Larssen & Larssen
[2009] FamCA 608
•29 June 2009
FAMILY COURT OF AUSTRALIA
| LARSSEN & LARSSEN | [2009] FamCA 608 |
| FAMILY LAW – PROPERTY – Superannuation |
| Family Law Act 1975 (Cth) |
| Clives and Clives (2008) FLC 93-385 JEL and DDF (2001) FLC 93-083 Levick and Levick (2006) FLC 93-254 Phipson and Phipson [2009] FamCAFC 28 Rosati v Rosati (1998) FLC 92-804 |
| APPLICANT: | Ms Larssen |
| RESPONDENT: | Mr Larssen |
| FILE NUMBER: | PAC | 1015 | of | 2008 |
| DATE DELIVERED: | 29 June 2009 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Parramatta |
| JUDGMENT OF: | Le Poer Trench J |
| HEARING DATE: | 21 - 22 May 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Batey |
| SOLICITOR FOR THE APPLICANT: | Mark Brown & Associates |
| COUNSEL FOR THE RESPONDENT: | Ms Schonell |
| SOLICITOR FOR THE RESPONDENT: | Gibsons Lawyers |
Orders
The parties are to do all things necessary to cause the completion of the sale of the property situate at and known as the rural New South Wales property. Should the sale not be completed then the parties are to forthwith upon such occurrence cause the property to be sold at an agreed price and through an agreed real estate agent.
The proceeds of sale of the rural property upon settlement are to be applied as follows:
(a)Discharge of the mortgage encumbering the property (approximately $535,000);
(b)The sum of $74,200 be set aside to meet the sale costs of the property including agents commission and legal costs of sale and any Capital Gains Tax (CGT) required to be paid by the husband. The sum remaining after meeting the sale expenses be placed into an IBD account in the names of the parties' solicitors on trust for the parties such amount to be applied in payment of any CGT payable upon sale of the rural property. In the event that after payment of the CGT there is a surplus in the said account then such surplus be divided 56% to the wife and 44% to the husband;
(c)There then be paid to the wife as an advance on her property settlement entitlement in the sum of $100,000;
(d) Any balance then be paid to the husband.
In the event of a shortfall between the amount preserved from the sale proceeds of the rural property and the amount required to be paid by the husband for CGT referrable to the sale of that property then the wife is to contribute 56% of that shortfall. Her obligation to make such payment is to be charged against the receipt of funds by her from the sale of the property situate at and known as the inner west Sydney property in the state of New South Wales being the whole of the land contained in Certificate of Title … (“the Sydney property”) when that receipt occurs.
That pending sale of the home in inner west Sydney the wife shall be responsible for paying the interest payments on the mortgages identified as items 25, 26 and 27 in the Joint Draft Balance Sheet and the husband be responsible for paying the interest payments on the mortgages identified as items 28 and 29 in the Joint Draft Balance Sheet.
At the time of the payment to the wife of the $100,000 from the sale of the rural property (or earlier at the option of the husband) the husband is to pay to the wife the sum of $22,796.
Subject to the following orders the parties do all things and sign all documents necessary to cause the Sydney property to be sold by auction at a reserve to be agreed on between the parties and failing such agreement to be determined by the President of the Real Estate Institute of New South Wales or his nominee.
In the event that the Sydney property fails to be sold by auction, then each party take all necessary steps and execute all necessary documents within the following two (2) months to cause the property to be sold by private treaty at the earliest possible date at a price to be agreed on between the parties and failing such agreement to be determined by the President of the Real Estate Institute of New South Wales or his nominee.
The proceeds of the sale of the Sydney property be disbursed as follows:
(a)Payment of agent’s commission and advertising expenses and legal expenses of the sale;
(b)Discharge of all liability to National Australia Bank which is charged against the property and referred to in the Joint Draft Balance Sheet;
(c)Subject to any charging order made herein, payment to the wife of the sum of $736,550 if there be that amount remaining. If there is less than $736,550 then the wife is to receive that entire sum;
(d)If there are still funds remaining after the payment to the wife of $736,550 then the balance is to be divided between the parties 44% to the husband and 56% to the wife.
In the event of the wife failing to achieve a payment of $736,550 from the sale proceeds of the Sydney property the husband is to pay the wife, within sixty (60) days of the completion of the sale, a figure calculated as 56% of the shortfall between the sum the wife did receive and the sum of $736,550.
The sale of the Sydney property is to be postponed until O has completed his final examination in the Higher School Certificate in 2009.
Until the completion of the sale of the rural property only, the orders made on 30 June 2008 requiring the husband to pay interim spouse maintenance and also to meet certain specified expenses is to continue.
As from the date of receipt of the said sum of $100,000 from the sale proceeds of the rural property (or such earlier date as hereafter provided) and until the completion of the sale of the Sydney property the wife is to pay all the outgoings on the Sydney property including insurance, rates and taxes together with the parties’ commitments in relation to the following loans charged against the Sydney property:
(a) Overdraft 2631 (current balance $150,000);
(b) Mortgage 5884 (current balance $113,000);
(c) Mortgage 3342 (current balance $80,700).
As from the payment to the wife of the said sum of $100,000 from the sale proceeds of the rural property and until the completion of the sale of the Sydney property the husband is to pay the parties’ commitment in relation to the mortgage 0384 (current balance $260,000).
The husband, at his option, may pay the sum of $22,796 to the wife as required by Order 5 hereof at a time earlier than the date of the payment to the wife of the sum of $100,000 from the sale proceeds of the rural property. Should he elect to do so then the orders of 30 June 2008 shall cease to operate from that time and the husband will only be required to meet the payment specified in Order 13 hereof.
Pursuant to s90MT(1)(b) of the Family Law Act 1975, whenever a splittable payment becomes payable in respect of the interest held by the husband (born … April 1959) member no. … in G Superannuation Plan, a sub-plan of the Plum Superannuation Fund, the wife (born … January 1957) shall be entitled to be paid 50% of that splittable payment and that there be a corresponding reduction to the entitlement the husband would have received in G Superannuation Plan, a sub-plan of the Plum Superannuation Fund but for this Order.
Order 15 has effect from the operative time and the operative time for this Order is four (4) business days after the service of sealed orders on the Trustee, PFS Nominees Pty Ltd.
Orders 15 and 16 bind the said Trustee for G Superannuation Plan, a sub-plan of the Plum Superannuation Fund.
Should it be necessary the husband is to sign any documents necessary to transfer any interest he may have in the Honda CRV motor vehicle registration … and the MV Augusta motorcycle registration … to the wife.
Should it be necessary the wife is to sign any documents necessary to transfer any interest she may have in the 2004 BMW motor vehicle registration … and the 2002 Aprilia motorcycle registration number … to the husband.
Otherwise than provided in these orders, each of the parties is solely entitled to the exclusion of the other to all other property and chattels of whatsoever nature and kind in the possession of each of the parties as at the date of the making of these orders.
The time in which the wife may apply for a spouse maintenance order is extended until a period of twenty-eight (28) days following the completion of the sale of the Sydney property.
The parties have leave to apply for further orders relating to the implementation of any of the orders made herein.
All outstanding applications be dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Larssen and Larssen is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: PAC 1015 of 2008
| MS LARSSEN |
Applicant
And
| MR LARSSEN |
Respondent
REASONS FOR JUDGMENT
This case involves a dispute between the parties, Mr Larssen (“the husband”) and Ms Larrsen (“the wife”), relating to the division of their matrimonial property. The case was heard over a two day period. The parties abandoned any formal objections to affidavit material and there was very limited cross examination. Both parties submitted that the Court should find their contributions to the marriage at the time of separation were equal. The dispute centres on whether there should be an assessment of contribution to the date of the trial that favours the husband. The parties also have a dispute in relation to the amount of any adjustment which should be made in favour of the wife having regard to the matters set out in s 75(2). There is a dispute as to whether a splitting order should be made in relation to the husband’s superannuation. There are other minor disputes in relation to the formulation of orders which I will refer to later in these reasons.
Credit
Each of the husband and the wife gave oral evidence. Both appeared to give their evidence in an honest and straightforward manner. There is nothing about the evidence of the parties or their manner of giving their oral evidence which suggests to me that either was attempting to be dishonest or to mislead the Court.
Background Facts
The wife is 52 years of age and the husband is 50 years of age. Cohabitation commenced when the parties married in February 1983. They separated in July 2007. At the time of separation the parties had been occupying the former matrimonial home in Sydney. Since that time the wife and the parties’ child O have occupied the property. The husband ceased to occupy the property at the time of separation. In October 1991 the parties’ only child, O, was born. O is currently 17 years of age. The parties were divorced on 21 April 2009.
In January 1984 the wife commenced full time employment as an office manager. She took two months maternity leave when O was born.
In 1988 the parties purchased the former matrimonial home in Sydney and in May 1992 the parties purchased a cabin in rural New South Wales in the husband’s name.
In 1994 the wife commenced her own business working three days a week.
In 2003 the parties sold the rural property they owned and purchased another rural unit. The unit was purchased in the husband’s sole name.
