Netis and Kippling
[2019] FamCA 363
•5 June 2019
FAMILY COURT OF AUSTRALIA
| NETIS & KIPPLING | [2019] FamCA 363 |
| FAMILY LAW – PROPERTY – Where dispute about the agreed property pool – Where one pool – Where the court satisfied the wife’s student loan should be taken into account at its full value – Where there has been significant wastage of funds by the husband post-separation – Where the court cannot determine amount of wastage by the husband to be added back in to the pool – s 75(2) factors – s 79 discretion – Where the husband has made a greater financial contribution to the current pool of assets – Where the wife has made greater non-financial contributions – Where the court is unable to determine the husband’s future earning capacity – Order that the husband authorise the release to the wife from the NN Trust account $80,000.00 and the balance of those funds be released to the husband – Order that the parties retain ownership of the assets presently in their possession, remain responsible for the liabilities in their name, and remain entitled to the superannuation in their name |
| Family Law Act 1975 (Cth) ss 75, 79 |
| Netis & Kipling [2018] FamCA 703 Stanford v Stanford (2012) 247 CLR 108 Bevan & Bevan (2013) FLC 93-545 Omancini & Omancini (2005) FLC 93-218 Wilde & Wilde [2007] FamCA 1044 Aleksovski & Aleksovski [1996] FamCA 111 Perrin & Perrin(No 2) [2018] FamCAFC 122 |
| APPLICANT: | Ms Netis |
| RESPONDENT: | Mr Kipling |
| FILE NUMBER: | TVC | 809 | of | 2015 |
| DATE DELIVERED: | 5 June 2019 |
| PLACE DELIVERED: | Cairns |
| PLACE HEARD: | Cairns via video link to Townsville |
| JUDGMENT OF: | Tree J |
| HEARING DATE: | 7 and 8 March 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Smales |
| SOLICITORS FOR THE APPLICANT: | Roberts Nehmer McKee |
| COUNSEL FOR THE RESPONDENT: | Mr Raeburn |
Orders
Within 7 days, the husband authorise the further payment to the wife of the sum of $80,000.00 from the funds held on his behalf by NN Legal.
Upon the payment of the $80,000.00 to the wife, the balance of the funds in the NN Legal Trust account be released to the husband.
Otherwise each party retain the assets presently in their possession, and superannuation in their name, and be responsible for the liabilities in their names.
Otherwise all applications for property adjustment be dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Netis & Kipling has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT CAIRNS |
FILE NUMBER: TVC809/2015
| MS NETIS |
Applicant
And
| MR KIPLING |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
Between 1 and 8 August 2018, I heard the trial of the parties’ parenting and property proceedings. However, as I noted in my subsequent reasons[1] (“the first reasons”) on the last day of that trial, ultimately the parties agreed that only interim property orders should then be made, and that the property trial would need to resume in due course. The trial thereafter resumed on 7 March 2019, and concluded the following day. At that time, by agreement, a further interim division of property was then ordered, under which Mr Kipling (“the husband”) received $50,000.00, and Ms Netis (“the wife”) received $20,000.00. Otherwise my decision was reserved.
[1]Netis & Kippling [2018] FamCA 703.
This is that decision and the reasons for it.
THE FACTS
I extensively traversed the relevant facts in the first reasons, and I repeat the relevant findings as follows:
The father
7.The father was born in B Town in 1969, and hence is presently 48 years of age. His parents separated when he was a few months old, and he remained living with his mother who re-partnered. The father apparently flourished academically at school, but when he was aged 13, his step-father was shot by his sister’s boyfriend. Although he remained living in B Town with a nanny, his mother and step-father moved to C Town, seemingly in response to the shooting. The father told Dr D, a psychiatrist who examined the parties for the purposes of these proceedings, that after his step-father’s shooting, he grew up a lot, and “I wasn’t a kid anymore.”
8.The father had always had an interest in sport, and at age 14 he became a champion. Also at around this time the father developed an interest in firearms. He started using and collecting guns as soon as he was legally able to, and that interest still continues, as I shall detail later.
9.The father’s half-sister (his father’s daughter to a subsequent relationship) was later killed in a motor vehicle accident.
10.In due course the father attended university, initially in B Town, but later in Brisbane. He graduated with a Bachelor degree, and then returned to B Town, where he completed an Arts degree. He qualified as a professional, being in June 1994, and initially worked for the public service. He then obtained employment in the community sector in B Town, where he worked for three years. It was whilst in that employment, when aged 27, that the father suffered a serious panic attack while at work. Dr D reported that this was a great shock to the father, although he did seek appropriate psychological and medical help.
11.Later that year, the father moved to the UK. He obtained employment in the finance sector.
12.Between 1998 and 2000, whilst living in the United Kingdom, the father enlisted and served in the armed forces. Then in 2000, he married his first wife, which marriage lasted for 10 years. Also in 2000, he commenced studying a Masters, and ultimately graduated with that degree.
