M and M
[2005] FCWA 73
•11 JULY 2005
JURISDICTION:
FAMILY COURT OF WESTERN AUSTRALIA
| ACT: | FAMILY LAW ACT 1975 |
| LOCATION: | PERTH |
| CITATION: | M and M [2005] FCWA 73 |
| CORAM: | THACKRAY J |
| HEARD: | 15 JUNE 2005 |
& WRITTEN SUBMISSIONS
| DELIVERED: | 11 JULY 2005 |
| FILE NO/S: | PT 6420 of 2003 |
| BETWEEN: | [M] Applicant/Husband |
| AND | |
| [M] Respondent/Wife | |
| Catchwords: |
PROPERTY SETTLEMENT -superannuation - alleged anomaly in prescribed valuation of defined benefit interest - appropriate mix of property and superannuation.
Legislation:
Family Law Act 1975, s 75(2), s 79, s 81, s 90MT(1), s 90MU(2) Family Law Legislation Amendment (Superannuation) Act 2001 Family Law Amendment (Annuities) Act 2004
Family Law (Superannuation) Regulations 2001
Family Law (Superannuation) Amendment Regulations 2005
Category: Not Reportable
Representation:
Counsel:
| Applicant: | Ms P Keeley |
| Respondent: | Mr R Hooper |
Solicitors:
| Applicant: | Clairs Keeley |
| Respondent: | Anderson Kershaw |
Case(s) referred to in judgment(s):
Cantarella & Cantarella (1976) FLC 90-056
Coghlan & Coghlan (2005) FLC 93-220
Dench & Dench (1978) FLC 90-469
Gardner and Gardner [2003] FamCA 249
Hickey & Hickey (2003) FLC 93-143
Rankin & Rankin [2005] FamCA 386
Wilkinson & Wilkinson (2005) FLC 93-222
Woollams & Woollams (2004) FLC 93-195
1 On 3 June 2005 I published my judgment in these proceedings concerning competing applications for settlement of property. I had been asked to determine the appropriate percentage division, but to refrain from making final orders until the parties could adduce further evidence and make submissions about the valuation/division of their superannuation. I decided a just and equitable outcome would be a 60:40 division in favour of the wife.
2 Both parties have now made further submissions (albeit the husband’s written submissions were prepared without the benefit of legal assistance). To finalise the proceedings I am required to determine:-
• the valuation of the husband’s superannuation; • the mix of property/superannuation each party is to receive; • who should receive the former matrimonial home.
Superannuation orders sought
3 In his amended application filed on 26 November 2004, the husband sought the following orders dealing with his superannuation:
“4.
Pursuant to Section 90MT(1)(a) of the Family Law Act 1975, whenever a splittable payment becomes payable in respect of the husband’s interest in the UniSuper Defined Benefit Plan and UniSuper Award Plus Plan the wife shall be entitled to be paid an amount calculated in accordance with the regulations using a base amount at the date of these orders in the sum of $54,000 in relation to the Defined Benefit Plan and $26,000 in respect of the husband’s interest in the UniSuper Award Plus Plan and that there be a corresponding reduction to the entitlement the husband would have had in the funds but for this order.
5.
Pursuant to Section 90MY the wife to bear the costs, expenses, fees and charges associated with implementation of this order.
6.
Pursuant to Section 90MD of the Family Law Act 1975 the operative time for the payment is the date of these orders.
7.
The husband shall, immediately upon receipt by him of this order, serve a copy upon the Trustee of the UniSuper Fund.
8.
The terms of paragraphs 4 to 6 inclusive of these orders bind the Trustee of the UniSuper Fund.”
4 The orders initially sought by the wife concerning the husband’s superannuation were contained in a Minute attached to her Papers for the Judge filed on 1 March 2005. These were as follows:
“13. Orders in the nature of immediate splitting orders be made to cause the transfer to superannuation funds nominated by the wife of $55,000 or thereabouts of the husband’s superannuation entitlements. 14. In the event that it is not possible to promptly effect transfer to superannuation fund nominated by the wife as contemplated by paragraph 13 above then the husband’s UniSuper Defined Benefit Fund be flagged with payment to the wife of 25 percent of the net value of all of the husband’s interest and entitlements in that fund as and when the same are payable to the husband and consequential orders to effect such arrangements.”
5 At the last hearing on 15 June 2005 counsel for the wife intended to hand up a Minute of the orders the wife proposes to give effect to my judgment. He overlooked doing so, but the document was subsequently provided. The wife now seeks the former matrimonial home (subject to the mortgage) and the assets already in her possession. The Minute seeks that the balance of her 60% entitlement be made up:
“(a) as to 50 percent by way of superannuation splitting order;
(b) as to 50 percent by payment of money”.
6 On my calculations, the outcome proposed by the wife involves her receiving approximately 77% of the currently available assets and 30% of the superannuation.
7 Since the last hearing the husband’s solicitors have also provided an Amended Minute of proposed orders. The husband now seeks an equal division of all of his superannuation.
The parties’ superannuation
8 The wife has two modest superannuation entitlements. She has $2,467 in Asgard and $796 in West State Super.
9 The husband is a member of the UniSuper Fund. His interest in that fund comprises two entitlements:
(a) an accumulation benefit; (b) a defined benefit, which he may take as a lump sum or a pension.
10 The husband’s UniSuper benefits were valued in accordance with the Family Law (Superannuation) Regulations 2001 (“the Regulations”) at 8 March 2005. The gross value of the accumulation benefit was $34,853. There was a minor difference in the parties’ valuations of the defined benefit entitlement. The wife’s expert says that portion of the husband’s superannuation was worth $144,349, whereas the husband’s expert says it should be $142,221. This minor discrepancy will be discussed below. It is now accepted that for the purposes of any splitting order, the two parts of the husband’s UniSuper entitlements must be treated as one benefit – see Regulation 33.
11 The husband also has an interest in a Commonwealth Rollover Fund, with an accumulated balance of approximately $25,000. At the hearing on 15 June 2005, the husband’s counsel (who was not counsel at trial) advised that she understood the husband’s interest in the Commonwealth Rollover Fund was both transferable and accessible. The Court had previously been informed that the interest in the Fund was a deferred annuity and did not fall within the scope of the superannuation splitting scheme laid down in Part VIIIB of the Family Law Act 1975. Statements from the Trustee indicated that the funds were required to be preserved. It therefore seemed unlikely the interest in the Fund was in fact transferable and accessible. Counsel for the husband accordingly undertook to make enquiries to ascertain the true position.
12 On 17 June 2005 I caused a letter to be sent to the parties to draw attention to the fact that the Family Law Amendment (Annuities) Act 2004 and the Family Law (Superannuation) Amendment Regulations 2005 had come into effect on 15 June 2005 – the same day the matter had been argued before me. The effect of these amendments is to bring deferred annuities within the legislative framework applying to other forms of superannuation interests. Thus, although the Commonwealth Rollover Fund could not have been “split” at the time of trial, it is now open to me to do so. Both counsel have confirmed they accept this is the case.
