Mulray and Gordon

[2009] FamCA 65

FAMILY COURT OF AUSTRALIA

MULRAY & GORDON [2009] FamCA 65

FAMILY LAW – PROPERTY SETTLEMENT –argument about composition of the net assets, including whether paid legal fees are included as notional assets – notwithstanding those issues contributions agreed 70:30 in husband’s favour – argument about the 75(2) adjustment in wife’s favour

Family Law Act 1975 (Cth)

APPLICANT: Ms Mulray

RESPONDENT: Mr Gordon

FILE NUMBER: SYF 2750 of 2004

DATE DELIVERED: 6 February 2009

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Moore J

HEARING DATE: 29 & 30 January 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Foster

SOLICITOR FOR THE APPLICANT: Marks Griffiths & Bova

COUNSEL FOR THE RESPONDENT: Mr Hodgson

SOLICITOR FOR THE RESPONDENT: Bryan Kain Solicitors

Orders

1. On or before three (3) months from this date the husband is to:

   (i)do all things and sign all documents necessary to transfer to the wife unencumbered all his right title and interest in the property known as 10 R Street in the State of New South Wales being the whole of the land contained in Certificate of Title Folio Identifier …;

   (ii)pay to the wife the sum of $146,000.

2. Until 14 days after the expiration of the current lease on 10 R Street the wife is entitled to exclusive occupancy of the property known as 12 R Street provided she maintains it in the same good order and condition.

3. The husband is to pay as and when they fall due all mortgage instalments and rates and like charges related to the property at 10 R Street pending the transfer to the wife pursuant to order 1 and to pay all mortgage instalments secured against the property at 12 R Street and rates and like charges related to that property during the wife’s occupation of it pursuant to order 2. 

4. Subject to these orders, each party is entitled to retain absolutely the property they now own or to which they have a current entitlement. 

5. Subject to order 6 hereof, until 30 March 2010 the husband is to pay to the wife by way of spouse maintenance the sum of $1,000 per week. 

6. Pending the expiration of the period referred to in order 5, the wife is to inform the husband forthwith if she obtains employment and if the employment is at a gross salary of $35,000 the sum referred to in order 6 is reduced to $500 per week and if at a gross salary of $60,000 per annum then the sum referred to in order 6 is reduced to nil. 

IT IS NOTED that publication of this judgment under the pseudonym Mulray & Gordon is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 2750  of 2004

MS MULRAY

Applicant

And

MR GORDON

Respondent

REASONS FOR JUDGMENT

Proceedings

1. For determination are proceedings for property settlement and spouse maintenance.  The orders sought by the wife are to be found in an amended application filed 24 December 2008 and those sought by the husband are set out in a Minute that became exhibit 1. 

2. As is apparent from the costs memoranda their solicitors are obliged to give them, they have both incurred extraordinary legal costs prior to the hearing: the wife’s total costs and disbursements are $238,914 which have been paid either from funds she retained at separation, from trust distributions later received, or money from her parents; the husband’s are $173,975 which has been paid from his income earned since separation. 

Approach

1. Pursuant to s 79 of the Act the court may not make an order altering the interest of parties in property unless it is satisfied in all the circumstances it is just and equitable to do so.  That conclusion is arrived at by evaluating the matters referred to in s 79(4) which involves a number of sequential steps as discussed by a line of well-known authorities [Pastrikos (1980) FLC 90-897, 6 Fam LR 497; Lee Steere (1985) FLC 91-626, 10 Fam LR 431; Ferraro (1993) FLC 92-335, 16 Fam LR 1]. For present purposes they can be collapsed to these: (i) identify the property and its value; (ii) evaluate contributions of the kind described in s 79(4)(a) – (c); (iii) consider what, if any, adjustment needs to be made to the contribution assessment by reason of any relevant matters set out in s 75(2); and, finally, (iv) consider the outcome achieved against the requirement for orders to be just and equitable.

2. Usually those assessments follow a record of the financial history including any findings about disputed material facts.  But no more than a brief outline of that needs to be given because it is agreed contributions should be assessed at 70:30 in the husband’s favour - despite unresolved disputes about the value of their net assets to which those apportionments would be applied.  Apart from those disputes, the question for determination is what, if any, adjustment should be made to the wife’s contribution entitlement by reason of two related s 75(2) factors: the capacity of the wife for appropriate gainful employment and disparity in the parties’ future earnings. 