In January 2004 the wife ceased the business.
From about October 2004 the husband paid for cleaning in the matrimonial home.
In January 2006 the husband’s business trips increased to approximately 12 per year and he was away between one and ten nights on each occasion.
In October 2006 the parties purchased, in the husband’s sole name, a property in Canada. The whole of the purchase price was borrowed.
In 2008 the husband listed both the Canada and the rural New South Wales properties for sale. The rural property sale was effected in April 2009 with an exchanged contract for $720,000. Prior to that time the parties had agreed the value of the property was $730,000.
Following separation the husband paid to the wife $4500 per month for 11 months and then in one month paid the sum of $3000.
On 30 June 2008 orders were made in the Court requiring the husband to pay spouse maintenance in the sum of $655 per week. The husband was further ordered to pay $45,000 to the wife’s solicitors to be used to meet legal costs and disbursements. Further, the husband was ordered to pay any loan or other facility held as against the title to the Sydney property together with rates and all other outgoings with respect to that property. The husband was also ordered to pay all lease payments in relation to the wife’s Honda motor vehicle. Additionally, he was ordered to pay all premiums in relation to current private health fund membership for the wife. Further, the Court noted that the husband would pay all private school fees and costs associated with O attending N School. Part of those Orders included permitting the husband to obtain a new overdraft facility of up to $30,000 in order to meet the payment of $45,000 to the wife.
In about 2007 O was injured in a sports race. The husband took a week off work to be with him. In 2007 and 2008 the husband managed O’s racing campaign. He took him to rural New South Wales, Adelaide, Canberra and also to State rounds. In the last four years the husband has taken O to Canada for training.
In July 2008 the husband was assessed to pay child support in the sum of $1,317 per month.
On 30 April 2009 the husband was made redundant and thereafter received redundancy payments.
The sale of the rural property will most probably give rise to the requirement to pay capital gains tax given the profit generated by the sale compared to the purchase price. The capital gains tax will be payable by the husband and will not be able to be assessed until the end of the tax year in which the contracts were exchanged.
The husband has a personal relationship with Ms R. The relationship has been on foot since December 2007. Ms R has resided with the husband from time to time and in about March of 2009, in association with some apprehended violence order (AVO) proceedings taken by Ms R against the wife, Ms R was residing with the husband on an almost full time basis. In more recent times she has resided with him four or five nights per week and he spends two to three nights per week at her residence. They have been on holidays together, however they largely pay their own expenses. There have been exceptions where the husband has paid for expenses and/or provided benefits such as frequent flyer points to enable the travel. The husband has no intention at this stage to form a permanent relationship. He conceded the relationship is exclusive. Ms R has clothes and possessions at the husband’s residence. She moved her clothes and possessions into the husband’s residence when she came to live with the husband at the time of the AVO proceedings. Some of the clothes still remain. In the last two weeks Ms R has spent up to ten nights at the husband’s residence.
In the wife’s oral evidence the following matters are of particular note.
In relation to the rural property the wife agreed to a value for the rural property of $730,000. She was aware that the rural property was on the market in 2008. She agreed that a sale at $720,000 represented a good opportunity to sell.
The wife wishes to retain the former matrimonial home. She is unable to service the mortgage. Any order which requires a payment of money to the husband will mean the property has to be sold. In submissions, counsel for the wife agreed that any order requiring payment by the wife of more than $20,000 would require a sale of the property.
The wife is seeking spouse maintenance. She conceded that she had some employment with an establishment called C Company. She works sometimes two to three days a week and sometimes does not work for a month. She was referred to her affidavit sworn 5 May 2009 and filed 6 May 2009 which stated that between July 2008 and 24 April 2009 she had earned $2,902. She conceded that her earnings were placed in a Bendigo Bank account. It was put to her that between 28 September 2008 and 23 March 2009 she had made deposits with a stated source of “C Company” totalling $3,135. She said that if that calculation was correct then it was higher than stated in her affidavit.
In assessing her stated total salary or wages before tax of $63 per week in her Financial Statement sworn 5 May 2009 and filed 6 May 2009, she said she had averaged her income over a year to arrive at that figure.
The wife is a regular attendee at a gymnasium. She goes twice per week. She walks on a walking machine for 20 minutes, an elliptical walker for 12 minutes and works on other machines. She spends between 30 and 45 minutes in total in exercising at the gymnasium. She has in the past competed in sports. She last competed in July 2007 and she last skied in September 2006.
In August 2007 the wife had a knee operation.
For the purposes of the case the wife saw Dr G. She saw him on one occasion, being in September 2008. She provided Dr G with history. It was put to her that she did not tell Dr G she was working and she replied she did not know. In his report dated 15 September 2008 Dr G notes, “Presently she is not working.” In his report dated 1 May 2009 Dr G notes, “Presently she is working casually as […] about three days a month and standing for long period aggravates the knee quite considerably.”
The wife acknowledged that her current employment involved a considerable degree of body movement.
The wife acknowledged that since separation the husband has paid all the payments in respect of loan facilities on the Sydney property and in relation to the two investment properties. She acknowledged that he had paid the lease payments in respect of her Honda motor vehicle and agreed that was $500 per month. The wife agreed it was recently paid out by him.
In the last three months the wife said she had applied for three jobs. The first job was doing retail sales in make up. It involved work behind a counter selling make up. The job was advertised as full and part time. It would involve the wife being on her feet. The second job she applied for was selling clothes. The third job was again selling clothes and was a full time job. All three jobs were applied for by the wife online and she has had no reply. She would accept either part time or full time work in any of those positions.
The wife was taken to item 53 of her Financial Statement. She acknowledged that Mr E does stay at her house and she stays at his. She denied any girlfriend/boyfriend relationship. She acknowledged that he stayed at her house until May 2008 and did not contribute any rent. He did contribute by paying for some groceries every third week.
The husband gave oral evidence. The husband was taken to exhibit H2 which was the cost memorandum. His evidence is that he paid $29,000 from his redundancy payment and the balance has come from income post separation. He paid the Honda lease payment as part of his redundancy.
The husband said that there were five loans with the bank which he was required to service. The first loan was for $150,000. The husband has paid the interest payments since separation. They are not tax deductible. The second loan was for $113,000. The husband has paid the interest since separation and the interest payments are not tax deductible. The third loan is for $80,000 and the interest has been paid by the husband since separation. The interest on the loan was tax deductible until June 2008. The loan of $260,000 was borrowed for the purchase of the Canada property and for shares. The interest on those loans is tax deductible.
There is a loan of $535,000 in relation to the rural property. The interest payment on that is tax deductible. Contracts were exchanged on the day before the trial. The husband has made the payments in respect of the rural property and has received income. The same is true in relation to the Canada property.
In cross examination the husband was asked about his income figure stated in his Financial Statement affirmed 8 May 2008 and filed 9 May 2008. The stated total salary or wages before tax was $5,961. He said that the figure was a division based on his base compensation before tax. It excludes any bonuses. The husband identified his 2005, 2006 and 2007 tax returns. In 2005 he acknowledged a taxable income of $532,486. In 2006 he acknowledged a taxable income of $518,887 and in 2007 he acknowledged a taxable income of $531,967. His 2008 tax return has not yet been completed but he anticipates that his income will be greater than his base salary.
The husband said that in 2008 he received his bonus in March. The bonus was $280,820 before tax. The 2009 bonus was $377,000. In 2009 the husband received a fidelity bonus of €120,000 which is about $200,000. It was paid to him as part of a redundancy package on 30 April 2009. The husband asserted that he had disclosed the fidelity bonus in his Financial Statement.
The husband acknowledged that the credit card liability set out in his Financial Statement (as relied upon by him in the hearing) was incurred post separation. He further acknowledged that $40,000 from his redundancy was paid to meet credit card debts incurred post separation. He said that there was approximately $2200 in benefits still to come from his former employer.
Although he doubted that a payment of $1,000 to his lawyers shortly after separation had come from a joint account, he could not establish that positively. He asserted that all of the balance of payments other than $29,000 had come from his income. He acknowledged that in addition to the $2,200 (or thereabouts) in stock options still to come to him from his former employer, there was an additional sum of about $4,000 yet to be paid to him.
The husband denied that the rural property was for his sole use. He denied that the Canada property was for his sole use. He said the wife had stayed at the rural property, but not at the Canada property. He agreed that he had the use and management of the properties post-separation.
The husband said his termination of employment occurred as part of a redundancy program by his employer. He denied that he had voluntarily resigned and said that had he done so, he would not have received a retrenchment package. I accept his evidence in relation to that fact.
The husband said he had not made any applications for work since being retrenched. He has been concentrating on the current proceedings.
The husband said he would be financially responsible for O until he concludes his Higher School Certificate, notwithstanding that he turns 18 years of age in October. He asserted that O spent alternate weekends and half school holidays with him. He conceded that he did not spend half of the last school holidays with him nor did he spend half of the last Christmas school holidays with him. He denied that O rarely spends more than one night with him on weekends.