13.At some stage the father and his first wife returned to Australia, and although the father believed that the purpose of doing so was to start and raise a family, it transpired that his wife did not want children. The marriage broke down, apparently over that issue.
14.The father then obtained further employment in in the UK. It was two days before he was due to leave to take up that employment when, in 2009 at age 39, he met the mother. They kept in contact, and in due course the mother travelled to the UK in 2009, and commenced to cohabit with the father.
The mother
15.The mother was born in the US in 1974, and hence is presently 44 years of age. When she was four, her father murdered her mother by strangling her. In due course, her father was convicted of the murder and jailed, which meant that the mother effectively lost both her parents. She and her elder and younger brothers were placed in the care of a paternal aunt and uncle (seemingly because her mother had no family in the United States, having come from South America). However her uncle was rough and abusive, and her aunt did not adequately protect her from him. She told Dr D that she “learnt to manage” coping with her uncle’s explosive behaviour, including a physical beating that he gave her as a 13 year old.
16.Notwithstanding her difficult background and home environment, she performed well at school, and thereafter attended college. She told Dr D that, whilst at college, she started to get nightmares about her time at home.
17.In due course the mother attended university in E State, where she lived for about 10 years. She obtained a Masters Degree in 1999 from the E State University, and thereafter worked in a professional occupation. Whilst there, at the age of 28, she had a panic attack, and saw a counsellor and was given some medication to help her cope with anxiety.
18.In about 2005 she moved from E State to F State, but returned to E State in 2007. Apparently her intention was to commence studying a doctorate there. However in May 2007, her younger brother committed suicide. Dr D noted that this suicide “stopped her plans” of further study in E State, and, because of her research interests, she decided to undertake a PhD in B Town instead.
19.In 2008 she relocated to Australia to commence university studies at G University. It was whilst in the first year of her PhD study that she met the father, when she was 35 years of age.
The relationship
20.The parties first cohabited in the UK in October 2009, however in January 2010 they both relocated back to B Town, and after a short time commenced to live together. Also in January 2010, the mother was offered a full scholarship to complete her PhD.
21.Upon return to B Town, the father took up a role with Company H. Initially that was an administrative position, but in 2011 he moved to a unit within that company, where he was involved in dealing with large clients, principally those engaged in significant industries.
22.In about October 2010, the mother became pregnant with the child. Upon finding out that she was pregnant, the mother ceased taking the anti-anxiety medication that she was then on, withdrawing from it “cold turkey.”
23.The parties were married in the United States in 2011. Later that same year the child was born. Whereas up until then it appears as though the parties’ relationship was not particularly problematic, the mother says that, from about that time, the parties began experiencing serious problems in their marriage.
24.In part that seems likely to have been related to the fact the father started to experience inter-personal difficulties in his employment with Company H. A detailed history of those difficulties is contained in the report of Dr J, a psychiatrist, dated 17 April 2014. The conflict caused the father to suffer symptoms of disturbed sleep, anger, irritability, panic attacks and ruminating thoughts fixated about the stressors at his work.
25.The father later told his psychologist, Ms K, that he began taking out his anger and frustration on the mother at home. He now greatly regrets having done so, and accepts that his behaviour contributed to the ultimate breakdown of the relationship. At some stage, perhaps as early as 2012, the mother began keeping a journal of the father’s behaviour. In August 2012 she retained solicitors to advise her in relation to the possibility of separation, particularly as to her prospects of being able to leave Australia with the child.
26.By July 2013 the father’s mental health had significantly deteriorated. By then he was seeking medical assistance, and was certified unfit for work. He has not returned to work since then, and has, as I understand it, remained on antidepressant medication thereafter. He has also, since April 2013, continued to see Ms K, who gave evidence in the father’s case, and whose notes in relation to the father were in evidence before me.
27.Although not working, the father began to concentrate more upon a small business. However the mother was becoming increasingly concerned about the father’s lax approach to securing weapons, and particularly that, although there was a gun safe in the parties’ home, the father would nonetheless leave weapons unsecured, including in the living room.
…
30.The mother says that on 22 July 2014 she and the father spoke about separation. She contends that on that date the parties separated, albeit they remained living under the one roof. The father disagrees, and says that separation occurred on 6 October 2014.
…
Post-separation
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38.On 17 May 2016, common law proceedings which the father had brought against Company H settled for a gross sum of $500,000.00, of which it appears $324,965.41 was his net entitlement, although a Medicare refund of nearly $70,000.00 followed in due course.
39.The father has also successfully concluded claims against his three superannuation providers for, as I understand it, total and permanent disablement entitlements.
…
Current situation
43. As at the time of trial, both parties remained living in B Town.
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45.As I have indicated, the mother remains in a relationship with Mr L, however does not cohabit with him (although it appears as though they spend some overnights together). She remains suffering from anxiety. Over the years she has had a variety of diagnosis of her condition, including major depression, and post-traumatic stress disorder. However it is plain that whatever terminology is used, anxiety is a core problem for her.