3. As for spouse maintenance, s 72 obliges the husband to maintain the wife to the extent that he is reasonably able to do so if she is unable to support herself adequately whether [in this case] by ‘reason of age or physical or mental incapacity for appropriate gainful employment…or for any other adequate reason having regard to any relevant matter referred to in s 75(2)’.  

4. It will be apparent from what has been said that s 75(2) serves two purposes – as Fogarty J noted in Waters and Jurek (1995) FLC 92-635 at 82,375 it does its ‘primary work’ in spouse maintenance but it is picked up also as part of the property settlement exercise through s 79(4)(e) [see also Collins and Collins (1990) 14 Fam LR 563] and the two purposes should not be conflated. In Clauson (1995) FLC 92-595 at 81,906 the Full Court said:

   ‘The distinction between s.74 and the s 75(2) exercise in a property order is important and must be maintained.  In the latter context the s 75(2) exercise is not an exercise of the maintenance power.  Nor is it a ‘back door’ maintenance order.  It requires the court to take into account, so far as relevant, the various matters set out in that sub-section in determining, in effect, what alteration, if any, should be made to the conclusions already reached on the basis of the parties’ contributions to their property.’

5. See also Fickling and Fickling (1996) 20 Fam LR 258. Of course when spouse maintenance is claimed in addition to property settlement the latter must be resolved first because the threshold question of whether a claimant is unable to adequately support herself or himself cannot be answered until their property entitlement is known since it might provide the means of securing an adequate level of support [Clauson (supra)]. 

Issues

1. The disagreements about the composition of their net assets relate to the value of household contents they each have, whether paid legal fees should be added back to their assets, and whether certain money advanced to the wife by her parents should be introduced as a liability. 

2. The submissions about s 75(2) contend for an adjustment of 20% on the wife’s behalf and not more than 5% on the husband’s behalf. 

3. The issue underpinning the spouse maintenance claim, which the husband asks be dismissed, is the wife’s capacity for gainful employment and not his capacity to pay, which is conceded, although the submissions on his behalf pose in passing a question about the appropriate level of her needs if the claim is not dismissed. 

Brief history

1. The husband (47) and the wife (46) met many years before they began living together.  The timing of that development is aired in detail in their affidavits but it need only be said here that it was sometime in the early 1990’s.  They married while on holiday in Norway in July 2001.  Their separation came about either during 2004 following a failed attempt at reconciliation or in February 2005.  There are no children. 

2. The husband completed his qualifications in his profession in late 1991.  In the course of his career he has taken up various posts and he established a private practice in 1996.  At one stage he had certain entities formed - a service company, trusts, and superannuation fund – to assist in the conduct of his practice.  There can be no precision about what he currently earns since his financial statement is based on his 2007 income and he has not yet completed his income tax return for 2008 although he estimates there would have been a 5% increase over the previous year.  His earnings are substantial on any assessment, being in the order of $700,000 per annum before tax. 

3. The wife worked as a sales representative in several positions over many years during the relationship but it is common ground she ceased full time work in 2001.  It appears she did some work for friends after that and more recently she undertook some part time or casual work as a market researcher, the last occasion being for about three weeks in 2007.  In 1993 she began studies in business which she completed and she graduated in 1999.  In 2005 she enrolled to study a Bachelors degree at a university and during 2007 and 2008 she completed many subjects and achieved good results.  She anticipates she will finish her studies around March 2010 by which time she will be qualified to practice a profession. 

4. The husband’s property at the outset included a home at R Street which was mortgaged and he had superannuation, savings, and a motor vehicle.  The wife had some savings and a motor vehicle.  They lived in the R Street property [No 12] and in 2000 the home next door [No 10] was acquired for investment purposes.  It remains rented and the lease expires in June. 