When challenged about expenditure in relation to O the husband said that he had spent $6,000 on a new bike for O in the last 12 months. He agreed that once O had finished his Higher School Certificate and turned 18 years of age he would not be contributing child support payments to the wife.
In relation to other costs for O the husband was asked if there was any reason why he did not contribute to the cost of a tonsillectomy for O. He replied that the operation was covered by medical insurance and he was not asked by O or the wife to contribute any further funds.
The husband acknowledged that during a recent trip to Canada, on which Ms R accompanied him, they had travelled on frequent flyer points. He said Ms R had transferred 50,000 points to him however, it had cost 200,000 points. So far as Ms R’s income is concerned the husband believes that she has a salary of about $50,000 per annum together with $20,000 in benefits and 5% superannuation. She does not own her own home. She leases. She does not own a car.
Asked about allowing O to remain in the former matrimonial home until he concludes his Higher School Certificate, the husband said he would be prepared to agree to a postponement of a sale of the Sydney property provided that there is some arrangement for the servicing (payment) of the mortgages on the property while the parties are waiting for O to finish his education and then the for sale of the property.
The husband was asked whether he would be intending to transfer to O the motor vehicle which was bought for him, to which he said he would. The husband denied that he intends to sell the Canada property.
The Balance Sheet
The parties tendered a joint balance sheet which was marked as exhibit X1. At the end of the hearing there were only a few issues in relation to the balance sheet which need to be identified. The balance sheet, as it was tendered, is as follows:
No. Ownership Description Husband's Wife's Comments value value ASSETS PERSONAL ASSETS 1 Joint [Matrimonial home, Sydney] #### #### $1,375,000 2 Husband [Rural property] $720,000 $730,000 3 Husband [Canada property] $440,771 $452,000 4 Wife 2005 Honda CRV $13,500 $13,500 5 Wife 2004 Augusta Motor bike $12,000 $12,000 6 Wife Household contents & Art work $10,000 $10,000 7 Wife Wife's bank account $1,400 $1,400 8 Husband Husband's Deferred compensation Investments as at 31.03.09 $2,500 $2,500 10 Husband 2004 BMW 530i $40,000 $40,000 11 Husband 2002 Aprilla Vehicle $12,000 $12,000 12 Husband's NAB Account No 6927 $76,158 $76,158 13 Husband NAB Account No 8266 + Interest $0 $0 14 Husband [T] Trust $101,244 $104,407 15 Husband Household contents $10,000 $10,000 16 Husband Balance of performance benefit due from [employer] $2,200 $2,200 17 Husband 24820 Babcock & Brown stapled securities $2,482 $2,482 18 Husband Cheque account NIL NIL ADD BACKS 19 Wife Wife's paid legal costs NK $45,640 20 Husband Husband's paid legal costs NIL $88,015 21 Husband Post seperation paid credit cards NIL $40,000 22 Husband Funds transferred by Husband from Joint funds immediately prior to separation NIL NIL 23 Husband Bond on Unit rented by Husband $3,500 $3,500 24 Husband Moneys' gifted to [O] NIL NIL TOTAL #### #### $3,020,802 LIABILITIES No. Ownership Description Husband's Wife's value value 25 Joint Overdraft No 2631 secured on [Sydney property] $150,000 $150,000 26 Joint Mortgage No 5884 on [Sydney property] $113,000 $113,000 27 Husband Mortgage No 3342 on [Sydney property] $80,700 $80,700 28 Husband Mortgage No 0384 on [Sydney property] $260,000 $260,000 29 Husband NAB Mortgage No 5057 on [rural property] $535,000 $535,000 30 Wife Wife's other personal loans (E) NK $15,000 31 Husband NAB Personal Loan $15,000 NIL 32 Husband Selling Costs & CGT [rural property] $74,200 NIL 33 Husband St George Credit Card $4,400 NIL 34 Wife ANZ Credit cards $9,756 TOTAL #### #### $1,163,456 NET $1,590,455 $1,857,346 SUPERANNUATION No. Ownership Description Husband's Wife's value value 35 Husband Husband's […] Super $379,347 $379,347 TOTAL $379,347 $379,347 33 TOTAL OF ASSETS & FINANCIAL RESOURCES $1,969,802 $2,236,693
Determination of the Balance Sheet Issues
The first issue relates to item 2, which is the value of the rural property. I accept the husband’s evidence that the property does have an exchanged contract at $720,000. Although the property is registered in the husband’s name, the wife has been aware that the property has been on the market during 2008 and there is no evidence that she took any steps to prevent its sale. The wife conceded that a sale at $720,000 represented a good opportunity to sell. Accordingly I propose to incorporate that property into the balance sheet at $720,000.
There were issues in relation to items 3 and 14 on the balance sheet; however, those issues were only raised because of differences between the parties about exchange rates. The parties at the time of submission had agreed on those exchange rates. Item 3 is to be included in the balance sheet at $446,385 and item 14 is to be included in the balance sheet at $102,825.
There is an issue about item 20, being the husband’s paid legal costs. The husband asserts that the amount which should be included is the sum of nil. He submits that the redundancy package was paid two years after separation and that according to the authority of Chorn and Hopkins (2004) FLC 93-204 the best course is to not include that sum or any sum in the balance sheet. If that argument was rejected, then it is conceded it would be difficult to argue against the sum of $29,000 being included as that sum was identified as being paid from the redundancy payment.
The wife argues that all of the husband’s paid legal costs of $83,665 should be included in the balance sheet and not just that proportion which was paid from his redundancy payment. It is submitted that part of the funds received by the husband came from a fidelity bonus. In March 2008 the husband received funds allocated as a bonus in the 2007 year and earlier. It is submitted that it is likely that part of the fidelity bonuses which were incorporated into the 2009 payment could be referable to pre-separation earnings.
The husband has, until his retrenchment, earned a very high income. The fidelity bonuses represent a significant proportion of his income when compared with the balance. The evidence does not enable me to conclude the precise source of funds in the husband’s hands, to meet his paid legal costs. It is not entirely clear cut but I believe I can do justice in this case by taking into account under s 75(2) the husband’s significant income post-separation and his capacity to thereby meet his legal fees from that source, including the payment of fidelity bonus, the entitlement to which arose prior to separation, which may have found its way into the payment of these costs.
Consistent with the parties’ approach of including in the balance sheet payments made with the husband’s redundancy payment I will include the sum of $29,000 as the husband’s paid legal fees.
The next item is item 21, that being “post separation paid credit cards”. It is conceded by the husband that the payment of $40,000 was made from the redundancy payment. It is conceded that it was a payment in respect of a liability incurred post-separation. The wife argues that the $40,000 referred to in item 21 should be added back because it came from the redundancy payment.
The inclusion or otherwise of the redundancy payment or what was left of same in the balance sheet creates a difficult dilemma. The parties have included, without objection, parts of the redundancy payment. This includes the fact that the husband has paid off the mortgage on the Canada property and therefore it stands in the balance sheet unencumbered. Further, items 12 and 14 on the balance sheet represent moneys that came from the redundancy.
There is some connection between the husband’s pre-separation employment and the payment of the redundancy which would, in my view, warrant inclusion of the sums received in the redundancy in the balance sheet.
In order to maintain some consistency I propose to include the $40,000 in the balance sheet and will take the source of those funds into account in assessing contribution.
Item 30 relates to liabilities alleged to be owed by the wife. The husband submits that part of this debt is for legal fees and part is for forensic accounting fees and as such, should not be included.
The liabilities are referred to in the wife’s Financial Statement sworn 5 May 2009. It shows a liability to Mr DE of $2,500, a liability to Mr E of $1,300, a liability to the wife’s solicitors for legal fees of $21,071 and a liability to M & Co estimated at $6,500. Clearly, the legal fees and the forensic accounting fees ought not be included in the balance sheet but should be taken into account under s 75(2). The wife’s counsel drew my attention to paragraphs 31 and 32 of the wife’s affidavit sworn 5 May 2009 and filed 6 May 2009. The wife’s affidavit was sworn 5 May 2009 and her Financial Statement was sworn 6 May 2009. There is no evidence to explain the inconsistency between the affidavit and the Financial Statement insofar as the debt to Mr E is said to be $1700 in the affidavit and also there is a further debt to Mr Aof $900.
This is clearly post-separation liability and, in the absence of any other explanation, it appears to have been used in day to day living expenses. In my view it should not be included in the balance sheet but should be taken into account under s 75(2).
Item 31 is the husband’s liability for a personal loan with a balance of $15,000. This is part of the funds borrowed to pay the wife $45,640 which is included without complaint as item 19, being the wife’s paid legal costs. The wife concedes there is some justification in including this sum in the balance sheet and I agree. I propose to include it as a liability.
Item 32 is a sum claimed by the husband to be quarantined to cover costs of selling the rural property and the payment of capital gains tax when the amount to be paid has been determined. The wife argues against inclusion of such a fund.