The valuation of the husband’s defined benefit fund
13 I have noted above the disparity in the valuations of the husband’s defined benefit entitlement in UniSuper. The difference is only $2,128.
14 Each party relied upon calculations provided by actuaries – Mr Dennis Barton for the wife and Mr Kevin Bowman for the husband. The differences in approach were outlined in an email from Mr Barton to the husband dated 12 May 2005. The husband suggested I resolve the issue by “splitting the difference”. Whilst attractive, this option is not available to me in the absence of consent. Instead, I find that the value of the husband’s combined UniSuper entitlements pursuant to the Regulations is $178,392 – i.e. $810 less than the value calculated by Mr Bowman. My finding arises from consideration of the five minor points of departure between the valuers identified in Mr Barton’s email.
Rounding and interpolation in reversion factor
15 These two discrepancies relate to amounts of $6 and $61 respectively. Both are de minimis, but in the second instance Mr Barton concedes he was in error. I will adopt Mr Bowman’s figures on both.
Reversionary factors
16 This explains $1,543 of the discrepancy. Mr Barton used a reversionary factor of 1.5409, whereas Mr Bowman used 2.025. Mr Barton’s figure was taken from Schedule 4 of the Regulations, whereas Mr Bowman’s figure must have been taken from Schedule 2. Schedule 4 prescribes the method for determining the value of a defined benefit interest in the payment phase. Schedule 2 prescribes the method for determining the value in the growth phase. As the husband’s interest is in the growth phase, I consider Mr Bowman has applied the correct factor.
Pension conversion factor
17 This explains $810 of the difference. Mr Barton used a pension conversion factor of 14.97, whereas he says Mr Bowman used a factor of 14.79. Exhibit 3 indicates that the appropriate factor was 14.97. I assume Mr Bowman mistakenly transposed the last 2 numerals. Mr Barton’s figure is to be preferred.
Date of birth
18 Mr Barton made his calculations based on his understanding that the husband had been born on 2 July 1956. This resulted in a $292 difference from Mr Bowman’s calculation. According to his affidavit, the husband was born on 21 July 1956. Mr Bowman worked on the correct date.
Submissions of each party
19 Counsel for the wife argued that the valuation arrived at by application of the formula in the Regulations produces a result that is unfair to his client. He drew attention to the fact that Mr Bowman’s valuation of the husband’s defined benefit entitlement was $144,349 whereas, if the husband had resigned on the date the valuation was performed, he would have “received” $187,920 for that part of his entitlement.
20 Nevertheless, counsel advised that the wife would not quibble with the use of the valuation provided by the Regulations, so long as she was permitted to take her settlement in the form she proposes – i.e. weighted more heavily with readily available assets and less heavily with superannuation. Counsel’s submission was that :-
“given the discounting of benefits that is contained within the superannuation regulations …there is no warrant for discounting the value of what the husband is to retain in the event that the bulk of his property entitlement is made up of superannuation”.
21 Counsel for the husband disagreed with this approach. She submitted that the Court was bound to apply the figure calculated in accordance with the Regulations in splitting the husband’s UniSuper entitlements.
22 The husband had also originally submitted that a fair result could only be achieved if his superannuation was split in proportions 60:40 in favour of the wife - being the proportions in which I had determined all the assets should be divided. Relying upon evidence in an affidavit from Mr Barton, the husband argued that if I required him to take more than 40% of the superannuation, he would need to be compensated by being allocated more than 40% of the total pool. This would be by way of what Mr Barton called an “asymmetry adjustment” to reflect the fact that an “illiquidity penalty” operates against the party whose settlement is more heavily weighted with superannuation. This penalty is compounded by virtue of the fact that the superannuation, when received, will be subject to taxation.
23 In correspondence received after the hearing, the wife’s solicitors maintained that Mr Barton’s affidavit had not been received into evidence at the trial and took objection to it. In response, the husband’s solicitors advised that to “simplify matters”, they would not rely upon Mr Barton’s affidavit. Furthermore, as noted above, the husband’s Amended Minute now proposes that the wife receive only 50% of the husband’s superannuation entitlements – i.e. there is a concession that the wife’s settlement should be weighted slightly more heavily with readily available assets than superannuation.
24 These submissions gave rise to a disagreement about what is claimed to be a late attempt to amend the relief sought. The wife argues that it would be unfair to allow the husband to depart from the proposal contained in his amended application filed in November 2004, which involved the wife being allocated only $80,000 from the husband’s UniSuper and nothing from his Commonwealth Rollover Fund. The perceived unfairness arises because the wife says she “presented her case, including her position in relation to appropriate level of adjustment for Section 75(2) factors on the basis that the range of superannuation split” was going to be somewhere between what she had proposed and what the husband had proposed.
25 I do not accept the wife’s argument. The husband’s original proposal in relation to superannuation was made at a time when he was saying the assets should be divided equally. However, I allowed the wife 10% more of the assets than the husband thought was appropriate. In these circumstances it is perfectly reasonable for the husband to say that the wife should take a greater amount of her settlement in the form of superannuation than he originally suggested. I am no more bound to limit the wife’s share of the superannuation to the amount originally proposed by the husband than I was limited by his proposal to split everything equally.
The law
26 Before giving consideration to these submissions, it is important I make a few observations concerning the relevant law and some recent developments.
27 The Family Law Legislation Amendment (Superannuation) Act 2001 inserted Part VIIIB into the Family Law Act 1975. That Part enables the Court to make orders in relation to the superannuation interests of the parties, including orders that split the entitlements.
28 At the time of trial, the decision of the Full Court in Hickey & Hickey (2003) FLC 93-143 was the authoritative statement of the manner in which the Court should proceed in dealing with cases involving superannuation splitting. The Full Court had determined that the effect of s 90MC is that a superannuation interest is:
“to be treated as property irrespective of whether or not a splitting or flagging order is sought or proposed to be made… Because a superannuation interest is to be treated as property in s. 79 proceedings it follows that it will be included in the list of property and valued at what is step one of the preferred four step approach to the determination of an application pursuant to s. 79”.
29 On the day prior to publication of my judgment, the Full Court handed down its decision in Coghlan & Coghlan (2005) FLC 93-220. By the slenderest majority, the Full Court took the view that the decision in Hickey & Hickey placed an unwarranted “gloss” on s 90MC in deciding that a superannuation interest is to be treated as property, regardless of whether a splitting or flagging order is sought or proposed to be made. The majority took the view that s 90MC was merely a provision that extended the Court’s jurisdiction by allowing orders to be made relating to the superannuation interests of parties involved in property settlement proceedings.
30 The majority of the five-member Full Court in Coghlan & Coghlan was of the view that henceforth “superannuation interests are to be regarded as another species of asset in relation to which orders can be made”. As a consequence, their Honours considered that it is unnecessary to determine whether or not the superannuation interests of the parties may be “property” within the meaning of s 4(1) of the Act or whether they are only a financial resource.
31 The majority went on to provide guidance to trial judges dealing with superannuation interests. Their comments are only obiter dicta in a case such as the present where a splitting order was sought, since a splitting order had “apparently” not been sought in Coghlan & Coghlan. Nevertheless, I consider I should treat the remarks of the majority as if they were binding upon me in this matter.