5. At separation the wife retained $93,583 in a cash management account and at the end of 2005, following her resignation from M Nominees Pty Limited, the husband paid her two cheques totalling $65,700 being income distributed to her at an earlier time but until then unpaid.  Tax was payable on those funds.  The husband made no periodic payments to her for her support following the separation.  However, she has continued to occupy the R Street home which is the subject of cross-collateral security held by the bank and the husband has paid the instalments on the debt as well as the rates and insurances.  She has paid the bills related to her occupation and she has maintained the property.  She has paid her day to day living expenses as well as her substantial legal costs from the capital just mentioned and from money advanced directly or indirectly by her parents.  She signed a loan agreement with her parents in August 2006 in circumstances she elaborated in her oral evidence and the time for repayment of that advance was extended in a later signed loan agreement.  On her case, not all of the funds coming from her parents are the subject of written loan agreements but she maintains the money is repayable nonetheless and a record has been kept of what has been advanced.  It is also her case that she has been in ill health for some time.  In November 2007 she consulted a psychiatrist, Dr C, who has been treating her for major depression.  It will be necessary to return to her evidence shortly. 

6. Since separation the husband has continued to practice his profession and he has retained all of his income which he has applied for his own purposes, including payment of his legal fees, although as already noted he has paid mortgage instalments, rates and insurance related to the R Street properties.  He has borrowed further funds to buy a home at Y in which he lives and he has paid the instalments related to that. 

Assets

·    household contents

1. In their financial statements each attributes a value to the chattels they have but neither has given any indication of the basis for the estimate advanced and nor have formal valuations been undertaken.  The wife’s estimate is $10,000 and the husband’s is $23,000. 

2. Mr Foster for the wife urges the inclusion in the assets of both figures while Mr Hodgson says they should both be left out and the items distributed between them.  Doing either would not make much difference to the result but since the issue requires a decision that is to include both estimates in the assets - it is property they own, there are no extra-ordinary considerations to take into account, it seems reasonable to accept they have each made a genuine attempt to estimate what it is worth as best they could, and neither has challenged the basis of the other’s figure. 

·    paid legal fees

1. The husband’s case is that the fees he has paid should not be added back to the assets whereas $137,000 of what the wife has paid should be included.  If there is a decision to add back any of the wife’s paid legal costs, it is agreed that would be the figure.  Her position, however, is that neither the husband’s paid legal fees nor any component of what she has paid should be introduced as assets. 

2. Mr Hodgson’s argument for the husband rests essentially on the proposition that he has paid his legal fees from income earned since separation whereas the figure sought to be introduced against the wife - relying on the principle discussed in Townsend (1995) FLC 92-569; (1994) 18 Fam LR 505 - is a portion of the capital she retained at separation and the distributions she received later. Implicit in references to the wife not having consulted a psychiatrist until November 2007 as well as to her studies and results achieved is the proposition that she has been capable of working and earning an income since separation.

3. Mr Foster’s argument for the wife contends that the husband retained his significant income for his own purposes after separation, it was not shared with the wife, and she has been required over those years to rely on the savings she retained and the distributions later paid to her as a result of income splitting arrangements in earlier years.  It is acknowledged she has had occupation of the home and the husband paid the mortgage instalments and charges but, while the home is part of the cross-collateral security, the borrowings relate to the investment property.  His income over those years has been substantial and more than enough to pay his legal fees while the wife has been left to find her needs from the capital she received and from assistance provided by her parents. 

4. A number of appellate decisions have discussed the topic of adding back to assets payments made for legal fees and adding back to assets property received by one party who has disposed of it post separation, but nonetheless it remains fraught for the exercise of discretion at first instance. 

5. In developing his argument Mr Foster referred to Chorn and Hopkins (2004) FLC 93-204 [per Finn, Kay and May JJ] and in particular to the Full Court judgment at paragraphs 56 – 58 namely -

   ‘56.     In summary, we consider that the above mentioned decisions of the Full Court establish that, while the treatment of funds used to pay legal costs remains ultimately a matter for the discretion of the trial judge, in determining how to exercise that discretion, regard should be had to the source of the funds.

   57.      If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the party, who has had the benefit of them.

   58.      If funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset; nor would any borrowing undertaken by a party post-separation to pay legal fees be taken into account as a liability in the calculation of the net property of the parties.  Funds generated from assets or businesses to which the other party has made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.’

6. For completion, there can be added paragraphs 59 and 60:

   ‘59.     Outstanding legal fees themselves are generally not taken into account as a liability.

   60.      If in the exercise of the discretion, it is determined that legal fees already paid should be taken into account as a notional asset, then normally any liability associated with the acquisition of the monies used to pay the legal fees should also be taken into account.’