It seems to me as a matter of justice that the sum should be included as suggested by the husband. The property was clearly at all times an investment property from which the parties had derived benefit by virtue of its increased value. The authorities from the Full Court (see Kelly and Kelly (No 2) (1981) FLC 91-108; Rosati v Rosati (1998) FLC 92-804; Rothwell and Rothwell (1994) FLC 92-511; JEL and DDF (2001) FLC 93-083) would support the Court in this case taking capital gains tax into account as a liability. The method of taking this into account as proposed by the husband appears to me to be a fair one. That is, that there be a preserved fund and once the tax has been ascertained (if any) it is paid from that fund together with the costs of sale and any balance then remaining be divided between the parties in the proportion determined by me as appropriate for the division of the parties’ assets generally. I propose to take that course of action.
The last two items for consideration are items 33 and 34. The submissions on the part of the wife are that the items should both be included or both excluded. The balance of probabilities points to the liabilities having been predominantly incurred post-separation, there being no evidence that the wife or husband had liability for credit cards at the date of separation. In the circumstances it seems to me that the parties’ liabilities for credit cards should be excluded from the balance sheet but again taken into account under s 75(2).
Having considered the whole case and having concluded the property in Sydney would need to be sold I requested from the parties’ lawyers an agreed figure for the sale expenses of the property were it to be sold, for the value in the balance sheet. That joint information was provided as follows:
(a) Real estate agents commission $30,250
(b) Conveyancing costs $2,000
(c) Marketing costs $2,500
Total sale costs $34,750.
Given that a sale of the Sydney property will be required I propose to include the sale expenses in the balance sheet. I have inserted the expense as item 35.
The determined balance sheet is therefore as follows:
No. Ownership Description VALUE ASSETS PERSONAL ASSETS 1 Joint Matrimonial home, Sydney $1,375,000 2 Husband Rural property $720,000 3 Husband Canada property $446,385 4 Wife 2005 Honda CRV $13,500 5 Wife 2004 Augusta Motor bike $12,000 6 Wife Household contents & Art work $10,000 7 Wife Wife's bank account $1,400 8 Husband Husband's Deferred compensation Investments as at 31.03.09 $2,500 10 Husband 2004 BMW 530i $40,000 11 Husband 2002 Aprilla Vehicle $12,000 12 Husband's NAB Account No 6927 $76,158 13 Husband NAB Account No 8266 + Interest $0 14 Husband T Trust $102,825 15 Husband Household contents $10,000 16 Husband Balance of performance benefit due from employer $2,200 17 Husband 24820 Babcock & Brown stapled securities $2,482 18 Husband Cheque account NIL ADD BACKS
19 Wife Wife's paid legal costs $45,640 20 Husband Husband's paid legal costs $29,000 21 Husband Post separation paid credit cards $40,000 22 Husband Funds transferred by Husband from Joint funds immediately prior to separation NIL 23 Husband Bond on Unit rented by Husband $3,500 24 Husband Moneys' gifted to O NIL TOTAL $2,944,590 LIABILITIES 25 Joint Overdraft No 2631 secured on Sydney property $150,000 26 Joint Mortgage No 5884 on Sydney property $113,000 27 Husband Mortgage No 3342 on Sydney property $80,700 28 Husband Mortgage No 0384 on Sydney property $260,000 29 Husband NAB Mortgage No 5057 on rural property $535,000 30 Wife Wife's other personal loans (E) NIL 31 Husband NAB Personal Loan $15,000 32 Husband Selling Costs & CGT rural property $74,200 33 Husband St George Credit Card NIL 34 Wife ANZ Credit cards NIL 35 Joint Agreed sale expenses for Sydney property $34,750 TOTAL $1,262,650 NET $1,681,940 SUPERANNUATION 36 Husband Husband's Super
$379,347 TOTAL $379,347
Assessment of Contribution
Both parties agree that the contributions of the husband and wife should be assessed as equal as at the date of separation.
The wife asserts that the contribution should also be assessed as equal to the date of the trial. In support of that assessment the wife says that the husband had the benefit of income from the Canada and rural New South Wales properties post-separation whilst acknowledging that he met the liabilities associated with those properties. She submits that the husband has earned a very significant income and his ability to earn that income was generated during the course of the cohabitation. At the time of separation the husband had the employment which he continued in until April 2009 when he was retrenched.
The wife submits that she has continued to be the primary carer for the parties’ son, O. She acknowledges that the husband has paid support for she and O in the sum of $4500 per month for approximately 11 months post-separation, $3000 for one month and then spouse maintenance and child support as referred to earlier in these reasons.
The wife argues that a significant part of the husband’s retrenchment payment came from a deferred bonus which was earned during the course of the marriage. I do not accept that it can be precisely quantified but I do accept that some part of his retrenchment package may have been a remnant from a fidelity bonus earned during the period of the cohabitation. I also accept that part of the fidelity bonus earned during the course of the cohabitation was paid prior to the husband’s retrenchment.
The wife points out that the fidelity bonus payment was identified by the husband as $169,544 as a part of his retrenchment package.
The husband says that he has paid all of the outgoings on the property in Sydney post-separation and has been responsible for the payment of the shortfall in respect of the expenses for the Canada and rural New South Wales properties. He has managed both properties post-separation. In his Financial Statement sworn 6 May 2009 the husband attests to a weekly income of $525 in relation to the rural property and a weekly income of $205 in relation to the Canada property. As against that, the husband pays a weekly mortgage in respect of the rural property of $771 and a weekly payment of $491 in respect of two further mortgages as against the Sydney property. He also meets a first mortgage payment on the Sydney property of $168 per week. In his 2008 Financial Statement, which became exhibit H8 in the proceedings, the husband disclosed that he was paying $467 per week in respect of the Canada property mortgage. Thus it can be seen, as submitted by the husband, that the contribution from the husband’s income towards the mortgage commitments of the parties jointly and severally is extensive. It needs to be recalled that part of the payments made by the husband are tax deductions and that also needs to be taken into account.
Post-separation the husband met all of the outgoings on the former matrimonial home. He paid $4,500 per month for 11 months and $3,000 one month towards the maintenance of the wife and O. He met child support payments once an assessment was in place. He has paid spouse maintenance since 30 June 2008 in the sum of $655 per week. He paid $45,000 to the wife’s legal costs and met the borrowing expenses in respect of that payment, some of which remains in the balance sheet. The husband paid all of O’s school fees and associated expenses. He has paid the lease payments on the wife’s Honda motor vehicle and paid the premiums in respect of private health fund membership for the wife. The husband has contributed his redundancy package, which was $403,603 after a motor vehicle lease payout of $29,386. The motor vehicle lease payout related to the wife’s car and also a car for O. In addition, the husband received $169,544 as a second payment. There was a third payment of $45,000 which represented the balance of the 2008 performance benefit. Altogether the husband received nearly $650,000 in that redundancy package. Of that sum, $323,000 Canadian dollars (C$323,000) were used to pay out the mortgage on the Canada property and the bulk of the assets received in the package are significantly contained in the balance sheet to which I have previously referred.
The husband argues that the contributions post-separation do favour him and submits that there should be an adjustment in his favour so as to reach a finding that contribution is 52.5% to the husband and 47.5% to the wife. I agree with the submissions of the husband and find that the contributions made by him post-separation are greater than the wife’s and very significantly so, so much that when taken into account with the contributions of each of the parties during the course of cohabitation it requires an adjustment in the proportions submitted by the husband.
Superannuation
The parties have elected to have their contributions to the superannuation pool assessed separately to the asset pool. Given that the superannuation appears to have been all accumulated by the husband during the course of the cohabitation, there seems little moment in endeavouring to identify a contribution to the husband greater than that ascribed to the asset pool to the date of separation. I therefore conclude that each of the parties’ contribution to the superannuation pool should be assessed as equal to the point of separation.
The evidence is that on 8 May 2008 when the husband affirmed his earlier Financial Statement his superannuation had a value of $350,227. In his Financial Statement affirmed 6 May 2009 the value of the superannuation is $379,347. That is the figure imported into the parties’ balance sheet. There is no evidence to establish how the superannuation increased in value between 2008 and 2009. The husband showed in his May 2008 Financial Statement a contribution of $252 per week to superannuation and so I accept that part of the increase in value was attributed to his weekly contribution. That contribution continued until April 2009 when he left that employment.
Given that there are so many other possible reasons for the increase in value of the husband’s superannuation entitlement between 2008 and 2009 I cannot attribute to him a contribution of moment which would warrant an assessment greater than equal to that of the wife’s. I therefore conclude that there should be an assessment of equal contribution.
It is appropriate at this stage to deal with the splitting order sought by the husband.
In his Minute of Order marked exhibit H1 the husband sought a splitting order so as to provide for the wife 50% of the current entitlement of the husband in the superannuation fund.
In the initial stages of the hearing there was some objection raised by the wife to a splitting order on the basis that it had not been previously flagged or sought. The husband referred to an earlier Response filed by him which was not placed in evidence before me and no further argument was raised in relation to the husband’s proposal to seek a splitting order in the trial.
The wife argues that there should be no splitting order. The wife argues that the husband should retain all of the superannuation and the value of the superannuation then should be notionally added to the asset pool to ascertain the net benefit to be retained by the wife based on her adjudicated percentage entitlement.