46.For his part the father also continues to struggle with mental health issues, although again the diagnoses have varied. In her report dated 23 July 2018, his present psychologist, Ms K, did not cavil with a psychiatric diagnosis in March 2016 that the father suffers from major depressive disorder and generalised anxiety disorder, whereas as I understand his evidence, Dr D seemed to lean toward a diagnosis of adjustment disorder in remission. Again it does not really matter what terminology is deployed; the father continues to grapple with anxiety issues, and these may be compounded by his personality, in that Dr D thought that the father had narcissistic traits.
47.The father is in a relationship with a woman who lives in Sydney, and apparently spends time with her each alternate week. He is not in employment, and is precluded from obtaining Centrelink benefits until 20 July 2020. He has, in effect, been living off the various payments that he has received arising from his workplace injury, although he concedes that he will shortly need to resume employment, perhaps on a part-time basis. He continues to operate his business, but it does not appear to be particularly profitable.
…
50.The father has been assessed for child support, but has never voluntarily paid it. It has only ever been paid by garnishee, including on the eve of trial, when a sum of nearly $20,000.00 was taken from his investment account. There is ongoing litigation between the parties in relation to child support, with the father intending to appeal an unfavourable ruling from the AAT to the Federal Court.
…
RELEVANT STATUTORY PROVISIONS AND LEGAL PRINCIPLES
Property Applications
Section 79 of the Family Law Act deals with the division of property of parties to a marriage which has broken down. It is well established that the approach to be adopted to determining property disputes is a four step one which involves:
·The identification of the property of the parties including their assets, financial resources and liabilities;
·The evaluation of the “contributions” or s 79(4)(a), (b) and (c) issues;
·The evaluation of the matters referred to in s 79(4)(d), (e), (f) and (g) including, by reference to s 79(4)(e) the matters set out in s 75(2); and
·A determination as to whether the result is just and equitable by reference to s 79(2) of the Act.
After the High Court’s decision in Stanford v Stanford[2] it may be taken as commonly accepted that the first step requires the identification of the parties existing legal and equitable interests in property, and thereafter, it is incumbent upon the court at the outset to determine whether or not it is just and equitable to make an order altering the interests of the parties in that property. However as the High Court itself indicated in Stanford, in many cases that step will be uncontroversial: for instance, if there is jointly owned property which is impracticable for the parties to jointly enjoy consequent upon separation, such as the former matrimonial home.
[2](2012) 247 CLR 108.
Add-Backs
In Bevan & Bevan (2013) FLC 93-545 at [79], Bryand CJ and Thackray J said:
We observe that “notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them”, and thus is not amenable to alteration under s 79. It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage – and potentially an important part. As the question does not arise here, we need say nothing more on this topic, save to note that s 79(4) and in particular s 75(2)(o) gives ample scope to ensure a just and equitable outcome when dealing with the unilateral disposal of property.
An earlier Full Court decision in Omancini & Omancini (2005) FLC 93-218 said:
30. To date, three clear categories of cases have emerged where the Court has determined that it is appropriate to notionally add back to the pool of assets, that is, assets that no longer exist. They are:
(a) Where the parties have expended money on legal fees. In DJM and JLM (1998) FLC 92-816 the Full Court said at 85,262:
“11.6 For reasons set out in Farnell, s 117 provides that each party to proceedings under the Family Law Act shall bear their own costs unless the Court otherwise orders. Failing to add back monies expended by parties on costs frequently has the effect of defeating the policy of s 117 by permitting the pool of available assets for distribution between the parties to be diminished by any monies that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought be to add costs already paid back into the pool. Whilst there may be cases where that approach is inappropriate, the reasons why it is not taken ought normally be spelt out.”
(b) Where there has been a premature distribution of matrimonial assets. In Townsend and Townsend (1995) FLC 92-569 Nicholson CJ as he then was with whom Fogarty and Jordan JJ agreed, said at 81,654:
“In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal with the husband’s receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.”
(c) In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644:
“As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec.75(2)(o) to applications for settlement of property instituted under the provisions of sec.79.”
31. As the Full Court said in Browne and Green (1999) FLC 92-873 at 86,360:
“44. We agree with her Honour that the principles stated by Baker J in Kowaliw certainly do not constitute any form of fixed code. They are no more than guidelines for use in the exercise of the discretionary jurisdiction conferred by s 79 of the Family Law Act 1975. Nevertheless, they have over the considerable period of time since they were enunciated, become a well accepted guideline in this jurisdiction – a guideline the use of which assists in the achievement of the important goal of consistency within the jurisdiction.”
However reasonable living expenses should not be added back, unless they are found to be extravagant: Wilde & Wilde [2007] FamCA 1044 at [184-[185].
Personal injury and other related claims
The proceeds of a claim for damages for personal injury is to be treated as a contribution by the party who suffered the injury, but not considered in isolation, as all contributions must be weighed and considered at the same time: Aleksovski & Aleksovski [1996] FamCA 111.
However a payment in respect of disablement made under a policy of superannuation maintained in respect of the employment of a party during the course of the relationship, is to be considered differently, in that the other party may have indirectly contributed to that superannuation interest: Perrin & Perrin(No 2) [2018] FamCAFC 122 at [39].
THE POOL
Overview
The parties tendered a document which set out an agreed property pool, including the agreed values of assets and liabilities. However two significant matters remained in dispute relevant to the pool. The first was the extent, and means by which, the wife’s student loan should be taken into account. The second was the extent, and means by which, alleged wastage of monies by the husband post separation should be taken into account. Finally, although the parties were agreed as to what should be in the pool, there was disagreement as to whether the Court should approach the exercise of the s 79 discretion by reference to one pool, or three pools, of assets.
The agreed pool
Upon review, the agreed pool document as tendered contained an addition error, namely, in calculating the “Total Non-super” figure, it failed to take into account the wife’s $2,000.00 car. That error then infected the remaining calculations. Correcting that error, sees the pool as follows:
| Asset | Husband | Wife |
| R Street, Suburb S | $325,000 | |
| KCL | $10,000 | |
| Motor Vehicle | $5,500 | |
| 4WD | $2,000 | |
| Antiques/Memorabilia | $25,000 | |
| Shares | $50,000 | |
| Watch | $3,000 | |
| Net Funds – NN Trust Account | $198,900 | |
| Total Assets | $617,400 | $2,000 |
| Liabilities | Husband | Wife |
| ANZ Overdraft | $9,206 | |
| CBA Home Loan | $378,492 | |
| Student Loan | $116,611 | |
| T Bank Credit Card | $9,568 | |
| U Bank Credit Card | $16,782 | |
| ANZ Credit Card ending …70 | $13,181 | |
| ANZ Credit Card ending …97 | $739 | |
| NAB Credit Card ending …78 | $5,649 | |
| NAB Credit Card ending …62 (CC Lawyers) | $8,000 | |
| V Street Fees | $2,100 | $2,100 |
| Total Liabilities | $443,717 | $118,711 |
| TOTAL NON-SUPER | $173, 683 | ($116,711) |
| Superannuation | Husband | Wife |
| Q Super | $12,571 | |
| Z Super | $58,385 | |
| Total Superannuation | $12,571 | $58,385 |
| TOTAL (INCLUDING SUPERANNUATION TREATED AS VESTED | $186,254 | ($58,326) |
NET POOL: $127,928
I should make some observations in relation to items in that pool. The first is that although the parties are agreed that in the pool there should be shares to a value of $50,000.00, in fact the shares no longer have that value, as contrary to the orders which I made on 12 September 2018, which in effect permitted the husband to access $20,000.00 from the fund which holds the shares, he accessed far more, and indeed funds associated with the shares were garnisheed by the Child Support Registrar to meet the husband’s obligations for child support as well.
The second matter is that the funds in the NN Trust account of $198,900.00, were in fact, by virtue of the consent interim orders made at the conclusion of the trial on 8 March 2019, reduced by $70,000.00.
Nonetheless it is convenient to adopt the agreed pool for the purposes of this judgment, however I will take into account the interim distributions when it comes to considering and framing the final orders.
The wife’s student loan
The husband contends that the wife’s United States student loan, in the sum of $116,611.00, can legally be dealt with by her in a way which might defer repayment of it for perhaps as long as 25 years. That is because, on the evidence before me, the wife could choose an Income Driven Repayment arrangement (“IDR”) which would not see her liable to pay any sum towards reducing the loan, so long as she was not living in the United States, and did not earn more than US$104,100.00 in foreign income. Further, the witness called in this respect by the husband, Mr Cohen, said at [14] of his affidavit:
Even if she makes more than the exemption amount, which has been increasing roughly US$1,000.00 per year, a payment above zero does not start until an individual shows approximately US$18,000.00. That means [the wife] would need to show an income of US$122,000.00 to have a payment above zero.
Apparently if the IDR goes for 25 years, “any amount remaining is forgiven.”
However the unchallenged evidence of the wife was that during the currency of any IDR, interest would be accruing on the loan, and would compound. Further, her unchallenged evidence was that she has, in the past, discharged her previous student loans, and regards it as, in effect, immoral not to meet her obligations of repayment, or to use what she sees as legal loopholes to avoid doing so.
As to this, the husband sought to test the wife’s resolve by inquiring whether she would be prepared to agree that any sums paid to her by way of property division be used to pay back her student loan, however the wife indicated that she had liabilities to her lawyers which would need to be discharged in priority to her student loan, and thereafter she would need to evaluate other competing priorities as well.
