pure mathematical basis…….
[11] Bremner and Bremner (1995) FLC 92-560
In Clives and Clives, [12] the Full Court said:
We accept that the task to be undertaken by a trial Judge in assessing weight to be attached to initial contributions, and other contributions, is not always an easy one and not discharged by a strict accounting exercise.
[12] (2008) FLC 93-385 at paragraph 44
With that in mind, I conclude that the parties’ overall financial and non-financial contributions should be given equal weight. In other words, if this matter was to be decided solely on the basis of contributions, their assets would be divided equally between them. However, the law requires me to consider other matters.
Section 75 (2) Factors
As mentioned, the husband is aged 55 years and the wife is 58 years old.
The husband is in receipt of an indexed pension of approximately $660 gross per week. The wife is employed [in the Education Industry] and earns approximately $1,000 gross per week more than the husband.
The husband proposes that there be splitting orders in relation to both parties’ superannuation. He believes that his indexed pension income would then reduce to less than $350 per week ($18,000 per annum) and that he would need to apply to Centrelink for increased benefits. I shall refer to that further below.
Having considered the unchallenged evidence of the husband’s doctor, I have no hesitation in accepting the submission by his counsel that it is most unlikely that he will ever work again. However, it is reasonable to infer that, at age 58 and subject to reasonable health, the wife is likely to continue working for another seven to ten years, notwithstanding that she is currently prescribed antidepressant medication.
Her psychologist says that her job offer in Queensland was “a fantastic career opportunity and in order to take advantage of it she needed to grieve and let go of this dysfunctional relationship”. He went on to say that he had not seen her as a client since her move to Queensland However, he had spoken to her and it appeared to him that the move was exceedingly positive.
When I consider the psychologist’s evidence, I find that it a reasonable inference that the resolution of these proceedings will probably see an improvement in her psychological well-being.
Neither party has an obligation to support any other person.
When I consider all these factors, I conclude that there must be an adjustment in the husband’s favour, primarily because of the wife’s substantially greater income earning capacity and her better state of health. I also conclude that it must be more than just a token adjustment.
Conclusions
I conclude that splitting both parties’ superannuation as suggested by the husband is an inappropriate manner in which to adjust their property interests. I say this for a number of reasons which include the follows:
a)It is clear that the husband’s proposal is designed to maximise the cash available to him so that he can retain the former matrimonial home. As I understood his argument, he would expect to be able to cash in his 55% split of the wife’s superannuation. Further, even though he cannot take a lump sum from his own superannuation, he believes that the wife would be able to do so. That is because section 59AC of the Victorian State Superannuation Act 1988 provides that a non-member spouse can be paid a lump sum amount if a request is made in writing.[13] However, that fails to acknowledge that if the member spouse’s superannuation interest is a pension due to a disability (as it is in this case), the Board may determine that a lump sum payment should not be made.[14] I have no evidence, and therefore cannot be confident, that the Board would accommodate any such request for a lump sum payment.
b)Notwithstanding what I have said in the preceding sub-paragraph, I am of the view that a splitting order in relation to the husband’s superannuation would be most inappropriate for public policy reasons. In this regard, the Explanatory Memorandum circulated by the then Attorney-General in relation to the proposed superannuation amendments to the Family Law Act in 2000 set out broad policy objectives which included:
i)ensuring that superannuation savings are used to maintain and improve living standards in retirement rather than being diverted to other uses; and
ii)effectively targeting Government assistance to those who have limited resources with which to fund their retirement.
c)It seems perfectly clear to me that the husband’s proposal is contrary to both of those policy objectives. A split of the husband’s superannuation will divert some of his superannuation savings to other uses and it will probably mean that he will find it necessary to maximise any additional Federal Government benefits to which he may become eligible.
[13] See sub-section (4)(a)
[14] See sub-section (6)
In my view, each party should retain his or her superannuation interests and any adjustment of property interests between them should be made from the non-superannuation assets.
This will mean that the wife will retain a superannuation interest that has a higher value than that of the husband. When I take this into account in conjunction with what I have said above in relation to the section 75(2) factors, I conclude that the husband should be awarded 65% by value of the non-superannuation assets.
As I have said above, the non-superannuation assets have a total value of $539,000. If the husband is to receive 65% of that value, he should receive assets worth $350,000 (in round figures). Consequently, if he is to retain the former matrimonial home and the wife is to retain the boatshed and the RetireInvest funds, the husband will need to pay the wife a further $60,000.
I am of the view that the husband should be able to borrow $60,000, notwithstanding that he is not working. This is because:
a)he will have an unencumbered real estate worth $410,000;
b)he has a secure indexed income; and
c)his evidence is that he is able to live frugally.
If the wife receives $60,000 from the husband, in addition to retaining the boatshed and the RetireInvest funds, she will retain non-superannuation assets with a total value of $189,000. She will therefore have the capacity to reduce her Queensland mortgage liability to a significant extent.
When I consider the provisions of section 79(2) of the Act, I am of the view that this provides a just and equitable settlement for both parties. I will therefore make orders to provide for what is set out above.
As mentioned above, the wife also seeks an order that the former matrimonial home be sold if the husband does not make the necessary payment to her. I am not inclined to make such an order at this time, because there are adequate enforcement procedures available to her if the husband does not pay the sum that he is ordered to pay.
I certify that the preceding seventy-four (74) paragraphs are a true copy of the reasons for judgment of Roberts FM
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