The husband says that is an entirely inappropriate way to deal with the superannuation. He submits that the superannuation is accumulated throughout the whole of a lengthy marriage and it must be seen as having been accumulated for the benefit of the parties in their retirement. Clearly, each of the parties will have a need for support in their retirement and they are both now at an age when the superannuation assumes far greater importance.
The Approach
Section 90ME(1) defines “splittable payments” as set out below:
(1) Each of the following payments in respect of a superannuation interest of a spouse is a splittable payment :
(a) a payment to the spouse;
(b) a payment to another person for the benefit of the
spouse;(c) a payment to the legal personal representative of the
spouse, after the death of the spouse;(d) a payment to a reversionary beneficiary, after the death
of the spouse;(e) a payment to the legal personal representative of a
reversionary beneficiary covered by paragraph (d), after the death of the reversionary beneficiary.The three ways in which superannuation interests which are not percentage-only interests are ordinarily split are set out in sections 90MJ(1) and 90MT(1).
The husband seeks that I make a splitting order adjusting his interest in his Super Fund. This is opposed by the wife. In considering whether or not to make a splitting order in respect of the husband’s superannuation fund to adjust the superannuation interests of the husband and the wife I have had regard to the relevant case law in relation to superannuation splitting and am required to assess the parties’ respective contributions to that superannuation fund and the relevant factors under s75(2).
In Coghlan and Coghlan [2005] FamCA 429, (2005) FLC 93-220, (2005) 33 Fam LR 414, the majority of the Full Court of the Family Court of Australia (Bryant CJ, Finn, Coleman, Warmick and O’Ryan JJ) explained that when determining property proceedings under s 79 a court has jurisdiction by virtue of s 90MC to make a splitting order of the parties’ superannuation interests. The majority said:
44. However s 90MS(1) does have the effect, in our view of requiring that
in a case where the Court intends to make orders in relation to
superannuation interests of the spouses, it must do so “under” s 79
(although s 90MS(2) makes it clear that the Court cannot make an order
in relation to a superannuation interest except in accordance with Part
VIIIB). In other words, the Court must apply to superannuation interests
the matters to be taken into account under s 79.The Full Court in Coghlan (supra) considered that an assessment of contributions to the superannuation and non-superannuation assets of the parties was required. The Full Court went on to identify the preferred approach to the identification and assessment of contributions in property settlement cases involving a superannuation interest where a splitting order is sought. The majority said (emphasis added):
63. However, given the conclusions we have reached above, we consider that the preferred approach to the determination of property settlement cases must be to prepare in addition to the list of items of property (which would clearly fall within the definition of that term in s 4(1)), a separate list containing any superannuation interest or interests (valued according to the Regulations if a splitting order is sought in any application before the Court, or if no such order is sought, valued either according to the Regulations or otherwise). This of course is the approach which the trial Judge adopted in this case.
64. Then for the reasons we earlier gave, whether or not a splitting order is sought on either party's application, the parties' contributions to both the property (as defined in s 4(1)) and also to the superannuation interests should be assessed. The other factors in s 79(4)(d), (e), (f) and (g) would then need to be considered. Specifically in the context of s 79(4)(e), that is the s 75(2) factors, any division of the property (as defined in s 4(1)) and any “division” of any superannuation interest (in the sense of an allocation of the base amount) based respectively on the assessments of the parties' contributions to the property and to any superannuation interest, would then be considered. Similarly, the parties' future superannuation prospects (be they in capital or income form) would also need to be considered. The overall justice and equity of the ultimate award (including any proposed splitting order or the need for such an order) would then be considered.
65. In summary, then, the trial Judge has a discretion as to how superannuation interests will be treated in a particular case. If superannuation is not included in the list of property but rather made the subject of a separate pool, it will be necessary where a splitting order is sought, or extremely prudent where no such splitting order is sought (in order to ensure that justice and equity is achieved) to:
(a) value the superannuation interest (according to the Regulations if an order under Part VIIIB is sought or according to the Regulations or otherwise if no order is sought);
(b) consider and make findings about the types of contributions referred to in s 79(4)(a), (b) and (c) which have been made by the parties to the superannuation interests on either a global approach or an asset by asset approach depending on the circumstances;
(c) consider the other factors in s 79(4) being the matters in s 79(4)(d), (e), (f) and (g); and
(d) ensure that pursuant to s 79(2) the orders in relation to the parties' property, and any order under Part VIIIB in relation to superannuation interests are just and equitable.
The majority of the Full Court (Warnick, Boland and Cronin JJ) in Clives and Clives (2008) FLC 93-385 considered recently the case law in Coghlan (supra) and Hickey and Hickey and Attorney-General for the Commonwealth of Australia (2003) FLC 93-143. Significantly, their Honours said:
87. It appears to us that, although the majority in Coghlan (similarly to
the Full court in Hickey) did not expressly determine whether a
superannuation interest was property, but rather determined
superannuation interest was generally not an interest which was to be
adjusted as property under s 79, because it was to be considered or
adjusted at the same time as also determining property entitlement, the
statutory provisions and principles applicable to adjustment of property
under s 79 should be applied.88. Further it is clear from the majority’s decision that, in determining
whether an adjustment of property interests under s 79 is just and
equitable, for that process to be properly carried out, consideration must
be given to the overall effect of the adjustment of the non superannuation
assets and also consideration of the superannuation splitting order.89. It appears to us that it would be somewhat artificial to determine that when a party's superannuation interest is treated as property, and included in one list of assets and liabilities, and a trial Judge errs in respect of one aspect of the structured discretion undertaken in the four step approach in respect of that pool, notwithstanding the overall result is considered correct, for that determination to be subject of a different set of criteria on appeal to one where the superannuation is considered in a separate pool.
Indeed, in Clives (supra) their Honours emphasised (at paragraph 90) “…that any adjustment made by way of splitting order must be considered as part of the exercise of discretion in ensuring that the adjustment of property interests under s 79 are just and equitable…”. In that case the parties sought that their superannuation interests be dealt with in a separate pool, and that the contributions made by each party and consideration of s 75(2) factors to each party’s superannuation entitlement be dealt with discretely.
One of the grounds of appeal against this discretionary judgment concerned the treatment of the superannuation pool of assets of the parties and more specifically, in relation to the trial Judge’s assessment of contribution and s75(2) factors in respect of the superannuation entitlements. The trial Judge found that the husband had made the greater financial contributions to his superannuation fund but held that the wife had made indirect financial contributions and, following an assessment of s 75(2) matters, made an adjustment in her favour. His Honour found that the wife had an entitlement to 40 per cent of the husband’s superannuation and an entitlement to 60 per cent of her superannuation fund.
However, on appeal the majority (at paragraph 75) noted that his Honour did not explain the basis on which he assessed each party’s respective contributions to the wife’s fund, or the particular s 75(2) factors to be adjusted from that fund. If the trial Judge had assessed the wife’s contributions to her fund at 60 per cent with no adjustment made under s 75(2), then the majority found that there was no explanation as to why the wife’s contributions exceeded those of the husband. It was held that his Honour gave appropriate weight to the husband’s superior pre- and post- cohabitation contributions to his superannuation fund, but that insufficient weight to the disparity in the parties’ ages was given.
Their Honours said:
80. Of crucial significance in our view was the failure by his Honour, when dealing with relevant matters under s 75(2), to consider the quantum of the splitting order he proposed to make in the wife's favour (see Wilkinson and Wilkinson (2005) FLC 93-222 at paragraphs 37-39) namely that the wife's superannuation entitlement would increase from $76,944 to $170,456 and the husband's entitlement reduce from $310,731 to $217,219. We are satisfied this omission constitutes appealable error.
81. The lack of consideration of the effect of the proposed splitting order is, as we will shortly discuss, further exacerbated by the failure of the trial Judge to consider the overall justice and equity of the orders he proposed to make.
82. We are satisfied that the trial Judge's assessment of contributions and relevant s 75(2) factors in respect of the superannuation pool was outside the reasonable ambit of his discretion and constitutes appealable error. We are also satisfied that his Honour fell into error in failing to consider whether the effect of his determination of both pools resulted in an order to be made under s 79 which was just and equitable.
In Levick and Levick (2006) FLC 93-254 the husband was a well-remunerated investment banker and the wife had worked predominantly as a homemaker and parent during the 22 year marriage, in addition to undertaking study and some part time employment. At issue was whether the wife’s entitlement was to be satisfied entirely from the currently available property, i.e. non-superannuation assets, or whether the superannuation fund should be the subject of a splitting order accompanied by an increase in the proportion of non-superannuation assets. Justice Moore said (at paragraph 60) that this question “…has to be determined by reference to what is just and equitable in all of the circumstances.” Her Honour evaluated the competing proposals, which involve not dissimilar facts to the present case before me. I find it useful to set out Her Honour’s reasoning as below:
61. Mr Lethbridge argued for leaving the superannuation with Mr Levick and providing her with currently available assets. At the core of this is her need to rehouse after the Cronulla home is sold and to enable her to provide adequately for herself from investment funds.
