M & M
[2005] FMCAfam 439
•25 August 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| M & M | [2005] FMCAfam 439 |
| FAMILY LAW – Property – marriage of twenty years in duration – parties parents of five children aged from 18 to 5 years – children living with wife – youngest child has special needs – major item of matrimonial property husband’s interest in defined benefits military superannuation scheme – wife engaged in home duties – assessment of contributions – assessment of section 75(2) factors – just and equitable. |
| Family Law Act 1975, ss.75(2), 79, 90MC, 90MS, 90MT Federal Magistrates Court Act 1999, s.42 D F and R D B Act 1973, ss.23, 24 Evidence Act 1995, s.69 |
| Lee Steere v Lee Steere (1998) FLC 91-626 Ferraro v Ferraro (1993) FLC 92-335 Clauson v Clauson (1995) FLC 92-595 Russell v Russell (1999) FamCA 187 Pierce &Pierce (1999) FLC 92-844 Norbis v Norbis (1986) FLC 91-712 C and C [2005] FamCA 429 |
| Applicant: | J A M |
| Respondent: | S A M |
| File Number: | DNM216 of 2004 |
| Judgment of: | Brown FM |
| Hearing date: | 5 July 2005 |
| Delivered at: | Darwin |
| Delivered on: | 25 August 2005 |
REPRESENTATION
| Counsel for the Applicant: | Ms A |
| Solicitors for the Applicant: | M M A |
| Counsel for the Respondent: | Mr B |
| Solicitors for the Respondent: | C B F L |
ORDERS
That pursuant to section 90MT(4) of the Family Law Act 1975 the base amount of $255,000.00 be allocated to the wife in respect of the husband’s superannuation interest in the D F R and D B S (hereinafter referred to as “the DFRDB”) and that pursuant to section MT(1)(a) whenever a splittable payment becomes payable in respect of that interest the wife is entitled to be paid the amount to be calculated in accordance with the Family Law ( Superannuation) Regulations 2001 in respect of that base amount and there is a corresponding reduction in the entitlement of the husband.
That pursuant to section 90MT(4) of the Family Law Act 1975 the base amount of $15,000.00 be allocated to the wife in respect of the husband’s superannuation interest in the P B S (hereinafter referred to as “the PBS”) and that pursuant to section 90MT(1)(a) whenever a splittable payment becomes payable in respect of that interest the wife is entitled to be paid the amount calculated in accordance with the Family Law ( Superannuation) Regulations 2001 in respect of that base amount and there is a corresponding reduction in the entitlement of the husband.
That the trustee of DFRDB and PBS, the husband and the wife in accordance with the Family Law ( Superannuation) Regulations 2001 shall do such acts and things and sign all such documents as may be necessary to calculate the payment entitlement of the wife in accordance with orders 1 and 2 hereof.
That orders 1 and 2 of these orders have effect from the operative time which shall be on 28 October 2005.
That the solicitor for the wife serve a sealed copy of these orders on the trustee of DFRDB and PBS and the trustee is given leave to re-list these proceedings on the giving of 7 days written notice in the event that it is unable to comply with these orders.
That unless otherwise specified in these orders and except for the purpose of enforcing any payment of money due under these or any subsequent orders, each party be solely entitled to the exclusion of the other to all property (including chose-in-action) in the possession of such party as at this date.
That the application and the response herein be otherwise dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT DARWIN |
DNM216 of 2004
| J A M |
Applicant
And
| S A M |
Respondent
REASONS FOR JUDGMENT
Introduction
These are property proceedings, which were commenced by the wife,
J A M on 14 May 2004. The husband, S A M responded to the application on 24 August 2004. The parties met in 1981 and married on 17 November 1984. They separated in February of 2003. The marriage between them produced five children, C J M born 12 February 1987; H R M born 25 September 1992; C E M born 27 December 1995; A J M born 24 August 1996; and H A M born 27 November 1999.
Mr M is a long serving member of the R A A F. Currently he is stationed at the W RAAF B, near N in N S W. The five children of the marriage are currently living with Ms M in D in the N T. The youngest child, H has significant special needs.
During the parties’ marriage, they divided their family responsibilities along what are often described as “conventional” lines. Mr M was the family’s bread winner, whilst Ms M remained in the home to care for the parties’ five children.
At the end of their long marriage, both parties currently find themselves in straightened financial circumstances. As a result of being part of the armed forces, Mr M has been a member of the D F and R D B S S (DFRDB) for many years. This is a defined benefits superannuation scheme. Mr M’s future entitlement to retirement benefits, pursuant to this scheme, forms by far the most substantial of the parties’ marital assets. The value of those benefits at the present time is in excess of $450,000.00.
The parties are in vehement dispute as to how Mr M’s entitlement to future superannuation is to be divided between them. It is Mr M’s position that, as he was a member of the scheme prior to the parties’ meeting and has contributed to it after their separation, any splitting order in respect of the fund should be made so that he receives 57% of its current value and Ms M receives 43%.
On the other hand, it is Ms M’s position that the fund should be divided so that she receives 70% of its current value. In her submission, as she is responsible for the care of the parties’ four youngest children, particularly H, she is precluded from returning to the workforce at this stage and her prospective needs are considerably greater than Mr M’s. Mr M does not accept this. It is his position that Ms M, a qualified nursing sister, is able to return to the workforce, notwithstanding H’s special needs. These proceedings will resolve these various issues between the parties.
The legal principles to be applied and the issues in the case
The process to be followed for the division of the parties’ property is well established by law.[1] The relevant legal principles are primarily contained in sections 79 and 75(2) of the Family Law Act 1975. I am required to follow a number of specific steps.
[1] See Lee Steere v Lee Steere (1998) FLC 91-626; Ferraro v Ferraro (1993) FLC 92-335;
Firstly, I must ascertain what are the parties’ assets and liabilities as at the date of trial. This creates some controversy between the parties. The parties’ two major assets are Mr M’s entitlements in the DFRDB and his entitlements in an associated superannuation scheme known as the P B S (PBS). In their respective applications, both parties seek that a splitting order be made in respect of both superannuation funds. Accordingly, the issue of the value of that superannuation assumes central importance.
The relevant section of the legislation, dealing with the valuation of superannuation interests, where one of the parties to the marriage seeks a splitting order in respect of that superannuation, is section 90MT of the Family Law Act, which reads as follows:
“(1)A court, in accordance with section 90MS, may make the following orders in relation to a superannuation interest (other than an unsplittable interest):
(a)if the interest is not a percentage-only interest – an order to the effect that, whenever a splittable payment becomes payable in respect of the interest:
i)the non-member spouse is entitled to be paid the amount (if any) calculated in accordance with the regulations; and
ii)there is corresponding reduction in the entitlement of the person to whom the splittable payment would have been made but for the order;
(b)an order to the effect that, whenever a splittable payment becomes payable in respect of the interest:
i)the non-member spouse is entitled to be paid a specified percentage of the splittable payment; and
ii)there is a corresponding reduction in the entitlement of the person to whom the splittable payment would have been made but for the order;
(c)if the interest is a percentage-only interest – an order to the effect that, whenever a splittable payment becomes payable in respect of the interest:
i)the non-member spouse is entitled to be paid the amount (if any) calculated in accordance with the regulations by reference to the percentage specified in the order;
ii)there is a corresponding reduction in the entitlement of the person to whom the splittable payment would have been made but for the order;
(d)such other orders as the court thinks necessary for the enforcement of an order under paragraph (a), (b) or (c).
(2)Before making an order referred to in subsection (1), the court must make a determination under paragraph (a) or (b) as follows:
(a)if the regulations provide for the determination of an amount in relation to the interest, the court must determine the amount in accordance with the regulations;
(b)otherwise, the court must determine the value of the interest by such method as the court considers appropriate.
(2A)The amount determined under paragraph (2)(a) is taken to be the value of the interest.
(3)Regulations for the purposes of paragraph (2)(a) may provide for the amount to be determined wholly or partly by reference to methods or factors that are approved in writing by the Minister for the purposes of the regulations.
(4)Before making an order referred to in paragraph (1)(a), the court must allocate a base amount to the non-member spouse, not exceeding the value determined under subsection (2).”
Accordingly, pursuant to section 90MT(2), it seems clear that the valuation of superannuation is a mandatory step, before any splitting order is made. It also seems clear from the wording of placita (a) of section 90MT(2) that the application of the Family Law (Superannuation) Regulations is the mandatory method of arriving at that valuation.
The husband’s superannuation is held in a defined benefit fund in its growth phase. A defined benefit interest is defined[2] as the interest a member has in a particular superannuation fund, which on vesting will be defined by reference to one or more of the following:
[2] See Regulation 5 of the Family Law (Superannuation) Regulations
·the amount of:
- the member’s salary at the date of termination of employment or retirement, or another date; or
- the member’s salary averaged over a period.