The parties variously contended that the prospect of the student loan not being repaid could be dealt with either in relation to the pool of assets and liabilities, or alternatively under s 75(2)(o). However to my mind, the difficulty of dealing with it under s 75(2)(o) is that it disguises the question which is really raised by the parties’ dispute, namely, should the loan be treated as a live, extant, and likely recoverable liability. I will therefore treat it as a pool issue.
I am satisfied of the following matters:
·As at the time of the conclusion of the trial, the wife’s student loan was in the sum of $116,611.00, as agreed by the parties;
·She has presently negotiated a deferral of the payment of that loan, which deferral will shortly expire;
·The wife has no interest in engaging in an IDR, and is not likely to do so;
·The wife has in the past always repaid her student loans, and regards doing so as a moral obligation;
·The wife intends, within no more than 10 years, to return to live in the Country DD, and (for reasons I identified in the first reasons) if she does so, she is likely to have significant earning capacity.
To the extent that the husband inferentially argued that, by not entering into an IDR, the wife was acting unreasonably, I reject that argument. That is because the cost of embarking on an IDR (assuming it did not see repayment) is to have compounding interest accruing. The debt would therefore become larger and larger, the longer it was deferred. The wife will inevitably return to the Country DD to live. When she does so, she will almost certainly be renumerated at a considerably better income than she can earn in Australia. It would therefore be likely that within 10 years, even if the wife did enter into an IDR, she would then commence repaying the student loan, albeit then in a much larger sum.
It therefore follows that I am satisfied that, in determining the pool of assets and liabilities in this case, the student loan should be taken into account at its full value. I assess that there is no prospect of the liability being wholly avoided by the wife by having an IDR for 25 years, and I decline to discount it at all to reflect some possibility that some part of it may ultimately may be forgiven in 25 years’ time.
The husband’s alleged wastage
As I noted in the first reasons at [38], on 17 May 2016, common law proceedings which the husband had brought against Company H settled for a gross sum of $500,000.00, of which $324,965.41 was his net immediate entitlement, followed later by a Medicare refund of approaching $70,000.00. However as counsel for the husband noted in his submissions, in addition to the $500,000.00, there was also reimbursement of workers compensation past weekly payments of about $250,000.00 as well, and thus the gross figure of the settlement was about $750,000.00.
Thereafter, the husband received two TPD payments totalling a little over $110,000.00.
The parties are agreed that of the $324,965.41 received on 17 May 2016, the $70,000.00 received thereafter, and the $110,000.00 in TPD payments, only $50,000.00 is represented in assets in the balance sheet. The wife says that the husband has unreasonably and excessively wasted the rest of those funds on discretionary spending. Although the husband broadly denies having done so, no real attempt was made by him to demonstrate where those funds have gone.
In the first reasons I detailed some of the extensive litigation which the husband has engaged in post-separation. In his oral evidence before me, he contended that a conservative estimate of the legal fees that he has expended in relation to those proceedings is $150,000.00. He was not challenged in relation to that by counsel for the wife, who indeed, appears to have herself spent something in the order of $280,000.00 on lawyers, or at least that is the total of her liability. Neither party sought to add-back legal fees into the pool. However it is plain that some part of the expenditure of the personal injury settlement is accounted for by legal fees.
In the first reasons at [167] I observed that the husband was entitled to spend the personal injuries settlement monies to meet his reasonable living expenses, albeit I could not then calculate what they were. It was therefore not possible to add-back an indeterminate sum into the pool.
By the time the matter resumed before me, perhaps in response to those observations, the wife had formulated an argument as to what should be taken to be the husband’s reasonable living expenses, calculated by reference to what the parties were spending during the course of the relationship from the husband’s income, which, as I understand it, was said to be, net of tax, about $90,000.00. As a further means of demonstrating the reasonableness of that approach, the wife pointed out that she herself had been living on much less than that post separation. It was said that since there have been about three years since the settlement of the proceedings, the reasonable living expenses of the husband could be no more than $270,000.00, and the difference between that sum and the payments received – in the order of $85,000.00, if legal fees are taken into account – should be regarded as wastage. Such a calculation is, however, necessarily imprecise.
Further, the wife tellingly demonstrated, by reference to the husband’s expenditure over about 6 weeks in September 2016, that he was then engaging in considerable discretionary expenditure. She did that by accessing the husband’s bank account statements for that period, and contended, by aide memoire, that the total funds which the husband expended at food and drink outlets over that period was $2,480.88, together with bottle shop purchases of $261.98 and cash withdrawals of $2,450.00.
I have already observed that the husband has not sought to provide any real detail of where the monies which he received from his personal injuries settlement have gone, nor did he contend that the six week period covered by the statement in 2016 was in some way an aberration. Rather, what he sought to do was to justify his expenditure by reference to his financial statements filed in these proceedings from time to time, which indeed do show considerable expenditure. He was not in any significant way really tested as to the truthfulness of those documents.