62. Mr Brereton submitted, in effect, that both parties should have to wait for the entitlement to be paid and that outcome would be consistent with the underlying intent of the recent legislative changes. He conceded that Ms Levick needs to re-house after the sale of the Cronulla home, but he maintained that Mr Levick needs to do so as well, particularly in light of the extent of his responsibility for the children and the time they spend in his care, and that ought to be given just as much priority. I think that a reasonable proposition.
63. Mr Brereton tendered documents (exhibit 9) indicating the type and price of housing available for sale in the Cronulla area. That information suggests there are available for purchase three bedroom homes at prices between $505,000 and $665,000 and four bedroom homes at prices between $545,000 and $689,000 ie. an average asking price of $575,000 for three bedrooms and $625,000 for four bedrooms. This at least gives some idea of what each party would have to pay to set themselves up in a home in the same area at this juncture and therefore gives some picture of their post-settlement financial positions.
64. Of course with the home yet to be sold precise figures cannot be used in any calculations here. But working on the agreed value and without taking any account of selling costs, I have already referred to the cash each might expect to receive from the settlement if structured on a splitting of the superannuation without any adjustment to other assets to account for it.
65. From Ms Levick's $703,000 she will be required to meet not just purchase price but also the costs associated with that and removal expenses. The indicators are that she could acquire a three bedroom home in the same locale from those funds, meet the associated costs, and she may have some funds left over. But, being compelled to look at the position generally, it seems to me on that scenario things could end up being a bit tight, leaving her with little left over as a buffer for contingencies and independent living. This suggests her position of taking her superannuation entitlement by an adjustment to the other assets might be a better arrangement for her. Of course that would result in her taking now all of her entitlement from the currently available assets and it would leave her with no provision for her future retirement, save to the extent that she build that up after she starts to earn income later. As to the prospect of that, she will be 43 years of age in April and her chosen field is unlikely to produce a huge financial bonanza for her. So the probabilities are that she would have little or no retirement funds in that event. The tension between these two possible outcomes has led me to conclude that the better arrangement would be for her to take her entitlement partly by a splitting order and partly by an increase in entitlement to other assets. As to the apportionment, if she were to retain 40% of her superannuation entitlement under a splitting order, that would leave her with $82,551 invested in a Fund for her later security. The balance of 60% under a splitting order is $123,826. But of course that does not mean she should receive now additional assets of that value there has to be allowance for the delay and tax that will be payable by Mr Levick in due course on what remains in the Fund.
66. Having said that, the outcome must be just and equitable overall, not just to her, and it is necessary to say something about Mr Levick's position in either event. Acknowledging, as I have, the reasonableness of his wish to buy a home and taking the asking price of properties in the area as a guide, if a splitting order were made to meet all of Ms Levick's entitlement, he would still have insufficient capital to buy a property outright. Even less so if her entitlement were met entirely from other available assets. So I do not think the mid-course proposed disadvantages him in any real way. Not to be forgotten is his substantial earning capacity and his ability in the past to borrow at favourable rates from his employer — the last occasion being as recently as 3-4 years ago for $400,000.
67. Taking the view as I have that a compromise between the positions put by their counsel would produce a more just and equitable outcome for both of them and having taken the view that a splitting order as to 40% of her entitlement giving her a base figure of $82,551 for investment would be appropriate, the remainder of the exercise is a bit more involved. In the end result, I have calculated that Ms Levick should receive a further $97,025 or 7.57% (say 7.5%) of the available assets in return for relinquishing the balance of her entitlement under a full splitting order.
The relevant considerations which Justice Moore took into account in deciding the percentage in which the parties’ superannuation should be split were summarised by Ryan FM (as she then was) in H and H (2003) FLC 93-168 (at paragraphs 83-84), as follows:
-The purchase price of appropriate accommodation and rehousing costs for both parties.
-The need for a financial buffer for ordinary exigencies of independent living.
- The current level of the parties [sic] superannuation.
-The probability that the wife would be able to acquire appropriate superannuation benefits from her own future income.
-The husband's substantial earing [sic] capacity and ability to borrow significant sums at favourable rates (from his employer).
In considering the issue of a reasonable exercise of judicial discretion, the Full Court of the Family Court of Western Australia (Finn, Thackray and Crisford JJ) in Phipson and Phipson [2009] FamCAFC 28 opined:
30. Having discussed all of the relevant s 75(2) factors, his Honour indicated the adjustment he proposed to make and then went on to explain the one factor he had “taken into account in particular”. That factor was identified as being the “significant difference” in the parties’ earning capacities, which his Honour noted would continue for the remainder of their working lives and would affect their future superannuation entitlements. In drawing particular attention to these matters it is apparent his Honour placed most weight on the factors identified in s 75(2)(b) and s 75(2)(f).
31. In our view, his Honour’s reasons for coming to his decision, although brief, are adequate since it is possible to discern the reasoning upon which the decision was based. It is true his Honour did not explain why reliance on the matters identified justified an adjustment of 12% rather than some other figure. However, as the Full Court has said in Pastern & Pastern [2007] FamCA 620 at [99]:
It is in the nature of a discretionary determination that there is necessarily a gap between identifying and considering relevant factors, and expressing a conclusion as to the cumulative effect of those factors. No matter how detailed the reasons provided by the trial Judge might have been, a point would necessarily have been reached where his Honour moved from a qualitative discussion of those factors to a quantitative reflection of them in the form of a s 75(2) adjustment.
However, the Full Court went on to say:
51. In our view, the differences in the parties’ net incomes and the associated impact on their future superannuation entitlements, even when considered with the differences in their ages, could not justify a s 75(2) adjustment of 12%. The adjustment was outside the reasonable range of discretion and the appeal will therefore be allowed.
52. We should also observe that we consider it was incumbent upon the trial Judge to have regard to the fact that whatever additional portion of the non-superannuation assets the wife received on account of s 75(2) factors would be immediately available to her to invest. This would lessen to some extent the difference in the parties’ incomes. The fact that the wife might prefer instead to retain her unencumbered property is not the point – she has the option to liquidate assets in order to generate income. There is no indication that his Honour gave consideration to this issue.
Having regard to all of the matters in this case and the authorities above referred to, I conclude that justice and equity would be achieved in this case by division of the superannuation equally between the parties. In so deciding I have taken into consideration that the wife will need to re-house herself. I see the advantage to the wife if that can be achieved in a way which allows her to purchase a residence rather than to rent one. There is no evidence of the actual need of the wife in the future. That is will she have to live in a house as opposed to living in a unit. I will then assume that she may be able to live in a unit. There is no evidence of the cost the wife might reasonably face to rehouse herself in a unit. This raises all kinds of issues such as the necessity to live reasonably proximate to the area where the former matrimonial home was situate. In this case there is no evidence in that regard. Given the balance sheet as it has been determined by me and given that at this stage the Court’s determination is that the wife should receive 47.5% of the net assets I do not think it is unlikely the wife will not be able to afford to buy an accommodation reasonably proximate to the area where she has been living in the former matrimonial home. The same conclusion can be reached in relation to the husband.
I think it is reasonable for the wife to have a financial buffer “for ordinary exigencies of independent living.” Given her present entitlement to the division of the parties’ assets I think she would have that. I acknowledge it would be unlikely to be a large sum of money if she was to buy a property.
The wife has no superannuation at the moment. I think it is unlikely that the wife will be able to build any significant superannuation for herself in the future given the likely level of income she could earn, taking into account her qualifications and work experience.
I consider the husband has a high income earning capacity and will have the opportunity to rebuild a superannuation fund for himself prior to retirement.
I am required to consider the question of the justice and equity of the orders to be made by the Court when I have concluded all of the exercises set out in section 79(4) of the Act and so I will revisit this determination at the conclusion of these reasons. At this stage I propose to order the split proposed by the husband. I will consider the matters under section 75(2) so far as they relate to the pool of assets later in these reasons in the light of a proposed split of the husband’s superannuation so that the parties will each have the same amount of superannuation. In so doing I will be taking into account any further adjustment which I think might be appropriate under section 75(2) in relation to the superannuation pool.
Section 75(2)
The husband submits that there should be an adjustment in favour of the wife under s 75(2) and that adjustment should be 5%. It was conceded that the wife has some health limitations and that her capacity for work and the income she is likely to earn in the future is less than that of the husband. The husband submitted that the wife’s evidence about her employment should not be accepted and that clearly, she has a capacity to work on a full time basis in the types of jobs which she has applied for. There is no evidence before the Court as to what income might be generated from that employment but I am prepared to accept that it will be significantly less than the income that would be available to the husband on his future employment.
The wife submits that there should be a very significant adjustment under s 75(2) in her favour. She submits that there should be a finding that she be entitled to 60% of the parties’ assets. She submits that apart from the very large disparity in the parties’ future earning capacities she will have, additionally, the care of O at least until he concludes his Higher School Certificate this year. She says it is reasonable to predict that O will be dependent upon her, at least for accommodation, for some time after he attains the age of 18 years.
