Maciel and Maciel
[2007] FMCAfam 262
•6 March 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MACIEL & MACIEL | [2007] FMCAfam 262 |
| FAMILY LAW – Property settlement – contributions – US Military pension received during relationship – future financial resource – US Military Pension and US Social Security to be received post separation – whether splittable – how to adjust for overseas entitlements. |
| Family Law Act 1975 (Cth) |
| C & C (2005) FCAFC 429 Gould (1996) FLC 92-657 FHL v EHL (2006) FAMCA 1287 D J v A J (2006) FCAFC 961 Doolan (unreported FCA 20/11/03) Hickey (2003) FLC 93-143 Buckby (unreported FCA 15/09/06) |
| Applicant: | MR MACIEL |
| Respondent: | MS MACIEL |
| File Number: | BRM2534 of 2006 |
| Judgment of: | Baumann FM |
| Hearing date: | 13 December 2006 |
| Delivered at: | Brisbane |
| Delivered on: | 6 March 2007 |
REPRESENTATION
| Counsel for the Applicant: | Ms Carew |
| Solicitors for the Applicant: | Wheldon & Associates |
| Counsel for the Respondent: | Mr Waterman |
| Solicitors for the Respondent: | Harrington Family Lawyers |
THE COURT ORDERS:
That the amount held in the Trust Account of MP in the sum of $369,035.85 be paid:-
The applicant Husband ,$115,708.43
The respondent Wife, $253,327.41
That the parties shall close the joint bank account held with Suncorp and the balance of the account shall be paid to the husband.
That save and except for the provisions of orders 1 and 2 hereof each party is to retain for their sole use and benefit absolutely all other property and financial resources, held in their sole name or possession as at the date hereof, and without limiting the generality thereof, the Husband shall retain his bank accounts, the Mitsubishi motor vehicle, accrued work benefits, his superannuation account, furnishings and his entitlements from the United States to a Service Pension and Social Security Pension, and the wife shall be entitled to her bank accounts, Peugeot motor vehicle, accrued work benefits, superannuation account and furnishings.
That each party is to be solely responsible for any debt in their sole name.
That any application for costs should be made in writing and filed and served within 14 days. The respondent to any costs application shall file and serve written submissions and response within 7 days of service. Any written submission in reply shall be filed and served within a further 7 days.
THE COURT NOTES:
That for the purposes of this order, the pool of assets adopted by the parties is:-
Husband’s Superannuation account $224,811.00
Wife’s Superannuation account $162,863.00
Net Sale proceeds of former Matrimonial home holding the Trust Account of MP $369,035.85
TOTAL $756,709.85.
IT IS NOTED that publication of this judgment under the pseudonym Maciel & Maciel is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRM 2534 of 2006
| MR MACIEL |
Applicant
And
| MS MACIEL |
Respondent
REASONS FOR JUDGMENT
(Settled from Reasons delivered orally)
Introduction
After a marriage of over 25 years, the applicant husband, Mr Maciel (now aged 63) and the respondent wife, Ms Maciel (now aged 49) are unable to agree on how the pool of property they amassed over their relationship should be divided. It was apparent that the issue which was the obstacle to resolution in these proceedings relates to how the Court should treat an entitlement the husband, a former enlisted serviceman in the United States Navy, receives and will continue to receive from both a US Navy pension and after he turns 65, his US Social Security benefit. As my reasons reflect, the history of this relationship is not seriously contested.
Background
The husband enlisted in the US Navy in 1961 and was stationed in Singapore at the time of marriage in 1980 to the wife in New Zealand. At that time the wife had just completed her degree enabling her to practice as a pharmacist. After their marriage the couple returned to Singapore and the first child, A, was born in 1982. Shortly after, their daughter's birth, the family moved to Washington DC where the husband was posted. The child, R, was born in San Diego in 1983, with the family moving to New Zealand in about 1985 as a result of another posting.