32 Their Honours were of the view that it is still within the proper exercise of the trial judge’s discretion to include a superannuation interest in the asset pool, whether or not a splitting order is sought. According to the majority, this approach can be adopted:
• Where the parties agree it should be adopted; • Where the Court is satisfied that the superannuation interest is property within the meaning of s 4(1) of the Act; • Where the superannuation interest is not property within the meaning of s 4(1), but is of relatively small value in the context of the value of the other assets in the case; or • There are features about the interest that lead the Court to conclude that this would be an appropriate approach. 33 The majority went on to say that having included the superannuation interests in the asset pool, the trial judge should then assess the parties’ contributions to all of the assets, including the superannuation. The Court can do so either on a global or asset by asset basis. Having done so, it may then be necessary when assessing the s 75(2) factors to have regard to the parties’ future superannuation entitlements, prior to proceeding to the final step of the process, which is designed to ensure the overall outcome, including any proposed superannuation splitting order, is just and equitable.
34 Notwithstanding that the approach described above has been mandated as an appropriate exercise of discretion in some cases, the majority in Coghlan & Coghlan considered that the preferred approach “must be to prepare in addition to the list of items of property…a separate list containing any superannuation interest…”. If this preferred approach is followed, the Court must still weigh the contributions of the parties to the superannuation, deal with the s 75(2) factors and then ensure the overall order in relation to the superannuation interests is just and equitable.
35 The majority in Coghlan & Coghlan was of the opinion that the separate treatment of superannuation involved in the “preferred approach” is more likely to ensure proper recognition is given to the parties’ direct and indirect contributions to the superannuation interests. Importantly, they observed that this approach allows “the real nature of the superannuation interests in question [to] be taken into account, both in consideration of the s 75(2) matters and in the final assessment of whether the ultimate order is just and equitable”. However, there is nothing in their judgment to suggest that the “real nature” of the superannuation interests should be overlooked in those cases where the superannuation is simply included in the list of all the other assets.
36 The majority in Coghlan & Coghlan directed trial judges who use the preferred approach to value the superannuation according to the Regulations in cases where an order is sought to split the superannuation entitlements. This is, of course, the requirement laid down in ss 90MT(2) and 90MT(2A). It is no doubt this legislative direction on which counsel for the husband bases her submission that the Court should not look behind the valuation calculated in accordance with the Regulations.
37 In Woollams & Woollams (2004) FLC 93-195 I dealt with a case involving an accumulation superannuation fund. I was faced with a dilemma arising from the fact that almost 90% of the husband’s settlement comprised superannuation entitlements, which the parties had agreed should be valued in much the same way as prescribed by the Regulations. After considering various issues, I made these observations:
“I should, of course, say that this discussion has proceeded on an un-stated premise – namely that the valuation of an interest in a superannuation fund pursuant to the Regulations throws up a figure that is not in fact the real value of the fund to the parties. This would seem to be the firm view of most of the Judges and Federal Magistrates to whose decisions I have referred above. It is certainly my view – at least in the case of accumulation funds in the growth phase. And I also believe from my experience as a solicitor, barrister and Registrar that this is the view of litigants who see much greater value attaching to assets that they can readily access than to superannuation of similar “value” that they will not be able to access for years.
No doubt this is the reason why the legislation makes plain that the court is obliged to value the entitlement in accordance with the Regulations only in those cases where it intends to make an order pursuant to s 90MT(1). However, unless the entitlement is to be split fairly evenly, there may still arguably need to be an adjustment in some cases where an order is made under s 90MT(1) to compensate the party who is left with the greater proportion of the superannuation entitlements and a lesser proportion of the realisable assets.”
38 In his recent contribution to Australian Family Lawyer (Vol 18 No 2 Autumn 2005), Mr Stephen Bourke discussed my judgment in Woollams. Having quoted the first of the two paragraphs set out above, Mr Bourke commented, “The statement in Wollams [sic] suggests that the correct approach to the valuation of superannuation is value to the owner”. But he then posed the question, “Is this correct?”
39 Mr Bourke was reviewing a large number of cases and space limitations did not permit him to quote extensively from all of them. However, had he been able to quote the second of the paragraphs from Woollams set out above, it would have been apparent that I accept the Court is obliged to value the entitlement in accordance with the Regulations in those cases where it intends to make a splitting order. This was not the position in Woollams.
| 40 | Nevertheless, Mr Bourke went on to say in his article: “The legislature has gone to great lengths to prescribe the approach to obtaining an amount to be taken as the value when power under s 79 is exercised. When the Court is not exercising its powers under s 79, the statement in Wollams suggests that the Court can ignore the actuarial expertise which underpins the Family Law (Superannuation) Regulations 2001 and rely on the value to the parties, who are required under superannuation law to forgo current income to save for their retirement. The actuarial assumptions in the valuation methodology have regard to future inflation, investment earnings, interest rates and other factors. It is submitted that the prescribed valuation cannot be ignored.” |
41 With respect to Mr Bourke, whose expertise in this area is widely acknowledged, the prescribed valuation can be ignored in cases where the Court does not propose making a splitting order, which is what I understand he meant when referring to cases in which “the court is not exercising its powers under s79”. This is so because there is no prescribed method of valuation in such cases. This was the decision of the Full Court in Hickey & Hickey (at para 89) and the same view was expressed in the judgment of the majority in Coghlan & Coghlan (at paras 63 and 65). S 90MU(2) has no application to cases such as Woollams where no splitting order is contemplated.
42 Furthermore, I have reservations about accepting Mr Bourke’s assertion that it is “actuarial expertise which underpins the Family Law (Superannuation) Regulations 2001” insofar as those Regulations deal with accumulation funds – which is the type of fund with which I was dealing in Woollams. The actuarial assumptions to which he refers are those that underpin the valuation of defined benefit funds. Accumulation funds are valued by reference to the amount of money currently invested in the member’s account – the valuation pays no attention to “future inflation, investment earnings, interest rates and other factors”.
43 The approach I adopted in Woollams was to give the husband a greater share of the currently available assets to compensate him for being left with all of the superannuation assets. I pointed out that some other judicial officers had been adopting a similar approach. The views underpinning that approach have now received a more authoritative expression in Coghlan & Coghlan – not just in the judgment of the majority, but also in the separate judgments of Warnick J and O’Ryan J. The majority confirmed that the trial judge is at liberty to – indeed must – take into account “the real nature” of the superannuation interests, as well as taking account of the valuation prescribed by the Regulations. In explaining their position, their Honours who formed the majority said:-
“When we refer to “the real nature” of the relevant superannuation interest, we are referring to the fact that notwithstanding that its value according to the Regulations may well be calculated to be a very significant amount, that superannuation interest may be no more than a present or future periodic sum, or perhaps a future lump sum, the value of which at date of receipt is unknown.”
44 The two judges who formed the minority in Coghlan & Coghlan did not disagree with the proposition that the “real nature” of the superannuation interests has to be taken into account.