The wife submits that the husband actually resigned from his employment rather than being retrenched. I accept the husband’s evidence that he was in fact retrenched and he was retrenched in the circumstances which he described in his oral evidence.
The wife says that the husband has disclosed that in the last four financial years he has earned a taxable income in excess of $500,000 per year. It is submitted that notwithstanding his retrenchment in April 2009 he would have income from the rural New South Wales and Canada properties.
It is submitted that Ms R is a financial resource to the husband. I do not accept that submission and, even if I was satisfied that there was a relevant basis for asserting that I could take her financial circumstances into account, I would find that her capacity to support the husband or contribute to his support would be very limited.
As stated earlier in dealing with superannuation, I propose to make a splitting order which would provide each party with one half of the available superannuation pool.
The division of assets based on assessment of contribution will see the husband with $883,018 worth of net assets and the wife with $798,922 worth of net assets.
I accept that the husband has a much greater capacity to earn income (in terms of quantum at least) than does the wife. There is nothing to suggest that the husband will not in the short to medium future be in employment which earns him at least the amount of his basic compensation from his former employer. That capacity to earn what must be seen as a high income also brings with it other benefits such as the capacity to add to his superannuation considerably over the remaining years of his employment. The wife could not expect to be able to do the same.
I need to be careful about projecting too far into the future due to the vicissitudes of life.
The husband had the capacity to meet a significant payment of his legal fees post-separation from income, some of which (the fidelity bonus) was probably referable to pre-separation work on his part.
The wife has post-separation liabilities of $2,500 to Mr DE, $1,300 to Mr E, legal costs to Mark Brown & Associates still owing of approximately $40,000 (see exhibit W1) and liability to her forensic accountants of $6,500. The husband will have a liability of approximately $30,000 to pay in legal fees (see exhibit H2).
The husband had a credit card balance on the balance sheet which was removed by me of $4,400 and the wife had a credit card balance on the balance sheet which was removed by me in the sum of $9,756.
I take into account that included in the balance sheet as an asset of the wife is her paid legal costs of $45,640. I also take into account that in the balance sheet there is an asset of the husband of $40,000 which was paid on his credit cards from the retrenchment package. Both those assets will be of no benefit to the parties when the balance sheet assets are divided.
I also take into account that until the sale of the rural property is completed the husband will have to meet the order of the Court made 30 June 2008 from his capital. I envisage it may take up to three months to complete the sale.
I propose to make any adjustment under section 75(2) in the division of assets on the balance sheet and leave the parties with equal amounts of superannuation. I do so for the purpose of simplifying the orders which will need to be made in relation to superannuation splitting. I note that each of the parties will take $189,673 in superannuation. I consider that an adjustment should be made in favour of the wife in relation to the superannuation pool. For reasons stated earlier and later in these reasons I consider the superannuation pool should be split equally and that the wife’s adjustment in relation to that pool translated to the asset pool.
Taking all of those matters into account I conclude there should be an adjustment in favour of the wife such that the asset pool of the parties should be divided 56% to the wife and 44% to the husband in circumstances where each of them would retain one half of the superannuation pool.
That determination will mean that the wife will receive $941,886 and the husband will receive $740,054 from the net asset pool. The wife will receive $201,832 more than the husband in net property. In addition the parties will have the fund of $74,200 set aside from the sale of the rural property to meet the sale expenses and capital gains tax.
Having reached the conclusion that the wife should receive 56% of the parties’ net assets I need to determine how that might be achieved. The wife has the following assets and liabilities on the balance sheet as determined by me.
ASSETS
2005 Honda $13,500
2004 Augusta motor bike $12,000
Household contents and art $10,000
Bank account $ 1,400
Paid legal costs $45,640
Total Assets $82,540
LIABILITIES $ NIL
NET ASSETS $82,540
The wife is to receive $941,886 as her 56% of the net assets in the balance sheet. She takes from the balance sheet assets which are hers of $82,540. She has no liabilities in the balance sheet which are solely hers. The wife therefore needs to receive $859,346 in other net assets from the balance sheet.
I am required to have regard to the matters set out in ss 79(4)(d), (f) and (g) of the Act. The impact of those sections has been considered by me in reaching the determination set out above or has no relevance to the facts of this case.
The wife wishes to retain the former matrimonial home in Sydney as her property. In order to do so she needs to be able to retain the property without debt. The equity in the home is $736,550. To achieve that equity four mortgages are deducted. The mortgages total $603,700. The sale costs are $34,750. The wife could not afford to service that debt and so the property will need to be sold.
The wife wishes to remain in the property until O completes his schooling this year. The husband agrees to that proposal. I think it reasonable to conclude that the wife will have the benefit of the occupation for about 11 months from the date hereof. I calculate that O will complete his study in November this year. The house will then need to be listed for sale. I do not think it is unreasonable to allow six months thereafter to achieve a sale and complete same. During that time each of the parties will have to apply their capital to meet the mortgage commitments on the property unless they obtain employment (or better paid employment in the case of the wife).
I need to consider what the arrangements should be put in place to service the mortgage and the other statutory outgoings on the property such as rates and taxes together with insurance during that time. The husband proposes that the wife should be paid $50,000 from the liquid funds available and from that fund she should be responsible for meeting the mortgage payments. Before considering that I propose to consider the wife’s spouse maintenance claim.
The Spouse Maintenance Claim
The wife seeks spouse maintenance in the sum of $4,000 per month. The wife has a limited income. The evidence is that she receives slightly more than the income disclosed in her Financial Statement of $63 per week from her part time employment. She is however actively seeking further employment of a more regular, if not full time, nature.
There is currently an order which sees the husband pay the wife the sum of $655 per week together with the payment of all of the outgoings on the Sydney property. That order was made at a time when the husband was in employment. In April 2009 he lost his employment.
Section 72 of the Act is as follows:
FAMILY LAW ACT 1975 - SECT 72
Right of spouse to maintenance
(1) A party to a marriage is liable to maintain the other party, to the extent that the first mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:
(a) by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b) by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c) for any other adequate reason;
having regard to any relevant matter referred to in subsection 75(2).
(2) The liability under subsection (1) of a bankrupt party to a marriage to maintain the other party may be satisfied, in whole or in part, by way of the transfer of vested bankruptcy property in relation to the bankrupt party if the court makes an order under this Part for the transfer.
Is the wife “unable to support herself adequately”?
The wife has an income of $64 per week from employment and share dividends. I should note that although the wife acknowledges an income from IAG Shares there is no note of IAG shares as an asset of the wife in her Financial Statement or in the balance sheet.
The wife has liabilities for insurance and registration on her car. She has a debt to Mastercard and to Visa. Her other costs of supporting herself are $626, as set out in her statement.
I accept that the wife is making a genuine attempt to obtain employment.
I accept that the wife does have a need for maintenance in the sum of about $655 per week at this time. I accept that the wife is unable to support herself adequately as she does not have an income from employment sufficient to do so.
Is the husband reasonably able to afford payment of $655 per week?
The husband is currently unemployed. There is no evidence to establish the prospect of the husband being able to find suitable employment quickly. The husband’s case has been run on the basis that he anticipates being able to find employment in the future which will provide him with greater remuneration than the wife is likely to achieve.
The wife’s need for spouse maintenance will exist until the former matrimonial home is sold. At that time the wife’s need for spouse maintenance should be reviewed.
The husband has an income from the Canada property which is now financially unencumbered. He also has an income from the rural property until the sale is completed.
The husband’s Financial Statement filed on 8 May 2009 shows an income of $205 per week for the Canada property and $525 per week for the rural property. That is a total of $730 per week. There are levies to be paid for each property totalling $257 per week. As against that he has mortgage expenses of $1,262 per week.
The only pool from which to meet the parties’ expenses at the moment is from capital.
It is the husband’s proposal that the wife be provided with a lump sum payment of $50,000 forthwith and that the balance of her entitlement come from the sale proceeds of the former matrimonial home. It is further proposed that the wife be responsible for payment of the regular outgoings on the property such as rates, taxes and insurance, together with part of the mortgage payments. The husband’s proposal is set out in a further minute of order sought by the husband as contained in exhibit H8. The husband’s proposed minute of order would see the continuing of the orders made on 30 June 2008 until the completion of the sale of the rural property. It would also see the husband being responsible for the payment of the interest on the $260,000 liability charged against the Sydney property.
The parties should be able to list the property in Sydney for sale about the middle of November 2009. If I allow a period of six months to complete a sale that will mean that the wife will have to support herself on her capital (absent obtaining more remunerative employment) for a period of 11 months from the date of these orders. It is difficult to put a precise figure on the need of the wife in this period as part of the husband’s Financial Statement which sets out the amounts paid for weekly mortgage payments are intermingled. However, doing the best I can I conclude the wife will need about $60,000 in order to support herself and meet the mortgage payments suggested by the husband in his minute of order together with the other outgoings on the property. Given that a payment of $60,000 will not give the wife any ability to discharge her debts, including legal costs, I think it is reasonable that the fund to be paid to her as advanced property settlement should be $100,000. That would leave the husband with cash of about $188,000 (subject to a requirement to pay the wife an additional sum of cash in order to meet the division of assets determined by the court) comprising the balance of the sale proceeds of the rural property (about $10,800) and the accounts in his name on the balance sheet. The parties would also have the balance of the funds from the $74,200 to be set aside from the sale proceeds of the rural property to meet the costs of the sale and any capital gains tax. Each of the parties would then have to support themselves from their capital until obtaining further employment.
As stated earlier the rural property has been sold. The proposed order would see the sale proceeds being applied as follows;
Rural property sale price $720,000
Less sale costs and CTG fund $74,200
Less mortgage payout $535,000
Less payment to the wife $100,000
Total liabilities $709,200
Net receipt from rural property $ 10,800
It is inherent in the husband’s approach that once the wife receives the sum of $100,000 from the sale of the rural property then the maintenance order made on 30 June 2008 should be discharged. I agree with that approach. The husband further submits that the wife should be responsible for payment of some of the mortgage and outgoings on the Sydney property. I agree with that submission unless and until the parties’ other financial circumstances change significantly (such as the husband obtains a high paying job or the wife obtains a job which pays her significant income).
As stated earlier I conclude that when the house has been sold then there should be the opportunity for the wife to apply for spouse maintenance should she have a case for same at that time. Thus the order made on 30 June 2008 so far as it provides for the payment by the husband of maintenance, other payments associated with the mortgages on the Sydney property, outgoings on the property and expenses for O will need to continue until the completion of the sale of the rural property. Following that time, other orders will need to be made requiring each of the parties to be responsible for payment of particular expenses associated with the Sydney property.
Returning then to the question of division of the parties assets to satisfy the determination of the Court, the wife is to receive $859,346 of property together with retaining the assets which are hers in the balance sheet and identified earlier in these reasons. She is to be paid $100,000 from the sale proceeds of the rural property. That will mean she is to receive $759,346 from the sale proceeds of the Sydney property.
The Sydney property will give rise to the following equity:
Assumed sale price $1,375,000
Less agents commission and legal costs of sale $ 34,750
$1,340,250
Less Overdraft 2631 $150,000
Less mortgage 5884 $113,000
Less Mortgage 3342 $ 80,700
Less Mortgage 0384 $260,000
$603,700$ 603,700
$736,550
Given that the wife will have a shortfall of $22,796 that sum should be paid to the wife by the husband at the time of the completion of the sale of the rural property or earlier at his option. Should he pay the sum prior to the completion of the sale of the rural property then as and from the date of that payment the requirement for the husband to pay the $655 per week pursuant to the orders of 30 June 2008 will be discharged.
Following the sale of the Sydney property and the discharge of the mortgages the wife will receive all of the sale proceeds. I realise the sale price achieved in 11 months’ time may be different to the value of the property on the balance sheet. That is one of the vicissitudes of life. If the value of the Sydney property declines then it is equally possible that the value of the husband’s property in Canada may also decline. There is no method of dealing with these contingencies without postponing the determination until after the Sydney property is sold. Neither party has submitted I should take that course of action.
Just and Equitable
The conclusion reached by me in this case will see the wife receiving $201,832 more in net assets that the husband. Each of the parties will share the same entitlement to the current superannuation pool. That is, each will have $189,673 which is a good start to prepare for retirement in the next 15 years or so. The wife will have occupation of the Sydney property for another 11 months during which the husband will be contributing further to the support of that property by meeting one of the mortgage payments. The mortgage to be contributed to by the husband is tax deductible for him. He does not have any employment at this time however, he is clearly optimistic that such a state of affairs is temporary. He has some minimal income from the Canada and rural New South Wales properties (until settlement of the sale). The wife has some employment however it is insufficient to support her. She is applying for other jobs. She will have to live off her capital until she obtains better paid employment. She does not appear to be optimistic about obtaining employment in the short term.
In relation to the split of the superannuation pool I conclude that in this case the wife will have a greater need for capital arising from the division of their assets to assist her with rehousing herself. The husband also has a need for capital to re-house in a property which he owns. The ability for each party to own a property in which to reside will be an important consideration for them as they approach retirement. I conclude that in all probability the husband’s ability to borrow money in the future to apply towards the purchase of a residence for himself will be greater than that of the wife and accordingly I conclude the adjustment which the wife should have as a result of consideration of the section 75(2) factors related to the superannuation pool should be reflected by additional adjustment in respect of the asset pool. That adjustment has already been made by me as set out earlier. That process in this case will contribute to the proposed division of assets as indicated by me as being just and equitable.
In the circumstances of this case I think the result proposed by me is just and equitable.
Orders to be Made
As set out earlier in these reasons, the husband is to cause the sum of $100,000 from the sale of the rural property to be paid to the wife from those sale proceeds. In addition the husband is to pay the wife the sum of $22,786. The timing of that payment is left in the hands of the husband until the completion of the sale of the rural property. The husband has the option to pay that amount earlier than the completion of that sale and in such an event his major obligations to pay maintenance are to cease.
A fund is to be set aside from the sale proceeds of the rural property to meet the expenses of sale and the possible CGT on the sale proceeds. The fund of $74,200 was nominated by the husband and the basis of the calculation set out in his Financial Statement in unchallenged form. Should the fund prove to be too much then the balance should be divided 56% to the wife and 44% to the husband. Should it be insufficient the parties will need to contribute in the same proportions.
Orders will be required for the sale of the Sydney property. That sale will be postponed until O concludes his Higher School Certificate examinations in this year.
Once the wife receives the $100,000 fund from the sale of the rural property or the fund of $22,786, whichever first occurs, then the maintenance orders made 30 June 2008 are to cease to operate. Thereafter the husband is to be responsible for the payment of the instalments required by the mortgagee in respect of loan 0384 secured against the property and the wife is to meet the balance of all expenses associated with the property pending the completion of the sale.
On 22 June 2009 I had my Associate forward to each of the parties the following request for further written submission:
1. Maintenance Order.
I am proposing to order that the wife receive from the sale of [the rural property] $100,000 as advance on her property settlement. I also propose to order the husband pay an additional $22,796 to the wife as property settlement either at the time of the settlement of [the rural property] or earlier if he so chooses. Once the wife receives the $100,000 from the sale of [the rural property] or the $22,796 from the husband then the maintenance order is to cease to operate. The husband will be ordered to pay one of the mortgages secured against the [Sydney] property from that time until that property is sold.
Once the [Sydney] property is sold I propose to grant the wife a period of 28 days in which to lodge any application for spouse maintenance which she may be advised to file. I suspect that she will not be in a position to successfully seek a spouse maintenance order at that time because of her capital which I envisage she will have.
Is there any reason why I should not grant the wife that opportunity?
2. The Sale Order for [the Sydney property].
The orders I am proposing will see the wife receive the balance of the sale proceeds from the [Sydney] property. Thus if the property sells for more than the price listed in the balance sheet the wife will receive a sum greater than that envisaged by the judgement I propose to give. Conversely if the property sells for less than that set out in the balance sheet the sum she receives will be less than that envisaged by the judgment. Do you wish to make any further submissions about this aspect of the case.
In response to the request the husband made a written submission on 26 June 2009. The wife declined to make any further submission. The husband in his submission opposes the granting of leave for the wife to seek spouse maintenance after the completion of the sale of the Sydney property. The reasons are stated in the submission. There is nothing in those submissions which persuades me to depart from my stated proposal to grant that indulgence to the wife.
In relation to the sale of the Sydney property the husband again opposes the wife receiving all of the proceeds of the Sydney property. He is concerned that the property may sell for more than the value on the balance sheet at the conclusion of the period of the wife’s occupancy agreed to by the husband. In such circumstances he says he should benefit from the increased sale price. He said he would be prepared to contribute further to the wife’s payment if the sale price is less than that provided for in the balance sheet.
Having regard to the fact that the husband is prepared to share in any loss sustained on the sale of the property I think it just and equitable that he be able to share in any of the net sale proceeds that exceed $736,550 being the wife’s anticipated entitlement under these reasons. Accordingly there will need to be orders to facilitate that provision.
There should be provision for the extension of the time in which the wife can apply for spouse maintenance until the expiration of one month after the completion of the sale of the Sydney property. It may well be that at such time the wife would not be able to satisfy the threshold in s 72 of the Act; however, I think she should be given the opportunity to assess her circumstances at that time and obtain some advice.
Although the rural property has been sold the sale is not completed. As such there must be some slight possibility that the sale will not be completed. Thus an order should be made requiring the sale.
A splitting order will be made as referred to earlier. At the time of the hearing the Trustee of the husband’s superannuation fund had not been served with a copy of the order being sought by the husband. I ordered that be done on the last day of the trial. The husband’s lawyer has since that time provided me with a letter from the superannuation fund advising that there would be no opposition to the proposed order by the Trustee of the fund. That letter has been marked as exhibit H9 in the hearing.
I certify that the preceding one hundred and fifty nine (159) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench.
Associate:
Date: 29 June 2009
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