I make the following findings:
·In 2016 the husband received, in total, net payments of about $395,000.00 derived from his personal injuries claim settlement, followed by $110,000.00 in TPD payments;
·By 7 March 2019, almost none of those funds remained represented in any extant asset (although the parties are agreed that a now largely non-existent share portfolio derived from the settlement monies should be in the balance sheet at a figure of $50,000.00);
·In late 2016 the husband was living fairly lavishly, with considerable entertainment expenses;
·The husband has spent at least $150,000.00 of the personal injuries settlement monies on his lawyers in other litigation;
·The husband used the personal injuries settlement and TPD funds to meet his reasonable living expenses, which could not have legitimately exceeded $90,000.00 per annum, and were likely less, but I cannot determine their reasonable quantum;
·I am therefore satisfied that there was significant wastage of funds by the husband, but I cannot determine its extent.
Because I cannot determine the amount of the wastage, I cannot determine the sum that should be added back in to the pool reflective of the excessive expenditure by the husband. If I were to do it by factoring in a conservative sum, say $50,000.00, I may not do justice to the wife. If I were to add in a significant sum (which could be warranted, particularly given the husband’s failure to put on material explaining his expenditure) I may not do justice to the husband. Therefore it seems to me as though this is a matter which should be taken into account under s 75(2)(o), and I will return to discuss it further when considering s 75(2) factors.
One pool or three pools
The husband contended that I should adopt three pools of assets. Although the husband advanced them in a different order, it is convenient to describe them as being one pool of the parties’ superannuation, one pool comprising the husband’s most recent TPD payment, which at the time of trial was in the Organic Legal trust account, in the agreed sum of $198,900.00, and a third pool of everything else. He contended that the superannuation pool and the “everything else” pool should not be the subject of any adjustment, but rather that the wife’s entitlement, which he contended was in the sum of $20,000.00, should be met by an adjustment under the TPD payment pool.
The reasons for adopting a three pool approach are not clear. For instance, why I would not include superannuation with the other non-TPD derived funds, is not readily apparent. Further, the TPD funds have, as a component of them, superannuation entitlements which have now been converted into the TPD payments. Finally, some of the TPD funds in part are derived from superannuation entitlements in accounts which accrued during the course of the parties’ relationship. Why I should treat those as different from other assets accumulated during the course of the parties’ relationship is unclear.
I decline to treat this as anything other than a single pool case. Whilst there may be some justification in cross-checking the reasonableness of the final outcome by drawing a distinction between the various species of assets and their sources, there is no warrant for the arguments advanced by the husband beyond that.
Conclusion
I am satisfied that the parties’ net pool of assets, treating superannuation as a vested entitlement, is $127,928.00. That is comprised of assets to the value of $619,400.00, liabilities to the value of $562,428.00, (including the full value of the wife’s student loan) and superannuation to the value of $70,956.00.
JUST AND EQUITABLE
At [187] of the first reasons, I determined that it was then just and equitable to divide the parties’ property. That remains my view. Neither party contended to the contrary in the March 2019 hearing.
THE PARTIES’ CONTRIBUTIONS
Financial contributions
In the first reasons at [175], I provisionally assessed the parties’ initial financial contributions as roughly equal. I confirm that assessment on a final basis.
I also addressed in those reasons the parties’ financial contributions during the course of the relationship, concluding that the husband has made an overwhelmingly greater financial contribution to the present pool of the assets of the parties, at least as at that time. Since then, a payment of a further large TPD payment has been received, derived from the husband’s employment with Company H. Accepting that a part of it is, in effect, the redemption of his superannuation entitlements, nonetheless it clearly arises out of his employment during the course of the relationship. Whilst inevitably the wife has made some contribution to the husband’s employment, the payment is primarily derived from that employment.
In the first reasons I also adverted to the fact that a significant component of the personal injuries settlement was likely to relate to the husband’s loss of future earning capacity, but it was impossible to determine what that amount was. In that context, it is significant that three superannuation insurers have now accepted that the husband qualifies for a total and permanent disability payment which, accepting it is likely to be pursuant to some contractual definition, nonetheless further supports that his personal injuries payment likely included a significant component for future economic loss.
In the first reasons, I identified that the wife had then been in employment for the last four years, and from those funds has (miraculously) not only managed to maintain her household, including caring for the child, but also fund this litigation. Unsurprisingly therefore, that income has not translated into assets presently available for division.
I remain of the view as I was in the first reasons, that the husband has made an overwhelmingly greater financial contribution to the present pool of assets of the parties.