45 O’Ryan J said at para 131-134 (my emphasis added):-
“The trial Judge said that the valuation of the husband’s pension had an “air of artificiality” about it but he failed to explain what he meant. As I indicated in the course of submissions, in my view, the husband’s pension which was in the payment phase was property as defined in s 4(1) and thus Pt VIIIB had nothing to do with the interest unless a splitting order was sought that would be binding on a third party. As to the valuation of the pension of $231,906, which was agreed, the majority point out that in the circumstances now prevailing since the introduction of Pt VIIIB valuations may be obtained which provide an indication of the true worth of a superannuation interest. In G. Watts, S. Bourke and M. Taussig QC, Super Splitting on Marriage Breakdown, (2002) CCH Australia Limited, at 3-180 the learned authors state “Overall, it is likely that the value of superannuation to a member has been undervalued by the court and by practitioners…” I agree.
That said there is nothing new about the capitalisation of income streams. It is a well established practice with logical foundation. For example, a party might purchase an annuity for a sizeable lump sum. It would be incongruous if the party’s entitlement then ceased to have a calculable value merely because it was an entitlement limited to a periodic payment during the party’s lifetime.
Another example is given in the written submissions of the wife that “There is no inherent artificiality in ascribing a value to an income stream. It is done regularly. An example is the capitalisation of future maintainable earnings in valuations of goodwill.” I agree. Another example is where there is a current value of a remainder interest which takes into account that the interest is not realisable until the death of the person who holds the life interest. A current value of the remainder interest can be achieved and there is no “air of artificiality” about the valuation. These ideas or concepts were well established prior to the introduction of Pt VIIIB. In my view, the trial Judge failed to consider whether the value of $231,906 reflected that it was payable in a periodic form. If it did then I do not understand how it is contended that there is an “air of artificiality” about the value.
If however, the valuation failed to properly reflect either that the amount was payable in a periodic form or could not be realised until some time in the future then this would be a matter of evidence and taken into account in determining what value to place on the interest or taken into account when considering the matters in s 75(2) or at step four when consideration is given to what order should be made….”
| 46 | O’Ryan J also said at para 165:- “The only explanation given by the majority for the separate list or separate pool for superannuation interests seems to be (pa 67 and pa 68) that if this approach is adopted then not only will contributions be more likely to be given proper recognition but the “real nature” of the interest in question can be taken into account. I am of the view that this is an approach that always has been taken and should be taken to all property when dealing with an application under s 79. The advantages identified by the majority which are said to stem from the adoption of an approach which includes the construction of a separate list simply repeat what is already required by s 79 regardless of the type of property.” |
| 47 | Warnick J said at para 115 (my emphasis added):- “It has always been the case that the court was required to acknowledge and reflect tensions between market value, value to the owner and lack of marketability of particular types of property and interests, such as minority shares in a private corporation and, of particular pertinence when considering superannuation interests, property such as annuities.” |
48 In the light of the judgments in Coghlan & Coghlan , I maintain the views expressed in Woollams. I understand it was those views that prompted the submission made by counsel for the wife that “given the discounting of benefits that is contained within the superannuation regulations …there is no warrant for discounting the value of what the husband is to retain in the event that the bulk of his property entitlement is made up of superannuation”. However, this submission presupposes there is a “discounting of benefits” inherent in the valuation formula prescribed by the Regulations. I will consider that issue later in this judgment.
The effect of Coghlan on the present case
49 I have already published my primary reasons in this matter and in doing so I followed the approach previously mandated by the Full Court in Hickey & Hickey. I included the superannuation in the list of all the property and did not deal separately with contributions and s 75(2) factors insofar as they related only to the superannuation.
50 As I have not yet made any orders, it is open to me to revisit my judgment and deal with the matter using the now “preferred approach” identified in Coghlan & Coghlan. I do not propose to do so on this occasion, since the Full Court has confirmed that it is still within my discretion to include the superannuation interests in
the same list as the rest of the property. That approach is particularly appropriate in a case such as the present, where the entire superannuation entitlements accrued after the parties commenced cohabitation and where there has been no great lapse of time between separation and trial. I will, however, make some brief additional observations relating to the contributions and s 75(2) factors pertinent to the superannuation interests.
51 Neither party had any superannuation at the time they commenced cohabitation. The bulk of the superannuation accrued prior to separation. Their superannuation entitlements were part of their respective remuneration packages. I consider there is no reason for me to treat their contributions to their superannuation any differently than their contributions to the other items of property they were able to accumulate from their income. Whilst most of the superannuation is attributable to the husband’s employment, the wife was making all the other contributions I identified in my primary judgment.
52 I acknowledge that the superannuation entitlements continued to accumulate after the parties ceased to cohabit, and that the indirect contributions of both parties were of a different character during the period of separation. However, I took all of their contributions, both pre and post-separation, into account when determining that their contributions overall should be regarded as being of equal value. Counsel for the husband made a concession that it would be a proper exercise of the Court’s discretion to find that contributions were equal, and he did not suggest that this concession excluded the superannuation interests.
53 Similarly, I had regard to the superannuation interests of the parties in making my assessment that there should be a 10% adjustment in the wife’s favour on account of s 75(2). In assessing the adjustment, I was mindful of the necessity not to engage in “double dipping” of the kind recently identified by the Full Court in Wilkinson & Wilkinson (2005) FLC 93-222. I took into account the fact that by one means or another the wife would be receiving her “fair share” of the husband’s current superannuation entitlements in the settlement. In assessing the s 75(2) factors relevant to superannuation, the main issue therefore was that the husband is likely to be able to continue to accrue superannuation entitlements at a far greater rate than the wife, although she of course is somewhat younger and will have a longer period in which to make provision for her retirement.
54 Accordingly, there is nothing arising from the decision in Coghlan & Coghlan that persuades me to depart from the view that a 60:40 division in favour of the wife is warranted.
The valuation anomaly
55 I turn now to consider the proposition of counsel for the wife that there is a serious anomaly in the valuation of the husband’s superannuation entitlements, and that this should be remedied by allowing the wife to have her settlement weighted much more heavily towards currently realisable assets.
56 The effect of the alleged anomaly is illustrated by comparing the current valuation of the husband’s entitlements with the amount that he would actually “receive” if he were to retire today. The total Regulation value of his combined UniSuper entitlements is $178,392 whereas the amount that would actually be paid into his Personal Deposit Account (and be available to be rolled over into a new fund) upon his immediate retirement would be $222,773. Accordingly, if I had decided to split the UniSuper entitlement 60:40 in favour of the wife applying the prescribed valuation method, the wife would end up with only $107,575 (about 48% of the entitlement) on the husband’s immediate retirement, whereas the husband would receive $115,198 (about 52%). I accept such a result would not be in accordance with my intention.
57 The husband said in his written submissions that he “assumes that the Family Court superannuation regulations are designed to be equitable and to be followed by all parties in proceedings”. He also seeks to counter the argument advanced on behalf of the wife by saying he has no intention of leaving his employment in the near future and therefore the perceived anomaly is an irrelevance.
