May and May and Anor
[2017] FCCA 403
•10 March 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MAY & MAY & ANOR | [2017] FCCA 403 |
| Catchwords: FAMILY LAW – Property – lengthy marriage and lengthy period of separation – assessment of contributions – whether the husband’s contributions exceeded the wife’s because of an inheritance he received or whether the husband’s handling of his father’s estate meant that the inheritance was of no net value to the parties – treatment of the wife’s (omitted) Superannuation entitlement – where the wife is retired and is in receipt of a pension - where the capitalised value of the entitlement is a significant item of the pool – where the wife cannot commute her pension but where if a splitting order is made the husband can cash out his entitlement – where the husband proposes a splitting order and the wife proposes that she retain her superannuation untouched and that the husband receive other assets in the pool – wife’s proposal generous to the husband – orders made in accordance with wife’s proposal. |
| Legislation: Family Law Act 1975, ss.75, 79 Family Law (Superannuation) Regulations |
| Cahill & Cahill (2006) FLC 93-253 C & C (2005) FLC 93-220 Semperton & Semperton (2012) 47FamLR 626 Stanford & Stanford (2012) HCA 52 Welch & Abney (2016) FamCAFC 271 |
| Applicant: | MR MAY |
| First Respondent: | MS MAY |
| Second Respondent: | MS H MAY |
| File Number: | NCC 2772 of 2014 |
| Judgment of: | Judge Terry |
| Hearing dates: | 18 & 19 July 2016 |
| Date of Last Submission: | 19 July 2016 |
| Delivered at: | Wauchope |
| Delivered on: | 10 March 2017 |
REPRESENTATION
| The Applicant: | In person |
| Counsel for the First Respondent: | Mr Levick |
| Solicitors for the First Respondent: | Turnbull Hill Lawyers |
| The Second Respondent: | In person |
ORDERS
The wife and the second respondent shall within 42 days of the date of these orders do all acts and things required to transfer to the husband at the expense of the husband the whole of their right title and interest in Property W in the state of New South Wales being the whole of the land in Certificate of Folio Identifier Lot 1, Deposited Plan (omitted) (“the property”).
The husband shall indemnify the wife and the second respondent and keep them indemnified from liability for outgoings including council rates in respect of the Property W property.
Contemporaneously with the transfer in accordance with Order (1):
(a)The wife shall do all acts and things and sign all documents required to transfer to the second respondent a 42.2% interest in the property known as Property D being the whole of the land contained in Certificate of Title Folio Identifier (omitted) (“the Property D property”).
(b)The wife shall indemnify the second respondent and forever keep her indemnified from liability for outgoings in respect of the Property D property and any liability in respect of any mortgage or charge thereon.
The application by the second respondent is otherwise dismissed.
The husband and wife are each declared the owner of all other property and superannuation in their possession or under their control.
In the event that any party refuses or neglects or is unable to execute any instrument or document being an instrument or document the execution of which is provided for in these orders or is necessary to put into effect the provisions of these orders then at the request of the other party the Registrar of the Federal Circuit Court of Australia is appointed pursuant to Section 106A to execute any such instrument or document in the name of the party refusing or neglecting or being unable to so execute the instrument or document.
IT IS NOTED that publication of this judgment under the pseudonym May & May & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
NCC 2772 of 2014
| MR MAY |
Applicant
And
| MS MAY |
First Respondent
| MS H MAY |
Second Respondent
REASONS FOR JUDGMENT
Introduction
These are property proceedings following the end of a lengthy marriage which was punctuated by a lengthy period of separation.
The first complication in the matter is that the parties’ daughter Ms H May has a legal interest together with the husband and the wife in a property in Property W which is one of the principal assets in the pool.
The husband wishes to receive Property W as part of his entitlement to a property settlement and Ms H May and the wife are content for him to do so but Ms H May will need to be paid out and the husband on the one hand and the wife and Ms H May on the other have very different views about how this should be done and about the amount Ms H May should receive.
The second complication is that the wife is in receipt of a (omitted) Super pension which has a capitalised value of $802, 881.00.
The husband proposes that a splitting order be made transferring half of this entitlement to him. He is 70 and will be able to cash out the amount he receives which will in turn give him the money to buy Ms H May out of Property W.
However the wife cannot commute and the pension will only ever be a fortnightly payment in her hands. It is her only income and she does not want a splitting order made.
The wife owns a unit with equity of $346,268.00 and her proposal is that she will transfer part of the equity in the unit to Ms H May in exchange for Ms H May transferring her interest in Property W to the husband.
Ms H May is agreeable to this proposal.
The husband’s proposal with more precision is that:
·Half of the wife’s (omitted) entitlement is transferred to him by way of a splitting order.
·Ms H May’s interest in Property W is transferred to him in exchange for a payment of $119,619.00.
·The wife’s interest in Property W is transferred to him.
·He retains his motor vehicle.
·The wife retains her unit, the remainder of her pension and a small amount she has in an accumulation superannuation fund.
On the figures pertaining to these assets this would result in the husband receiving assets worth $1,037,821.50 and the wife receiving assets worth $797,030.50, giving the husband 57% of the pool and the wife 43%.
It is the husband’s case that this is just and equitable because his contributions exceeded the wife’s; he inherited half of the Property W property from his father and also brought in money by way of a personal injury award and family gifts.
Ms H May does not agree that her interest in Property W is worth $119,619.00. She says it is worth more like $220,000.00 and if the husband had to pay Ms H May $220,000.00 then the percentages as between the husband and the wife would be about 53.5/46.5 in the husband’s favour.
The wife’s proposal with more precision is that:
·She will transfer a 42.2% interest in her unit (worth $220,495.00) to Ms H May leaving her with equity in the unit of $125,773.00.
·She and Ms H May will transfer their interest in Property W to the husband giving him an asset worth $750,000.00 and he will also retain his motor vehicle.
·She will retain her motor vehicle, her accumulation superannuation worth $39,322.00 and her (omitted) Superannuation entitlement.
On paper this would give the wife assets to the value of $977,916.00 and the husband assets worth $756,000.00, a split of approximately 56% to the wife and 44% to the husband. However the wife said that this was enormously favourable to the husband because the capitalised value of her superannuation was illusory. In reality she would be retaining assets to the value of $175,095.00 and her entitlement to fortnightly pension payments.
The wife disputes that the husband’s contributions exceeded hers. She said that she did not remember him receiving gifts from his family, his damages award was largely eaten up by the costs associated with a dispute with a builder which he was responsible for and he had made a complete dogs breakfast of administering his father’s estate with the result that the only people who benefited from it were the parties children.
Ms H May and the wife are on good terms and Ms H May said that she would accept her mother’s proposal.
The evidence
The husband relied on his amended initiating application, affidavit and financial statement filed on 7 July 2016.
The wife relied on her amended response, affidavit and financial statement filed on 22 April 2016.
Ms H May relied on her response and affidavit filed on 6 July 2015.
Mr N, a property valuer, provided evidence of the value of Property W in a valuation attached to his affidavit filed on 8 July 2016.
All of these witnesses were cross-examined.
The wife’s (omitted) entitlement valued in accordance with the scheme specific factors in the Family Law (Superannuation) Regulations with a capitalised value of $802,881.00 as at 17 September 2014. Neither party provided a current valuation but Mr P of (omitted) Pty Ltd in an affidavit filed on 24 May 2016 said that value of the wife’s entitlement was affected by her age (a negative factor) and the fact that the pension was indexed (a positive factor) but that overall the value would decrease as the wife became older.
The husband sought a percentage splitting order which means that from his perspective the value as at 17 September 2014 is indicative only.
There was evidence that the Trustee of (omitted) Super had been accorded procedural fairness.[1]
[1] Exhibit C
In considering the evidence of the parties I need to bear in mind that they commenced cohabitation 44 years ago. There is considerable risk that the memory of each of them about some of the things which happened in the past especially as to dates and amount of money is flawed.
There is also a considerable risk, as is so often the case in property matters, that the parties are now seeing the past through the prism of their current feelings about each other and that their recollections of the past are not entirely accurate.
Background
The parties commenced living together in (omitted) 1970 and married on (omitted) 1971 when they were 24 and 21 respectively. They have two children, Mr J (Mr J) born (omitted) 1978 and Ms H May born on (omitted) 1985.
It was common ground that the parties separated under one roof in 1996 after 25 years of marriage.[2]
[2] Husband’s affidavit paragraph 5, wife’s affidavit paragraph 12
Both parties initially remained in the former matrimonial home but in 2001 the wife moved to Sydney. She retired from her job with the (employer omitted) in 2004 at the age of 55 and became entitled to her pension but she almost immediately obtained alternative employment. She worked at the (employer omitted) between 2004 and 2006. In March 2006 she obtained employment in (country omitted) as a (occupation omitted) and she remained there until January 2009 when she returned to live in the former matrimonial.
The parties were on good terms between 1996 and 2009. They lived under one roof for five years although the wife’s work often took her away overnight. Ms H May was about 11 when the parties separated and they both had involvement in her parenting until she commenced university in 2004. The husband visited the wife in (country omitted) and the parties went on an extended family holiday in (country omitted) and the wife assisted and supported the husband with the litigation over his father’s estate which followed his father’s death in in 2004.
The wife asserted she and the husband reconciled in January 2009. The husband disputed this but it was not in dispute that he went to (country omitted) with the wife when she accepted employment there in August 2009 and lived there with her for two years.
In August 2011 the parties returned from (country omitted). Premises were rented in Sydney, the wife said jointly and the husband said by the wife, and the wife worked in Sydney from August 2011 until 1 September 2013 and then in (country omitted) until 3 July 2014. The husband spent time with the wife in both Sydney and (country omitted).
It was the wife’s case that the parties finally separated on 4 July 2014.
The husband agreed that 4 July 2014 was a watershed. He agreed that the parties had a bitter row on that day and were never thereafter on good terms but he said in his affidavit that the parties did not live together as husband and wife at any time after 1996. He described the parties two years together in (country omitted) as an attempted reconciliation and said that he only visited the wife in Sydney and (country omitted).
The husband received Centrelink benefits from 1996 onwards. He referred to this as corroboration of his claim that the parties did not reconcile but while it may be corroboration of that claim but it may also be a motive for him to misrepresent the situation after 2009. The wife said that the husband assured her in 2009 that he had ceased receiving Centrelink benefits.
The parties conduct after 2009, which included the husband moving to (country omitted) with the wife and later living with her for at least part of the time in (country omitted) and Sydney, together with the evidence that immediately prior to 4 July 2014 the parties had $300,000.00 from the sale of a jointly owned property in a joint account which they intended to use to build on Property W, is more consistent with the wife’s assertion that the parties reconciled and I prefer the wife’s evidence that the parties reconciled in January 2009 and finally separated in 2014.
Another reason for preferring this evidence is that it is in my view in the context of property proceedings it is an admission against interest by the wife. She steadily earned income during the 2009 to 2014 period.
I am satisfied on the balance of probabilities that the parties lived as husband and wife from 1970 to 1996 (about 25 years) and from 2009 to mid-2014 (5 ½ years).
At the time of their final separation the parties owned only one real property, Property W which was registered in the names of the wife, the husband and Ms H May. They also had cash in the bank from the sale of a jointly owned property in Property C and shortly afterwards the wife used most of it to purchase the unit which she still owns.
The wife also had superannuation, mainly in the form of a pension being paid to her by (omitted) Super.
On 22 October 2014 the husband filed an application for a property settlement.
The Property W property
It is necessary to set out in some detail how Property W came to be owned by the parties and Ms H May, both in order to make a finding about the value of their interests in the property and in aid of an assessment of contributions to the non-superannuation assets.
When the husband’s father died in 2004 he was the owner of two adjoining properties, Property W1 & W2. He left a will appointing the husband as his executor and leaving Property W1 to his grandchildren Mr J and Ms H May and Property W2 to the husband. He had no other significant assets.
The husband’s sister Ms J and his niece Ms L filed an application in the Supreme Court of New South Wales challenging the will and the husband as executor defended the application. The niece was unsuccessful but on 12 December 2007 a judgment was handed down awarding Ms J $200,000.00 from the estate. The estate was also required to pay Ms J’s legal costs subsequently fixed at $84,441.00 and the husband incurred legal costs of $72,130.00 defending the claim.
The husband was thus obliged to find $356,571.00 to pay his sister and the legal costs.
It had been agreed for the purposes of the Supreme Court proceedings that Property W1 and W2 combined were worth $785,000.00. No individual values were ascribed to the two properties although it was agreed that Property W1 was more valuable.
Using this value the estate was worth $429,428.00 after the Supreme Court decision. If a 58.4/41.6% ratio is applied to the entitlements of the children on the one hand and the husband on the other then Mr J and Ms H May were entitled to $250,785.95 or $125,392.97 each.[3]
[3] The wife’s counsel came up with this ration using the figures in Mr N’s valuation. The husband did calculations based on a 58.2% /41.8% ratio which slightly favours the husband and wife because it slightly decreases the value of Mr H May’s legal interest. The ratio used by the wife’s counsel is valid using the figures in Mr N’s valuation and the difference is too slight to make a material difference and I have used the 58.4%/41.6% ration.
The husband did not do this calculation at the time nor did he prepare any accounts for the estate. His focus was on not having to sell the properties and to assist him the wife agreed in February 2008 to join him in taking out a loan for $330,444.22 secured over a property the parties jointly owned in Property A. The money was used to pay out the existing loan of $128,922.00 secured over that property and to pay Ms J $200,000.00.
In January 2009 the husband and wife took out a fresh loan for $480,276.00 over Property A which paid out the existing loan, provided the amount necessary to pay the legal costs the husband owed to his solicitor and provided $51,000.00 of the amount required to pay his sister’s legal costs.
In September 2009 the husband and wife sold Property A for $469,000.00. They were left with a debt of $96,000.00 to the bank. The wife’s income assisted with repayments in respect of this debt following the sale of Property A.
In or about 2009 the husband as executor transferred Property W1 to Mr J and Ms H May and Property W2 to himself. Mr J and Ms H May rented Property W1 out and retained the rental. The husband used Property W2 to store personal belongings and sometimes camped out there when he was in Australia.
Mr J had married and he began agitating to be paid $200,000.00 which he asserted was his share of the estate. The husband still did not want either of the Property W properties sold and in May 2011 he and the wife jointly borrowed $218,000.00. $200,000.00 was paid to Mr J and the balance was used to pay costs associated with the transfer.
I do not know what Property W1 was worth in February 2011 when Mr J was paid out but the two blocks combined were agreed to be worth $785,000.00 in 2007 and are now worth $835,000.00 on a highest and best use valuation so Mr J’s interest in 2009 was worth $139,701.01 at its highest and possibly something less.
It might be that Mr J was entitled to $200,000.00 because it was the value of his legal half interest in Property W1 but it represented a significant overpayment to him if considered from the perspective of his entitlement to a share of the estate.
In his affidavit the husband said that he opposed Mr J being paid $200,000.00, both because he did not believe that this was the value of Mr J’s interest and that he objected to Mr J’s behaviour toward him and the wife over seeing their grandchildren. He alleged that the money was paid because of abuse and duress by Mr J but blamed the wife for giving in to Mr J’s demands.
The difficulty for the husband is that he allowed the transaction to go ahead and drew the cheque to pay Mr J. He may not have liked it but there was no evidence that he paid the amount because the wife subjected him to duress. There was no evidence that he calculated the amount he felt Mr J was entitled to and attempted to negotiate with him and I do not accept that the wife should now be held responsible because Mr J was paid too much.
In exchange for the payment, Mr J’s half share in Property W1 was transferred to the husband and wife as joint tenants and at the same time the husband transferred ownership of Property W2 to the joint names of himself and the wife.
In February 2012 at the instigation of the husband the titles for Property W1 and Property W2 were consolidated and the joint property became known as Property W1. The parties interests were recorded as being:
the husband and wife as joint tenants as to one half share of the part formerly known as (omitted) [Property W1]and Ms H May as to one half share of the part formerly known as (omitted) and the husband and wife as joint tenants of the part formerly known as (omitted) [Property W2].
Carrying the previous arithmetic through the effect of this was that Ms H May became the owner of an interest in property not dissimilar in value to the amount paid to Mr J, an entitlement considerably in excess of her entitlement if the payment to the husband’s sister and the legal costs had been factored in.
The husband made no comment in his affidavit about why this occurred.
The husband and wife increased their borrowings in 2013 and on 6 February 2014 the whole of their indebtedness to the bank was discharged by sale of the property they owned in Property C.
In February 2015 Mr N of (omitted) Valuers valued the combined property. He said that the highest and best use of the property would be to re-subdivide and that if the two lots were sold separately Property W1 would be worth $505,000.00 and Property W2 $360,000.00 but with costs of $30,000.00 associate with re-subdivision to be taken into account. He valued the property at $750,000.00 if it was sold as one lot.
Using these figures Property W2 is worth 41.6% of the whole and Property W2 58.4% of the whole. Ms H May’s interest in Property W2 is therefore worth $243,820.00 on a highest and best use valuation and $219,000.00 if the valuation of $750,000.00 for the combined property is used.
Ms H May did not set out in her affidavit what she thought her share of the combined Lot was worth but she said that she was prepared to accept 42.2% of her mother’s unit in exchange for her share which would place a value of $220,495.00 on the interest.
The husband asserted that Ms H May’s was only entitled to $119,619.00. To arrive at this figure he deducted a share of the legal costs of the estate and the stamp duty he had paid on transfer of the interest to Ms H May.
However it is too late for the husband to claw back from Ms H May a contribution to the payment to his sister and the costs of the estate when in 2009 and again in 2012 he transferred an interest in land to her which did not take these amounts into account.
If the husband had administered the estate properly in the first place then the interest of both Ms H May and Mr J would have been diminished by the requirement that they bear a share of the payment to be the husband’s sister and by a share of the legal costs.
However the husband did not properly administer the estate. Mr J was paid an amount which includes an element of gift and Ms H May received a legal interest in property which includes an element of gift. The husband made no effort at the time to properly calculate his children’s entitlements and he cannot go back now and undo the gift made to them both.
Ms H May is entitled to the value of her legal interest in the combined property.
It follows however that the husband’s inheritance has added almost nothing to the pool of assets owned by the husband and the wife.
The husband asserted in his affidavit that the value of the contribution of his inheritance was $428,869.00 but this was the net value of the estate or close enough to it after payment of legal costs and the payment to the husband’s sister. Mr J subsequently received $200,000.00 and Ms H May’s legal interest is worth $243,820.00 at best and $219,000.00 at worst and these two payments almost equal the entire value of the estate as it was after the judgment in December 2007.
The only beneficiaries of the husband’s father’s will were in fact been his grandchildren.
To put it another way if the Property W property is currently worth $750,000.00 then the parties’ interest in it is $531,000.00. It might seem to the husband that this derives from his inheritance but the reality is that the parties jointly borrowed, and repaid by the sale of jointly owned property, $323,130 to pay Ms J, part of Ms J’s costs and the husbands costs of the litigation and $218,000.00 to pay Mr J and pay the costs of removing Mr J from the title. This alone totals $541,130.00 and they jointly incurred additional costs and interest borrowing this money.
If the Property W property is worth $835,000.00 then the parties have an asset worth net $591,180.00 which somewhat exceeds the amount put in by the husband and wife but the husband cannot receive sole credit for any windfall increase in the value of the property when the asset would not exist at all had the wife not joined with him to borrow money to pay out his sister and the costs of the litigation.
The assets and liabilities of the husband and wife
The husband and wife have the following assets:
Description Ownership Value Interest in Lot (omitted) (formerly Property W1 & Property W2) Joint $531,000.00 Mitsubishi (omitted) Husband $24,500.00 Property D Wife $522,500.00 Kia (omitted) Wife $10,000.00 Total $1,088,000.00
I intend to use $750,000.00 as the value of Property W at this stage of the exercise; the land is not subdivided. I will refer to the fact that the land could be re-subdivided when considering s. 75(2) matters.
The husband calculated the parties’ net entitlement in this scenario as $529,875.00. I calculate it at $531,000.00. It makes little material difference which figure is used.
The wife’s unit was purchased for $522,500.00 in September 2014. The parties included the unit in the pool at this amount and this is the only evidence I have of its value.
In his financial statement the husband admitted owning household contents, a box trailer, sporting goods and tools with a value of $4,400.00 although in his case outline document he said that he owned household contents, sporting goods and tools worth $4,400.00 and that the box trailer was worth $500.00.
The wife in her financial statement said that she had contents worth $5,000.00. The husband asserted that she also had jewellery worth $5,000.00 but there was no evidence about that.
Given that neither party provided a basis for their admissions against interest about items in their possession and that the value of the items is about the same I intend to leave these items off the list of assets available for division between the parties.
The husband estimated his motor vehicle to be worth $24,500.00 with a liability of $18,000.00 and the wife estimated hers to be worth $10,000.00. There was no evidence to support these assertions either but they are bigger ticket items and it was accepted that they should be in the pool and I will include them at the values estimated against interest by the parties.
The parties have the following liabilities:
Description Ownership Value (omitted) Bank Mortgage Wife $176,232.00 (omitted) Bank Car Loan Husband $18,000.00 Total $194,232.00
The husband owes about $4,000.00 in unpaid council rates for the Property W property which he said that he was challenging through the court. I cannot determine the merits of this claim but the husband has been in occupation of the property since July 2014. He should have been paying the rates and the unpaid rates are not a debt in which the wife should have to share.
The wife has credit card debt of about $22,000.00. There was no evidence that this derived from the relationship and as it involves post-separation spending choices by the wife I do not intend to include when calculating the pool.
The husband has no superannuation. The wife’s superannuation is as follows:
Description Value (omitted) Super $39,322.00 (omitted) Superannuation Scheme $802,881.00 Total $842,203.00
(omitted) is an accumulation fund. The wife is 66 years old and she can cash out it out if she chooses to do so.
The wife was a member of the (omitted) Superannuation Scheme throughout her career as a (occupation omitted) with the (employer omitted). When she retired in 2004 she commuted a small amount of her superannuation and became entitled to a fortnightly pension. The pension is indexed and she currently receives $1,041.33 per week.
The husband seeks a splitting order and the wife’s superannuation has been valued in accordance with the Family Law (Superannuation) Regulations. As at 17 September 2014 the gross value of the interest was $802,881.55.
The wife has no further right to commute and she can never receive anything other than fortnightly payments.
The husband on the other hand can cash out his entitlement if a splitting order is made. He is 70 and the (omitted) Super Factsheet about superannuation splitting orders in family law matters states that the effect of a base amount splitting order is as follows:
If the spouse has met a Commonwealth condition of release, the full amount of the benefit payable will be classified as unrestricted non-preserved (i.e. able to be cashed out). [4]
[4] (omitted) Superannuation Factsheet Exhibit R
The pool contains non-superannuation assets of $893,768.00 and superannuation of $842,203.00 all in the wife’s name, a total of $1,735,971.00. However I need to remain acutely aware that $802,881.00 of the superannuation pool is the capitalised value of a pension being paid to the wife.
The applicable law
S.79 (1) of the Family Law Act 1975 empowers the court to make such orders as it considers appropriate altering the parties’ interests in property.
S.79 (2) provides that the court shall not make an order under this section unless it considers that it would be just and equitable to do so.
In Stanford & Stanford[5] the High Court stressed that when an application for a property settlement was made the court must first identify the parties interests in property and then consider whether it was just and equitable to make an order altering those interests. It stressed that this question could not be answered simply by considering whether a party had made contributions as set out in s. 79(4) of the Family Law Act 1975.
[5] Stanford & Stanford [2012] HCA 52
The husband and wife were married for 25 years, then had a separation of 13 years in which there affairs remained intertwined and then reconciled for 5 years before finally separating. They own a property in joint names which they cannot continue to jointly enjoy and both seek property settlement orders and I am satisfied that it is just and equitable to consider making them.
I intend to take the usual steps to resolve what particular alteration of interests would be just and equitable and those steps are:
i)to assess the contributions of the parties under s79(4)(a), (b) and (c) and to express those contributions as a percentage;
ii)to consider the matters in s.79(4)(d), (e), (f) and (g), which includes the matters in s.75(2) so far as they are relevant, and determine whether any adjustment should be made as a result to the contribution based entitlements;
iii)to consider the effect of those findings and resolve what orders are just and equitable in all the circumstances of the case.
Contributions
The wife’s counsel submitted that the court should assess contributions separately to the superannuation and non-superannuation assets.
I agree that it is appropriate to treat the two pools separately. First, in C & C[6] the Full Court recommended that where a superannuation splitting order was sought it was preferable to assess contributions to superannuation and non-superannuation assets separately. Second, the situation is complicated in this case because of the nature of the wife’s superannuation. There are decided cases which suggest that it is not appropriate to assess contributions to a capitalised income stream at all. [7]
Contributions to the non-superannuation assets
[6] C & C (2005) FLC 93-220
[7] For example Cahill & Cahill (2006) FLC 93-253 which involved a DFRDB pension. See also Welch & Abney [2016] FamCAFC 271
1970 to 1996
The parties’ marriage had three distinct phases and the first was from 1970 to 1996.
There was no evidence that either party had any significant assets at the commencement of cohabitation.
The husband had a (occupation omitted) traineeship with (employer omitted) but he ceased working for (employer omitted) in 1972 and did casual work for the next twelve months. He then worked as an (occupation omitted) for two years and was a (occupation omitted) for (employer omitted) from 1975 to 1979.
After 1979 the husband did not have regular paid employment. He claimed that he commenced deriving some income from (omitted) activities in 1970 and was fully engaged in those activities between 1979 and 1993 and that between 1979 and 1982 he derived some ‘cash in hand’ income as a result of having a (omitted) licence. He asserted that the arrangement he had with the wife was that he made loan repayments for properties purchased by the parties and she paid household expenses.
The wife worked as a (occupation omitted) throughout this period and brought in a steady income.
The wife disputed that the husband contributed any significant sums of money to the household after he ceased regular employment. The husband produced a couple of documents confirming that he received some income but it is impossible to get a clear picture idea of what it was.
I suspect that as with many other things in this case each parties evidence is biased to their own case and that the truth lies somewhere in the middle; that the husband’s income was probably more than the wife now wishes to admit but was sporadic and unreliable and less valuable than the husband would now like the court to believe.
It is impossible for me now to make a definitive finding about the exact amount the husband earned but there can be little doubt that the wife was the primary income earner.
The husband claimed that once he ceased regular employment in 1979 he became the primary homemaker and carer for the children. The wife conceded that he did a share of the homemaking and parenting tasks although she minimised his contribution stating that both Ms H May and Mr J were in child care 5 days a week from a young age.
I rather suspect that the husband was the primary homemaker and parent after 1979. When the wife moved to Sydney for work in 2001 Ms H May remained living in (omitted) with the husband. Ms H May was then older but it suggests an acceptance by the parties at the time that he was capable of carrying out the role of primarily caring for her and had been used to doing so.
The parties purchased Property B in 1971 or 1972 and Property A in 1983. They built a home on Property A.
In 1988 the parties sold Property B and purchased Property C which was vacant land. They commenced construction of a home on Property C but a dispute arose with the builder. The parties were involved in litigation with the builder for 7 years and the home was never completed. The general flavour of the evidence was that the parties lost money over this dispute.
The husband claimed that his mother gave him $2,000.00 when Property B was purchased and loaned him $46,000.00 to assist with building on Property A and that this money later found its way into the Property C property and was never repaid. The wife said that she had no recollection of this and the husband had nothing which definitely established it.
It seems somewhat unlikely that the husband would have invented the fact that the mother gave him money but his evidence about the inheritance was unreliable and misleading and without concrete evidence about what his mother gave/loaned him or how it was used and I cannot exclude the possibility that he is mistaken about the amount involved or that his evidence about what happened to the money is misleading or incomplete.
The husband had a car accident in 1994 and was awarded damages of $82,037.00 in about 1999. Most of the money was used to pay the costs of the solicitor who handled the damages claim and the builder with whom the husband was in dispute. The husband received $15,200.00 which he used to buy a computer for Mr J, make home loan repayments and pay for living costs.
This was all in the future in 1996. When the parties separated in 1996 they were living at Property A and owned Property C which had a partially constructed home on it.
The wife was employed as a (occupation omitted) and at or around this time the husband began to receive Centrelink benefits.
1996 to 2009
The wife was employed for most of the period between 1996 and 2009. In 2001 she obtained employment in Sydney and commenced living there. Ms H May, then 15, remained in (omitted) with the husband.
The wife retired from the (employer omitted) in 2004 but did a (omitted course) as a (omitted) course and went on to obtain other employment. She worked at the (employer omitted) from about 2004 to 2006 and in (country omitted) between 2006 and 2009
The husband was in receipt of Centrelink benefits throughout this period.
Mr J was 17 and Ms H May 11 in 1996. They both remained in the former matrimonial home. Mr J moved out a couple of years later while attending University in (omitted). Between 1996 and 2001 the wife lived in the former matrimonial home but was away several nights a week and in 2001 she moved to Sydney. She said that she came to (omitted) midweek and on weekends to care for Ms H May but I am satisfied that from 1996 to 2004 the husband had the primary care of Ms H May. Ms H May commenced living with the wife in Sydney when she began university in 2004.
The parties both made a contribution to parenting responsibilities during this period when the children needed it; the husband’s contribution in this regard probably exceeded the wife’s.
The parties were on good terms during this period and were supportive of each other. The husband visited the wife in (country omitted) and the wife was very supportive of him during the estate litigation and joined with him to borrow money to obviate the need for Property W to be sold.
2009 to 2014
I accept the wife’s evidence that the parties were reconciled between January 2009 and 4 July 2014.
The wife worked in (country omitted) from 2009 to 2011, was employed by the (employer omitted) from 2011 to 2013 and worked at (employer omitted) from September 2013 to July 2014
The wife was the primary financial provider during this period and her income was important to the parties when they had to take out loans to fund payment of the estate legal costs and to pay Mr J out.
There was almost no evidence about homemaking contributions during this period but the parties agreed on a shared life and the wife obviously valued the companionship of the husband.
Prior to the parties’ final separation they sold Property C for $830,000.00 which resulted in them having $450,000 in a joint account which they intended to use to build at Property W. 12 March 2014 $147,000.00 was transferred to the wife’s (omitted) Super account.
Post separation matters
When the parties separated on 4 July 2014 they had $335,000.00 in their joint account. The wife transferred $300,000.00 to an account in her name and the husband retained $35,000.00.
On 9 October 2014 the wife purchased Property D for $522,500.00 using the $300,000.00 she had removed from the account.
The wife also used a large part of the money in the (omitted) Super account. It is unclear to me how much was used to assist with purchase of the unit, how much was spent on living costs and whether the wife used any of the money to pay her legal fees but there was no suggestion that any of the money she spent should be added back.
The husband said that he used $30,000.00 of the money he had at separation to pay legal fees in respect of the family law proceedings. It was not suggested that this be added back either.
Conclusion about contributions to the non-superannuation pool
I agree with the submission by the wife’s counsel that contributions should be assessed as equal overall.
The wife worked steadily from 1970 to 1996 and provided income to the relationship. The husband’s income became sporadic after 9 years. It is likely that he earned some income and played a greater role at home and in caring for the children and importantly this was the division of roles with which the parties were happy with at the time.
I cannot be certain about the amount of the family gifts the husband received although I suspect he did receive something but his financial contribution otherwise during the relationship was considerably less than the wife’s.
The husband received a damages award in 1999 as a result of an accident during this period. However the information about the award was slight. No evidence was provided about the extent to which it was for pain and suffering and the extent to which it was for past or future economic loss, and it is therefore not possible for me to make a precise finding about how to treat it in terms of assessing contributions.
It also provided little net benefit for the parties because most of it went to pay for an unproductive building dispute.
For the thirteen years from 1996 to 2009 the parties were separated but they continued in similar roles to before. The wife earned an income and lived substantially away from the former matrimonial home for eight of those years but during part of this period she used her income to pay joint debts. The husband lived in the former matrimonial home and provided primary care of Ms H May until she left home to attend (omitted) School.
The parties lives remained intertwined as a result of joint ownership of property, joint responsibility for loans and shared parenting responsibilities and they had some holidays together and worked together on the affairs of the husband’s father’s estate. The wife made a valuable financial contribution by agreeing to be party to a loan which ensured that the Property W property was preserved.
Between 2009 and 2014 the parties again lived as husband and wife and carried out agreed roles within a marriage, with the wife the income earner and the husband providing support and comfort for her in their home life.
The husband maintained that contributions favoured him because of his inheritance in 2004 but there is strength in the wife’s submission that the inheritance resulted in no net gain to the parties. The entire inheritance was worth $429,428.00 after the decision in December 2007 but to preserve the property he and the wife spent in excess of $548,000.00. It was the husband’s case that the parties now had an interest in the property based on a value of $750,000.00 which on my calculation puts the value at $531,000.00.
The parties contributed in different ways during their 43 plus year association/marriage/relationship. There are no post-separation matters which would disturb a finding of equality of contributions and I am satisfied that contributions to the non-superannuation pool should be assessed as equal.
That would entitle each party to non-superannuation assets of $446,884.00.
The superannuation
All of the wife’s (omitted) Super entitlement was acquired between 1970 and 2004 and I am satisfied that I should assess contributions to it rather than just assess contributions to the wife’s (omitted) Super and treat her receipt of a pension as a s.75(2) matter.
In the wife’s hands her pension will only ever be an income stream but the husband can cash out his entitlement and in those circumstances the capitalised value of the superannuation cannot be regarded as illusory.
I am satisfied that contributions to the wife’s superannuation should also be assessed as equal.
The wife remained in her (omitted) Superannuation fund for 8 years after the parties separated but during this period the husband made contributions as homemaker and parent and the parties lives remained intertwined.
The wife’s (omitted) Super was acquired after 2004. It is unclear how much of it was acquired prior to the parties’ reconciliation in 2009 but $147,000.00 of the parties’ joint funds was transferred into this account shortly after the parties separated and most of it was taken out again for the wife’s own purposes and except insofar as some of it may have gone into the unit is now gone.
If the (omitted) Super fund is treated as having a capitalised value then on the basis of contributions the parties are each entitled to superannuation worth $421,101.50.
S. 79(4) (d) (e) (f) and (g) matters
I am required to consider the matters in s. 79(4) (d) (e) (f) and (g) of the Family Law Act 1975. The only relevant subsection is (e) which requires the court to have regard to the matters in s. 75(2) of the Act.
S. 75(2) matters
I intend to start by clearing out of the way some potential s. 75(2)(o) matters raised by each party. S. 75(2) (o) requires the court to take into account any matters which the court considers the justice of the case requires to be taken into accounts.
The wife alleged that from time to time money which was borrowed or money from the sale of properties went to the husband and he never explained what happened to it. However the evidence is not such as to allow me to make a finding that the husband either committed waste or has undisclosed assets.
The husband alleged that the wife was a profligate spender who racked up large credit card debts as a result of heavy drinking and spending on clothes and extravagant dinners and gifts and regular outings to the Casino in Sydney.
The husband gave evidence of some specific large amounts of money which he said involved waste but the wife denied that her spending was extravagant and the evidence is far too general to allow me to find that the wife’s spending went beyond acceptable discretionary spending. The mere fact that someone has credit card debt or takes out a personal loan is not evidence of profligate spending.
I am not satisfied that there are any matters which I should take into account pursuant to s. 75(2) (o).
Returning to the remaining s. 75(2) matters the husband is 70 and is in receipt of an age pension of $437.00 per week. He has not re-partnered and is not responsible for the support of any other person.
If the wife’s (omitted) Super entitlement is treated as an asset the husband is entitled to non-superannuation assets worth $446,884.00 and superannuation of $421,101.50.
If the husband retains Property W and his motor vehicle he has assets worth $537,500.00. He would be obliged to pay the wife $90,616.00 and Ms H May $219,000.00, a total of $309,616.00 to retain this property.
In his trial affidavit the husband said that he intended to borrow funds to enable him to do this. The money from a superannuation split of the size he proposed would also obviously be a source of funds to enable him to pay money to the wife and Ms H May.
The wife is 66. Her income is her pension of $1,041.33 per week. If a superannuation splitting order is made transferring half of the wife’s (omitted) Super entitlement to the husband her pension payment will be reduced by 50% and her income will be $520.66 per week.[8] Her income will not be much more than the husband’s and the source of her income will be her share of the superannuation.
[8] (omitted) Superannuation Factsheet Exhibit R
The husband submitted that the wife could easily obtain employment doing some form of (employment omitted) and that she was only holding off doing so at present to advantage herself in the property proceedings.
The wife said that she had retired in December 2014 due to health issues and did not intend to work in the future.
Neither the wife’s age nor the health conditions she identified would on the evidence available to me preclude her obtaining employment but it is not open to me on the state of the evidence to find that this is something the wife is likely to do. She has reached retirement age and cannot be criticised if she chooses not to work.
If the wife’s superannuation is treated as an asset the wife is entitled to non-superannuation assets worth $446,884.00 and superannuation of $421,101.50. She owes $176,000.00 to (omitted) Bank and will be obliged to continue making mortgage repayments of $250.00 per week. She has credit card debt of about $22,000.00. She did not explain why her credit card debt was so high.
The wife has paid some of her legal fees but she owes in excess of $50,000.00 for legal fees. She said that she intended to use her (omitted) Super to pay as much as possible of her legal fees.
A comparison of the proposed outcomes
The wife said that she was willing to forgo her entitlement to $446,884.00 of the non-superannuation assets and receive only $175,095.00 net being her motor vehicle, her interest in her unit after taking into account the (omitted) Bank mortgage and the amount required to pay Ms H May out of Property W and her (omitted) Super.[9]
[9] This calculation is based on Ms H May receiving an interest in the wife’s unit worth $220,495.00.
The alternative for the wife, on the husband’s proposal and taking into account my findings about contributions, would be to have her income halved to $520.66 per week and receive $90,616.00 cash from the husband which she does not want.
Ms H May also does not want cash from the husband; she is content to assist her mother by leaving the $219,000.00 cash to which she is entitled in the wife’s superannuation fund and take a share of her mother’s unit.
It would not be just and equitable to force this outcome on the wife and Ms H May and the issue then becomes one of whether there should be a splitting order in the husband’s favour for the amount in excess of Ms H May and the wife’s entitlements, namely $111,485.50.
An order to this effect would reduce the wife’s income stream by about 14% or $144.00 per week.
The alternative is to do as the wife proposes and give the husband Property W but make no splitting order and allow the wife to retain her income stream.
The answer might seem obvious to the husband, as one outcome delivers him a better result, but it is not as straightforward as it may at first appear.
In their joint judgment in Semperton & Semperton Thackray & Ryan J referred to the fact that every case which involved an income stream with a capitalised value turned on its own facts. They said as follows:
It is also important to bear in mind that approaches adopted at first instance are necessarily influenced by the facts of the particular matter. Furthermore, the decision of an appellate court that an outcome ordered by a trial judge was within the range of discretion does not mean the approach adopted by the trial judge was the preferred approach. An alternative approach may just as well have escaped appellate intervention.
Experience teaches that no case is the same as another. Each not only has its own facts, but also individual nuances that often defy description. By way of example, and subject to the proviso mentioned about tax, it would be surprising to see any complaint about the approach adopted by the Federal Magistrate here if both parties had more than ample assets and income to accommodate and support themselves without resort to social security. If that had been the position, the DFRDB would properly have been seen as no different from an annuity acquired as part of prudent retirement planning.
However, the scenario becomes more complex when one or both of the parties has insufficient assets or income to provide secure accommodation. The party with the benefit of a secure, lifetime pension might prefer to “trade” all or part of that for the different security offered by capital sufficient to acquire secure accommodation. Litigants are driven by wishes, desires and hunches about their own futures that differ from the imperatives that inspire the statisticians who apply the law of averages in constructing formulae.
It is considerations of this sort that encourage us to accept that “one size does not fit all”. Or put another way, why one approach to a particular problem should not be seen as the preferred or the correct approach. Ideally, a judicial officer will be alive to the nuances of each individual dispute, including the reasonable wants and desires of each of the parties, and thus seek to craft an order that will provide individual justice for both parties.[10]
[10] Semperton & Semperton (2012) 47FamLR626 187-190
The reasonable wishes of the parties in this case are the husband’s wish to keep the Property W property and the wife’s wish to keep her income stream and they can both fairly be accommodated without a splitting order being made.
If no splitting order is made the husband will retain Property W worth $750,000.00 and will continue to receive the aged pension. He has a home, and he did not suggest anywhere in his evidence that he desired to obtain cash to improve the habitable dwelling on the two lots. The potential exists however for him to obtain some cash as well as have a home. He could take out a reverse mortgage, he could sell the property and buy something cheaper or he could re-subdivide and keep part of the property.
If the husband re-subdivides he may well have the benefit of an additional $85,000.00 which Mr N believed existed in the property.
The husband may not choose to go down the path of freeing up cash from the property but that is his choice. I acknowledge that if he does so he may incur selling costs and even CGT (although on the current figures that would not be much) but he could still free up cash.
The wife will retain her unit which after the transfer of an interest to Ms H May will have net equity of $125,773.00. She will have more income than the husband unless he frees up some cash from Property W but she will have to pay $250.00 per week to the bank for the rest of her life (or at least until she turns 96) and while she is on good terms with Ms H May she does face the possibility that her wishes and Ms H May’s wishes might diverge in the future. The wife’s accommodation is not as secure as the husband’s.
All of the wife’s (omitted) Super will go to pay her legal costs.
Although on one view the wife might be retaining assets worth more than the husband part of her entitlement is $802,881.00 which she can never turn into cash. From her perspective the capitalised value is illusory and she will have very limited if any capacity to raise extra capital to allow her to enjoy additional luxuries of life.
If no splitting order is made the husband will receive:
Description
Value
Property W1
$750,000.00
Mitsubishi (omitted) $24,500.00 Less (omitted) Bank car loan
($18,000.00)
Total
$756,500.00
The wife will receive:
Description
Value
Property D
$522,500.00
Kia (omitted)
$10,000.00
Less (omitted) Bank home loan
$176,232.00
Less transfer of share of Property D to Ms H May
$220,495.00
(omitted) Super
$39,322.00
Total
$175,095.00
The wife will also retain her income stream.
For the reasons set out above I consider that this outcome is just and equitable and the orders of the court will be as set out at the beginning of this judgment.
I certify that the preceding one hundred and eighty three (183) paragraphs are a true copy of the reasons for judgment of Judge Terry
Date: 10 March 2017
Key Legal Topics
Areas of Law
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Family Law
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Property Law
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Equity & Trusts
Legal Concepts
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Remedies
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Costs
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Jurisdiction
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Injunction
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Constructive Trust
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