Upon moving to New Zealand, the wife was able to secure part time employment as a pharmacist (her qualifications not being recognised in either Singapore or the United States of America) and when the husband retired from the US Navy in March 1989, the family shortly thereafter emigrated to Australia. Both parties obtained employment in Brisbane within a short time, but by December 1990 the husband had changed his employment and commenced work as a public servant in the Queensland Government. He is currently still engaged (at the time of hearing), in a Queensland Government Office.
The wife is employed on a permanent part time basis as a pharmacist. Both A and R live independently and have intact relationships with both parents. In June 1989 the parties purchased a house at C with the deposit being paid from joint savings and a mortgage from the bank. In June 2000 this home was sold for approximately $220,000 and the net proceeds, and other borrowings and savings were contributed to the purchase of a more expensive home at S. The home has recently sold with net proceeds being held pending this decision.
Settlement occurred in the last month and the Court has not been informed of the net proceeds currently available, but had an estimate at trial. In approximately 2001 both the husband and wife began to make additional superannuation contributions by way of “salary sacrifice”. This, the wife says, was part of a "joint plan"– presumably to secure a retirement nest egg for the couple.
There is disagreement between the parties as to when separation occurred - the husband says on 1 January 2005, the wife says about August 2005. I deal with that dispute below. In January 2006, the wife traded in a Honda vehicle (for $7,250) and with the benefit of a car loan purchased a Peugeot for $26,250. Although the wife, in her trial affidavit, raised concerns and issues at paragraph 53 to 60 about the use of alcohol, those assertions were significantly and specifically not relied upon at trial. These proceedings were commenced in March 2006.
Principles
A long line of authority culminating more recently in Hickey (2003) FLC 93-143, makes it clear that the process to be adopted in a consideration of a property dispute under the Family Law Act 1975 involves a four step process. The first step is to determine, usually at the date of hearing the assets, liabilities and values of all property in the possession, power or control of the parties at the time of hearing.
Secondly, by reference to s.79(4) of the Family Law Act, the Court has to consider the relevant contributions of both a financial and
non-financial nature direct and indirect in character.
Thirdly, by reference to s.79(4)(e) of the Act, the Court must consider the relevant s.75(2) factors; and finally, as a final step the Court is to consider, when looking at the order, that it does justice and equity to the parties.
Credit
The wife was not required for cross-examination. The husband was only briefly examined. The parties were represented at trial by experienced Counsel – Ms Carew for the husband; and Mr Waterman for the wife. As a result assessment of credit was almost impossible by me. In any event, little of the factual matrix was seriously contested apart from the issue of separation, the difference in the party's perspectives of their own non-financial contributions or the assessment of the other party reaches a determinable level.
I formed the view that a determination of the date of separation similarly changes little in my final determination. No corroborative evidence was offered by the husband to support his contention that he regarded "separation status under one roof" was effective on 1 January 2005. His self-serving letter dated 10 August 2005 does not assist me. The best evidence of separation, where corroboration is not offered to the Court, is generally when the parties physically separated.
The wife says that from about July/August 2005 she was aware the husband had made some changes to her being a beneficiary on a life policy on his life. The wife said they continued to share meals, but that sexual relations had ceased years ago. This much the husband agrees with. The wife says (at paragraph 42) that:
“Shortly after 10 August 2005 I left the home except for one to two day per week. I largely stayed boarding with a friend.”
The wife was not challenged on these facts as I say under
cross-examination, and I accept her version of events. The only significance of such a finding seems that it is likely to provide a "demarcation" as to when contributions made fall within the "pre-separation period" as opposed to the "post-separation period". As I soon identify little turns on this distinction in this case.
Nature of the effect of the husband's US Service and Social Security entitlements
This issue occupied most of Counsel's time in submissions. I regard it as important to make the following findings in respect of each:
US Navy pension:
a)as a result of the husband's enlistment in the US Navy he is entitled to receive a navy pension. He enlisted on 12 June 1961 and retired on 31 May 1989 (a period of about 29.5 years of service). The husband calculates at the date of marriage he had completed 18 years seven months and 12 days of military service;
b)he was required to serve at least 20 years to be entitled to a service pension;
c)
the usual formula for computing retired pay for the husband is to:- "compute your retired pay based on length of services by multiplying the basic monthly pay for your entire grade at time of retirement by the years of creditable active federal service at a rate of 2.5 per cent of each whole year of service." On the basis of
29 whole years of service the husband was entitled to 72.5 per cent of retirement salary. The "retirement pay" increases every year by CPI otherwise called the "cost of living adjustment".
d)The husband says in his financial statement that the net current benefit is approximately $700 per week. The sum conceded under cross-examination, (and adopting a conversion rate at that time of approximately US$1 equals 78 cents Australian) was approximately $792 a week. For the purpose of these reasons I propose to adopt a current entitlement of about $750 per week.
e)There is no reversionary component; it cannot be computed to a lump sum; and no surviving spouse pension is available under the scheme.
US aged pension
The husband made an application for the United States Aged Pension (also known as Social Security). This pension is assessed on the husband's earnings during his “USA” working life. Annexure “JEM6” sets out his earnings record from 1960 to 1989. To qualify for benefits the husband earned "credits" from his work. This benefit cannot be paid whilst he is working (even if not generating US taxable income). Based on the best evidence before the Court the husband's entitlement, if he was to retire this year (at age 64) the wife calculates would be a gross payment of approximately US$994 a month or gross payment of approximately $15,300 Australian per annum (78 cents to the US $1) or, put another way, approximately $300 per week.
The husband in his evidence indicated he tentatively planned to retire on 1 July 2007. There are some tax benefits available to the husband by retiring at that time. He also expressed an intention to retire when the house mortgage was discharged (on sale of the home); that has now occurred.
Pool of assets
The undisputed pool of assets comprises the following:-
Net proceeds of sale (before accrual of interest and as estimated at trial)
$371,944
Mitsubishi motor vehicle - husband
$6,000
Proceeds of Honda motor vehicle - wife
$7,250
Superannuation husband- QSuper
$224,811
Superannuation wife - Rest super
$162,863
Total pool
$772,868
By agreement, furniture has been divided. Counsel for the husband urged me to include the parties' superannuation in the one pool. She also suggested each party ought retain the car (or proceeds) in their possession and exclude same from the divisible pool.
Because of the relatively small value of the cars and without serious opposition by Mr Waterman for the wife, I am persuaded that that approach is a reasonable one. If anything, that slightly favours the wife and the husband's Counsel's submission is sensible.
I also believe the one pool of assets is appropriate (considering the discretion identified in C v C) because all of these entitlements accrued during the course of the marriage (and really only since the parties migrated to Australia). Counsel for the wife argues that the husband's entitlements, accrued but not yet paid for long service leave should be "added" to the pool. A combination of exhibits 1 and 2 suggest at current rates of salary (that is $877) the husband's gross entitlements (that is before tax ) are as follows:
long service leave 754 hours
$18,242
recreation leave 203 hours
$5,771
The wife also has long service leave entitlements of 314.67 hours (see exhibit 4) from her current employer – although the evidence makes it uncertain as to when she may seek to use that entitlement, or when it could be available. On the evidence the husband at trial had not decided whether he would "work off" his recreational leave and long service leave entitlements or take them as a lump sum on retirement.
Because I have taken the view the husband will retire in the immediate future and will access those benefits, I choose to deal with those benefits as a financial resource. As Gould (1996) FLC 92-657 at paragraph 82,774 identified, it may not matter whether the payment is received as a "lump sum" or as a "normal salary" during a period when the recipient chooses not to work. The absence of any evidence on the tax treatment also makes it more difficult to be fair to the parties.
The wife's own entitlement (although not calculated or as significant as the husband's) is nonetheless a future financial resource which accumulated mostly during the relationship. As I say, I intend to take these entitlements into consideration as a financial resource when considering the relevant s.75(2) factors.
Although the wife's counsel initially contended it may have been within my discretion to include a calculation of the husband's US Navy pension and/or Social Security benefit as an asset, which was described as a "financial resource" in stage one of this analysis, by final submissions I gained the impression he had retreated from that submission.