58 Before proceeding further, it is important to record that I accept that the husband is unlikely to leave his employment in the near future. Even if were to do so, it is likely he would obtain a post in the higher education sector in Australia and would therefore still be able to continue his membership of UniSuper. The husband seems happy and well settled in his current employment. There was no evidence at all to suggest he is likely to give up his tenured position prior to the normal retirement age of 65 years.
59 In considering the apparent anomaly, it is important to recognise that the prescribed valuation method for a defined benefit plan is only one part of the process of division of the entitlement. The other part of the process governs the way in which the entitlement of the non-member spouse grows in the “adjustment period”, which commences on the date the separate entitlement is “created” and concludes on the date the parties receive their entitlements.
60 In accordance with the legislative framework, if I decide to split the husband’s interests in UniSuper, I must nominate a “base amount” which represents the wife’s interest in the fund. This amount is then used to calculate her ultimate entitlement when the husband satisfies a condition of release and exits the fund. Regulation 45D prescribes the interest rate that will be applied to the “base amount” allocated to the wife pursuant to a splitting order. For present purposes it is sufficient to record that the relevant interest rate in the adjustment period would be:
“the rate determined by the Australian Government Actuary, and published in the Gazette, being a rate that is 2.5 percentage points above the percentage change in the original estimate of full-time adult ordinary time earnings for all persons in Australia, as published by the Australian Bureau of Statistics”.
61 The way in which the relevant Regulations work is conveniently summarised in an agreed statement of experts that was (unsuccessfully) sought to be tendered on appeal in Wilkinson & Wilkinson (supra). I refer to the statement here only for its concise exposition of the practical effect of the Regulations. One of the experts who prepared the statement was Mr Stephen Bourke, who I have already noted is an acknowledged authority on the subject. The document is reproduced in full below:
“1.1 We the undersigned experts have conferred on 14 September 2004 in relation to:
·
the growth of the base amount allocated to the wife out of the husband’s superannuation under the Order made on 10 February 2004; and
·
the growth of the husband’s superannuation out of which the adjusted base amount is to be paid to the wife.
1.2 The Order made on 10 February 2004 allocated an amount of $111,732 to the wife out of the husband’s superannuation in the SAS Trustee Corporation Pooled Fund. The husband’s interest is governed by the State Authorities Superannuation Act 1987 (NSW) and the State Authorities Non-contributory Superannuation Act 1987 (NSW). 1.3 After allocation of the base amount, the trustee of the SAS Trustee Corporation Pooled Fund, having been accorded procedural fairness, is bound by the Order and required to adjust the base amount commencing from the operative time and continuing until a splittable payment becomes payable. 1.4 The SAS Trustee Corporation is then required to pay the adjusted base amount to the wife in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001. 1.5 The husband’s interest governed by the State Authorities Superannuation Act 1987 (NSW) is a defined benefit interest and the husband’s interest governed by the State Authorities Non-contributory Superannuation Act 1987 (NSW) is also a defined benefit interest.
1.6 In the prescribed method of valuation for defined benefit interests, the valuation is discounted by reference to the assumptions made by the Australian Government Actuary in deriving the lump sum valuation factors in Schedule 2 of the Family Law (Superannuation) Regulations 2001. Those assumptions included:
1.6.1 an interest rate of 6.5%; discount of 2.5%, which is then used in determining the growth factor in adjustments to the base amount.
1.6.2 a salary inflation rate of 4.0%;
The valuation factors do not make any allowance for the fact that the payment will not be received for a number of years.
1.7 The rate of adjustment for defined benefit interests is provided by reg. 45D(3) of the Family Law (Superannuation) Regulations 2001 as being the interest rate “determined by the Australian Government Actuary, and published in the Gazette, being a rate that is 2.5 percentage points above the percentage change in the original estimate of full-time adult ordinary time earnings for all persons in Australia, as published by the Australian Bureau of Statistics during the year ending with the February quarter immediately before the beginning of the adjustment period.” 1.8 The interest rate for the period commencing at the date of the order until 30 June 2004 is 7.1% and the interest rate for the period from 1 July 2004 until 30 June 2005 is 7.8% (see Family Law (Superannuation) (Interest Rate for Adjustment Period) Determination 2004).
1.9 For the purposes of this report, the following
assumptions are made:
1.9.1 The operative time was not set by the court and
we agree that operative time should be the date of valuation on the basis that the member’s interest will continue to grow from that date and the base amount should also grow from that date – 17 July 2003. A later operative time will result in a gap where the base amount is effectively frozen.
1.9.2 The long term percentage change for full-time adult ordinary time earnings for all persons in Australia is 4%, making the long term adjustment rate 6.5% for defined benefit interests in accordance with reg.45D(3) of the Family Law (Superannuation) Regulations 2001.
The Conclusions:
2.1
The growth of the husband’s superannuation interest, assuming a constant benefit multiple, being the accrued benefit multiple and personal account balance at 17 July 2003, adjusted for wages growth and personal account earnings only is (Schedule 1):
2.1.1 Age 58: $260,051 2.1.2 Age 65: $370,976 2.1.3 Age 70: $485,397 2.2 The adjusted base amount payable to the wife and
percentage of the forecast benefit is (Schedule 1):
2.2.1 Age 58: $132,348 (50.9%) 2.2.2 Age 65: $205,667 (55.4%) 2.2.3 Age 70: $281,782 (58.1%) The adjusted base amount takes an increasing portion of the member’s final benefit because it is being adjusted at 2.5% above assumed wages growth.
2.3
The growth of the husband’s superannuation interest, assuming growth in the husband’s benefit multiple due to additional service, wages growth and fund earnings on the personal account is (Schedule 2):
2.3.1 Age 58: $305,991 2.3.2 Age 65: $537,206 2.3.3 Age 70: $755,140 2.4 The adjusted base amount payable to the wife and
percentage of the forecast benefit is (Schedule 2):
2.4.1 Age 58: $132,348 (43.3%) 2.4.2 Age 65: $205,667 (38.3%) 2.4.3 Age 70: $281,782 (37.3%) The adjusted base amount takes a decreasing proportion of the member’s final benefit because the member’s additional service results in growth of the benefit multiple and therefore growth in the ultimate retirement benefit payable to the member.”
62 In referring to the above statement of experts in Wilkinson & Wilkinson, the Full Court said:-
“However, we can say that we would have been reluctant to receive that further evidence on a re-exercise of the discretion. This is because we have reservations about its probative value, given that it seems for the most part to be based on assumptions about future events. We appreciate that certain assumptions are built into the prescribed or approved valuation methods for superannuation interests, but these assumptions are supported by legislative direction.”
63 If I am to consider the “real nature” of the superannuation interests, I must surely take account of the manner in which each party’s share will grow in the adjustment period. This is not an issue of importance in cases where an accumulation fund is being split, since the parties’ entitlements will vary over time in the same fashion. However, the problem is acute in defined benefit plans where the growth in the non-member spouse’s entitlements is calculated by a prescribed formula that applies rules different to those governing the entitlement of the member spouse.