·a specified amount;
·specified conversion factors.
and the release of monies from a defined benefit plan will be in one of four forms:
·lump sum only;
·pension only;
·combination of lump sum and pension where member is able to take more than 50% as a lump sum; or
·combination of lump sum and pension where member is required to take 50% or more as a pension.
The method for the valuation of a defined benefit interest coincides with these four forms.
The Attorney General has approved a method of valuing superannuation in both the DFRDB and the PBS. This is contained in the Family Law (Superannuation) (Methods and factors for valuing particular superannuation interests) Approval 2003.
Both the solicitor for the wife and the solicitor for the husband have performed (or instructed a suitably qualified expert to perform) the necessary calculations in respect of the two funds. Controversy between the parties arises as they have each selected two different dates, as being germane to the performance of the appropriate calculations and which, in the husband’s submission, demonstrate the artificiality of the valuation methodology and its potential to be unfair to him. Accordingly, there are currently four different valuations of the monies held in the two schemes, which each arise from the application of the statutory mandated valuation methodology. They are as follows:
DFRDB Scheme
20 February 2003[3]
30 April 2004[4]
10 January 2005
30 June 2005
$453,218.89
$416,278.82
$429,945.33
$455,167.07
PBS
20 February 2003
30 April 2004
10 January 2005
30 June 2005
$23,061.54
$26,016.47
$28,913.43
$29,344.87
[3] This is the date of the parties’ separation
[4] This date relates to the time when Mr M had been posted to the W RAAF B and his salary had been reduced because he was no longer living in a remote or tropical posting
The relevance of these various dates, from the prospective of each of the parties, is as follows. Obviously 20 February 2003 is relevant because it is the date on which the parties agree that they separated. Accordingly, after this date, all contributions made to the fund are to be considered Mr M’s alone. By 30 April 2004, Mr M had been posted to the W RAAF B. It was his choice to be posted away from D. However this had consequences for his annual salary, which dropped because he was no longer entitled to a number of benefits which related to a posting in D. As can be seen, this had a dramatic consequence for the calculation of his superannuation benefits, which fell by approximately 8% in value.
By 10 January 2005, no doubt as a result of some salary increases and the addition of completed years of service, Mr M superannuation had recovered somewhat but was still valued at a lesser amount than as at the date of separation. By 30 June 2005, the date most approximate to the date of hearing, after over two years of separation, his superannuation had approximately the same value as on the date of the parties’ separation, notwithstanding his additional contributions to it.
Mr B, counsel for the husband, points to these differences in valuation as highlighting anomalies in the valuation methodology, which prejudice his client. Essentially, he argues that it is unfair to use only the first and last valuations, which indicate very little change in the superannuation valuation, when in effect his client has been contributing to the fund alone, without any contribution by the wife, for a period of about twenty eight months.
In contrast, the PBS shows a steady increase between separation and now and seems to be unaffected by any changes in the husband’s salary at the time of calculation. Accordingly, in percentage terms, it is possible to calculate the net increase in that fund by reference to the husband’s sole contributions. These calculations indicate that the fund has grown by about 21.5%.
In my view, it is appropriate to use the valuations which are closest to the date of hearing. In my view, it is more appropriate to make reference to the various matters raised by Mr B when an assessment of the parties’ respective contributions is made.
Apart from issues to do with the parties’ superannuation, there are no other areas of controversy between the parties. Accordingly, I find that the following items are available to be divided between the parties:
Husband’s interest in the DFRDB Scheme
$455, 167.07
Husband’s interest in the PBS
$29,344.87
1984 Land cruiser (retained by the husband)
$4000.00
1981 Toyota Celica (retained by the husband)
$1,000.00
Wife’s superannuation entitlements
$1,589.00
Total
$491,100.94
The parties agree that there are no relevant liabilities.
Secondly, I must ascertain the contributions, which each party has made towards those assets. Contributions fall into two broad categories. The first kind is contributions to the property: financial contributions and non-financial contributions, made directly or indirectly, by or on behalf of a party to the marriage to the acquisition, conservation or improvement of any of the property. The second kind is contributions to the welfare of the family: in the words of the section, “the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of home maker or parent”. It is clear from the authorities that this second kind of contribution must be given appropriate weight and not treated as a token matter or inherently less valuable or important than contributions to property.
This second step occasions a great deal of controversy between the parties, which relate to the valuation issues already discussed in respect of the husband’s superannuation entitlements. Years of service and salary at the crystallisation of the superannuation entitlements are two key components of the formula used to calculate the value of a member’s entitlement in the DFRDB scheme. Mr M joined the RAAF on 10 January 1978. Accordingly, he has been a member of the scheme for over twenty seven years.
The parties began to live together in June of 1982. They separated in February of 2003. Accordingly, about six years of Mr M’s membership of the DFRDB scheme relates to periods when he was not living with Ms M. This factor and the anomalies created by variations in his salary, from time to time, cause Mr M to argue that the parties’ contributions to his superannuation entitlements cannot be regarded by the court as being essentially the same.
It is also Mr M’s position that he is entitled to some credit, at this stage of the court’s deliberations, by reason of the fact that he assumed responsibility for a number of the parties’ joint debts in the period since separation and has paid them. It is for these reasons that Mr B, counsel for Mr M, proposes that Ms M receives a split of Mr M’s superannuation in the sum of $190,000.00. This sum equates to approximately forty three percent of the parties’ assets, as at the date Mr M was posted to W and his annual salary had fallen.
On the other hand, it is Ms M’s position that the relationship and subsequent marriage between the parties must be regarded as a long one, during which both she and Mr M contributed, in different ways, to the full extent of their respective capacities. As such, their respective contributions should be regarded as being essentially equal and at this stage of the court’s deliberations, the property available for distribution should be divided equally between them, including the superannuation entitlements.
The third step involves the assessment of the parties’ prospective needs, by reference to the factors set out in section 75(2) of the Family Law Act. Pursuant to section 75(2)(o), the Court is entitled to take into account “any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account”. In the main, section 75(2) deals with the prospective needs of the parties. This area too, occasions controversy between the parties.
It is Mr M’s position that there should be no further distribution of the parties’ assets in favour of the wife by reference to any of the factors set out in section 75(2). It is his position that he is currently paying a large amount of child support in respect of the parties’ four youngest children and, as a result, finds himself in extremely straightened financial circumstances. In addition, he believes that Ms M is not fully utilising her income earning capacity as a registered nurse. He believes that if she did pursue employment her financial position would not be greatly dissimilar to his own. In his submission, these are factors which negate any need for there to be an additional distribution of assets in Ms M’s favour at this stage.
On the other hand, it is Ms M’s position that her future employability has been considerably diminished during the parties’ long marriage. As such, it is not likely that she will be able to return easily to the workforce. In addition, it is currently her preference to remain as the children’s primary carer and not engage in paid work. Finally, Ms M points to H’s special needs and his high level of dependency on her as factors which preclude her from being employed for the next several years, which is in marked contrast to Mr M, who has desirable employment skills. Ms M has been in receipt of social security payments since the parties separated. In contrast, Mr M has been receiving an income of approximately $50,000.00 per annum. As a result of these factors, it is Ms M’s position that she is entitled to a further twenty percent distribution of the parties’ assets in her favour.
Associated with these factors are two other matters. Firstly, the parties are in dispute as to the financial significance of any split in the husband’s DFRDB superannuation entitlements. Mr M argues that, if there is such a split, Ms M will receive a sum of money that will be invested in the M S B S (MSBS). The sum will attract interest and will, in all likelihood, appreciate significantly. In addition, Ms M may be entitled to apply to the trustee of the scheme for an early release of funds if she finds herself in difficult financial circumstances. On the other hand, Mr M himself will be compelled to take part of his superannuation benefits as a pension. He is not able to delineate what the consequences for his pension will be, if there is a substantial reduction in his present entitlements by virtue of a split in favour of the wife. However, it would appear to be his argument that potentially he may be left with a much reduced lump sum payment and a fairly modest pension, which is less attractive than a lump sum on retirement.
As can be readily imagined, Ms M does not share Mr M’s pessimism in this regard. Her counsel, Ms A, points to what she described as the obvious benefits of having an indexed linked pension for life from the age of fifty five years onwards, which is not dependant upon permanent retirement from the workforce.
Secondly, an evidentiary point has arisen regarding the establishment of H’s special needs. Ms M seeks to rely on a report prepared by C D S, which purports to assess H’s current level of abilities and disabilities, as well as a referral prepared by a physiotherapist in respect of H. It is Mr M’s position that the authors of these reports should have provided their evidence in the form of affidavits and in the absence of this and the availability of report writers for cross-examination, it is unsafe for the court to place any weight on the conclusions reached in the reports.