The husband's US Navy pension is not an "eligible superannuation plan" as defined in s.90ND of the Act and is therefore clearly not a "superannuation interest" for those purposes. The wife relied upon the evidence of Mr S, a superannuation expert, to manufacture a calculation of the husband's pension using the methodology under the Family Law Superannuation Regulations.
Whilst ingenious this is a flawed exercise, in my view. The foreign Navy pension and the future entitlement to Social Security benefits from the USA are "financial resources" as they're paid benefit and will be treated as such by me when considering the s.75(2) factors. Of course, the navy pension paid during the relationship should be regarded as an additional direct financial contribution made by the husband from a source to which the wife, at best, made a minimal contribution arising solely from cohabitation from the date of marriage to the date of retirement.
This approach is consistent with the decision of the Full Court in
FHL v EHL(2006) FAMCA 1287 where the Court approved the trial Judge's treatment of the wife's interest in two French superannuation funds as a "financial resource". For the reasons given I will regard the pool consisting of net proceeds of sale approximately $371,944; husband's super $224,811; wife's super $162,863; A total of $759,618.
Contributions
Both parties acknowledge that at the time of marriage neither had any assets of significance. I assess the husband's contributions during the relationship to the trial as follows:
a)his direct salary from his employment to 1989 as a navy serviceman with all the usual benefits (health cover, subsidised housing, et cetera) which he and the family benefited from. His financial benefits to 1989 exceeded those of the wife, who was for much of this time unable to work in her chosen profession and was more heavily engaged in the duties of carer for the infant children and home-keeping;
b)post-1989 again, it seems, the husband's income from personal exertion was, at least, equal to or slightly greater than the wife. However, he additionally contributed to the joint pool of income, the benefit of the Navy pension. In making these findings I did not have the benefit of any taxation returns for the parties for the period since they immigrated to Australia in 1990 so as to permit finite assessment;
c)post separation the husband maintained for a time the payments on the home mortgage (see exhibit 2) which he calculated amounted to at least $22,418. The husband had the benefit of residing in the home whilst the wife for the last 12 months or so has been "boarding" with friends. The husband also paid rates and insurance and was paying $40 a week for a cleaner. The husband did not make payments on the loan between October 2005 and January 2006 because of accumulated credit from advance payments.
d)post-separation, like the wife, the husband has continued to deposit salary sacrifice non-deductible superannuation contributions to his QSuper benefit. The wife makes hers to her Rest Super. The evidence is not clear on what affect these additional payments over the last 12 months have had on the aggregate benefits now;
e)the husband says he does "not admit the wife's allegations that she made greater homemaking and parenting contributions than me. I say that the contributions were generally equally shared." (paragraph 2.8). However, this is inconsistent with the husband's assertion of paragraph 9 of his earlier affidavit that for the first eight years of the marriage or so, the wife "was the primary parent and homemaker." When both were employed full-time, and I infer as the children got older, the care duties may have equalised somewhat. However, at least to separation, on balance, I would find the wife's non-financial contributions as greater than those of the husband.
The wife's contributions as set out above, in my view, were greater than those of the husband as homemaker and parent, but inferior in amount to the direct financial contributions of the husband. The wife has also made additional superannuation contributions post separation. The length of the marriage; the lack of any substantial windfalls in the form of gifts, inheritances, or other unexpected benefits and the broad nature of the contributions (both financial and non-financial) would have persuaded me to regard contributions as equal - save for one factor which favours the husband, in my view.
That factor is the benefit the husband contributed from his Navy pension and where, approximately two-thirds of the time served to gain the benefit accumulated prior to marriage. I do not, in this case, regard the benefit as an "initial contribution" for the reasons explored by
Warnick J in Doolan (unreported Family Court of Australia 20/11/03), but rather for the period after 1989 the extra income (without personal exertion) provided a real and manifest benefit to the family. Although not conceded by the husband the wife says basically the pension was to meet the mortgage - leaving by implication the personal incomes and salaries of the parties available for child rearing, general living expenses and savings.