7. Standing alone, these passages tend to point in the direction of adding back the $137,000 because the savings and the trust entitlement existed at separation and both parties could be seen as having an interest in those assets [57] and not adding back the $173,000 paid by the husband since that came from income he generated post-separation which did not come from assets or a business to which the wife could be said to have made a significant contribution or to which she has any actual legal entitlement [58].  But it is more complicated than that. 

8. Mr Foster also cited in his submissions Gollings and Scott [2007] FamCA 397 [per Finn, Kay and Boland JJ], in particular paragraphs 46 – 49. In that case, contrary to the argument for the husband at trial and repeated on appeal, the trial judge did not add back to the assets the $17,000 the wife had received from the sale of a motor vehicle to fund legal fees and associated costs. The appellant’s argument would seem to fit with the discussion by the Full Court in Townsend (1994) 18 Fam LR 505; [1995] FLC 92-569 to the effect that capital received by one party may be seen as a premature distribution of assets and the justice of the case may require it be added back to the assets notionally rather than leave it to be taken into account when considering the s 75(2) factors, and it would seem to fit within paragraph 57 of Chorn and Hopkins which their Honours cited when disposing of the point.  But their Honours upheld the decision of the trial judge to exclude it: the treatment of funds to pay legal costs is ultimately for the discretion of the trial judge and there had been no error since her Honour was ‘….entirely conscious that some of the source of funds expended by each party could properly be attributed to either property owned by them at the date of separation or to earnings generated post-separation in circumstances where the capacity to generate that income had been significantly contributed to by the other party…’ and it was ‘…..entirely appropriate for her Honour, as an exercise of her Honour’s discretion, to make no requirement that either party’s expenditure for legal costs should be added back into the pool of assets in the circumstances where the husband had already expended $62,500 and the wife about $100,000.’  A final reason for upholding the discretion has less complication about principle; namely, the amount involved was trivial given the assets involved. 

9. In that same case the husband had gifted to his partner post separation $72,000 put towards the acquisition and renovation of her property and the trial judge included the amount as an asset of the husband’s.  On appeal, the discretion to include it was held to be appealable error.  The decision was said to have not been adequately explained [72] to which this is added:

   ‘While the treatment of the funds in question was ultimately a matter for her Honour’s discretion, given the matters referred to in C & C she needed to explain more fully her reasons for adding back the amount which she did, and she has erred by not doing so.’

10. The reference to C and C refers back to earlier in the judgment when their Honours had cited passages from C and C (1998) FamCA 143 [Nicholson CJ, Ellis and Kay JJ] in the context of a discussion about people being able to get on with their lives after separation independently without having to account for how they spend their money. The Full Court in C and C had been critical of the trial judge’s decision to add back to the assets a relatively small amount provided by the wife to help out an adult child and they considered it unreasonable to conduct a ‘microscopic examination’ of post separation expenditure with a view to deciding whether or not to bring it to account in dividing up the assets of the magnitude available in that case.  The cases which deal with notional add-backs, their Honours said in C and C [45], ‘are generally examples of circumstances in which it would be clearly unjust and inequitable not to take those matters into account.’ and at [46] ‘….the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule.  The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives….’  The Full Court in Gollings and Scott drew on this to say [68] that as a general rule once parties have separated, provided obligations of maintenance and support are properly met and subject to considerations related to waste and the like as discussed in Kowaliw (1981) FLC 91-092, each party is entitled to get on with his or her life independently of the other.

1. It becomes apparent that there is no ready answer to the question of inclusion or exclusion of paid legal fees [or of assets sent off elsewhere]: on the one hand, generally they would not be included if paid from earnings after separation because people are entitled to get on with their lives and there is no obligation to save up for the divorce; on the other hand, if proper obligations have not been met or there are other aspects of the case such as the funds being generated from assets or business to which the other party has made a significant contribution, then they might be included.  And, as Gollings and Scott demonstrates, it might not be appealable error to exclude funds derived from the sale of assets after separation and used to pay legal costs - despite some incongruity with Townsend (1994) 18 Fam LR 505; [1995] FLC 92-569 - and yet it might constitute appealable error to include as an asset money gifted to others. To add to the mix, the general statement in Chorn and Hopkins about paid legal fees and post separation earnings has not been universally embraced – see Harrington and Harrington (2007) FLC 93-317 [Warnick, Boland and Stevenson JJ] on appeal from a decision of O’Ryan J expressing disagreement with the proposition. The answer might be to include paid legal fees as an asset even though paid from post separation earnings and then have regard to the source when evaluating contributions – current bank accounts are invariably included and their source considered and theoretically the money would be in the bank account had it not been paid in fees. In any event much appears to hinge on the facts of the particular case and the explanation for exercising the discretion one way or the other.