Non-financial contributions
In the first reasons I accepted that the wife had made greater non-financial contributions than the husband. During further cross-examination of the husband in the resumed property trial, he asserted that his illness after July 2013 did not impact upon his non-financial contribution, for instance caring for the child, and he descended to some specificity about frozen breast milk being thawed and given by him to the child at 2:00am some mornings. I am nonetheless well satisfied that his disability did adversely impact upon many domains of his life, including his contribution to the household. I find that the wife’s non-financial contributions exceed the husband’s.
Evaluation of contribution based entitlement
Ordinarily a Court grapples with the inexact science of attempting to arrive at a percentage entitlement based upon financial and non-financial contributions. This is not a case where that is an easy fit. Particularly:
·The amount to which the wife has indirectly contributed to the TPD payments is very difficult to assess;
·The extent to which the husband’s personal injuries settlement contained amounts attributable to future economic loss is unable to be determined.
Ultimately the only conclusions which the facts enable me to draw are as follows:
·The parties initial financial contributions were about equal;
·The husband has made an overwhelmingly greater financial contribution, both during the course of the relationship, and subsequently;
·The wife has made greater non-financial contributions than has the husband, both during the course of the relationship and post separation.
The wife also sought to argue that her contributions have been made more onerous by virtue of the husband’s behaviour, including his regular conduct of litigation, and his difficult style of interacting with her. Particularly it is said that she has resigned herself now to living in Australia, against her will, and that her contributions should be viewed through that prism of unhappiness. I do not accept that argument. On occasion the wife has been the active combatant. This is not a case where the husband’s illness or personality has required a significantly greater contribution by the wife; it is not one of those rare cases contemplated in Kennon & Kennon (1997) FLC92-757.
SECTION 75(2) FACTORS
At [181] to [186] of the first reasons I said as follows:
181. As to s 75(2) factors, both parties have problematic mental health, although Dr D thought that the husband’s condition was in remission.
182. Neither party has any financial resource (accepting that the remaining TPD payment will be property by the time of any final order) and the wife is, as I have indicated, in receipt of an $80,000.00 per annum income. The husband presently only has the income earned on the $71,324.00 investment fund, and any profit he can earn from his business.
183. Plainly the wife is physically and mentally capable of appropriate employment, but a question mark hangs over the husband in that respect. Dr D thought that the husband could presently return to work, and the fact that he had not was not so much explicable by reference to his mental health, but rather reflective of some avoidant behaviour, perhaps the result of fearfulness of rejection or suffering further injury in a workplace. Therefore whilst I am not persuaded that the husband has no capacity for appropriate gainful employment, the extent of that capacity remains untested.
184. Under the orders which I have made in relation to parenting, the mother will have the primary care of the child for eight nights per fortnight.
185. As I understood her argument, the wife contends that the husband’s considerable expenditure in the last few years is a factor which should be taken into account. I do so, but I note that the funds which he has expended were principally derived from his personal injury payment, which the authorities say must be taken to be a contribution by him. Therefore, in a sense, his expenditure has been of funds contributed by him, although to the extent that they were superannuation related TPD payments, there has likely been some indirect contribution to at least some of those by the wife.
186. Ultimately it seems to me that, at least at present, the s 75(2) factors weigh slightly in favour of the husband.
Since then the wife has resigned her employment, and the husband is now without income from the investment fund, which only has very minimal shares left in it.
A question mark still hangs over the capacity of the husband to work in any respect. Although he was robustly cross-examined by reference to his failure to re-commence his gun dealing business, particularly notwithstanding the fact that he still pays rent on storage premises for it, there was no assessment in evidence before me as to the husband’s residual capacity for employment. It cannot be ignored that he has now been compensated for future economic loss arising from diminished earning capacity, and has had three insurers accept that he is totally and permanently disabled. Whilst I expect that the husband will find some niche for meaningful employment once these proceedings are over, it is impossible to determine what his present earning capacity is.
The wife concedes she still has earning capacity, and I accept that hers is greater than the husband’s.
As has been seen, I am now satisfied that the husband has engaged in significant wastage, but I cannot determine the amount of that, save that it is likely to be at least in some tens of thousands of dollars. However as the authorities make it plain, to the extent those funds were derived from a personal injuries payment, they are taken to have been contributed by the husband, not the wife. In a sense therefore, in part, he was wasting that which he brought into the relationship, although about $110,000.00 was by way of two TPD payments.
Although at the interim hearing, I was of the view that s 75(2) factors weighed slightly in favour of the husband, given the wastage which has now been established, even though it is unquantifiable, I am now of the view that s 75(2) factors favour the wife. However the extent of the adjustment in her favour is extremely difficult to assess, but it is nonetheless real.
THE EXERCISE OF THE S 79 DISCRETION
The husband contends that the wife should be paid $20,000.00, which was the effect of the consent interim order made at the end of the trial, and therefore his position logically must now be that there is no further division should be made. He contended that the $20,000.00 payment (accepting that it has now been made) that he said that the wife was entitled to, was based upon a 10% entitlement to the pool of assets comprising the final TPD payment. Although, as indeed do I, his counsel had difficulty developing arguments based upon percentage based entitlements, nonetheless the 10% figure was what was lit upon.