64 I have already observed that application of the formula prescribed by the Regulations would lead to an inequitable result if it were known that the husband would be exiting the fund in the near future. However, s 90MU(2) provides that in deciding whether to make a flagging order (i.e. the alternative to a splitting order, which does not involve the Court applying the prescribed valuation formula), the Court “may take into account the likelihood that a splittable payment will soon become payable in respect of the superannuation interest”. The rationale for this provision was outlined in the Explanatory Memorandum issued by authority of the Attorney-General with the 2001 superannuation amendments. The Memorandum said:-
“…when a court is called upon to make a property settlement it may be that the actual value of the superannuation interest is unknown, but will become known in the very near future. While the regulations will provide for a method of valuing superannuation interests, a court may consider it more appropriate to “defer” final decision on the superannuation, and in context some or all of the property, until the actual value of the superannuation interest is known.”
| 65 | The Memorandum later went on to say:- “As noted above, the value of a superannuation interest in a defined benefit plan will not be known with complete certainty until the benefit is received. The value that the parties will arrive at using the factors developed by the Australian Government Actuary will represent the present value of the various possible superannuation outcomes (that is, the receipt of a resignation, retrenchment, invalidity, death or retirement benefit), weighted according to the probability of each of those outcomes occurring. The actual benefit eventually received by the member may in fact be higher or lower than this value, depending upon the circumstances in which the member leaves his or her superannuation fund. Information to be made available for parties will make it clear that, although they will now be able to gain a better appreciation of the value of an interest in a defined benefit scheme, the actual value may differ because of the inherent uncertainties in such schemes. The parties will still need to weigh up for themselves how they wish to deal with that information.” |
66 These observations in the Explanatory Memorandum confirm that it was understood by the legislature that the valuation provided in accordance with the Regulations would not always provide a perfect result. Accordingly, where departure from the fund is imminent, it was considered that it may be preferable to wait until the benefit crystallises. However, it was anticipated that in other cases the value would generally be struck in accordance with the Regulations, regardless of the fact that the actual benefit ultimately received may be higher or lower than expected.
67 Even though there is no evidence in this case that the husband’s departure from the fund is imminent, the wife submits (assuming I do not adopt the approach she prefers), that I should make a flagging order and adjourn the proceedings until the husband satisfies a condition of release. She says it will be only by this means that the final order can take account of the actual value of the husband’s superannuation and injustice avoided.
68 The treatment of defined benefit funds has always been a difficult area of matrimonial law. It was never anticipated that the 2001 superannuation amendments would be a panacea. The Explanatory Memorandum acknowledged that valuing an interest in defined benefit plans is “problematic” and “significantly more complicated” than valuing an interest in an accumulation plan. Importantly, it was accepted that strict application of the prescribed formula would be inappropriate for some funds because of factors specific to those funds. Provision was therefore made to allow those funds to apply for special treatment. The UniSuper fund has not sought such special treatment.
69 Knowing all of the inherent limitations of a formulaic approach, Parliament clearly intended that when splitting defined benefit interests, the Court should value the member spouse’s entitlement in the manner prescribed by the Regulations. There is no legislative intention evidenced to support the routine adjournment of cases involving a defined benefit entitlement. On the contrary the intention of the legislature appears to have been that flagging/adjournment orders should primarily be considered in those cases where there is a “likelihood that a splittable payment will soon become payable” – to use the terminology of s 90MU(2).
70 The end result of Parliament’s deliberations was a scheme that Corinna Lueg has described as being designed to balance four competing principles – “simplicity, equity, certainty and administrative convenience” – see Valuing The Superannuation Interest Under the Family Law (Superannuation) Regulations – Practical Actuarial Perspective, a paper delivered at the 2002 National Family Law Conference.
| 71 | As Ms Lueg said:- “The methods cannot, and do not purport to be, perfect for all circumstances. However, they are the best balance that can be achieved to give a fair and reasonable outcome for most situations…There will always be anomalies in particular cases because any standard basis cannot be perfect for all circumstances.” |
72 The provisions of s 81 of the Act must also be kept in mind when considering the proposition that these proceedings should be adjourned. That section is designed to encourage a “clean break” between parties. It provides as follows:-
“In proceedings under this Part… the court shall, as far as practicable, make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them.”
73 The adjournment proposed by the wife would condemn the parties to further negotiations/litigation at the time the husband retires - which may be many years away. I accept that the overriding requirement of the Act is that contained in s 79(2) to make a property adjustment order that is just and equitable – and if that can only be achieved by an adjournment, s 81 must give way. Dench & Dench (1978) FLC 90-469. Cantarella & Cantarella (1976) FLC 90-056. However, in this case the only submission advanced to justify adjourning the proceedings relies on the anomaly that would apply in the event the husband was to leave his employment in the near future. I have found he is not likely to do so.
74 Importantly, there is no submission or evidence to suggest that there would be a similar anomaly in the event the husband was to retire at his expected retirement age of 65 years. Accordingly, it has not been established to my satisfaction that the discrepancy identified by counsel for the wife is likely to persist as the years pass. On the contrary, the manner in which the wife’s entitlement will grow pursuant to the method prescribed by the Regulations suggests that the discrepancy will diminish by the time the husband reaches his anticipated retirement age – see the joint statement of experts in Wilkinson & Wilkinson. I therefore intend to proceed on the basis that a fair and equitable outcome can be achieved in the present case as a consequence of the process of valuation prescribed by the Regulations and the process by which the wife’s base amount will grow pursuant to the same Regulations.
75 I would have felt more comfortable in coming to this decision if I had the benefit of input from the actuaries concerning the likely movement in the parties’ respective entitlements over time. However, enough money has already been spent on this litigation. Actuarial evidence does not come cheaply and I do not want to delay matters further by seeking additional expert evidence.
76 There appear to be no reported decisions dealing directly with the valuation issue discussed above. I have made a fairly cursory search of unreported decisions in this Court, the Family Court of Australia and the Federal Magistrates Court and have located only one judgment that deals with similar concerns about valuations of defined benefit funds pursuant to the Regulations.
77 In Rankin & Rankin [2005] FamCA 386, Young J was also presented with a case where the current resignation value of a defined benefit entitlement was significantly greater than the valuation pursuant to the Regulations. In the course of judgment his Honour made the following comment:-
“Ultimately, and having regard to the current legislation and the required valuation process I have, for the purposes of the orders pronounced hereafter directly disregarded the difference of $134,274.32 insofar as it is not specifically included within the net pool of assets and financial resources upon which a superannuation splitting order has then been made. These matters are to be properly considered within s.75(2)(f) and (o).”
78 The $134,274 mentioned by his Honour was the difference between the current resignation benefit and the current value of the benefit calculated in accordance with the Regulations. In considering this difference, Young J noted that he had a:-
“substantial degree of uncertainty as to what, on the evidence of the expert witness would be a just and equitable valuation of the husband’s superannuation entitlements other than on the strict approach contained within Schedule 2 [of the Regulations]”.