2. In this case I see more merit in the position put by the wife and therefore I propose excluding the fees paid by the husband and $137,000 paid by the wife.  My reasons follow:

   (a)The statements in C and C and Gollings and Scott about people being able to live independently after separation and use their earnings as they choose is hinged on the consideration that obligations to provide financial support have been properly met. 

   (b)Mr Hodgson’s points about the wife not consulting a psychiatrist until November 2007, successfully undertaking studies over the past two years, having occupation of the home, and not having brought proceedings for interim periodic maintenance are sound as far as they go and it is understandable that reliance would be placed on Townsend since the amount in question is part of the capital accumulated in savings or in the trust up to the point of separation.  Yet none of that overcomes the fact that the wife has been diagnosed with major depression and the evidence of her treating psychiatrist about the impact on her capacity for gainful employment relates at least to part of the four year separation period.  Further, while she has occupied the home the husband has not contributed to her day to day expenses which she has paid from available capital and money made available by her parents and that has been in circumstances where the husband has had a large income in any language from his practice.  To add back $137,000 of the $158,000 capital she retained would mean very little of it would represent living expenses during a substantial period and that would be unjust in all the circumstances. 

   (d)That being so, there is no argument put in the wife’s case to include what the husband has paid which makes it unnecessary to discuss the relevance of their source in post separation earnings. 

   ·    debt to wife’s parents

3. The wife seeks to have $90,000 included as a liability to her parents.  She says she owes them much more but it has been agreed to leave out the balance of $102,000. 

4. Arguing for exclusion despite even the executed loan agreement, Mr Hodgson refers to the absence of any corroboration of debt from her mother, he refers to the records kept of periodic advances being unsatisfactory by reason of inconsistencies and uncertainty about calculations, and he says it is doubtful it is repayable given the wife’s close relationship with her parents.  He agrees that if it is excluded regard would be had to it under s 75(2)(o).  Mr Foster’s arguments to the contrary refer to the executed loan agreement and the absence of any support from the husband from his earnings as well as her need for funds to meet her expenses including legal costs. 

5. Whatever the shortcomings in the records – not tendered and the point not elaborated – there is no doubt the wife’s parents did advance funds which she has used to meet her needs since separation and her close relationship with them is no reason to say it is not repayable. 

6. I would include it if I could be satisfied that in addition to the $158,000 allowed to be retained for post separation living expenses [the effect of excluding the $137,000] she had need of another $90,000 - because that would be the effect of including it as a debt when calculating their net assets.  To be noted shortly, I am satisfied she currently needs around $1,000 per week excluding any expense for accommodation, but there is nothing to support that being extrapolated back over the four years of separation.  In any event the $158,000 retained in capital is about $40,000 per annum and she has had the occupation of the home and the husband has paid the charges related to it along with the repayments related to the debt secured by the home. 

7. The better approach in my view is to exclude it and take into account under s 75(2) that she has debt to her parents which in some measure relates to living expenses. 

Assets and liabilities

1. I should note that both counsel included with the parties’ other assets their superannuation entitlements - the husband’s being much more substantial than the wife’s - and so I take no issue with it. 

2. I find their net assets to be as follows:

   Husband
   10 R Street  1,250,000
   12 R Street  1,325,000
   Y property  1,750,000
   Cash at bank   16,870
   Public Company Shares   44,985
   Shareholding – D Gordon Pty Ltd      92,640
   Loan account – D Gordon Pty Ltd   30,629
   M Nominees Pty Ltd   1
   M Corporation Pty Ltd  10
   M Property Trust   870,010
   M Superannuation Fund   404,500
   First State Superannuation   60,055
   Loan account M Management Trust   22,605
   Household and personal effects   23,000
     5,890,305
   Liabilities:
   Westpac Mortgage Y property                 1,247,030
   Debt to M Property Trust         746,117
   Secured mortgage debt     746,117       2,739,264
   Net:   3,151,041

   Wife
   CBA account  nil
   1999 SAAB   5,250
   Household contents   10,000
   ING Superannuation     3,150
   NPT Superannuation   4,665
   Supertrace Superannuation     16,304
      39,369

   Net Husband:            3,151,041

   Net Wife:                       39,369

   Total:  3,190,410

3. Applying the agreed contribution entitlements to that total figure, the husband would be entitled to assets to the value of $2,233,287 and the wife to assets to the value of $957,123. 