Finally in determining what order the Court should make under section 79, the Court must be satisfied that in all the circumstances, it is just and equitable to make the relevant orders. Overall, it is the justice and equity of the actual orders that the Court must consider.[5]
[5] See Russell v Russell (1999) FamCA 187
At the outset, I am at pains to point out to the parties that the task I must undertake, as I have just outlined it, is not a simple accounting or arithmetical exercise. In the jargon of the times, I cannot “crunch the numbers” to come up with an exact division of their property, which is not open to challenge or incapable of different interpretation. The task set for me, in this case, requires me to balance and compare contributions which are by their nature different. The discretion I have is a wide one.
The difficulty in this case is that the vast majority of the parties’ marital assets is in the form of superannuation and so is not immediately realisable. The purpose of superannuation is to prepare its beneficial owner for retirement. In this case, both parties are in their early forties and therefore many years away from retirement. However their current and future financial needs prior to retirement are likely to be great. In some ways this lends an atmosphere of artificiality to the exercise. Unless Ms M persuades the trustee of the superannuation scheme to release funds to her prematurely, neither her nor Mr M’s financial position will change. The significance of the orders will become apparent when the parties consider retirement, likely to be some years away and after H has reached his maturity.
The documents relied upon
Both parties provided minutes of the orders they seek in these proceedings at the commencement of the hearing on 5 July 2005. These are attached to these reasons for judgment at schedule one and two respectively.
Ms M relied on the following documents:
i)An affidavit of herself filed 29 June 2005;
ii)A statement of her financial circumstances filed 29 June 2005;
Mr M relied on the following documents:
i)An affidavit of himself filed 4 July 2005;
ii)A statement of his financial circumstances filed 4 July 2005;
iii)An affidavit of his solicitor, C B filed 4 July 2005.
Only the parties themselves gave evidence in these proceedings and each was cross-examined by counsel for the other party.
The evidence
This is not a case which turns on credit. In my estimation, both the husband and the wife are decent and hard working citizens, whose integrity is beyond reproach. To their mutual credit, both parties acknowledged the contributions of the other. Where there were differences in their respective accounts of events, these were minor and had more to do with difficulties of recollection than any suggestion of deceit. As is commonly the case in matters such as this, both parties shared the common tendency to recall their own contributions with more clarity than they recalled the contributions of the other.
I have no doubt that the parties regarded their marriage as being one of equals and that they pooled their resources during it. Both contributed to the marriage, in different ways during it, to the full extent of their respective capacities. In particular it was a mutual decision of the parties to have a family and that Ms M would leave the paid workforce to be a parent and homemaker.
In these reasons for judgment, findings of fact are made on the balance of probabilities, following my observations of the witnesses concerned. In what follows, statements of fact constitute findings of fact.
Background
The wife was born 5 April 1962. The husband was born 5 February 1962. The wife completed Year 12, at school, in 1978. The husband joined the R on 10 January 1978, at the age of fifteen years and eleven months. He has been a member of the armed services ever since. He has received training as an automotive and refrigeration mechanic in the R.
The wife’s first employment was as a part-time shop assistant at M in P, in N S W. At the time, her father was posted to the R B at R and the wife was living with her parents. Mr M was also posted to R, where the parties met. They began to live together in mid 1982. Clearly, both parties were young when they began to live together and neither had any property of significant value at the time. The husband had been a member of the DFRDB scheme since joining the R.
The wife joined the R A N in late 1983. She lived away from the husband for her basic training and for her first postings, a period of about a year. During this time, the parties kept separate finances. The wife left the RAN around the time the parties married in November of 1984. They apparently found it difficult living away from one another and were concerned that, during their married life, their respective services would post them to different locations. Accordingly, the wife believed it was untenable for her to remain in the N. When the parties married, they secured married quarters at the R R B. The wife received a small amount of accumulated superannuation on her discharge. Thereafter, she had some limited part-time work. The husband’s rank at the time was a.
The parties opened a joint bank account with the A D C U after their marriage. All their wages were paid into this account. In 1986, Mr M was posted to the A R B for four years. The parties’ first child, C was born at A on 12 February 1987. The parties divided their family responsibilities along conventional lines. Mr M was the family’s bread winner. Ms M attended to most of the home duties and was primarily responsible for caring for C and then their second child H, who was born 25 September 1989.
At the end of 1989, Mr M was posted back to R and the family moved there with him. The parties decided their children would receive a private education. By 1992 C was at school and the wife decided to study nursing at the U of W S. This was a long held ambition of hers. H was in day care, whilst the wife attended to her studies. Between 1992 and the end of 1995, the wife was engaged in full-time tertiary study. This period coincided with the birth of the parties’ third child C, who was born 27 December 1992. C was placed in day care from an early age.
The wife graduated with a Bachelor of Science degree in nursing at the end of 1996. She is qualified as a registered nurse, although she is not currently formally registered with any nursing board. She did her post-graduate posting at the N H during 1996. She accumulated the modest amount of superannuation she holds during this period of employment in 1996. The parties’ fourth child A was born 24 August 1996. The wife has not worked as a nurse since 1996.
In late 1996, Mr M was posted by the R to D and the family moved to be with him at the beginning of 1997. Initially the family lived at the
R Base at 8 C S. This was R married quarters. In August of 2002, the family moved to 18 G S, F B. This property was privately rented but the R subsidised the rent. The parties were living in this property at the time of their separation.
Mr M’s employment took him away from home from time to time. He was required to attend courses and go on exercises. Mr M was away from D for a period of thirteen months in the period from 2001 to 2002. The parties’ fifth and final child, H was born in D on 27 November 1998.
When H started preschool, the wife obtained part-time employment as coordinator of the R C C. She also did some editing for T E M. The community centre was a short distance from the parties’ marital home and the wife was able to do the part-time editing from home. She believes she was earning approximately $600.00 per week by way of this employment. She gave up this work at the time the parties separated. This was also the time H’s special needs began to manifest. The separation seems to have been traumatic and difficult for both Mr M and Ms M. The wife has not worked since the parties separated.
The parties lived in rented accommodation during their marriage. They do not seem to have accumulated property of substantial worth during their marriage, apart from the husband’s superannuation entitlements. The impression I have is that, with five children to support on primarily one wage, they found it difficult at times to make ends meet financially.
The parties owned two motor vehicles at the time of their separation, a Celica motor vehicle and a Toyota Landcruiser. The first vehicle was owned outright. The Toyota Landcruiser was purchased with a personal loan from the D F C U. Shortly prior to their separation, the parties applied to the D F C U to consolidate a number of their joint loans into one debt. They consolidated the following sums: $9,992.32 in respect of the Toyota Landcruiser; a debt to Buyer’s Edge for $928.00; and a debt to the RAAF Welfare Trust for $500.00; into one debt of $11,667.47. Mr M has paid all the necessary instalments in respect of this debt since the parties separated.
After the parties separated, it was discovered that they owed a considerable sum in respect of electricity utilised by the family whilst living at C Street. The sum owed was $6,184.44. It arose because of some error in the metering of electricity at the RAAF Base. The error was not attributable to any fault of either of the parties. However the RAAF was prepared to extend little leniency to Mr M. He was required to pay the bill immediately and borrowed additional money from the D F C U for this purpose, bringing the parties’ joint debt to $15,780.00.
At separation the husband moved into single quarters at the RAAF Base. The wife remained living at the G Street, F B property with the children but was unable to manage the rent without the RAAF rental subsidy. She decided she had to move with the children. In the tension and difficulties surrounding their separation, this move was not particularly well handled, as the parties found it difficult to communicate about it. The husband was left to pay some rent on the property, after it had been vacated. The security deposit was forfeited. In these difficult circumstances, the husband understandably found it difficult to pay child support. Currently, the parties each blame the other for making a difficult situation worse. From the husband’s perspective, the wife’s selfishness compounded his financial difficulties. From the wife’s point of view, she was left with little financial support for the parties’ five children. The antipathy the parties share for each other remains to this time.
The wife retained the parties’ furniture and household effects at separation. The husband retained the two motor vehicles and has continued to pay the D F C U loan. The instalments on the loan are $162.60 each fortnight. At separation, the husband’s income was $50,820.00 per annum. By this time he has been promoted to the rank of c. He has held this rank since February of 2002.
The parties have very different views as to the care arrangements for the children following separation. From the wife’s point of view, the husband was generally disinterested in seeing them. From the husband’s point of view, the wife made it as difficult as possible for him to see the children. In the context of these proceedings, it is not necessary for me to resolve this issue. However, there can be no doubt that the children have lived with Ms M since separation. She has been in receipt of Centrelink benefits during this period and she has also received regular payments of child support from Mr M in the sum of $522.00 per fortnight.