79 His Honour left open for consideration in later cases whether:- “a trial Judge should, in all cases and without discretion, be bound to adopt a valuation produced in accordance with the Superannuation Regulations and Schedule 2. Alternatively is it the overwhelming requirement of the Court to achieve a just and equitable result even if it be necessary to reject or vary a Schedule 2 valuation?”.
80 The solution arrived at by his Honour, which he felt overcame “the specific issues and uncertainties”, was similar to that employed by Burr J in Gardner and Gardner [2003] FamCA 249. In both cases, orders were made pursuant to s 90MT(1)(b), prescribing a percentage division of the superannuation entitlements in the payment phase. That option was appropriate in each of those cases because, although the funds were still in the growth phase, the member was no longer contributing to the fund. That is not the position in the present matter and a percentage division of the superannuation in the payment phase would be fraught with difficulties. Messrs Watts, Bourke & Taussig discuss these difficulties in their book Super Splitting on Marriage Breakdown at page 158.
81 I should also record there was no suggestion in this case that I should attempt to deal with the valuation dilemma by use of what has been called the West & Green formula. Such an approach would have its own problems – see Super Splitting on Marriage Breakdown (supra at pages 158-9) and see also the careful analysis by Young J in Rankin (at paras 262 to 278) concerning the various authorities relating to this approach.
82 Before leaving this discussion of valuation issues, I should observe that Young J expressed similar concerns in Rankin to those voiced by counsel for the wife in the present case concerning the salary figure used for the purposes of calculating the husband’s entitlement. However, the submission ignores the manner in which the husband’s salary is used for the purposes of the calculation. The formula does not apply the husband’s current salary but rather an average salary over the last 3 years. Accordingly, the fact that the husband may have recently had a significant pay rise has very little impact on the value of his entitlement.
The application for an adjournment
83 It follows from what I have said above that I do not propose to adjourn the proceedings as requested. Although the valuation issue raised by counsel for the wife was an interesting one, it needs to be put into perspective when weighing up any possible advantages of an adjournment against the many disadvantages. If I were to:-
· divide the husband’s UniSuper fund in equal shares, as
the husband now proposes; and· do so by reference to the prescribed formula; and · the husband were then to resign from his employment
immediatelythe wife would receive $89,196. On the other hand, if the wife was entitled to “receive” one half of the actual amount the husband would “receive” on immediate resignation, she would get $111,386. The difference is $22,190.
84 Whilst this is a significant sum it needs to be assessed against the costs associated with an adjournment and the adverse impact on both parties of not achieving a clean break. It should also be remembered that whilst the value of many of the parties’ assets has been agreed, the real value – for example of the former matrimonial home – would never be truly known unless sold. Accordingly, for present purposes, I should not proceed on the assumption that the valuation of the parties’ superannuation entitlements is the only valuation free from doubt.
The mix of property/superannuation
85 I turn now to the competing proposals about the mix of property/superannuation each party is to receive. The wife accepts it is fair she should take some of her settlement in the form of a share of the husband’s superannuation. On my calculations she is proposing to take about 30% of all the superannuation, whereas the husband now proposes an equal division. My decision on this disagreement will have important consequences, in particular for the parties’ ability to obtain housing.
86 The husband has now abandoned reliance on the affidavit of Mr Barton, which contained a detailed and carefully argued analysis of why a party is disadvantaged if they receive a disproportionately large share of their settlement in the form of superannuation. However, I do not need expert evidence to satisfy me there is an “illiquidity penalty” (to use Mr Barton’s expression) in such cases. The argument he advanced is similar to the considerations I had in mind in adopting the approach I did in Woollams, where I had no expert evidence. However, in the absence of the evidence contained in Mr Barton’s affidavit, I am certainly unable to be specific in quantifying the penalty that would apply in the event I was to make orders as proposed by the wife.
87 In support of her position, the wife draws attention to the fact that the husband has a fairly high income and she presently has a low income. She says this means the husband is in a better position to borrow funds to obtain accommodation for himself and the two children living with him. Importantly, a significant proportion of the wife’s income is derived from child support for the third child, which is unlikely to be of much value when approaching a financial institution for funds.
88 The apparent strength of the husband’s position is demonstrated by the fact that he considers there is a possibility he could not only retain the [country] property (which has sentimental value to him) but also the former matrimonial home in which he is living. There would be no prospect of the wife being able to do the same. Indeed, she will have difficulty even acquiring the husband’s interest in the former matrimonial home, unless she is successful in having her settlement more heavily weighted towards currently available assets. In coming to that assessment, I am mindful of the fact that although to date, the parties’ legal costs have been ignored, it is the case that both parties will have substantial legal costs to discharge from their settlement.
89 However, in coming to my decision, I must also be mindful of the fact that the disparity in the financial position of the parties has been taken into account in considering the s 75(2) factors. The wife received 20% more of the assets than the husband, in part, because she has a lower earning capacity than him. On the other hand, it is important to recall that my 10% adjustment for s 75(2) factors was made in light of the fact that the wife had limited her claim for an adjustment to 10%. I acknowledge that concession was made in the context of the wife’s application that she should receive more of her settlement in the form of readily available assets and less in the form of superannuation.
90 If I were to make orders along the lines proposed by the husband, the settlement would be in accordance with the table set out below.
| Description | Husband | Wife |
| Assets | $ | $ |
| [the matrimonial home] | 395,000 |
| [the country property] | E124,000 |
| 1993 Ford Falcon | 4,000 |
| 1994 Magna | 1,500 |
| Motorcycle | 200 |
| Household effects | 4,000 | 4,000 |
| Tools, equipment and instruments | 4,000 | |
| Joint Westpac Account | 635 | 635 |
| Husband’s CBA Account | 281 |
| [BP] Group | Nominal |
| [BP] Account | 32 |
| Wife’s Westpac Account | 8 |
| Husband’s UniSuper | 89,392 | 89,000 |
| Husband’s Commonwealth Rollover Fund | 12,500 | 12,500 |
| Wife’s Asgard super | 2,467 |
| Wife’s West State super | 796 |
| Husband’s legal fees added back | 5,680 |
| Payment from husband to achieve 60:40 division | 230,701 |
| Assets TOTAL | 639,720 | 341,607 |
| Liabilities | ||
| House mortgage | 185,052 |
1,826
| Wife’s Westpac MasterCard Wife’s HECS liability | 3,831 | ||
| Payment to wife to achieve 60:40 division | 230,701 | ||
| Liabilities TOTAL |
| ||
| Net assets |
|
91 On this scenario the husband would have $122,075 in currently available assets and $101,892 in superannuation. The wife would have $231,187 in currently available assets and $104,763 in superannuation.
92 If, on the other hand, I were to make orders along the lines proposed by the wife, the settlement would be in accordance with the table set out below.
| Description | Husband | Wife |
| Assets | $ | $ |
| [the matrimonial home] | 395,000 |
| [the country property] | E124,000 |
| 1993 Ford Falcon | 4,000 |
| 1994 Magna | 1,500 |
| Motorcycle | 200 |
| Household effects | 4,000 | 4,000 |
| Tools, equipment and instruments | 4,000 |
| Joint Westpac Account | 635 635 |
| Husband’s CBA Account | 281 |
| [BP] Group | Nominal |
| [BP] Account | 32 |
| Wife’s Westpac Account | 8 |
| Husband’s UniSuper | 118,897 | 59,495 |
| Husband’s Commonwealth Rollover Fund | 25,000 |
2,467
| Wife’s Asgard super Wife’s West State super | 796 |
| Husband’s legal fees added back | 5,680 |
| Payment from husband to achieve 60:40 division | 62,758 |
| Assets TOTAL | 286,725 | 526,659 |
| Liabilities | ||
| House mortgage | 185,052 |
| Wife’s Westpac MasterCard | 1,826 | ||
| Wife’s HECS liability | 3,831 | ||
| Payment to wife to achieve 60:40 division | 62,758 | ||
| Liabilities TOTAL |
| ||
| Net assets |
|
93 On this scenario the husband would have $80,055 in currently available assets and $143,897 in superannuation. The wife would have $273,207 in currently available assets and $62,722 in superannuation.
94 I consider the proposal made by the wife would leave the husband with insufficient currently available assets. After payment of his legal costs, the husband would have very little capital and would not receive any significant additional capital until he retired. In the meantime, he would have probably had responsibility for housing two of the three children, whilst paying child support for the third child. I consider the mix of assets/superannuation proposed by the husband to be equitable. On his proposal, the wife will still have in excess of $110,000 more in readily available assets than he will and they will have similar amounts set aside in superannuation. Of course, by the time they each retire it is likely he will have much more superannuation than she will.
The former matrimonial home
95 The parties have been unable to reach agreement in relation to which of them will receive the former matrimonial home as portion of their settlement.
96 Taking into account my intention to make superannuation splitting orders along the lines proposed by the husband, the husband would have to pay the wife $230,701 if he wishes to achieve his objective of keeping both the [country] property and the former matrimonial home (subject to the mortgage). On this scenario he would end up having to service a total borrowing of in excess of $415,000, which seems a tall order even for someone on his comparatively high income. On the other hand if the husband were to keep only the [country] property and the wife were to receive the home (subject to the mortgage) the husband would have to pay her only $20,753. On this scenario the wife would end up with a total borrowing of not less than $165,000, which is just above what her counsel said was the “outside range” of her borrowing capacity.
97 The arguments advanced in support of the husband’s position
were these:-
• It was the wife who left the property in the first place; • She has set herself up away from the former matrimonial home; • It was only comparatively late in the proceedings when the wife decided she wanted the former matrimonial home – previously she proposed that her interest in the property be transferred to the husband. 98 The arguments advanced in support of the wife’s position
were these:-
•
It would be unfair to place any weight on the fact it was the wife who decided to leave the home. She says it would have been more appropriate for the husband and the older children to have left the property, especially given the husband’s superior income.
•
If the husband does not receive the former matrimonial home, there will be no doubt he can afford to retain the [country] property to which he has sentimental attachment.
•
It would be reasonable that the wife have one property she wants (the home) and the husband have one property he wants ([the country property]), rather than the husband getting the chance to keep both of them. This presupposes the husband is going to be able to afford to keep both properties, which I have to say I doubt – unless he has financial assistance from third parties.
99 The wife concedes that whatever happens the husband should remain in the property until December 2005, as [one of the children] is in the middle of his TEE. Whilst commendable, this concession in itself leads to further complications. There has already been substantial movement in property prices during the time this matter has been before the Court. If the husband waits until the end of the year to acquire a new home, house prices will probably have increased further. The parties appear unable to agree on most things, so there is little prospect of them agreeing to some adjustment of the settlement to take account of the fact that the wife will be acquiring a property that by then will probably have increased further in value. Without such an adjustment there could be unfairness since the wife will be acquiring a property at a value agreed some months ago and the husband will be buying in a different market.
100 Whether or not it might have been more appropriate for the husband to have left the home, the reality is that it was the wife who left. She is not to be punished for that, but her proposal would mean that both parties will have to move. The husband’s proposal would involve only the wife having to move (assuming she decides to buy a new home). Her original proposal was to transfer the home to the husband. Two out of three of the children are living in that property with the husband. In these circumstances I have decided on balance that it is appropriate to allow the husband the opportunity to acquire the wife’s interest in the former matrimonial home.
101 At the hearing on 15 June 2005, I made it clear I did not consider it reasonable for the husband to expect that the wife would have to wait to receive the whole of the proceeds of sale of the [country] property to make up the final instalment of her settlement (assuming he decides he cannot afford to keep both properties). The [country] property could have been sold by now were it not for the fact the husband has made it clear he wanted to keep it as part of his settlement. It could take some time to sell. If the husband wants to acquire both properties, he will be required to pay the wife the required amount by way of settlement within 45 days. If the husband decides he cannot afford to acquire both properties, the sale proceeds of the [country] property can be divided 60:40 when they ultimately come to hand. In the meantime, the husband will have to pay the wife the amount needed to bring about a 60:40 division of the balance of the assets.
102 If the husband cannot raise the funds to acquire the wife’s interest in the former matrimonial home within the specified time, the wife should be given the opportunity to acquire the husband’s interest within a further 45 days. If she cannot do so, the property will then be sold.
Form of splitting orders
103 The orders now proposed by the husband involve splitting both the UniSuper and Commonwealth Rollover Funds. This will necessitate leave being given to the husband to amend his application and procedural fairness being afforded to the Trustee of the Commonwealth Rollover Fund. The wife proposes that the appropriate division of superannuation be achieved by adjustments being made to the parties’ respective entitlements in the UniSuper Fund. She says there will be no need for further notice to be given to the Trustee of that fund. I accept the wife’s submissions. I do not wish there to be any further delay in resolution of this matter by waiting for notice to be given to the Commonwealth Rollover Fund and for the requisite time to elapse. The “base amount” to be allocated to the wife from the husband’s UniSuper Fund will therefore be increased from the figure of $89,000 the husband proposes to $101,500. This will reflect the half interest the wife otherwise would have received in the Commonwealth Rollover Fund.
104 In formulating the orders regarding the superannuation splitting, I propose specifying 8 March 2005 as being the “operative time”. In doing so, I have in mind the comments recently made by the Full Court in Wilkinson & Wilkinson (supra at para 62). If this date is not used there is clearly prejudice to the wife, since her entitlement only begins to grow from the date on which the order takes effect.
Orders
105 In the course of preparing these reasons I have had regard to some matters and authorities on which counsel have not yet had the opportunity to comment. I am also conscious of the fact that the resolution of this final stage of the proceedings has followed a somewhat unorthodox course, with some submissions being made in correspondence from the solicitors. I have therefore decided to deliver these reasons in draft to give counsel an opportunity to comment on matters that were not previously the subject of submissions. I will therefore refrain from setting out the proposed orders in this judgment and I will ask counsel to agree the form of orders in due course.
I certify that the preceding [105] paragraphs are a true copy of the reasons
for
judgment delivered by this Honourable Court
Associate
0