On the other hand the wife contends that she should be entitled to $100,000.00, which, given her $20,000.00 distribution to her at the end of the trial, would logically now reduce to $80,000.00. Her counsel also struggled with attributing percentage based entitlements.
I have already observed that, beyond description in words, this is not a case where one can confidently express as percentages, the parties’ contribution based entitlements, or indeed their s 75(2) factor based entitlements. This is ultimately a case where the outcome needs to be just and equitable, cross-checked by, perhaps, a reverse engineering of contribution and s 75(2) based entitlements.
I identify the following as the particularly relevant considerations in the exercise of my discretion:
·Both parties are presently in to their mid to late forties; the husband will turn 50 this year;
·Both parties suffer from a degree of ill health, the husband’s being worse than the wife. That ill health has seen him assessed as having total and permanent disability, and has seen him paid significant, but unquantifiable, sums attributable to his diminished future earning capacity;
·The parties’ financial contributions at the commencement of the relationship were approximately equal, but thereafter the husband made greater financial contributions to the assets presently available for division, whereas the wife has made greater non-financial contributions;
·The wife has a greater earning capacity than the husband, notwithstanding that she has recently resigned her employment because of her present difficulty in emotionally coping;
·Both parties leave the relationship with significant debt; the husband takes over the home loan (which exceeds the value of the house) but the wife takes away a student loan of $116,611.00, which is attached to no asset other than her earning capacity;
·The wife will take away, on the parties’ proposals, considerably greater superannuation than the husband, albeit that some of the husband’s superannuation is now reflected in the TPD payment in the NN Legal trust account;
·The most significant asset which is available to reflect any property division is the recent TPD payment, to which the wife is taken to have made an indirect contribution, because it was derived from the husband’s employment during the course of the relationship, accepting that a part of it is nonetheless a redemption of his superannuation;
·The wife has the primary care of the parties’ child, who is only seven years of age;
·The husband has, post separation, wasted monies that would otherwise presently be available for division, although the extent of that wastage is not possible to calculate.
The question then, is what is a just and equitable outcome to reflect those countervailing considerations. Ultimately, I assess the appropriate outcome as being an additional payment to the wife of $80,000.00, as she contended for. I conclude that it is just and equitable because:
·Although principally it will be reflected in a payment to her from funds derived from the husband’s recent TPD payment, she has nonetheless made indirect contribution to those funds;
·Although she leaves the relationship with greater earning capacity, the sum is still insufficient to discharge her student loan;
·Although the husband will have considerable credit card debt, he has chosen not to repay that from the funds that were available from the personal injuries settlement, and it is, in a sense, fair that he should bear the consequences of his chosen spending regime, even if the expenditure was of funds which he is to be regarded as having contributed;
·The wife has greater care of the child than does the husband;
·Although it will probably not enable the wife to secure housing for herself and the child, the further payment of $80,000.00 should enable her to have a degree of financial stability, even accepting that much of those funds are likely to be spent in respect of her legal fees;
·The husband likely has some residual earing capacity, and although he will not be eligible for social security or other benefits until 2020, in large part the financial situation that he finds himself now in is the product of the way he has chosen to deal with the funds available to him post-separation;
·The funds which will be available to the husband, namely about a further $50,000.00, should be sufficient to see him meet his basic requirements for a year or more, if he manages the money cautiously.
It is useful to try and cross-check this outcome by, in effect, reverse engineering s 75(2) and contribution based entitlements. By reference to the agreed balance sheet, and treating superannuation as a vested asset, the wife will take assets worth $160,395.00 and liabilities of $118,711.00, and hence have a net entitlement of $41,674. For his part, the husband will take assets worth $517,400.00, liabilities of $443,711.00 and super of $12,571.00, which sees a net position of $86,254.00. It therefore reflects a 32.6/67.4 percentage division in favour of the husband. Even assuming that s 75(2) factors were equal, then a contribution based entitlement to the wife of about 33% is quite justifiable. However assuming s 75(2) factors favoured the wife to the extent of 5%, then plainly a contribution based entitlement in the order of 28% is conservative. I am satisfied that such an entitlement is defensible and within range.
Reflective of the interim orders made on the last day of trial, I therefore will order that the husband authorise the release to the wife from the NN Trust account the further sum of $80,000.00, and thereafter that the balance of those funds be released to him. Otherwise I will order that the parties retain ownership of the assets presently in their possession, remain responsible for the liabilities in their name, and remain entitled to the superannuation in their name. Otherwise all extant applications in relation to property will be dismissed.
CONCLUSION
For these reasons there will be orders as set out at the commencement of this judgment.
I certify that the preceding sixty one (61) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Tree delivered on 5 June 2019.
Associate:
Date: 5 June 2019
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