In January of 2004, Mr M accepted a posting back to the W RAAF Base. This resulted in his annual salary being reduced to about $49,000.00. The parties’ oldest child C attained eighteen years of age on 12 February 2005. As a result, the husband’s liability to pay child support was reduced to $502.51 per fortnight. The husband hoped that Ms M and the children would also move to N S W, as this is where Ms M’s family live. However, Ms M has elected to continue to live in D because she believes that the children are well settled in their schools in D. This decision on her part seems to have added to the level of tension between the parties. Obviously, it is very difficult and expensive for Mr M to have face-to-face contact with the children.
In addition, in the period since separation Mr M has incurred a number of additional debts. He estimates his liability in respect of legal costs for these proceedings as being about $10,000.00. He has borrowed other monies to re-establish himself in W. At present, he is living in a bed-sitter on the RAAF Base and paying rent of $50.00 per week.
I accept that with the necessary recurrent payments on the D F C U loan; payment of child support; and other living expenses; Mr M is not in a strong financial position. By way of example, although he retains the Toyota motor vehicle, he is unable to pay the cost of having it registered.
The husband currently owes the D F C U the sum of approximately $18,400.00, which he is paying off at the rate of $170.00 per fortnight. He also owes the RAAF W T Fund the sum of $3,200.00, which he is paying off at the rate of $69.00 per fortnight. It is unlikely that his financial position will be relieved in the short to medium term.
At the present time Ms M’s major source of financial support is a supporting parent and carer’s allowance which she receives from Centrelink in an amount of $561.00 per week. Her major expense is her rent of $214.00 per week. She has purchased a motor vehicle for herself, which she values at $200.00. However, this vehicle was recently severely damaged in an accident.
C continues to live with Ms M but is not currently working or claiming Centrelink benefits. The other children are still at school. H, C and A all attend M C S, where they are in Grade 10, Grade 8 and Grade 4 respectively. Ms M pays $50.00 per week in respect of the children’s school fees. H is attending N S S. He attends school from 8.00am until 2.00pm each school day.
It is Ms M’s position that H requires extensive assistance from her. In her affidavit, Ms M deposes as follows:
“I am committed to doing everything I can to ensure that H is able to develop his full potential. This means doing physiotherapy, speech exercise and occupational therapy with H regularly.
I don’t foresee returning to the full time work force. If I could obtain employment that was flexible and part time I would be interested. Support services with children with disabilities are being cut back all the time and therefore I expect it will be increasingly difficult to return to any paid work while H is in my care.”[6]
[6] See wife’s affidavit of evidence at paragraphs 76 and 77
Clearly the extent of H’s special needs and their implications so far as Ms M’s ability to seek paid employment for herself are central considerations in this case. H’s birth appears to have been unexceptional. However, when he was about two and a half years old, Ms M began to notice he was not progressing as quickly as other children. As a result, she sought assistance from the Paediatric Health Team at the R D H and was then referred to the C D S Intervention Program. It is now her position that H has been diagnosed as being intellectually disabled and has symptoms of autistic spectrum disorder.
Ms M left the workforce in 2002, when H was about three years of age. He was still wearing nappies and needed assistance to eat. It is Ms M’s position that she was not able to balance the demands of paid employment, the needs of her four other children as well as manage H’s significant special needs. This continues to be her position.
H began to attend preschool in mid 2003. He now attends N S S from 8.00am until 2.30pm each day during school terms. It is Mr M’s position that, as H is attending school and the other children are older and also attending school, it is open to Ms M to at least obtain a part-time job. Ms M does not accept this is so. The parties also have somewhat different views as to the extent of H’s special needs and the extent of the additional care he requires.
H takes considerably longer than other children to do most routine tasks and has to be prompted to do them. He also has difficulties with his speech and feet. In order to keep him on task in respect of routine matters, a series of communication cards have been prepared for H to follow. Ms M sets out these cards for H each morning, afternoon and evening. H’s occupational therapist has also set activities for H to do each day. These are such things as drawing or completing puzzles.
Mr B, counsel for Mr M, is critical of Ms M for not providing any detailed medical assessment of H’s special needs. This is so. Ms M however has attached some documents, which have been prepared variously by staff at C D S; the Children’s Development Team; and H’s speech pathologist. Mr B objects to the admission of these documents into evidence, asserting that his client is at a significant disadvantage as the authors of the various documents are not available to be cross-examined by him. On the other hand, Ms A, counsel for Ms M, asserts that the documents are admissible pursuant to the provisions of section 69 of the Evidence Act 1995, the section of the Act which deals with the exception of business records to the hearsay rule.
The first document to which Mr B takes exception is entitled “Play based assessment report”. The document refers to H and was completed on 19 January 2004. The document has been signed by a psychologist; an occupational therapist; a physiotherapist; a speech pathologist; and a social worker; all of whom are associated with C D S in one way or another. The document indicates that Ms M was referred to C D S in respect of H in August of 2003.
Essentially the document is formed into three columns, which deal with a number of matters, namely: issues to do with H; why those particular issues have arisen; and suggested interventions for them. For example, under the “issues” column it is suggested that “H’s speech is very difficult to understand.” Thereafter, under the “why” column, it is suggested that H presents “with severe verbal and oral dyspraxia.” In response to this, in the “suggested interventions” column, it is recommended that “H practice single speech sounds in his play.”
I think Mr B is right to be critical that the document, in itself, is somewhat difficult to follow and has been presented without much explanation. However, in my view the document is admissible as a business record. I reach this view because the contents of the document are not greatly contentious, as they accord with the evidence of Ms M herself. I am also aware that pursuant to section 42 of the Federal Magistrates Court Act 1999:
“In proceedings before it, the Federal Magistrates Court must proceed without undue formality and must endeavour to ensure that the proceedings are not protracted.”
In my view, the document is largely illustrative of what Ms M has said in her evidence in chief that H, because of his special needs, is a demanding child, who takes far more time to care for than a child without such difficulties. In addition, in order to reach his full developmental potential, H needs frequent and intensive stimulation and encouragement, particularly in regards to his speech and behaviour.
The document itself does not purport to be an expert medical opinion. Rather, it provides those who are treating and caring for H with strategies to deal with his special needs. Perhaps, another example is illustrative. Under the column heading “issues” appears “concerns with personal safety and stranger danger”. In the column headed “why” is recorded “H has no observed awareness of dangers in his environment”. The “suggested intervention” is “H will require support, and need to be reminded visually what to do, what-to-do stories with pictures can help this. Pictures of trusted people can remind H who to ask for help.”
I do not believe that the contents of this document are greatly controversial. As I have already indicated, I accept that H is a child with significant special needs. I also accept that Ms M is devoted to H and wishes to provide him with the highest standard of care. As H’s mother, she believes she is the best person to provide this care and, with the advice of appropriate experts, the necessary stimulation and encouragement he needs. The document serves to illustrate the intensive care that H needs to have, through such things as repetitive word exercises and balancing exercises. Things Ms M provides for H. These are matters of which the various authors of the report might reasonably suppose to have had personal knowledge, when the document itself was compiled in 2004.
The second document objected to is a letter written by C G, a senior physiotherapist with the C’s D T at the D of H and C S to an unspecified doctor. Ms G reports that she has been asked to see H who is reported to suffer from “verbal dyspraxia and global developmental delay.” She also notes that H has some problems with his feet and asks the doctor concerned to consider referring H for the fitting of orthotics to help support the development of the arch of his feet.
Again, no great explanation is provided as to the nature of H’s problems with his feet. However, I do not think that this evidence is particularly significant in the overall scheme of things. In her evidence, Ms M merely says that H has been referred to a podiatrist. The document confirms the truth of this assertion. I propose to admit the letter into evidence.
The final document objected to is one headed “H’s vocabulary selection”. The author of the document is not specified. By way of explanation for the document, Ms M deposes that she herself has written a number of communication books to help H expand his vocabulary. The document is the basis on which Ms M has compiled these communication books. Again, this does not appear to be a particularly contentious issue. I propose to admit the document concerned.
The first step – the pool of assets
As I have already indicated, the parties total marital assets, available for distribution between them, amount to $491,100.94. Apart from some items of comparatively small value, the vast amount of this sum is attributable to Mr M’s future entitlements to superannuation, as valued pursuant to the appropriate methodology. Both parties seek splitting orders in respect of the superannuation.
The second step – assessment of contributions – section 79(4)(a) to (c)
I now turn to the second of the steps in the exercise under section 79, namely an assessment of the parties’ contributions within the context of section 79(4)(a) to (c). These provisions are as follows:
“Section 79(4) In considering what order (if any) should be made under this section in proceedings with respect to any property of the parties to a marriage or either of them, the court shall take into account –
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them;
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them;
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of home maker or parent.”
Section 79(4) requires that the court look at the entirety of the contributions, both financial and non-financial, to the welfare of the family, as well as to the acquisition, conservation and improvement of those assets. Contributions are not required to be tied to the acquisition, conservation or improvement of a particular asset and are to be taken into account generally as contributions in a total sense. The task required of me pursuant to section 79(4) of the Family Law Act thus is to weigh and assess the disparate contributions of the parties to arrive at an outcome, which is both appropriate and just and equitable in all the circumstances.[7] Contributions, which are different in quality and nature, must be compared. The exercise is not purely an arithmetical or accounting one.
[7] See Pierce &Pierce (1999) FLC 92-844
In assessing the parties’ contributions towards the acquisition of the assets of their marriage, it is necessary to consider whether the court should adopt a global approach or an asset by asset approach. In the former, the court assesses the parties’ contributions to their assets in a total or comprehensive manner. In the latter, the court assesses the parties’ contributions to individual items of property. Both approaches are legitimate, however the High Court has held that the global approach is generally more convenient, particularly when it is necessary for the court to assess contributions, which are different in nature. In Norbis v Norbis[8] it was said as follows:
“Although it is natural to assess financial contributions under sec. 79(4)(a) by reference to individual assets, it is also natural to assess the contribution of a spouse as home maker and parent either by reference to the whole of the parties’ property or to some part of that property. For ease of comparison and calculation it will be convenient in assessing the overall contributions of the parties at some stage to place the two types of contribution on the same basis, i.e. on a global or, alternatively, on an “asset-by-asset” basis. Which of the two approaches is the more convenient will depend on the circumstances of the particular case. However, there is much to be said for the view that in most cases the global approach is the more convenient.”
[8] Norbis v Norbis (1986) FLC 91-712 at page 75, 268 per Mason C J & Deane J
Pursuant to section 90MC of the Family Law Act 1975 superannuation interests are to be treated as property. Specifically, pursuant to section 90MS of the Act, such superannuation may attract the provisions of section 79 of the Act. The difficulty in this case is how to assess the parties’ various contributions, pursuant to section 79, to the somewhat amorphous property which is the husband’s DFRDB entitlements.
I say amorphous because of the artificiality of the valuation of that superannuation, given that it remains in its growth phase and its final extent depends on factors which are currently unknown, namely Mr M’s salary at retirement; his years of service; and his rank on retirement.
Clearly, these attributes, give the DFRDB entitlements a very different quality to other types of property, whose value can be readily ascertained by sale and can be easily transferred to others, such as real or personal property. This also raises the question as to whether the section 79(4) exercise has a different quality, when it is applied merely to superannuation.
In C and C [9]the majority of the Full Court considered:
“…section 90MC does no more than confer jurisdiction on the relevant courts to make orders in relation to superannuation interests in proceedings with respect to the property of parties to a marriage (or indeed in proceedings between such parties where the only asset of any significance is a superannuation interest) and that s 90MS does no more than provide that superannuation interest are but another species of asset (in addition to property as defined in s 4(1)) in relation to which orders can be made in proceedings between parties to a marriage.
“Importantly, the conclusion, that by virtue of s 90 MS superannuation interests are to be regarded as another species of asset in relation to which orders can be made, will mean that the Court will be relieved from having to determine in any particular case the question of whether “a superannuation interest”, which comes within the definition of that term contained in s 90MD, may in fact also come within the definition of “property” in s4(1) … or whether it is only a financial resource. It is interesting to note in this regard that, from its inception, s 75(2) has contained reference in paragraph 75(2)(b) to “property and financial resources” and then in paragraph 75(2)(f) has contained reference to “a…benefit…under any superannuation fund or scheme.” Thus, the treatment by the legislation of a superannuation benefit or entitlement as a concept separate from property and financial resources is not new.”[10]
[9] C and C [2005] FamCA 429 at paragraph 52
[10] See C and C (supra) at paragraph 53
The majority in C and C provided some guidance as to how this different “species of asset” was to be treated in the exercise of the court’s discretion pursuant to section 79. The majority of the court said as follows:
“Nothing we have said in this judgment would prevent a Court in the exercise of its discretion from including a superannuation interest as an item of property in the list of property which is drawn as “the first step” in determination of proceedings under s 79, whether or not a splitting order is sought in those proceedings. This approach could be adopted where the parties agree that it should be adopted, or where the Court is satisfied that the superannuation interest is indeed property within the meaning of the definition of property contained in s 4(1), or if the interest is not within that definition, but is of relatively small value in the context of the value of the other assets in the case, or there are feature about the interest which leads the Court to conclude that this would be an appropriate approach.
The parties’ contributions to all items on that list (including superannuation interest) would then be assessed on either a global or an asset by asset basis. It might then be necessary in the s 75(2) context to have regard to the parties’ future superannuation entitlements (having regard of course to any division proposed on the basis of their contributions), with consideration then being given to the overall justice and equity of any proposed award or order ( including any proposed splitting order). Indeed, this is the approach which the Full court has used on its re-exercise of the trial Judge’s discretion in Ilett and Ilett (which will be delivered contemporaneously with the decision in this case).
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 times 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.
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 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.”[11]
“The reasoning in Hickey would seem to overcome this legislative omission in that if the words in paragraph (ca) of the definition of “matrimonial cause” in s 4(1) are read not, as we hold, as merely enlivening the jurisdiction to make orders concerning superannuation interest, but rather as meaning that in all proceedings under s 79 (irrespective of whether or not a splitting order is sought), superannuation interest are to be treated as property.”[12]
“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:
[11] See C & C (supra) per Bryant CJ, Finn and Coleman JJ at paragraphs 61-64
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.
In the context of a consideration of the matters referred to in sub-paragraphs (b) and (c) of the last paragraph, the following matters may well be relevant: the relationship between years of fund membership and cohabitation (if applicable), at separation and at the date of hearing; preserved and non-preserved resignation entitlements at those times; and any factors peculiar to the fund or to the spouse’s present and/or future entitlements under the fund.”[13]
[13] See C & C (supra) per Bryant CJ, Finn and Coleman JJ at paragraph 65-66
Accordingly, it is necessary to examine in more detail the nature of Mr M’s interests in the DFRDB and PBS and what occurs when a split is made in those entitlements.
Members of the DFRDB scheme are required to contribute 5.5% of their fortnightly salary, for superannuation purposes, to the scheme. The scheme is designed to provide its members with an income when they have left the defence forces after either fifteen or twenty years of service or in the event of invalidity. The primary form of benefit is a combination of an indexed pension and a lump sum payment or commutation. DFRDB members are also entitled to a productivity benefit pursuant to the “D F (Superannuation) (Productivity Benefit) Determination”. This benefit is paid at the same time as a member’s DFRDB entitlement crystallises.
The amount of a member’s indexed pension and commutation is calculated pursuant to the provisions of the D F and R D Benefits Act 1973. Section 23 of the Act provides the basis to calculate a member’s indexed pension or to utilise the terminology of the Act his or her “entitlement to retirement pay”. Essentially, after fifteen completed years of service, a member is entitled to receive 30% of his termination salary as retirement pay. This percentage increases incrementally after each subsequent completed year of service. For example, after thirty-nine years of completed service, the percentage increases to 73.5%.
This latter figure has some significance to Mr M. He currently has twenty-seven years of completed service. If he remains in the RAAF until his compulsory retirement age of fifty-five, he will have accumulated thirty-nine years of service. In this context, the issue of Mr M’s immediate plans regarding his continued service in the RAAF arose. Mr M is currently entitled to retire from the RAAF and access his benefits, as he has served more than twenty years. It was suggested to him during the case that he was likely to do so shortly and pursuing employment opportunities as either an automotive or refrigeration mechanic.
I accept Mr M’s evidence that he proposes to remain in the RAAF as long as he possibly can. It is the only working environment he has ever really known and he enjoys it. His continuing service is likely to confer considerable benefits on him in the long term. True it is that if he did retire from service, he would be entitled to receive both a pension from the DFRDB scheme and any additional income he earned by his own personal exertion. I have no doubt that because of his skills, acquired whilst in the RAAF, Mr M has attractive employment prospects. However, I accept his evidence that he prefers to remain in the RAAF for as long as possible notwithstanding these prospects.
Section 24 of the D F and R D B Act 1973 provides the legislative basis for the calculation of any commutation a member of the DFRDB scheme may wish to pursue. Essentially a member may commute a maximum of five times his or her annual rate of retirement pay on exit from the services. For obvious reasons, the degree of commutation has implications for the calculation of retirement pay.