It seems from the evidence that until the parties came to Australia they had really saved very little. Ms Carew for the husband submits an adjustment in the husband's favour of 7.5 to 10 per cent is appropriate. Considering the length of the marriage and the other contributions which I have to balance against that additional contribution I regard an adjustment to trial of 5 per cent in the husband's favour is appropriate.
Section 75(2) factors
I identify the relevant factors for consideration as follows:
a)age and state of health. The husband is 14 years older than the wife and he intends to retire as soon as the sale of the home is settled. He alleges (without corroboration) a number of health problems (paragraph 25 and 26) but there is no evidence his life expectancy has reduced.
b)income, property and financial resources. The wife is employed on a "permanent part-time basis" working now 33 hours a week. Her employment as a pharmacist now that she has ceased working Sundays has reduced to approximately $953 per week (approximately 50,000 per annum). She seems on the evidence to be able to anticipate an uninterrupted working life. She claims to have good health.
Although at the time of trial the husband was employed I accept he intends to retire. His post-retirement income will compromise a total of approximately $51,400 per annum being a Navy pension of $36,400 and the US Social Security of $15,000 per annum. It is these two benefits which the husband received for life that the wife asserts strongly should compel a significant adjustment in her favour. In fact, the contention of Counsel for the wife was that it is so significant that she should receive the whole of the proceeds of sale and a significant part of the husband's QSuper entitlement.
In support of that submission the wife offered evidence from
Mr S about the "capitalised value of US Navy pension" was estimated to be $568,861. Furthermore, Mr S opines the "value" of the husband's entitlement to the US Social Security benefit would amount to $200,516 (see exhibit 5).
I have already observed how artificial such an assessment of this future overseas source of income is when trying to assert it is almost "notional" property. Using a specific Australian legislative formula and importing (however creatively) factors from a foreign income source really provides little assistance save for one matter. I am satisfied that the right to obtain these dual streams of income is a future financial resource which manifests in a real benefit to the husband.
True it is that no similar assessment has been made of the wife's future income from her own employment. That also represents a valuable capacity which she will use on past actions, to maximise her retirement nest egg probably through increased superannuation. The Full Court in D J v A J (2006) FCAFC 961 being an appeal from a decision of a Federal Magistrate, considered whether his Honour's s.75(2) adjustment in the wife's favour on account of the husband's deferred benefit superannuation entitlement was "manifestly excessive" (in that case approximately 23 per cent of a small pool) – because it was argued he had failed to take into account that the husband's RBT pension entitlement was also his income stream in circumstances where the wife is continuing to earn income and has her superannuation entitlement which will continue to increase because of her employment.
I incorporate paragraph 46 to 48 of that judgment because I believe much of these observations are apposite to the current case:-
46:
“However, with respect this argument overlooks the following important considerations. The first is that the wife has to work and remain working in order to obtain her income, while the husband will receive his indexed pension for life regardless of any other circumstance. As was said by Counsel for the wife in his written submissions:
“A large guarantee of life pension makes no calls on the time, labour or lifestyle of its recipient. It is not comparable to a lesser present income subject only to life's usual contingencies but calling on all the time, labour and lifestyle sacrifices demanded of any employment.”
47:
But perhaps more importantly, the nature of the 'income' is different. Any income the wife will earn in the future is simply that, income earned by her own efforts without any contribution from the husband. In comparison, the husband's 'income stream' is defined benefit superannuation interest now being paid as an indexed pension which is a value attributed to it by regulation of $864,753.31 to which the wife has, through the years of marriage, made an indirect contribution by virtue of the matters in s 79(4) of the Act.
48:
These two considerations also dispose of any suggestion that by making the further adjustment in the wife's favour (beyond the
59 per cent which she received on account of her contributions to the non-superannuation assets) to cover both the contributions of the husband's superannuation interest and his superior position in relation to superannuation, as indeed is evidenced by the value of the parties' superannuation interests. His Honour in some way double counted. The wife was entitled to receive in the ultimate division of the parties' property recognition both for contributions during the years of the marriage to the husband's superannuation interests and for the fact that the husband is now receiving for life a substantial income without the necessity to work, while the wife has to continue to work to achieve a comparable income.”
I also do not ignore, as earlier identified, the parties' entitlement as to long service leave, which in the husband's case, is likely to materialise in the actual payment around the time of his retirement. In this regard, I believe an adjustment of 10 per cent in the wife's favour for these future benefits.
The effect of the proposed order will be that each party will have access to an "almost" equal share of the liquid funds and reasonable current superannuation entitlements. This will allow them both, if they so desire, to re-accommodate themselves, although the parties, (depending on the quality of their home and standard of living) may need to borrow. The husband because of his imminent retirement will, of course, have access to his superannuation now, whilst the wife will not be able to access the accumulated benefit for some years. She has the continued benefit through her opportunity for full-time employment to maximise her superannuation interests through tax effective salary sacrifice.
For the reasons I have given in respect of the relevant factors under
s.75(2) (namely that both Counsel conceded most of the 75(2) factors did not require consideration in this case) an adjustment of 10 per cent to the wife is, in my view, appropriate. This is, I accept, a significant adjustment – amounting, in effect, to the wife receiving the first 20 per cent of the pool – approximately $150,000. I regard such an adjustment as proper.
Treatment of superannuation "assets"
I am mindful the direction from the Full Court in C & C (2005) FCAFC 429, would generally require me to consider separately the contributions and s.75(2) factors adjustment (if any) to the superannuation interests of the parties. In my view, the evidence before the Court would not persuade me to treat, in this case, the contribution based entitlement to superannuation interests any differently than the non-superannuation interests.
I have already noted that all of the parties' individual superannuation entitlements have arisen during the relationship and have both increased through a conjoint strategy of salary sacrificing. The more "vexed" question (as that description was used by Coleman J in Buckby unreported FCA 15/09/06) is the way in which the Court's conclusions with respect to s.75(2) factors should apply in respect of the superannuation interests. His Honour said in Buckby (at paragraph 369):
“Adjusting pursuant to s 75(2) with respect to superannuation interests is potentially difficult. There does not appear to be any statutory or precedential foundation for quarantining s 75(2) to non-superannuation assets and substantial support for doing so can be gained from all the so called ‘post C v C decisions’, and the separate arguments in C v C itself. Nor, given the asset backing of the superannuation interests in the BAAMAC Fund, is there any real scope for seeking to go behind, or beyond, the values of the superannuation interests.”
The nature and predominant reason for the adjustment of 10 per cent in the wife's favour for the husband's US sourced benefits applies, in my view, equally to the superannuation interests as it does to the non-superannuation interests. Such a common approach may not be appropriate in some cases where the factual matrix is different than this case. In my view, and in some sense consistent with both Counsel contending superannuation interests should be included in the one pool, I intend to apply the same adjustment factors across the entire mix of assets and do not propose to make any splitting order.
Just and equitable
Based on the above analysis I calculate that the wife is entitled to receive 55 per cent of the entire pool, and the husband is entitled to receive 45 per cent. This would amount to each party retaining the following:
The Husband’s 45 per cent of $759,618 equals $341,828 comprising:-
QSuper benefit
$224,811
Share of house sale proceeds approximately
$117,017
Total
$341,828
The Wife's 55 per cent of $759,618 equals $417,789 comprising:-
Rest superannuation
$162,863
Share of house sale proceeds
$254,962
Total
$417,789
The effect of this order must be considered in light of the intention of the husband to retire, which will enable him to avail of his superannuation benefit of at least $224,811 – thus reducing the level of borrowings he will be required to raise (compared to the wife) if the parties were purchasing similar value homes to reside in.
As already noted the husband's continued indexed income from the US will not, post-retirement, differ significantly from that likely to be achieved from the wife from her employment (with her reduced hours). I regard an order which achieves this result as just and equitable. The final orders should incorporate the exact calculations once the actual net proceeds are incorporated into the equation.
I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of Baumann FM
Associate:
Date:
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