Section 75(2)

1. Apart from those entitlements, neither have any other assets.  The wife will have debt to repay to her parents as noted whereas the husband has no similar obligation. 

2. The parties are of similar ages. 

3. The husband has no health issues and he can be seen as continuing his career as a professional earning very good money in the range already indicated. 

4. The wife’s situation is quite different.  She does have a solid work history, at least up to 2001 with only some patchy work thereafter, but she has demonstrated an ability to apply herself to study over the past two years and achieve quite good results.  These considerations might be seen as standing her in good stead for a return to the workforce in the future, but Dr C diagnoses major depression where the symptoms may have become entrenched and the doctor is quite guarded about what the future might hold. 

5. In her first report last year the doctor summarised the situation by saying that the wife’s precarious emotional condition is the result of significant life stress in her middle years ‘particularly her sense of ongoing betrayal by her husband’, her parents’ frailty and illnesses are continual stresses upon her coping resources, and because she had thought of herself earlier as being competent and self assured she was having difficulty understanding her inability to cope.  She referred to the wife’s ‘disablement’ being quite extreme and she saw the prognosis as poor.  She expressed doubt that the wife would be capable of being gainfully employed in the foreseeable future.  In her more recent report the doctor expressed the view that the wife’s impairments had become chronic and she anticipates her patient will require ongoing psychiatric treatment and medication.  She repeated the view that she would not be capable of gainful employment.  In cross-examination at the hearing Mr Hodgson put to Dr C details of the wife’s studies during 2007 and 2008 and the good results she had achieved, but while Dr C [in effect] acknowledged these as some cause for a degree of optimism and she hoped the wife would be able to cope and adjust once the litigation is behind her, as Mr Hodgson was suggesting, she adhered to reservations about her ability to work in the future. 

6. Despite this, Mr Hodgson submits that the principal stressors on the wife are these proceedings which have required the wife to revisit the past and prepare affidavits, the feelings of betrayal by the husband, and the expense and financial pressure of the costs of the proceedings.  The litigation behind her and the doctor’s observation about her strong work ethic are indications her difficulties will not be ongoing and she will be able to return to work.  After all, she can undertake full time study, she is confident she will find work in that field on completion, and it is reasonable to expect she will have the resilience and inner strength to do so.  Mr Foster, on the other hand, submits that Dr C’s evidence means the difficulties the wife is experiencing may have become entrenched, as she believes they have, and her future capacity for gainful employment must be seen as questionable.  A periodic order for a time would enable her to finish her studies and gain those qualifications and her position at that point could be re-evaluated if necessary. 

7. As I assess it, the weight of the evidence supports the position put by Mr Foster.  That is to say, at present the wife could not be seen as having a capacity for paid work by reason of mental health issues.  By the same token, that is not to say the problems should necessarily be seen as chronic and entrenched because recovery by concluding the litigation, completing her studies and qualifying for work in her chosen field is not without hope and her demonstrated endeavours with study and results over the past two years supports that in some measure. 

8. However, even if she does complete her studies and find work using those qualifications, Mr Foster correctly submits that the disparity of their income earning potential will remain enormous since there is no prospect she will ever earn income the magnitude of the husband’s.  [B and B No 2 [2000] FamCA 734; HKM v MM & SJM [2006] FamCA47 noted]. 

9. In summary, I am satisfied the wife has no current capacity to earn income; while there is no crystal ball to predict the future, there is at least some cause for hope for recovery; but whatever develops, the husband’s future earnings will outstrip hers significantly.  In most cases earning capacity, as has been observed [Best (1993) 16 Fam LR 937 at 962; [1993] FLC 92-418 at 80,295], is the most valuable ‘asset’ a party can take out of the marriage.

10. Without doubt these considerations call for an increase in the wife’s contribution entitlement.  In my view the 5% urged in the husband’s case would be insufficient and that is self evident once that is converted from percentage terms to a monetary sum of just under $160,000 [see Clauson].  Given the sort of earnings the husband can command and the disparity in their property entitlements based on contributions, that is plainly inadequate. 