Mr M has provided information regarding his entitlements pursuant to the DFRDB scheme at various dates as follows:
Date Theoretical termination salary Years of service Maximum retirement pay Maximum commutation Reduced retirement pay 20.2.2003
$50,820.00
25
$21,958.50pa
$107,992.50
$18,106.99pa
10.1.2005
$49,580.00
27
$22,682.85pa
$113,414.25
$18,906.15pa
30.6.2005
$52,853.00
27
$24,180.24pa
$120,901.20
$20,031.26pa
If theoretically Mr M remained on the same salary until the age of fifty-five years, on my calculations, the figures would be as follows:
Date Theoretical termination salary Years of service Maximum retirement pay Maximum commutation Reduced retirement pay 5.2.2017 $52,853.00 39 $38,846.95pa $194,234.75 $28,720.01pa[14] [14] The reduction in pension amount is calculated by reference to a life expectancy factor as at the date of retirement.
Accordingly, completed years of service is a highly influential component in regards to the calculation of a member’s benefits, as is salary on exit from service. It is of course highly improbable that Mr M’s salary will remain as it is for the next decade of so. Inflationary forces will increase it. However Mr M himself believes his promotion within the RAAF is likely to be slow. He has been a corporal since 2002. At best he could expect promotion to sergeant in about five years from this time. He is more likely to be promoted around 2009. He believes that there is an “outside chance” of him being promoted to the rank of f s before his retirement in 2017. I accept his evidence in this regard.
In the event of a split in the entitlement of a member of DFRDB scheme, the spouse in whose favour such a split is made does not become a member of the DFRDB scheme. Where the member’s interest is in the growth phase, as is the case here, the non-member spouse becomes what is known as an Associate B Member of the MSBS scheme with a benefit based on the amount of the split transferred. The same occurs in respect of any split in the PBS. In each case, there is a reduction in the benefits to which the member of both the DFRDB and PBS would have otherwise been entitled to. An Associate B Member of the MSBS is not entitled to any indexed pension or retirement pay. Rather his or her interest accrues interest at the long-term bond rate between the operative time (the effective date of the splitting order) and the date when the associate benefit becomes payable.
The provisions of the M S and Benefits Rules, in particular rules 86 and 87, deal with the payment of associate B benefits. In certain circumstances an Associate B Member may apply for an early release of benefits. These circumstances include total and permanent incapacity for work; compassionate grounds as determined by the Australian Prudential Regulation Authority pursuant to mandated criteria;[15] and severe financial hardship, again as determined by reference to mandated criteria.[16]. Ms A indicated that neither she nor her client were aware of these provisions. Obviously access to some of these monies now or in the near future would be of considerable benefit to Ms M.
[15] See sub-regulation 6.19A of the Superannuation Industry (Supervision) Regulations 1994
[16] See sub-regulation 6.01(5) of the Superannuation Industry (Supervision) Regulations 1994
No specific evidence was provided to me, by either of the parties, as to the likely effect of the split, as proposed by him or her at this stage, on Mr M’s future entitlement to either retirement pay or a lump sum, when he elects to retire from the RAAF. The issue is a somewhat complicated one, and as has previously been indicated, the parties have different views as to the relative merits of being a member of the DFRDB scheme, after a significant splitting order has been made, or an Associate B member of the MSB scheme.
In its handbook for the scheme, the management of the DFRDB provides the following information as to how the reduction in both a member’s pay and commutation is to be calculated:
“If the members benefit is in the growth phase (i.e. the member is a contributor or is a person to whim a deferred benefit may become payable in the future), the member’s benefit is not reduced at the operative time of the family law split. In stead, the member’s benefit will be reduced when it becomes payable to the member.
Reduction of later standard pension (D F R and D Benefits (Family Law Superannuation) Orders 2004)
Where a standard pension becomes payable to a member spouse at a time after the operative time.
To calculate the member entitlement is necessary to first calculate the non-member spouse (NMS) percentage of the benefit using the formula.
(1) Hypothetical % age entitlement x NMS entitlement 100
The hypothetical percentage entitlement is the percentage of the annual rate of salary that would have been attributable to the member spouse as pension immediately before the operative time if the member had been able to retire at the operative time. This percentage is calculated using factors determined by an Actuary.
The non-member spouse entitlement is the percentage amount to be allocated to the non-member spouse under the terms of the splitting order or agreement.
The person payable to the member spouse is then reduced to an amount calculated using the following formula:
(2) (pre-split retirement % age – NMS % age) x member salary on retirement
The non-member spouse percentage (NMS % age) is the proportion of the hypothetical pension entitlement of the member that relates to the non-member spouse calculated using the formula in (1) above.
The pre-split retirement percentage is the percentage of the annual rate of salary that would have been applicable to the member spouse at retirement if there had not been a payment split.
Reduction of lump sum components (D F R and D Benefits (Family Law Superannuation) Orders 2004.
Where a lump sum benefit becomes payable to a member spouse at a time after the operative time.
To calculate the member entitlement it is necessary to first calculate the non-member spouse amount of the benefit using the formula.
(1) NMS Amount=Hypothetical member amount x Transfer amount Scheme value + surcharge debt
The hypothetical entitlement is the amount of the lump sum that would have been attributable to the member spouse immediately before the operative time if the member had been able to retire at the operative time. This amount is calculated using factors determined by an Actuary.
Transfer amount is the amount payable to the non-member spouse under the terms of the splitting order or agreement.
The lump sum payable to the member spouse is reduced to an amount calculated using the following formula:
(2) pre-split retirement amount – NMS amount
The non-member spouse (NMS) amount is the amount of the hypothetical entitlement of the member that relates to the non-member spouse calculated using the formula in (1) above.
The pre-split retirement amount is the lump sum that would have been applicable to the member spouse at retirement if there had not been a payment split.
Reduction of the D Act (Productivity Benefit Scheme) entitlements of DFDRB members (Actuarial Methodology and Factors)
·At the operative time ComSuper will identify the 3% benefit and the Superannuation Guarantee (SG) top-up amount (if any)
·An adjustment factor is calculated as follows:
Adjustment factor = Transfer Amount Scheme value + surcharge debt
·Amounts in the notional Productivity and SG accounts that should be established at the operative time are then obtained by multiplying each of the values in step (i) by the reduction factor identified in step (ii).
·The accounts accumulate with the interest rate applying to the productivity benefits until the time of payment.
·Where, at the time benefits are payable, no SG top-up is payable to the member (i.e because the member has an entitlement to pension) the top-up amounts in the notional SG account are reset to zero.”[17]
[17] See D F R & D Benefits Scheme Family Law and Splitting Super handbook at pages 17-20
The difficulty in this case is that neither party has provided any actuarial evidence as to the likely consequences of any split of Mr M’s DFRDB entitlements at this stage. I have no way of knowing what the hypothetical percentage entitlement in this case would be. Notwithstanding this difficulty, both parties wish me to deal with their competing applications. In particular, I am unaware as the likely drop in the amount of Mr M’s retirement pay resulting from any particular split.
It is now necessary to assess the significance of the contributions both parties rely upon in support of their respective cases. Mr M relies much on what he sees as being his superior contributions to the DFRDB, in the period prior to the parties’ commencing their relationship. He relies not only on the monies he applied directly to the superannuation, likely to be a comparatively small amount, but also on completed years of service.
I find that the parties began their financial union when Ms M left the RAN in late 1984. Prior to this time the parties kept separate finances and lived apart for long periods of time. Accordingly, Mr M had been in the DFRDB for a period of about seven years prior to the parties’ relationship or twenty eight percent of his completed years of service, as at the date the parties separated. I think this a significant factor, which favours Mr M.
The marriage between the parties was a long one, being well over twenty years in duration. The marriage produced five children. Undoubtedly the parties’ responsibilities to parent their five children involved significant financial sacrifice on both their parts. As I have already indicated, I have no doubt that their marriage was one of equals and both Mr M and Ms M contributed during it to the full extent of their respective capacities. Mr M was the main breadwinner and Ms M was the principle homemaker. Obviously their respective contributions are very different in quality but I have little difficulty in coming to the conclusion that these contributions must be assessed as being essentially equal for the purposes of section 79(4).
The parties have now been separated for nearly two and a half years. During this period, Mr M has continued to contribute to the DFRDB scheme. He has also assumed responsibility for the parties’ debts on separation. These debts have not formally been factored into the parties’ table of assets and liabilities as the parties agreed that they should not be so. However I take the debts into account. The payment of the debts has involved considerable financial privations on his part. He has also continued to expend a considerable portion of his income in child support.
On the other hand, Ms M has been solely responsible for the care of the parties’ five children. Given her lack of financial resources, this cannot have been easy. She has been forced to find alternative accommodation for herself and the children. However because of Mr M’s assumption of responsibility for the parties’ matrimonial debts in the period following separation, I am of the view that his post separation contributions are slightly superior to those of the wife in the same period.
Having made these findings, the question which arises is what significance Mr M’s greater contributions, at the outset of the parties’ marriage, should have now, over twenty years later, in the context of the only significant marital asset being Mr M’s interest in the DFRDB.
In this regard, I bear in mind what has been said in the Full Court of the Family Court in a number of cases. In Quaresimini & Quaresimini[18] the Full Court said as follows:
“The section 79 exercise is not a pure accounting exercise. It is an exercise in identifying the various matters to be considered under section 79 and weighing them up against the other before reaching what is an appropriate order to be made, which order may not be made unless it is just and equitable. The manner in which disparate contributions have to be measured, especially initial capital contributions, has been the subject of much discussion.”
[18] Quaresimini & Quaresimini (1999) Fam CA 1314
In Pierce & Pierce,[19] Ellis, Baker & O’Ryan JJ made reference to several of the authorities. Their Honours said as follows:
“In our opinion it is not so much a matter of erosion of contribution but a question of what weight should be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions both of the husband and the wife. In considering the weight to be attached to the initial contribution, in this case the husband, regard must be had to the use made by the parties of that contribution.”
“…there is no principle that the length of the marriage leads to a likelihood that other contributions will outweigh or weigh equally with ‘a particular contribution’. It is a matter of assessing the contributions of all relevant kinds in each case to arrive at an outcome, which is both appropriate and just and equitable. In some cases particular contributions may be outweighed or equalled by other ones. In other cases particular contributions may be so disproportionate to other contributions as to merit special recognition.”
[19] Pierce & Pierce (1999) FLC 92-844 at page 85,811
In my view, the interrelationship between his years of completed service and the amount of Mr M’s retirement pay and so the extent of his commutation, gives great significance to Mr M’s pre-marriage contributions as identified by me, which now merit special recognition at this stage, notwithstanding the lengthy marriage between the parties.
The task required of me pursuant to section 79(4) of the Family Law Act is to weigh and assess the disparate contribution of the parties to arrive at an outcome, which is both appropriate and just and equitable in all the circumstances. Contributions, which are by their nature and quality different, must nonetheless be compared. A corporation or government department is able to ascribe value to the efforts of its servants by the amount of salary it attributes to them for the performance of those efforts. Such a task is not so easy to perform in respect of an exemplary parent or homemaker, who receives no actual salary for the labours he or she perform. Yet, very often, the court is called upon to compare and contrast those roles, when performing its responsibilities pursuant to section 79(4). In addition, the task must be performed when members of society hold very different views as to the nature of marriage and the economic consequences of divorce.[20] Accordingly, the task set for the court pursuant to section 79(4) cannot be regarded purely as an arithmetical or accounting exercise. Section 79(4) carries with it an extremely broad discretion. The parameters of the discretion are that the orders made pursuant to section 79(4) must be appropriate and must not be made unless it is just and equitable to do so.
[20] See Mallet v Mallet (1984) 156CLR 605 at 607-8
Accordingly, along with all the other contribution factors during the period of the parties’ marriage, I must balance and assess the significance to be given to the husband’s initial contribution of his superannuation. Having completed that exercise, I am satisfied, upon an overall assessment of the respective contributions made by each of the parties, that those contributions should be considered as being 57.5/42.5% in the husband’s favour.
The third step – section 75(2) factors – the prospective needs of the parties
I am now required to consider the various matters set out in section 75(2) and in particular to consider whether any further adjustment should be made in favour of either party. The section 75(2) factors are as follows:
a)the age and state of health of each of the parties;
b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them to obtain meaningful and gainful employment;
c)whether either party has the care or control of a child of the marriage who is not attained the age of 18 years;
d)the commitments of each of the parties that are necessary to enable the party to support:
i) himself or herself;
ii) and a child or another person that the party has a duty to maintain;
e)the responsibilities of either party to support any other person;
f)the eligibility of either party for a pension, allowance or benefit under:
(i)any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia,
(iii)and the rate of any such pension, allowance or benefit being paid to either party;
g)where the parties have separated or the marriage has been dissolved, a standard of living, which in all the circumstances is reasonable;
h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training;
j)the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
l)the need to protect a party who wishes to continue that party’s role as a parent;
m)if either party is cohabiting with another person – the financial circumstances relating to the cohabitation;
n)the terms of any order made or proposed to be made under section 79 in relation to the property of the parties;
na) any child support under the Child Support (Assessment) Act that a party to the marriage has provide, is to provide, or might be liable to provide in the future, for a child of the marriage;
o)any other fact or circumstance;
p)the terms of any financial agreement that is binding on the parties.
Sub-section (a) – Both parties are forty-three years of age and are apparently in good health. These matters are not significant in this case.
Sub-section (b) – Mr M is a skilled tradesman. During his period of service, he has gained qualifications as both an automotive and refrigeration mechanic. These skills are likely to stand him in good stead when he ultimately retires from the RAAF. This must occur at the age of fifty-five years.
As a result of his membership of the A F, Mr M is entitled to benefits from the DFRDB. To a large extent, the Australian Government funds Mr M’s entitlements in the scheme, which are open-ended. Mr M is entitled to receive some level of retirement pay for the rest of his life, when he leaves the RAAF. He is entitled to receive this retirement pay regardless of whether or not he obtains other employment. This is a considerable benefit to him and means that he has a level of income security for the rest of his life. It is difficult to ascertain what the level of this income will be at this stage.
At the present time, Mr M is secure in his employment and is likely to remain so until he reaches the age of fifty-five years. He enjoys a salary of about $50,000.00 per annum. However, due to his other recurrent expenses, particularly child support, he cannot be regarded as being in a strong financial position.
Ms M has been in receipt of social security payments since the parties separated. These payments, together with child support received from Mr M, are her sole sources of income. On any view, she cannot be regarded as being in a strong financial position. She is living in rented accommodation and life is a financial struggle for her.
Ms M struck me as being an intelligent and resourceful person. She has a tertiary qualification in nursing. However, she has not chosen to pursue that profession, after her initial period of supervision training. Accordingly, her registration has lapsed. Notwithstanding these difficulties, I consider that Ms M would be able to resume her nursing career, if she so wished, without an undue level of difficulty. I concede that it may be necessary for her to undergo some level of retraining. In addition, in the past, Ms M has worked as an editor and the coordinator of a community centre. I consider that she has some capacity to obtain meaningful and gainful employment in the future.
Sub-section (c) - The parties are the parents of four children under the age of eighteen years. These children live with Ms M in D. As a result of his posting to W, Mr M has little input into the day to day arrangements for the care of the children, which inevitably must fall on Ms M. One of the children, H, requires a significant level of input into his care because of his special needs. As a result, Ms M’s ability to join the workforce is severely restricted. Given that H is currently just under seven years of age, these restrictions are likely to remain for many years to come. Inevitably Ms M’s responsibilities towards all the children but particularly H, must curtail the level of remuneration the wife can earn and severely restrict her employability. These are factors which strongly favour Ms M.
The wife, of course, does not bear the financial responsibility for maintaining the children alone. She will be entitled to claim child support from the husband, as indeed she has done. The application of the relevant formula pursuant to the child support legislation, has resulted in the husband having a liability to pay the wife a significant sum of child support each month. However, it must not be forgotten that the payment of child support, in no way compensates the principle residence providing parent for the loss of career opportunity and the inevitable restrictions upon working hours and choice of work, which the obligation to care for children usually entails.[21] The husband does not face such restrictions on his employment, as a result of the current level of his obligation to care for the children.
[21] See Clauson and Clauson (1995) FLC 92-595 at page 81,911
I have found Ms M to be a devoted parent. She clearly wants to be available to help H as much as possible. She spends much time with H, helping him through his various routines and exercises. She does not want to devolve these responsibilities on to others and believes if she does so, H will inevitably suffer and his development impeded. In her view she can provide essential continuity for H, which is not available from his school or paid carers. As such, it is not in H’s interests for her to seek paid employment.
Sub-section (d) – As I have already indicated, the current financial position of both parties is dire. Mr M lives modestly. His income is largely consumed in paying debts and child support. He rents a bed-sitter from the RAAF for his accommodation. Ms M is in receipt of social security, nearly forty percent of her weekly entitlement to social security is consumed in the payment of her rent. Clearly neither party can be said to be wasting their financial resources.
Mr M is working to the full extent of his employment capacity. This is not the case with Ms M and Mr M is critical of her for it. No evidence was provided as to the likely consequences for Ms M, if she was to obtain some employment, so far as any reduction in her level of social security is concerned. I accept that, given her responsibilities to care for the parties’ children, particularly H, it is difficult to see that she could easily obtain full-time work. In these circumstances, there appears to be a strong likelihood that, even in the event that she was able to obtain part-time work, Ms M’s overall financial position would change dramatically.
Sub-section (e) – Besides the four children concerned in this case, neither party has any legal responsibility to maintain any other person. The parties’ oldest child, C is eighteen years of age. He continues to live with Ms M but does not contribute economically to her household. Accordingly, Ms M is responsible for supporting him.
Sub-section (f) – Ms M is in receipt of social security payments as her principle source of income. In the past, she has acquired a limited amount of superannuation. Accordingly, at the present time, she has almost no preparedness for retirement, a situation which is likely to remain the same for some time to come.
On the other hand, Mr M is well prepared for retirement due to his membership of the DFRDB scheme. At the age of fifty-five, he will receive a significant payment of cash and be entitled to retirement pay for the remainder of his life. He will also be able to seek other employment, between the ages of fifty-five and at least his early sixties, to augment his retirement pay. On any view, he is well prepared for retirement. These are factors which favour Ms M significantly.
Sub-section (g) – As I have already indicated, my impression of the parties is that they struggled financially bringing up a large family on one income. Obviously, one of the sad consequences of the end of the marriage between them is an inevitable reduction in the standard of living for them both. It is trite but true nonetheless that two households cannot live as cheaply as one. In this case, it is clear to me that both parties are currently living on a financial knife-edge. What is important in respect of this sub-section is that any drop in standard of living should not be borne disproportionately by one party.
In this case, I do not think that it can be said that there is any vast discrepancy in the standard of living enjoyed by the parties. To use a colloquialism, they are both “doing it tough”. Both live frugally and neither has a capacity to save any significant sums of money. In addition, Mr M is burdened by his responsibility to pay significant debts, many of which were incurred during the parties’ marriage. Accordingly, I do not think that the matters for consideration under this sub-section are strongly relevant in this case.
Sub-sections (h) (j) and (k) - In strict terms Ms M has not brought an application for spousal maintenance but her need for ongoing financial support is a strong flavour of her case. The marriage between the parties was a long one. During it, Ms M was able to obtain tertiary qualifications as a registered nurse. She has chosen not to utilise those qualifications. She has not practised as a registered nurse since 1996. She would need to make some efforts to renew her qualifications but these qualifications cannot be said to be hopelessly outmoded now. Were it not for Ms M’s responsibilities for the children, particularly H, it would easily be open to her to renew her qualifications in this area.
If Ms M was able to return to nursing on a full-time basis, I consider it likely that she would be much better off financially than she is currently. One of the difficulties in this case is for the court to balance Ms M’s responsibilities for the children with considerations of fairness to Mr M, which stem from the under-utilisation of Ms M’s training and other skills.
The parties’ major marital asset is Mr M’s entitlements in the DFRDB scheme. Ms M has contributed to the acquisition of that asset. The parties chose to have five children. As a result of that decision, Ms M left the paid workforce. She was largely responsible for caring for the parties’ children. In her absence, Mr M’s income earning capacity would have been severely curtailed because of the need to fund child care for the children.
Sub-section (l) – This sub-section is directed towards the financial consequences of one party continuing in his or her role as a parent. Ms M is an exemplary and dedicated parent. Clearly, she is devoted to H and wants him to have the best chance of overcoming his disabilities and becoming fully engaged in society. It seems that she is prepared to make considerable sacrifices so that this goal can be achieved.
As has been indicated already, H benefits from routine and the constant repetition of certain simple exercises. Ms M believes that she is the person best placed to provide this routine and do H’s exercises with him. As a result, she believes that it is not practical for her to seek paid employment. She fears that if she did so, H’s progress would inevitably be setback.
Mr M does not quibble that H has some special needs. However, it would appear to be his position that, notwithstanding H’s special needs, the dire financial circumstances of the parties dictate that Ms M should utilise her income earning capacities as a registered nurse. In essence, it is Mr M’s position that the parties have to cut their cloth to suit their financial position and it is not viable for Ms M to devote herself to H in this way, particularly when he is receiving an appropriate education and is away at school for considerable periods of time each day.
I confess that this is an issue which has troubled me. I can understand why Ms M would want H to have the best chance in life. I can also understand why Mr M would think it unfair to him that Ms M has the luxury of not having to seek employment. The issue is closely balanced.
Sub-section (m) – Neither party is co-habiting with another person. This is not a relevant consideration in the current matter.
Sub-section (n) – Both parties seek splitting orders in respect of the husband’s DFRDB and PBS superannuation. Where the parties differ is in the extent of that split. As this superannuation is the parties’ only significant marital asset, the splitting order will not affect their immediate financial positions, unless Ms M can persuade the trustee of the MBS scheme to release some of the funds to her prematurely.
It is Mr B’s submission that it is possible that Ms M will be much better off as the recipient of a lump sum invested at the long term bond interest rate than Mr M, who will receive a reduced commutation and reduced retirement pay, when the parties’ respective splits in the superannuation crystallise. In the absence of any expert actuarial evidence, I am not in a position to make any particular findings in this regard. It remains a matter of conjecture.
Sub-section (na) – Because the parties’ four youngest children live with Ms M, Mr M is currently assessed to pay child support to her. Mr M is PAYG tax payer. His income is easily ascertained for the purpose of applying the relevant child support formula to it. Given the number of children involved, he is paying a significant percentage of his annual salary in respect of child support. This situation will remain the same for the foreseeable future.
H, C, A and H all have their teenage years before them. These are the years when children are at their most expensive to maintain. In addition, H, C and A are receiving a private education. Given H’s special needs, H is likely to be an expensive child to parent. Although the amount of child support Mr M is paying is considerable, it is unlikely to meet all of the children’s financial needs.
On the other hand, the children have an entitlement to have regular contact with Mr M. Given the distance between the parties’ respective homes and their limited financial means, it is difficult to see how this can occur easily. The financial burden will most likely fall on Mr M for this contact to occur. The high costs of contact may have some implications for the assessment of child support. However, overall the factors to be considered under this sub-section, along with the considerations already discussed under sub-section (c) above strongly favour Ms M.
Sub-sections (o) and (p) – I do not consider that these sub-sections are relevant.
Conclusions on section 75(2) factors
After having considered the various section 75(2) factors, it seems clear that the most important considerations for the court, under the section’s ambit, are the current disparity in the parties’ level of income and the heavy financial responsibility that falls on Ms M’s shoulders as a result of the parties’ children continuing to live with her. Both these factors favour Ms M to a significant degree. However, in my view, the significance of these factors is tempered by two other matters.
Firstly, Mr M himself is not in a strong financial position. He is struggling. He lives in modest circumstances, largely because of his responsibility to pay marital debts and child support. For the foreseeable future, a significant proportion of his wage will be utilised for child support. Secondly, Ms M is not currently utilising her income earning capacity at all. She has significant skills as a registered nurse. I can well understand why Ms M would want to be available to H. However, in the straightened financial circumstances currently confronting both parties, it does not seem reasonable to me that Ms M should expect Mr M to bear a disproportionate burden of her decision not to pursue paid employment.
In all these circumstances, I have come to the conclusion that a 12.5% adjustment in the wife’s favour is appropriate.
Section 79(2) – is this a just and equitable outcome?
The final step in determining property matters is to stand back and consider whether the proposed result is just and equitable. The difficulty in this case can be easily expressed. Both Mr M and Ms M have a pressing need for liquid assets to re-house themselves and provide for their immediate financial needs. However, the parties do not have recourse to such assets as their major marital property is comprised in Mr M’s future entitlements to superannuation in the DFRDB. As a result, there is something of an artificial flavour in dividing the parties’ marital assets.
Fifty-five percent of the parties’ net available assets, as I have calculated them, is represented by the sum of $270,105.51. I propose to round this sum down to $270,000.00. This can only come from a split in Mr M’s entitlements in the DFRDB and PBS superannuation schemes. The artificiality comes about because, too a large extent, Ms M is receiving a larger proportion of this superannuation because of her current pressing financial needs but, unless she can persuade the trustee of the superannuation schemes to release funds to her, she will not be able to access these monies for many years to come.
So although her pressing financial needs, particularly in respect of support of the children, dictate that Ms M should receive a significant proportion of the parties’ marital assets, the reality of the situation, given that those assets are held in the form of superannuation, is that there is a real possibility that she will receive those assets only after the financial pressures on her have been relieved and the children concerned have become self-supporting. It cannot be guaranteed that she will be able to persuade the trustees of the superannuation funds concerned to release any monies to her prematurely. Indeed, it was only during these proceedings that Ms M became aware of such an outcome.
Notwithstanding these matters, I am satisfied that the result, I propose represents a just and equitable outcome. The marriage between the parties was a long one of over twenty years in duration. The marriage produced five children. In these circumstances, it appears just that the parties should, at this stage, approach planning for retirement on a relatively even footing.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgement.
I certify that the preceding one hundred and forty-five (145) paragraphs are a true copy of the reasons for judgment of Brown FM
Associate: C White
Date: 25 August 2005
and Clauson v Clauson (1995) FLC 92-595
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