11. The 20% argued by Mr Foster would give her an extra $638,082 but I see that as falling outside the range.  A more appropriate figure in my assessment would be 15% which is a further $478,561. 

Conclusion

1. That assessment gives the wife an overall entitlement of $1,435,684 and the husband $1,754,726. 

2. It is the wife’s application to retain the investment property at No 10 which has an agreed value of $1.25 million and this assessment means she would be able to do so, at least in the first instance before she takes stock of her whole financial situation.  I can see no reason not to provide for it to be transferred to her.  What she does with it and the reasonableness of her retaining it while continuing to agitate a periodic maintenance claim against the husband is another question.  That means the wife would have to be paid further $146,315 calculated as follows:

   Entitlement  $1,435,684
   Now holds   $39,369
   Balance required                  $1,396,315
   No 10  $1,250,000
   Cash payment               $146,315 [say $146,000]

Spouse maintenance

1. The wife claims maintenance of $1,000 per week in the first instance until she completes her studies around March 2010 and it is said this could then be reviewed having regard to her circumstances at the time.  This is based on her present health and the uncertainty attaching to her capacity to work in the future.  As to that, there is no need to repeat what has already been said save that I am satisfied she does not presently have a capacity for gainful employment but that could change after she completes her studies and has the property proceedings behind her.  Of course apart from considerations related to her earning capacity she does now have an entitlement to assets worth $1.435 million and the obvious question is whether that should be seen as sufficient for her needs without any further support from spouse maintenance.  I shall return to that in a moment. 

2. As for the quantum of her proper needs, she sets out her expenses in her financial statement.  In Part N she identifies expenses of $1107 per week [excluding accommodation costs] to which there can be added health and car insurance of $46 identified earlier in her statement, making a total of around $1150 per week.  There is a passing submission by Mr Hodgson that her expenses are ‘inflated’ and of course items can always be pruned if that is necessary but I did not interpret the questioning to be a substantial challenge to her individual claims and, even if that is wrong, any question about the reasonableness of her figures can be answered by pointing to the husband’s assertion that his needs, which he identifies as ‘various’ at No 32 of his financial statement, amount to $1,200 per week. 

3. As I find, at this stage the wife has a need of around $1150 per week - provided she has no accommodation costs to pay and subject to these observations about her entitlement to assets.  Mindful of the make up of the assets she will retain but nonetheless worth $1.435 million [before payment of debts] it is clear that she could use them to acquire accommodation less costly than No 10 and invest the balance to generate an income.  In due course if there is argument about it the view might be taken that it would be reasonable for her to do so.  Even so, she could not achieve that re-organisation right now.  If she has to sell No 10 to re-organise for self-sufficiency that cannot be achieved overnight - quite apart from the lease running until June, preparation for sale and marketing and settlement will all take time.  In the meantime, whether she moves to live in No 10 or she decides to sell it, she needs accommodation and the only realistic answer to that is her continued occupation of No 12 until No 10 becomes available in June.  Just as time is necessary for her to consider what use to make of her capital, it is also necessary for her to complete her studies and gain the qualifications she has been aiming for.  It is reasonable to allow her the time to do so since she has demonstrated ability to complete subjects and achieve good results.  In the meantime, she would need to remain in occupation of No 12 until No 10 becomes available so she can occupy it or prepare it for sale. 

4. As there is no issue about the husband’s capacity to pay the amount she claims, I am satisfied it would be proper to order payment of $1,000 per week until 30 March 2010 and to permit her continued occupation of No 12 until the lease expires.  On the expiration of the time stipulated not only will there be scrutiny of the decisions she has taken about use of her capital but also her capacity for gainful employment should be much clearer with her qualifications in hand.  Her application envisages notice to the husband about employment in the meantime with a consequent reduction in the quantum of maintenance depending on her gross income and I see that as appropriate. 

Form of orders

1. Orders have been drafted to implement these decisions.  However, there are issues not explored in the evidence or submissions, such as timing and bank security, and it may be necessary to look more closely at the situation because it seems to me unlikely things could be achieved in the time stipulated in the wife’s proposed orders - for example, she seeks the transfer of No 10 unencumbered within 21 days but whether that can be done in that time frame strikes me as questionable.  In any event it is probably necessary to give the parties’ legal representatives an opportunity to consider the detail of the drafted orders after delivery of this judgment. 

I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Moore

Associate: 

Date: