Nielson & Nielson
[2012] FamCA 70
•24 February 2012
FAMILY COURT OF AUSTRALIA
| NIELSON & NIELSON | [2012] FamCA 70 |
| FAMILY LAW - PROPERTY SETTLEMENT – Assets and Liabilities – What value should be attributed to the husband’s interest in a property acquired after separation with his current wife – Whether the husband’s employee entitlements should be included in the list of relevant assets or treated as a financial resource; Contributions – Where the husband made greater financial contributions – Where the wife made greater parent and homemaker contributions – Where the parties agree that contributions were equal as at the date of separation – Where the husband contends that his post-separation contributions were greater – Where the wife has had a greater parenting load since separation – Contributions assessed to be equal; Adjustments – Whether the wife has unexercised earning capacity – Where the husband has a substantially greater income than the wife – Circumstances warrant a 15 percent adjustment in favour of the wife; Just and equitable; FAMILY LAW - CHILD SUPPORT – Where each party seeks a prospective departure from the Child Support Assessment and the payment of non periodic child support – Special circumstances as a ground of departure – Whether it is just and equitable and otherwise proper to make a child support departure order; FAMILY LAW - SPOUSAL MAINTENANCE – Where the wife will receive a proper rate of child support and has some unexercised capacity for paid employment - No order made for the payment of spousal maintenance. |
| Family Law Act 1975 (Cth) Sections 74, 75, 79 and 90MT Child Support (Assessment) Act 1989 (Cth) Sections 3, 12, 116 and 117 |
In the Marriage of Hickey (2003) 30 Fam LR 355;
In the Marriage of Omacini (2005) 33 Fam LR 134;
Mallett v Mallett (1984) 9 Fam LR 449;
In the Marriage of Ferraro (1992) 16 Fam LR 1;
In the Marriage of Shewring (1987) l2 Fam LR 139;
In the Marriage of Lenehan (1987) 11 Fam LR 615;
In the Marriage of Norbis (1986) 10 Fam LR 819; FLC 91-712;
In the Marriage of Zyk (1995) 19 Fam LR 797;
In the Marriage of Coghlan (2004) 33 Fam LR 414;
In the Marriage of Clauson (1995) 18 Fam LR 693 at 711; [1995] FLC 92-595; Howles & Howles [2009] FamCA 1091;
Hurst v Weber [2009] FamCAFC 137; 233 FLR 337;
NHC v RCH (2004) FLC 93-204; 32 Fam LR 518;
In the Marriage of Farnell (1996) FLC 92-681; (1996) 20 Fam LR 513;
Ismail and Elfar [2011] FamCA 716;
In the Marriage of Willis [2007] FamCA 819;
Savery & Savery (1990) 13 Fam LR 812; (1990) FLC 92-131;
In the Marriage of Townsend (1994) 18 Fam LR 505; (1995) FLC 92-569;
McGuiness v Cowie (2002) 29 Fam LR 441; [2002] FamCA 461.
| APPLICANT: | Ms Nielson |
| RESPONDENT: | Mr Nielson |
| FILE NUMBER: | SYC | 2956 | Of | 2009 |
| DATE DELIVERED: | 24 February 2012 |
| PLACE DELIVERED: | Sydney |
| JUDGMENT OF: | Loughnan J |
PLACE HEARD: Sydney
| HEARING DATE: | 1, 2 & 3 February 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT WIFE: | Mr M Kearney |
SOLICITOR FOR THE APPLICANT: | Gayle Meredith Lawyers |
COUNSEL FOR THE RESPONDENT HUSBAND: | Mr S Wheelhouse SC | |
SOLICITOR FOR THE RESPONDENT | Delaney Lawyers | |
Orders
1.Within 21 days of these orders the husband shall do all such acts and things and sign all such documents as may be required to:
1.1transfer to the wife all of his right, title and interest in the property situated at and known as … T Street, Suburb L; and
1.2transfer to the wife all his right title and interest in Q7 Audi Motor Vehicle, registration … ;
and upon compliance by the husband with the above orders, the Orders of 9 September 2009 shall be and hereby are discharged.
2.Forthwith on compliance with Order 1 the wife shall discharge the mortgage secured on the Suburb L property and shall thereafter indemnify the husband and keep him indemnified in relation to that mortgage.
3.Forthwith the parties shall do all such acts and things and sign all such documents as may be required to cause the funds in the Westpac Bank account number …29 in the joint names of the parties to be disbursed as follows:
2.1 $70,845 to the husband; and
2.2 the remaining balance to the wife.4.The Court allocates as required by Section 90MT(4) of the Family Law Act a base amount of $490,907 of the husband’s superannuation benefits to the wife out of the husband’s interest in Super Fund Z member number … .
5.In accordance with Section 90MT(1)(a) of the Family Law Act, whenever a splittable payment becomes payable the trustees of Super Fund Z shall:
5.1.create an entitlement for the wife to be paid the amount calculated in accordance with Part VI of the Family Law (Superannuation) Regulations 2001; and
5.2.make a corresponding reduction in the entitlement the husband would have had in Super Fund Z but for this order.
6.The trustee of Super Fund Z (“the trustee”) shall do all such acts and things and sign all documents as may be necessary to:
6.1.calculate in accordance with the requirements of the Family Law Act1975 and the Family Law (Superannuation) Regulations 2001, the entitlement for the wife created by Orders 5.1 and 5.2 of these Orders; and
6.2.pay the entitlement whenever the trustee makes a splittable payment out of the husband’s interest in the super fund.
7.The trustee shall do all acts and things and sign all such documents as may be necessary so that in accordance with the obligations set out under the Family Law Act 1975 and Family Law (Superannuation) Regulations 2001 the trustee can calculate the entitlement of the wife and make payment to the wife in accordance with Orders 6.1 and 6.2 of these Orders.
8.Orders 4 to 7 inclusive shall have effect from the operative time being four (4) business days after service of the Order upon the trustee.
9.Having been accorded procedural fairness, Orders 4 to 7 bind the Trustee to observe the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001.
10.Except as otherwise provided in these orders, the husband and the wife each be declared the sole legal and beneficial owners of all items of property or resource including money, motor vehicles, insurances, equities, superannuation entitlements and personal effects currently in the possession or control of each of them respectively.
11.The wife’s application for spousal maintenance contained in her Further Amended Initiating Application filed 2 June 2010 is dismissed.
12.Pursuant to section 117 of the Child Support (Assessment) Act1989 Mr Nielson [the husband] shall provide child support to Ms Nielson [the wife] for each of the children J born … September 1998, B born … September 2000 and M born … June 2002 [the children] by way of payment in the sum of $575 per week, paid each calendar month, the first payment to be made within seven days of the date of this Order and thereafter on the same date each month and the final payment to be made upon the happening of a child support terminating event in relation to each child as defined by section 12 of the Child Support (Assessment) Act1989.
13.The child support to be paid pursuant to Order 12 herein, shall be varied on 1 January in each year (“the review date”) commencing 1 January 2013 to such sum as shall be determined by multiplying the maintenance being paid on the review date by the fraction N/B when ‘N’ is the Consumer Price Index (All groups for Sydney) published by the Australia Bureau of Statistics (“CPI”) in respect of the quarter year immediately preceding the receive date and ‘B’ is the CPI in respect of the quarter year ending 12 months prior to the review date.
14.Pursuant to section 124 of the Child Support (Assessment) Act 1989 Mr Nielson [the husband] shall provide child support to Ms Nielson [the wife] for the children J born … September 1998, B born … September 2000 and M born … June 2002 [the children] by way of payment of:
14.1.all school fees including private school fees in respect of each of the children from the date of the making of this Order until the date each child respectively leaves secondary education and such fees shall mean and include tuition fees, reasonable excursion fees, incidental sporting costs, school books, school uniforms and reasonable extracurricular activities; and,
14.2.all orthodontic and dental expenses referable to the children.
15.The payments made by the husband pursuant to Orders 12 and 14 above shall, in combination, count for 100% of the liability of the husband pursuant to any administrative assessment of child support.
16.Leave is granted to the parties to restore the proceedings within 6 weeks of the date of these Orders or within such further time as the parties agree, in respect of the wording of the orders, by giving at least 7 days written notice to the Associate to Justice Loughnan and to each other.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Nielson & Nielson has been approved by the Chief Justice pursuant to s121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 2956 of 2009
| Ms Nielson |
Applicant
And
| Mr Nielson |
Respondent
REASONS FOR JUDGMENT
Ms and Mr Nielson lived together for about 19 years and separated in 2008. Following the breakdown of their marriage they cannot agree about a settlement of their property, child support and spousal maintenance. A feature of the case is the disparity in income between the parties, each of whom qualified as a business professional. Although they are divorced and the husband has re-married, for convenience I will refer to the parties as the wife and husband.
Applications
The wife seeks orders in terms of a minute of orders handed up at the commencement of final submissions. She seeks:
1.That within 14 days of these orders the husband do all such acts and things and sign all such documents as may be required to:
1.1transfer to the wife all of his right, title and interest in the property situated at and known as [T Street, Suburb L] free from encumbrance, the husband being solely responsible for discharge of all liability secured over the title of the said property;
1.2pay to the wife the sum of $14,816 in arrears owing pursuant to the Orders of 9 September 2009;
1.3pay to the wife the sum of $380,825 by way of property settlement; and,
1.4transfer to the wife all his right title and interest in Q7 Audi Motor Vehicle, registration […];
and upon compliance by the husband with the above orders, the Orders of 9 September 2009 shall be and hereby are discharged.
2.That forthwith the husband shall do all such acts and things and sign all such documents as may be require to cause to be paid to the wife all of the funds in the Westpac bank account number […29] in the joint names of the parties.
3.That the Court allocate as required by Section 90MT(4) of the Family Law Act a base amount of $575,938 of the husband’s superannuation benefits to the wife out of the husband’s interest in [Super Fund Z] member number […].
4.That in accordance with Section 90MT(1)(a) of the Family Law Act that whenever a splittable payment becomes payable the trustees of the [Super Fund Z]:
4.1.create an entitlement for the wife to be paid the amount calculated in accordance with Part VI of the Family Law (Superannuation) Regulations 2001; and
4.2.make a corresponding reduction in the entitlement the husband would have had in the [Super Fund Z] but for this order.
5.That the trustee of the [Super Fund Z] (“the trustee”) do all such acts and things and sign all documents as may be necessary to:
5.1.calculate in accordance with the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001, the entitlement for the wife created by Orders 5.1 and 5.2 of these Orders; and
5.2.pay the entitlement whenever the trustee makes a splittable payment out of the husband’s interest in the super fund.
6.That the trustee do all acts and things and sign all such documents as may be necessary so that in accordance with the obligations set out under the Family Law Act 1975 and Family Law (Superannuation) Regulations 2001 the trustee can calculate the entitlement of and make payment to the wife in accordance with Orders 4.1 and 4.2 of these Orders.
7.That Orders 3 to 6 inclusive have effect from the operative time being four (4) business days after service of the Order upon the trustee.
8.That having been accorded procedural fairness, Orders 3 to 6 bind the Trustee to observe the requirements of the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001.
SPOUSAL MAINTENANCE
9.That pursuant to Section 74 of the Family Law Act 1975 the husband pay or cause to be paid direct to the wife or as the wife may direct from time to time in writing maintenance for the wife in the sum of $3,000 per calendar month, the first payment to be made within seven days of the date of this Order and thereafter on the same date each month until the first of the following events:
9.1.the wife resides in a de facto relationship for more than three months or remarries; or
9.2.the youngest child of the marriage commences secondary school.
10.That the maintenance to be paid pursuant to Order 9 herein, be varied on 1 January in each year (“the review date”) commencing 1 January 2013 to such sum as shall be determined by multiplying the maintenance being paid on the review date by the fraction N/B when ‘N’ is the Consumer Price Index (All groups for Sydney) published by the Australia Bureau of Statistics (“CPI”) in respect of the quarter year immediately preceding the receive date and ‘B’ is the CPI in respect of the quarter year ending 12 months prior to the review date.
CHILD SUPPORT DEPARTURE ORDERS
11.That pursuant to section 117 of the Child Support (Assessment) Act 1989 [Mr Nielson] [the husband] shall provide child support to [Ms Nielsen] [the wife] for each of the children [J] born [in] September 1998, [B] born [in] September 2000 and [M] born [in] June 2002 [the children] by way of payment in the sum of $2,750 per calendar month, the first payment to be made within seven days of the date of this Order and thereafter on the same date each month and the final payment to be made upon the happening of a child support terminating event in relation to each child as defined by section 12 of the Child Support (Assessment) Act 1989.
12.That the child support to be paid pursuant to Order 11 herein, be varied on 1 January in each year (“the review date”) commencing 1 January 2013 to such sum as shall be determined by multiplying the maintenance being paid on the review date by the fraction N/B when ‘N’ is the Consumer Price Index (All groups for Sydney) published by the Australia Bureau of Statistics (“CPI”) in respect of the quarter year immediately preceding the receive date and ‘B’ is the CPI in respect of the quarter year ending 12 months prior to the review date.
13.That pursuant to section 124 of the Child Support (Assessment) Act 1989 [Mr Nielson] [the husband] shall provide child support to [Ms Nielson] [the wife] for the children [J] born [in] September 1998, [B] born [in] September 2000 and [M] born [in] June 2002 [the children] by way of payment of:
13.1.all school fees including private school fees in respect of each of the children from the date of the making of this Order until the date each child leaves secondary education and such fees shall mean and include tuition fees, reasonable excursion fees, incidental sporting costs, school books, school uniforms and reasonable extracurricular activities; and,
13.2.all orthodontic and dental expenses referable to the children.
14.That the payments made by the husband pursuant to Orders 11 and 13 above shall, in combination, count for 100% of the liability of the husband pursuant to any administrative assessment of child support.
15.That save as otherwise provided herein, all outstanding applications be and hereby are dismissed.
16.That the husband pay the wife’s costs of and incidental to these proceedings.
The husband seeks orders in terms of a minute of orders handed up at the commencement of final submissions. He seeks:
Proposed Minute of Order
1. The following definitions apply for the purposes of these Orders:
1.1 “[Suburb L] Property” means the property situate at and known as [… T Street, Suburb L] in the State of New South Wales, being the whole of the land comprised in Certificate of Title Folio Identifier […] owned as joint tenants by the Husband and the Wife;
1.2 “The Westpac Mortgage” means the mortgages to Westpac Bank registered on the title to the [Suburb L] property numbers […] and […];
1.3 “The [Suburb R] Property” means the property situate at and known as [… R Street, Suburb R], in the State of New South Wales, being the whole of the land contained in Folio Identifier […] owned as joint tenants by the Husband and [Ms F];
1.4 “The Commonwealth Bank Mortgage” means a mortgage to the Commonwealth Bank No […] registered on the title to the [Suburb R] Property;
1.5 “[Super Fund Z]” means a superannuation fund operated by [Z] in which the husband is a member no. […];
1.6 “Westpac Account No. […66]” means an account operated in the name of the Wife with the Westpac Bank Account No. […66];
1.7 “Westpac Account No. […41]” means an account operated in the name of the Wife with the Westpac Bank Account No. […41];
1.8“Westpac Account No.[…29]” means an account operated in the joint names of the Husband and the Wife with the Westpac Bank Account No. […29];
1.9 “Commonwealth Bank Account” means an account operated in the name of the Husband with the Commonwealth Bank Account No. […07];
1.10 “[Super Fund X]” means a superannuation fund operated by [X] in which the Wife is member no. […];
1.11 “Husband’s [Company 1] employee options” means options to acquire shares in [Company 1] issued to the Husband as an employee of [Company 1], having option numbers […],[…],[…], and […];
1.12 “Husband’s [Company 1] conditional rights” means conditional rights to acquire shares in [Company 1] issued to the Husband as an employee of [Company 1] having numbers […], […], […], […], […], […], […], […] and […];
THE COURT ORDERS:
Alteration of Property Interests and Declaration of Interests in Property
1Order that all prior Orders are discharged.
2Order that within twenty-one (21) days of the date upon which these Orders are made:
3The Husband shall do all acts and things and sign all documents necessary to transfer all of his right, title and interest in the [Suburb L] Property to the Wife;
4The Husband shall do all acts and things and sign all necessary documents to transfer to the Wife all his right, title and interest in the Q7 Audi motor vehicle, Registration […].
5Order that as between the Wife and the Husband the Wife is solely liable for all indebtedness to Westpac including all repayments of principal and payments of interest pursuant to the Westpac Mortgage and shall indemnify and keep indemnified the Husband from any liability he may have pursuant to the Westpac Mortgage.
6Declare the Wife to be the holder of all right and title to:
6.1The funds in Westpac Account No. […66] and Westpac Account No. […41];
6.2The contents of the [Suburb L] Property with the exception of those items contained in Annexure “A” to these Orders;
6.3 All personal effects and jewellery in her possession.
7Order that within twenty-one (21) days of the date upon which these Orders are made:
7.1The Wife and the Husband do all acts and things, including signing any documents necessary to cause to be paid to the wife $150,000 from the funds in the Westpac Bank Account No. […29] with the remainder of the funds to be transferred to an account nominated by the husband; and
7.2 Close the account after the said payments are made.
8Declare the Husband and [Ms F] to be the joint holders of all right and title to the funds in the Commonwealth Bank Account.
9Declare the Husband and [Ms F] to be the joint holders of all right and title to the [Suburb R] Property funds in the Commonwealth Bank Account.
10That the Husband be and hereby is declared responsible for, together with [Ms F], the Commonwealth Bank Mortgage Account number […05].
11Declare the Husband to be the holder of all right and title to:
11.1 Audi Q7 registration number […];
11.2 Audi A4 registration number […];
11.3 The Husband’s [Company 1] employee options;
11.4 The Husband’s [Company 1] conditional rights; and
11.5 All furniture and personal effects in his possession.
12Declare the Wife to hold all right and title to all other assets not dealt with specifically by these Orders and in her possession, custody or control as at the date of the making of these Orders.
13Declare the Husband to hold all right and title to all other assets, not dealt with specifically by these Orders and in his possession, custody or control as at the date of the making of these Orders.
Superannuation
14The Wife and Husband acknowledge each has been afforded procedural fairness in relation to the making of these Orders.
15Declare the Wife to hold all right and title to her member’s entitlement in [Super Fund Z].
16Order pursuant to ss.79 and 90MT of the FLA in relation to the Husband’s interest in the Fund:
16.1 There be allocated under s.90MT(4) of the FLA, a base amount of $250,000.00 from the Husband’s interest in the Fund;
16.2Pursuant to s.90MT(1)(a) of the FLA, whenever a splittable payment becomes payable in respect of the Husband’s interest in the Fund:
16.2.1The Wife or her legal personal representative is entitled to be paid the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations (Commonwealth) 2001 (the “FLS regulations”); and
16.2.2There will be a corresponding reduction in the entitlement of the Husband’s interest in the Fund;
16.3 Order 16.2 binds the Trustee of the Fund as follows:
16.3.1 Order 16.2 takes effect from the operative time being the fourth business day after the date of service of a sealed copy of these Orders on the Trustee of the Fund;
16.3.2The Trustee, the Wife and the Husband must do all acts and things and sign all such documents as is necessary to satisfy the requirements of the FLA and the FLS Regulations to:
16.3.2.1Calculate the value of the transferable benefits from the Husband’s interest in the Fund to the Wife’s interest in accordance with r.7A.12 of the Superannuation Industry (Supervision) Regulations (Commonwealth) 1994 (the “SIS Regulations”);
16.3.2.2Make payment to the Wife in accordance with Order 16.2.1, including but not limited to acting upon a request pursuant to r.7A.06(2) of the SIS Regulations for the rollover or transfer of the transferrable benefit out of the Husband’s interest in the Fund to a fund nominated by the Wife in accordance with r.7A.12 of the SIS Regulations whenever the Trustee of the Fund makes a splittable payment out of the Husband’s interest in the Fund;
16.3.2.3Pursuant to r.14F of the FLS Regulations, any payments from the Husband’s interest in the Fund made after the Trustees have rolled-over or transferred the interest of the Wife in the Fund, as contemplated in these Orders, are not splittable payments;
16.3.2.4The Trustees of the Fund will be relieved of their obligations to calculate and split payments under Order 16.2.1 in the event that the transferrable benefits are transferred to a superannuation fund of the Wife’s choosing in accordance with the SIS Regulations.
Child Support
17Order pursuant to s.117 of the Child Support (Assessment) Act, 1989, by way of departure of the assessment of the Child Support Agency No. […], the Husband:
17.1Pay or cause to be paid to the Wife, or as the Wife may from time to time direct in writing, child support for each of the children in the sum of $1000 per child per month, the first payment to be made in seven (7) days of the date of the making of this Order and thereafter on the same date each month, with the final payment to be made upon the happening of a child support terminating event in relation to each child, as defined by s.12 of the Child Support (Assessment) Act, 1989, (this sum is to cover reasonable extracurricular activities as well as other expenses of the children) PROVIDED ALWAYS that the Wife does not enter into a defacto relationship for more than three (3) months or remarry; and
17.2Pay, or cause to be paid by a direct payment, to the schools of the children, the school fees to a maximum of $50,000.00 per annum, such payment being for private school fees in respect of each of the children from the date of the making of this Order until the date each child leaves secondary education and such fees shall mean and be limited to tuition fees, reasonable excursion fees, incidental sporting costs, school books and school uniforms;
17.3The child support payable by the husband, pursuant to Order 19.1 above, is to account for 100% of the annual rate of child support payable by him under any administrative assessment of child support to the Wife for the period from the date of making this Order until the happening of a child support terminating event in respect of all the children;
18Order that Order 17 is suspended if one or more of the following events occur, namely:
18.1The Wife enters into a defacto relationship, as defined in s.4AA of the FLA for more than three (3) months; or
18.2 The Wife remarries; or
18.3In the period from the date of the Orders to the date of the final payment upon the happening of the child support terminating event in relation to each child as defined by s.12 of the Child Support (Assessment) Act 1989 the Husband receives of a Notice of Assessment of income tax specifying that the Husband’s income after tax is less than $500,000.00 per annum.
19The arrangements as set out hereunder entitled “Parenting Orders” are not adhered to whether by agreement or unilaterally by a party.
20Order that in the event Order 17 is suspended by reason of the occurrence of one or more of the events described in Order 18, then the Husband shall pay child support as assessed by the Child Support Agency or its successor administrative body.
Parenting Orders
…….
Costs
30 That the costs of the parties be reserved to be dealt with by separate Application.
“A”
HALL
grand mother clock $400
DINING ROOM
Hardwood dining table $2200
Eight chairs $640
Hardwood sideboard $450
Wedgewood dinner service $1100
Stainless steel cutlery $220STUDY
2 drawer filing cabinet $50
leather sofa bed $400FAMILY ROOM/KITCHEN
kitchen appliances $850
seth thomas clock $250
flat panel colour tv 128cm $300
STAIRS
wine $700JEWELLERY
diamond dress ring $900
diamond necklet $470
To the extent that the husband’s minute contained proposed parenting orders, learned Senior Counsel for the husband said that the proposed orders were prepared in anticipation of a settlement of parenting issues and confirmed that there was no parenting controversy before me. For this reason and despite the reference to them in paragraph 19, I have not set out above the terms of the proposed parenting orders. As to proposed order 19, I take it that there is an error in the document and will assume that the intention is that the provision be read as 18.4 – one of the conditions that would trigger a reversion to the administrative scheme (proposed order 20). In any event no harm is done as the condition is meaningless without the “Parenting Orders”.
Documents read
The wife relied on the following documents:
Document
Sworn/affirmed
Filed
Further Amended Application for Final Orders
2.06.2010
Affidavit of Wife
22.11.2011
23.11.2011
Wife’s financial statement
22.11.2011
23.11.2011
The husband relied on the following documents:
Document
Sworn/affirmed
Filed
Affidavit of husband
08.12.11
09.12.11
Affidavit of husband
23.01.12
01.2.12
Husband’s Financial Statement
08.12.11
09.12.11
Husband’s Financial Statement
23.01.12
02.02.12
The single experts evidence is:
Document
Sworn/affirmed
Filed
Affidavit of Mr Y
03.05.2011
17.11.2011
Affidavit of Mr Y
23.01.2012
1.02.2012
Affidavit of Ms W
31.01.2012
01.2.2012
Affidavit of Mr A
31.01.2012
01.2.2012
Disputed facts
In the outline filed in the husband’s case, the following issues were identified:
Principle Anticipated Contentious Questions are:
1.1Should the Husband’s [Company 1] employee options and conditional rights be included in the pool of “assets of the parties”?
1.2What is the value of the Husband’s [Company 1] employee options and conditional rights? This issue was settled by the parties.
1.3What addbacks should be made to the Balance Sheet, if any?
1.4Have the contributions of the Husband and Wife within the meaning of s.79(4)(a)(b) and (c) of the FLA since separation been equal?
1.5If the answer to question 7.4 is in the negative; have the contributions of the Husband been greater?
1.6If the answer to question 7.5 is in the affirmative; is the Husband entitled to an adjustment in his favour?
1.7What are the relevant s.75(2) considerations?
1.8Does the percentage division require there to be a splitting Order in relation to the Husband’s superannuation? Both parties seek a splitting order
1.9Do the relevant s.75(2) considerations entitle the Wife to an adjustment in her favour and if so, what percentage adjustment should be made? It is agreed that there be an adjustment in favour of the wife, the dispute relates to the percentage
1.10In what percentage should the assets of the parties be divided?
1.11Is the Wife entitled to an order for spousal maintenance? If so, for what period and in what amount?
1.12What departure order should be made, if any? It is agreed that there should be a departure order, the dispute relates to the terms
Short history
The wife was born in 1967 and as at the date of the hearing was 44 years of age. The husband was born in 1967 and was also 44 years of age. They commenced living together in May 1989 and were married in October 1997. The parties separated in April 2008. The parties’ divorce became final in August 2009.
Children
10.There are three children of the marriage:
J, born in September 1998 and currently 13 years of age;
B, born in September 2000 and currently 11 years of age; and
M, born in June 2002 and currently 9 years of age.
Background facts
11. The parties commenced cohabitation when they were 21 years of age. They were both studying to obtain qualifications as business professionals and neither held assets other than personal effects. The wife was employed as a business professional with the NSW Government and the husband was employed as a business professional with Company 2.
12. In May 1990, the husband and wife purchased a home in S Street, Suburb E for $192,600 plus acquisition costs. The parties used their savings toward the purchase and borrowed the remainder of the purchase price. They then moved into the property.
13. In 1994, the husband and wife completed their studies and obtained qualifications as business professionals. The husband commenced employment with Company 1 and the wife continued to be employed by the NSW Government. Both parties were on a salary of approximately $100,000 per annum.
14. In December 1994, the parties sold the Suburb E property for $230,000.
15. In May 1995, the husband and wife purchased a property at T Street, Suburb L for $580,000 plus acquisition costs. The parties applied the sale proceeds from the Suburb E property toward the purchase and the balance was borrowed.
16. From 1996 to 1998, the parties undertook renovations to the Suburb L property. The costs were paid from their respective incomes, savings and by increasing the mortgage held over the property.
17. In October 1997, the parties married.
In August 1998, the wife took maternity leave from her employment with the NSW Government.
In September 1998, J was born.
In 1999, the wife returned to her employment with the NSW Government on a part-time basis working 2 days per week.
In mid 2000, the wife took maternity leave from the NSW Government.
In September 2000, B was born.
In April 2001, the wife returned to part-time employment with the NSW Government.
In October 2001, the husband took on an international role with Company 1 that required him to travel overseas several times per year for around 12 days plus one or two shorter trips.
Between October 2001 and August 2004, the husband travelled each April, June, October and December.
In February 2002, J commenced school at School 1.
In March 2002, the wife took maternity leave from her part-time position with the NSW Government.
In June 2002, M was born.
In July 2003, the NSW Government closed down the wife’s workplace and the wife was made redundant. She received a redundancy payout of $35,550. The wife then looked after the children and household on a full time basis.
In August 2004, the husband’s employment was transferred to England and the parties relocated with their children. The parties leased out the Suburb L property while they were away and rented a property in England.
In late 2006, the parties undertook further renovations to the Suburb L home using savings and income. During cross-examination the wife was asked about the cost of the renovations. It was not clear to me whether the question was directed to both lots of renovations or only one. She said that the renovations cost about $800,000.
32. In October 2006, the husband studied in France for a month while the wife stayed in England with the children.
33. In December 2006, the parties and children returned from England to live in Sydney where they rented a property while renovations to the Suburb L home were being completed.
In February 2007, J commenced school at School 2. B commenced school at School 3 and M recommenced at School 1.
In May 2007, the parties and children moved back into the Suburb L property.
In February 2008, M commenced school at School 2.
In April 2008, the parties separated. The wife and children remained living at the Suburb L home. The parties came to an arrangement whereby the husband spent alternate weekends with the children. The husband continued to travel for his employment and the wife says this resulted in the husband spending less time with the children than the parties intended.
Between May 2008 to November 2008, the husband paid to the wife $2,500 per week by way of spousal maintenance and child support. He also paid for school fees and associated expenses.
On 30 June 2008, the husband’s taxable income for the 2007/2008 financial year was around $1.2 million.
From November 2008, the husband paid to the wife $2,000 per week by way of spousal maintenance and child support and paid into the joint account $1,000 for the children’s school fees and associated expenses.
In May 2009, the wife transferred $450,000 from a joint account to another account. She says that was as a result of something arising from a settlement conference. In June 2009 the husband ceased making some support payments. The wife then used the funds she withdrew from the joint account for living expenses for herself and the children.
On 30 June 2009, the husband’s taxable income for the 2008/2009 financial year was approximately $1.5 million.
On 17 July 2009, the wife filed an Initiating Application thereby commencing these proceedings.
On 9 September 2009, Judicial Registrar Johnston, as his Honour was then, made the following orders:
1.That all parties are given leave to inspect all documents produced on subpoena by Department of Immigration.
2.That by consent orders are made in accordance with the hand-written Short Minutes of Orders filed in Court today signed by the parties and their respective solicitors and by Judicial Registrar Johnston and placed with the Court papers as set out hereunder:-
By consent, pending further order:
1.The husband pay to the wife by way of spousal maintenance and child support the sum of $2,300 per week such sum to be paid fortnightly to the wife’s Westpac Bank Account […41] Sydney Branch first payment on 11.9.2009 and fortnightly thereafter.
2.Orders in terms of paragraph 3.2 and 3.3 of the husband’s Response filed 7.9.2009 [at “Interim or procedural orders sought” as set out hereunder:
3.That pursuant to Section 117 of the Child Support (Assessment) Act 1989, by way of Departure Order in relation to the assessment of the Child Support Agency number […], the husband:-
…
3.2pay or cause to be paid to the wife as the wife may from time to time direct, all school fees including private school fees in respect of each of the children from the date of the making of this Order until the date each child leaves secondary education and such fees shall mean and include tuition fees, reasonable excursion fees, incidental sporting costs, school books, school uniforms and reasonable extracurricular activities; and
3.3pay all orthodontic and dental expenses referable to the children.].
3.That the parties within 7 days cause to be deposited to the joint Westpac eSaver account no. […29] the following:
(a)the husband to deposit to the said account from his Westpac account no. […85] all except the sum of $100,000 and the husband contends that the balance of account no. […85] is currently $382,360;
(b)the wife to deposit to the said account from her Westpac account no. […66] all except the sum of $100,000 and the wife contends that the balance of account no. […66] is currently $387,875, and
the parties thereafter be restrained, pending further order from dealing with the funds held in that account other than by written agreement.
4.That order be made in terms of paragraph 3, 4 and 5 of the wife’s Amended Application filed 31.08.09 [at “Interim or procedural orders sought”] it being noted that the husband has made a selection in the terms of paragraph 3.3 [as set out hereunder:-
3.That within 7 days the husband select, and advise the wife of his selection, one of the following persons to be appointed single expert to value shares, options and rights owned by the husband:
3.1[Mr LL] – [Company 3] at […] , Sydney NSW, 2000;
3.2[Ms SS] – [Company 4] at […] , Newcastle, NSW, 2300: or
3.3[Mr BB] – [Company 5] at […] , Sydney, NSW, 2000
4.That the husband be restrained from speaking to or communicating in any other way with the nominated single expert referred to in Order 3 herein.
5.That the husband provide discovery of documents relating to his financial position relevant to these proceedings such discovery to include the following documents:
5.1all documents in relation to the shares, rights and options owned by the husband including documents which set out every allocation to the husband since his employment by [Company 1], copies of the Executive […] Share Plan policy document and the […] Incentive Scheme policy document and any other documents which set out the conditions and rules in relation to the various schemes;
5.2statements relating to any loan facility of the husband and/or any associated entity including but not limited to any loan from [Company 1] relating to shares owned by the husband for the last 12 months;
5.3transaction statements relating to the purchase and sale of shares by the husband or any entity in which he has an interest for the last 12 months;
5.4payslips for the last 12 months; and
5.5the husband’s passport.].
5.The proceedings stand over to the Case Assessment Conference on 19 November 2009.
6.The application be listed for hearing on the 14th day of December 2009.
7.Each parties costs be reserved.
In late 2009, the wife obtained casual employment.
In mid 2010, the wife obtained part-time employment as a clerk.
In November 2010, the husband married Ms F.
On 25 November 2010, the husband and Ms F purchased a property at R Street, Suburb R as joint tenants. The husband sold shares to contribute to funding this purchase.
Credit and Submissions
The evidence of the witnesses
49.The only witnesses called for cross-examination were the parties. There are few issues that fall to be determined solely by reference to the testimony of the parties. To the extent that credit is marginally relevant:
50.There were some inaccuracies in the wife’s affidavit – for example - that the husband ceased making maintenance and child support payments in May 2009. Overall, however, the wife was a good witness. She was generally careful in answering questions in cross-examination and made some concessions in favour of the husband when they were sought.
51.The husband too appeared to reflect carefully before answering questions in cross-examination. He was not significantly challenged on the substance of his evidence save that he was obliged to concede in cross-examination that his Financial Statement is inaccurate. Except perhaps for his estimate of the weekly cost of rates, every figure on the income and the first page of fixed expenses of his latest Financial Statement is wrong. Thus his estimates of weekly income, weekly tax, weekly superannuation payments were all wrong and in some cases, substantially so. Through his counsel the husband made an issue of the wife’s claimed weekly expenditure on petrol, car maintenance, clothing and child minding, which claims totalled $760 per week. I understood that the challenge was as to the amount claimed and that it was not suggested that the wife had no need at all to expend funds on any one of those items. In that context it was remarkable and irritating that the inaccuracies in the husband’s own Statement (each in his favour) amounted to $1,000 or more per week.
52.Notwithstanding the time taken on these matters, I do not consider that credit is a significant issue in the case. The husband was careless in the disclosure of his financial circumstances. That said, I do not believe that either of the parties set out to mislead the Court. Although they are highly intelligent people, they naturally see issues and events from their own perspectives.
The approach in proceedings under Section 79
53.The case law reveals that there is a permissible approach to the determination of an application brought pursuant to the provisions of s 79, involving four inter-related steps. First, I make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Second, I identify and assess the contributions of the parties within the meaning of s 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Third, I identify and assess the relevant matters referred to in s 79(4)(d), (e), (f) and (g), (the other factors) including, because of s 79(4)(e), the matters referred to in s 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourth, I should consider the effect of those findings and determinations and identify orders that are just and equitable in all the circumstances of the case.[1]
[1] This summary of the effect of the authorities is paraphrased from the comments of the Full Court in In the Marriage of Hickey (2003) 30 Fam LR 355 at 370.
54.There is no mention of steps in s 79 but it is convenient to approach the exercise of discretion in a structured way. The Full Court has supported such an approach.[2]
[2] In the Marriage of Hickey above.
The property of the parties at the date of the hearing
55.The Court is required to make a finding as to the property of the parties. That involves identifying assets, liabilities and financial resources and their values.
56.There are circumstances whereby assets can be included in the list for division although they no longer exist. The same logic would apply to the exclusion from the relevant list of liabilities, debts that do exist at the date of the hearing. In the Marriage of Omacini (2005) 33 Fam LR 134 the Full Court noted:
[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 In the Marriage of DJM and JLM (1998) 23 Fam LR 396; (1998) FLC 92-816; [1998] FamCA 97 the Full Court said at [11.6]:
[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 In the Marriage of Townsend (1994) 18 Fam LR 505; (1995) FLC 92-569 Nicholson CJ as he then was with whom Fogarty and Jordan JJ agreed, said at Fam LR 509; FLC 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 In the Marriage of Kowaliw (1981) 7 Fam LN N13; (1981) FLC 91-092 at FLC 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 s 75(2)(o) to applications for settlement of property instituted under the provisions of s 79.
57.The parties ultimately settled an agreed balance sheet and there are many items about which there is no dispute as to inclusion or the value of the asset or liability.
58.The agreed balance sheet is as follows, with the contentious items in bold:
Title Description Husband’s value
$Wife’s value
$ASSETS 1. J T Street, Suburb L 2,650,000 2,650,000 2. H R Street, Suburb R 1,550,000 3,100,000 3. H Shares in husband’s name Nil Nil 4. W Westpac Bank accounts in wife’s name: 0 0 account no. …66 11,150 11,150 account no. …41 45,455 45,455 5. J account no. …29 519,388 519,388 6. H Westpac Bank accounts in husband’s name: 0 0 account no. …62 3 3 account no. …15 Closed 7. H Commonwealth Bank Account number …07 24,337 24,337 8. J Audi Q7 2006 – petrol 4.2 litre, registration no. … (used by wife) 58,400 58,400 9. H Audi A4 Convertible 2006 56,850 56,850 10. H Audi Q7 2006 – diesel 3.00 litre 50,000 50,000 11. H Company 1 shares/options/rights as per single expert and as per experts (net $474,489) Incl at item 35 371,360 12. H Husband’s tax pre-paid 10,820 10,820 13. W Furniture 21,300 21,300 14. H Furniture 50,000 50,000 15. W Jewellery 7,090 7,090 16. H Jewellery 0 0 17. H Company 1 bonus with respect to year end 31.12.2011 0 nk 18. W Maintenance owing to wife pursuant to Order made 9 September 2009 14,816 Total $ 5,054,793 $ 6,976,153 ADDBACKS 19. H Paid legal fees and disbursements - agreed at $207,345 0 207,345 20. W Paid legal fees and disbursements 130,643 130,643 21. W Funds in solicitors trust account 23,650 23,650 22. W Joint funds transferred by the wife to her account and dissipated 270,000 0 23. H Jewellery purchases since separation given to friends 0 47,705 24. H Difference between the purchase price and Redbook value of Item 10, Audi Q7 2006 0 27,000 25. H Tax refund 11,163 26. H Funds transferred to Ms F 70,000[3] 70,000 Total $424,293 $517,506 [3] This concession was made by the husband’s counsel after the document was submitted
LIABILITIES 27. W Mortgage on T Street, Suburb L 100,195 100,195 28. H Mortgage on R Street, Suburb R 1,133,975 2,324,950
(57,000)29. H Unpaid tax on superannuation 0 0 30. J Essential roof repairs to Suburb L house 0 12,000 31. W Westpac Altitude credit card 0 327 32. H Commonwealth bank credit card agreed as to amount $23,803 23,803 0 33. H Unpaid tax 2010-2011 22,785 0 34. W Unpaid PAYG tax for 2012 year 3,063 3,063 Total $1,283,821 $2,383,535
SUPERANNUATION 35. W Super Fund X at 2 February 2012 61,793 61,793 36. H Super Fund X as at 20 April 2011 788,515 788,515 Total $850,308 $850,308
FINANCIAL RESOURCES Title Description Husband’s value
$Wife’s value
$37. H Unvested Options, condition rights 371,360 Incl at item 11 38. H Shares Company 1 Incl at item 35 Incl at item 11 39. H Accumulated employment entitlements Nk Total 371,360 Nk
SUMMARY Husband’s value
$Wife’s value
$40. Gross assets $5,054,793 $6,976,153 41. Liabilities (1,283,821) (2,383,535) 42. Net assets $3,770,972 $4,592,618 43. Add-backs 424,293 517,506 44. Net assets + add-backs 4,195,265 5,110,124 45. Superannuation 850,308 850,308 46. Net assets + superannuation 4,621,280 5,442,296 47. Net assets + add-backs + superannuation 5,045,573 5,960,432 48. Financial resources 371,360 nk 49. Net assets + add-backs + superannuation + financial resources $5,416,933 5,960,432
+ nk
59.As to the disputed issues about assets:
The relevant value of the husband’s interest in R Street, Suburb R
60.By the arguments made in relation to both the asset and associated liability, the wife seeks that the husband’s interest in the Suburb R property be brought to account at a net value of $832,050 (the agreed value of the property at $3,100,000 minus the net mortgage[4] at $2,267,950) and the husband contends it should be included at a net $416,025 (one half of the agreed value of the property at $1,550,000 minus one half of the net mortgage at $1,133,975). The husband and Ms F bought the property in joint names and they are joint borrowers in respect of the mortgage secured on the property.
[4] The amount owing minus the balance held in the off-set account.
61.Accepting the unchallenged evidence[5] of the husband, the purchase was funded with a mortgage from the Commonwealth Bank and capital payments as follows:
[5] From paragraphs 44 – 47 of the husband’s first affidavit.
Source
Amount
Opening balance of the husband’s Westpac account #...62
$21,630
Sale proceeds of non-Company 1 shares
$174,280.10
Transfer of online savings
$87,000
Transfers from the account of Ms F
$20,000
Sale proceeds of Company 1 shares
$660,708.73
The husband’s Westpac account #...85
$374,000
From an account of Ms F with HSBC
$30,000
$1,367,618.83
62.On that basis, Ms F contributed $50,000 and the husband contributed $1,317,618.83.
63.As to the mortgage, as at 1 January 2011 the standard variable mortgage stood at about $2,325,000 and the associated MISA account at a credit balance of $40,000.
64.It was submitted on behalf of the husband that 3 approaches are available:
(a)Crediting the husband with 100% of the equity and 100% of the debt (the approach advanced on behalf of the wife);
(b)Crediting the husband with 60% of the equity and 60% of the debt; or
(c)Crediting the husband with 50% of the equity and 50% of the debt (the approach advanced on behalf of the husband).
65.It was submitted on behalf of the wife that 3 approaches are available:
(a)Crediting the husband with 50% of the equity and 50% of the debt (the approach advanced on behalf of the husband);
(b)Crediting the husband with 100% of the equity and 100% of the debt (the approach advanced on behalf of the wife);
(c)Including in the balance sheet the amount the husband spent on the purchase – of the order of $1.3M.
66.There are inadequate aspects to the approaches proposed by each party. The approach proposed on behalf of the wife ignores both the capital contribution of $50,000 made by Ms F and notwithstanding the current instalments being met entirely by the husband, her taking on the same legal obligations as the husband, under the mortgage. The husband’s approach ignores the fact that the husband paid the overwhelming part of the capital contribution and despite the legal position, is in fact paying all of the mortgage instalments, at least while Ms F is out of work.
67.On balance, the approach proposed on behalf of the wife better reflects the current position. On any view the husband would have an irresistible claim to greater than 50% of the current equity of the Suburb R property.
68.Both approaches ignore the fact that but for the purchase, it is likely that the pool would be greater by an additional $500,000 or so, over and above the allowance sought on behalf of the wife. Much more capital went into the purchase than is reflected in the equity held in the Suburb R property. That balances the concerns I have in respect of the wife’s approach on this issue and is also a matter I will take up in respect of contributions and s 79(4)(e) considerations.
Conclusion
69.I will include the Suburb R property in the balance sheet at a net value of $832,050 by including the property at the value agreed of the entire property - $3,100,000 and the associated debt at the entire net mortgage balance of $2,267,950.
Company 1 shares/options/rights as per single expert and as per experts (net $474,489)
70. The husband has benefits arising from his employment with Company 1. The parties reached a compromise at a value for those benefits at $371,360. The issue between the parties is as to whether the benefits should be included in the list of relevant assets or treated as a financial resource.
71. It was submitted for the husband that the evidence indicates that there are three items. Learned Senior Counsel went on to speak of two of those items. Firstly, there are options granted as part of the remuneration package to an employee of Company 1. These options need to be exercised during a specific period of time and only have a market value if the option price is less than the share price. The policy at Company 1 is that options are no longer issued and may only be exercised conditionally. The schedules of the expert reports indicate when the options may be exercised. None of the periods in which they may be exercised have commenced and the initial exercise price for the first tranche of options is in the vicinity of $23.00. I was taken to paragraph 8.2.1 of the report of Mr Y in relation to the variables to be taken into account in valuing the options. The end result of this is that the options have a value subject to those contingencies. Conditional rights are slightly different, they are granted so that the employee can acquire a share at a future point in time subject to performance and other hurdles. No conditional rights granted to the husband at this point in time have resulted in vesting him in a right to a share. When this does occur, it will be subject to a tax liability. Executive employees of Company 1 must hold a shareholding equal to their annual salary.
72. Senior Counsel referred to Howles & Howles [2009] FamCA 1091, where Fowler J described a set of options that are no different in substance to the options in the case before me. At 69, his Honour says:
In the case of the husband’s options the options expire some five years after they were granted to the employee and the vesting schedule for the options is one third on 1st July, two, three and four years after the options were granted. There is a possibility for acceleration of the vesting period.
73. At 71, his Honour went on to say:
An employee cannot transfer the benefits of the options, except in circumstances such as the death of the employee of transfers from or to a controlled company, where the “Executive Committee” has given approval. Although the options may be sold to an approved third party the employee is likely only to receive the intrinsic value of the option.
74. It was submitted that as a matter of comity I should follow Fowler J’s approach. I asked whether I had a discretion in relation to this issue and was told that his Honour’s decision was not an exercise of discretion but was a finding of fact. I am not sure that they are mutually exclusive or that the proposition is correct.
75. In any event, it was submitted for the husband that I should not ignore the value of the shares entirely. They should be taken into account as part of the s 75(2) factors as a financial resource.
76. It was submitted for the wife that the employee entitlements should be considered in two contexts that should not be confused. First, there is an issue as to the character to be ascribed to that bundle of entitlements and the second, there is an issue as to their value. The parties have reached a compromise on the value. Learned counsel for the wife said that the agreed figure is the mid-point of the figures arrived at by the parties’ valuers. It was then submitted that a series of discounts were made before each expert arrived at their opinion of the value - including time restrictions, the difficulty in converting options into cash, the risk of husband not remaining in employment with Company 1 and the lack of marketability. The retention policy has also been taken into account. All of the contingencies and uncertainties feed into the value. It was submitted that Howles was a different case entirely and was no more that an application on those facts of the principles in dealing with options, it does not establish more than that.
Discussion and conclusion
77. In my view it is appropriate to include the shares, options and rights as property. The parties have agreed on the value for them at $371,360. They arrived at that figure by calculating the mid point between the valuations provided by the competing valuers. As was submitted on behalf of the wife, each of the valuers was at pains to discount the value ascribed to the items by reference to many if not all of the things that are relied on in the husband’s case, as reasons why the items should not be treated as property. Ms W allowed for various discounting factors. She applied a “Special Value” approach to the valuation process. She explained this to be appropriate in circumstances where the husband’s entitlements have a value only to the husband because of the restrictions attached to their transferability. Ms W applied various discounts to the value of the entitlements. A discount was applied for illiquidity/marketability, recognising the husband’s inability to readily convert the entitlements into cash at the valuation date. A discount was applied for Company 1 specified restrictions including timing restrictions imposed on the sale of shares and the Executive Minimum Shareholding Requirement. The value was discounted further to allow for risk of cessation of employment and for performance hurdles.
78. In his original report Mr Y sets out at 8.3 – 8.11 the allowances he made in his calculations for each of the variables he described at 8.2.1 as relevant to the valuation of the options. He went on at 8.12 to say that he valued the options as if they could be sold and in his opinion they could not.
79. It is not the case that something is property only if it can be sold.
80. After the trial I was referred to the Full Court decision of Hurst v Weber [2009] FamCAFC 137; 233 FLR 337. Although the Full Court was not unanimous, it fully supported the wife’s argument before me. The majority found that it was within the discretion of the Federal Magistrate to include share options as an asset and O’Ryan J in the minority found that in the circumstances of the other findings made, the Federal Magistrate was obliged to include the options as property.
81. I will include the shares, options and rights in the list of relevant assets at the agreed value of $371,360.
Maintenance said to be owing to the wife under the orders of 9 September 2009
The wife claims that she is owed $14,816 by way of arrears of maintenance. The item was included on the draft balance sheet as a contentious item. It would of course be entirely counterproductive to include this item as a notional asset in the hands of the wife. Assuming however that I was to include the amount in the hands of the husband as a notional asset the question remains whether this adjustment should be made.
The position is far from clear as the husband made payments for the support of the wife’s household over the years and the wife also had access to joint funds. For example, the wife had the use of what originated as the withdrawal by her of the sum of $450,000 from a joint account. This amount was sought by the husband as an add back of $270,000. The wife said that substantial amounts of the claimed $270,000 were applied to joint debts and that the balance was applied to normal living expenses.
Enforcement is discretionary and in the circumstances it is not appropriate to include the claimed sum.
Add-backs
The funds applied by the husband to legal fees associated with these proceedings
The husband has paid $207,345 in legal fees and the wife has paid $130,643 and $23,650 was held in her solicitor’s trust account on account of fees. It is agreed that the wife’s fees will be added back as a notional asset. The issue relates to the husband’s paid costs.
Suffice it to say that the husband advocates that his fees not be added back and relies on the discussion by the Full Court in NHC v RCH (2004) FLC 93-204; 32 Fam LR 518.
The judgment of the Full Court was delivered on 9 July 2004 and relevantly included the following:
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 had made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.
On 23 March 2005 a different Full Court delivered the judgment in Omacini above and made no reference to the earlier decision. As is set out earlier, there the Full Court cited with approval the words from Farnell:
…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.
In both NHC v RCH and Omacini however, the Full Court recognised that the treatment of paid legal costs was a matter at the discretion of the trial judge. That fact is demonstrated in that, notwithstanding the general approach advanced in NHC v RCH the Full Court in that case did not interfere with decision made by the trial judge to add back the legal costs paid by both parties, even though at least part of the costs had been paid from post-separation sources.
90. Here, it is likely that but for the payment of legal fees, the net pool of assets would be greater than it is. Generally parties bear their own costs but if they are to be required to contribute to the costs of each other, that should be by reference to all of the matters in s 117(2A).
I will read back the paid legal costs as notional assets.
The joint funds transferred by the wife to her account and dissipated
The husband claims that the wife has had the use of $270,000 in joint funds and has failed to account for that sum.
In May 2009, the wife transferred $450,000 from a joint account to another account. She says that was as a result of something arising from a settlement conference. In June 2009 the husband ceased making some support payments. The wife then used the funds she withdrew from the joint account for living expenses for herself and the children. On 9 September 2009 consent orders were made for the financial support of the wife and children.
The problem with this argument is that the particular amount is unclear. Of the $450,000 withdrawn the wife repaid $273,224 to a joint account. The balance went as to $10,000 to offset maintenance and other expenses, including expenses such as legal fees that are brought to account elsewhere. The husband too had access to joint funds. He continued to draw on the balance of the fund left after the wife’s withdrawal and apart from legal fees and furniture those amounts are not to be added back.
To labour the point, the settlement is undertaken in relation to property at the date of the hearing. There is no reference in s 79 to add backs. In some instances such as those discussed in Omacini above, it is appropriate to add back assets that no longer exist or to ignore current liabilities. If the position is unclear then there should be no add back. Finally, there is the fact that more than $500,000 was lost to the property pool because of the Suburb R purchase.
I do not propose to add back $270,000 as a notional asset on the wife’s side of the ledger.
The jewellery bought by the husband for Ms F and for a former girlfriend
The husband paid $47,705 for jewellery for a former girlfriend and subsequently for Ms F. The jewellery is not otherwise included in the balance sheet.
The husband seeks that this item be excluded and the wife seeks that it be brought to account. This issue did not feature significantly in the submissions. From the outline of argument provided on behalf of the husband the submission is that there is no evidence that the funds applied to the purchases were joint funds of the husband and wife and in any event they were made when the husband was fully supporting the wife and children. I was referred to Ismail and Elfar [2011] FamCA 716 (Collier J) at 285.
The relevant passages from that part of the judgment are:
(285) It is clear that the wife removed monies from the Veridan account at the time of separation. There is no doubt that the amount so removed is in the agreed sum of $39,548. It is the husband’s contention that this amount should be added back notionally to the pool of assets available for distribution pursuant to the authority of cases such as Townsend[6], Farnell[7] and Chorn & Hopkins[8]. The wife’s response is that the amount ought not be clawed back in any fashion. It is her case that following the separation of the parties the husband has paid no maintenance or support for the wife and has kept for himself the proceeds of the business.
(286) Therefore counsel asserts that the amount the wife took she has had to expend on every day living expenses for herself and at times some of the children.
(287) The wife other than her assertions as to the use and disposal of the money has provided no detailed information as to how it was dealt with or expended. Put simply there is no proper accounting for the wife’s dealing with this amount.
(288) In Omacini[9] their Honours identified three clear cases of categories where the Court has determined it is appropriate to notionally add back to the pool of assets. The second of those categories identified was where there has been a premature distribution of matrimonial assets. I am satisfied that the amount taken from the Veridian account was indeed an amount that came from what could only be considered as matrimonial funds or borrowings. Certainly the amount the wife withdrew had the additional result of extending to its limit, or very close to its limit the Veridian line of credit.
(289) The amount involved is clearly ascertainable. I propose to add it back to the pool of assets. However, I propose to deal with the matters of the wife’s living expenses post separation when I come to consider the issues of the parties’ contributions.
[6] (1995) FLC 92-569.
[7] (1996) FLC 92-681.
[8] (2004) FLC 93-204.
[9] (2005) FLC 93-218.
With the greatest respect, the reference highlights the limited utility in these circumstances in citing findings from another discretionary judgment. It is trite to say that the facts of the two cases are not the same. For example, Collier J made adverse findings in respect of the parties before him in terms of their disclosure and their credit. Thus:
(236) All in all, I found the wife a less than impressive witness.
(237) The husband I found to be an even less impressive witness.
The submission before me included reference to the fact that the husband was fully supporting the wife. In the matter before his Honour, Collier J read back the claimed funds against the wife, notwithstanding that the husband was not supporting her.
As I understood the submission, the Court should strive for a level of consistency in the treatment of similar issues. There is nothing in the judgment of Collier J to suggest that his Honour was seeking to set out principles that would guide judges dealing with different facts.
It is trite law but the task in relation to property settlement is generally and obviously to deal with the assets as they are at the date of the hearing. Thus In the Marriage of Willis [2007] FamCA 819 the Full Court said:
26. The wife said that she received $10,820 from the sale of IAG and AMP shares and withdrew $8,500 from her superannuation fund. Her evidence was that she spent this money on clothes and dancing lessons for Lana and Shayna, council and water rates and general living expenses. The husband failed to challenge this evidence successfully. It seems to us that her Honour’s findings were clearly supported by the wife’s unchallenged evidence.
27. The funds expended by the wife were not an asset existing at trial. Whether to include this money in the table of assets for division was an exercise of discretion, somewhat similar to the addback of legal fees. The trial judge stated her reasons for the decision which she made. In our view, the choice which she made was well open to her.
The emphasis is mine.
Coming back to the matter before me, the problem as I see it is that in circumstances where there remain cash funds, such as the husband’s CBA account, it is likely that the pool would have been greater but for these purchases. True it is that life goes on during the period between separation and final hearing and there would not normally be an add-back for what might be called usual living expenses. Wherever the line is drawn between usual living expenses and a payment that falls within the approach taken, for example in In the Marriage of Townsend and supported in Omacini (above) , a payment of the better part of $50,000 for jewellery for subsequent partners can comfortably be accommodated on the Townsend side of the line. In some senses this is not a significant sum but in my view the expenditure should be added back.
The difference between the purchase price and the Redbook value of the Audi Q7 bought by the husband after separation
The husband bought an Audi Q7 motor vehicle after separation. It’s agreed value for the balance sheet is said to be $27,000 less than the likely market value of the car. The wife seeks that the shortfall be read back into the list of assets. The husband was asked about this in cross-examination. He said that he bought the vehicle to more comfortably transport the children as his Audi A4 is a 4 seater and not suited to the purpose. He said that Ms F sometimes drives the new vehicle.
I do not propose to add-back the loss made on the vehicle. On separation the husband lost access to the Audi Q7 driven by the wife. The parties established that type of motor vehicle as suitable transport for the children. There was no challenge to the husband’s evidence about the lack of suitability of the car he drives for the purpose of transporting the children. The purchase of a car notoriously results in a significant part of the purchase price being lost immediately, particularly in respect of a new car. On balance this is not an item that should be read back as a notional asset.
The husband’s tax refund
The evidence suggests that husband is owed $11,163 by the tax office. On 2 February 2012 he was advised[10] that that sum had been paid into his ATO accounts. I will include that sum on the husband’s account.
[10] Exhibit 20.
I find that the assets are:
Asset
Value
T Street, Suburb L
$2,650,000
R Street, Suburb R
$3,100,000
Wife’s Westpac Bank account no. …66
$11,150
Wife’s Westpac Bank account no. …41
$45,455
Joint Westpac Bank account no. …29
$519,388
Husband’s Westpac Bank account no. …62
$3
Husband’s Commonwealth Bank Account number …07
$24,337
Audi Q7 2006 – petrol 4.2 litre, registration no. … (used by wife)
$58,400
Audi A4 Convertible 2006 H
$55,850
Audi Q7 2006 – diesel 3.00 litre H
$50,000
Husband’s Company 1 shares/options/rights
$371,360
Husband’s tax pre-paid
$10,820
Furniture W
$21,300
Furniture H
$50,000
Jewellery W
$7,090
Husband’s paid legal fees
$207,345
Wife’s paid legal fees
$130,643
Wife’s funds in solicitors trust account
$23,650
Jewellery purchased by the husband and given to friends
$47,705
Husband’s tax refund
$11,163
Funds transferred by the husband to Ms F
$70,000
Total
$7,465,659.00
Asset – superannuation
Value
Super Fund X at 2 February 2012 – wife
$61,793
Super Fund Z as at 20 April 2011 - husband
$788,515
Total
$850,308.00
Liabilities:
The parties agree about some relevant debts. As to the disputed issues:
Suburb R mortgage
For the reasons set out above I will include the full amount of the net mortgage balance at $2,267,950.
Roof repairs to Suburb L
The wife has a quote for roof repairs to the Suburb L property. The Suburb L property has been valued and I do not understand that the valuation was conditional on any repairs being undertaken. I do not propose to include the quote as a relevant liability.
Wife’s Westpac Altitude Credit Card
The wife has a credit card debt. There is no suggestion that the $327 owed was applied other than to the purposes of the wife and the children. I will allow the debt.
Husband’s Commonwealth Credit Card
The husband has a credit card debt of $23,803. The husband conceded that Ms F has made use of the card. The problem here is that it is likely there has been expenditure on the card for reasons other than the husband’s living expenses. Excluding the liability will no doubt be unfair to the husband to the extent that it includes his expenses and those of the children. Including the debt would be unfair to the wife in that there is likely to have been a diversion of funds that might otherwise have been available for distribution, for purposes outside the family.
There is no ideal answer to the problem. The general position is that circumstances are adopted at the date of the hearing and on that basis I will allow the debt.
Husband’s Unpaid Tax 2010-2011
There is no evidence that there is any such unpaid tax. Indeed as I understand it, the husband received an income tax refund in January 2012. I will exclude this debt.
The relevant liabilities are:
Liabilities Value Mortgage on T Street, Suburb L $100,195 Mortgage on R Street, Suburb R $2,267,950 Westpac Altitude credit card $327 Commonwealth bank credit card agreed as to amount $23,803 $23,803 Unpaid PAYG tax for 2012 year $3,063 $2,395,338.00
Net assets
The net assets have a value of $5,920,629. Of that, $850,308 is in the form of superannuation and $5,070,321 is in the form of non-superannuation assets.
Financial Resources
The husband has accumulated benefits from his employment which he has not disclosed. When taken to the issue in cross-examination he reflected that he might have of the order of 15 years of relevant contributory service with Company 1 and therefore has or will soon have an entitlement to long service leave. He said that there is an incentive of an additional week recreation leave for employees to take their allotted 4 weeks each year. I take it that the husband has not accumulated a significant amount of annual leave but do not recall any specific disclosure in that regard. The husband is entitled to an undisclosed amount of sick leave.
In the circumstances no value can be placed in these benefits. Some unused leave entitlements may be paid out on termination of employment and others may not. In any event the benefits are likely to represent the right to be paid for a period not actually worked. That is a valuable right.
Contributions
The obligations placed on the Court by s 79 call for an assessment of the respective contributions of the parties. The manner of assessing contributions has been the subject of previous decisions. The contributions of a parent and homemaker are to be assessed, not in any merely token way, but in terms of their true worth to the building up of the assets.[11] There are said to be risks in taking an overly technical approach to the assessment of the respective contributions of the parties in that the Court can become involved in questions of the quality of contributions which go far beyond the real world expectations of parties.[12]
[11] Mallett v Mallett (1984) 9 Fam LR 449; In the Marriage of Ferraro (1992) 16 Fam LR 1.
[12] In the Marriage of Shewring (1987) l2 Fam LR 139.
As to whether the Court should apply the considerations in s 79(4) to the assets globally or asset by asset, the authorities have it the former approach is preferred, in appropriate circumstances either approach is permissible and sometimes the asset by asset approach is best. See In the Marriage of Lenehan (1987) 11 Fam LR 615; In the Marriage of Norbis (1986) 10 Fam LR 819; FLC 91-712; In the Marriage of Zyk (1995) 19 Fam LR 797.
In the Marriage of Coghlan (2004) 33 Fam LR 414 the Full Court allowed that superannuation may be included in the list of property drawn up as “the first step” in the determination of proceedings under s 79, whether or not a splitting order is sought in those proceedings. The Full Court suggests that:
“… approach could be adopted where the parties agree that it should be adopted, or where the court is satisfied that the superannuation interest is indeed property within the meaning of the definition of property contained in s 4(1), or if the interest is not within that definition, but is of relatively small value in the context of the value of the other assets in the case, or there are features about the interest which leads the court to conclude that this would be an appropriate approach.”
Here, the parties did not isolate superannuation interests for the purposes of applying s 79(4) to the assets. When I noted that fact at the conclusion of the submissions made on behalf of the husband an attempt was made by learned senior counsel for the husband to revisit the treatment of superannuation. There was quite properly an objection to that change of approach, given that the case had been conducted on the basis of one pool, the evidence had closed and submissions had been made for both parties.
I too will apply s 79(4) to superannuation and non-superannuation assets alike.
Contributions
It is an agreed fact that the contributions of the parties to the date of separation were equal. Although by the Case Summary filed in the husband’s case something else was sought to be argued, through the oral submissions of his counsel the husband contends that his contributions thereafter were greater than those of the wife to the effect that his overall contributions were slightly more than those of the wife. His counsel put the difference at 55% compared to 45% by the wife. The wife argues that the contributions were equal overall.
Section 79(4)(a) Contributions
Financial contributions, both direct and indirect were made by each of the parties.
The parties had no significant assets when they started living together. They were each in paid employment at that time. The wife worked as a business professional with the NSW Government from 1989. She took maternity leave for J’s birth in 1998 and returned to that work 2 days a week in 1999. She took maternity leave for B’s birth in mid 2000 and again returned part-time in about September 2001. She took maternity leave for M’s birth in March 2002 and was made redundant in about July 2003, receiving a payout of $35,550. The wife’s superannuation from the NSW Government was rolled over from Super Fund V to Super Fund X.
The husband worked as a business professional at the commencement of the marriage. In 1994 he joined Company 1 and has remained there since. The husband recalls that the parties’ salaries were about the same in 1994. The husband’s salary grew faster than that of the wife and prior to 2011 his annual income for several years was in excess of $1M.
The parties both applied their income to family purposes. The husband’s income was substantially greater than that of the wife. The husband made the overwhelming financial contribution.
Since separation the husband continued to support the wife’s household. The wife had the considerable benefit of remaining in the Suburb L home and has been well supported by the husband. In 2009 the wife commenced looking for part-time or casual work. She commenced in a casual position in November 2009 and later took part-time work as a clerk. She earned $2,150 in the financial year ended 2010 and $12,233 in the following year. She currently estimates that she earns $500 per week.
Section 79(4)(b) contributions
This provision deals with direct and indirect non-financial contributions other than those made in the form of parent and homemaker contributions.
There is scant evidence about non financial contributions. The parties’ undertook renovations to the Suburb L home between 1996 and 1998 and between either 2004 and 2007 or 2006 and 2007. Neither of the parties contends that they performed the work of the renovations although the wife says that they jointly made decisions about the work to be done and both liaised with and gave instructions to the builders, selected fittings and fixtures and liaised with the architect. It is the unchallenged evidence of the wife that she made most of the decisions in respect of the later renovations, attending all site meetings, choosing fixtures and fittings and spending at least one full day each week with the architect, researching and choosing fittings and making decisions in relation to the renovations.
The parties established the AB Trust in 2003 and publicly listed shares were traded but there is no evidence about who performed the work.
There is no evidence about non-financial contributions since separation.
Section 79(4)(c) contributions
This provision deals with contributions to the family including contributions in the form of homemaker contributions and contributions to children of the marriage.
The wife made the greater parent and homemaker contribution. That fact inescapably follows from the agreement that contributions were equal to the date of separation. The parties each concede the contributions made by the other and the overall picture is one whereby the husband made significant parent and homemaker contributions as his busy work commitments allowed. A nanny was employed for the periods of the wife’s part-time work and from 1997 the parties employed a cleaner, once a week and from 2007 a lawnmower and pool maintainer once a fortnight. However, the wife was the primary care giver of the children and otherwise managed the household.
The wife made a greater contribution than the husband by way of homemaker and parent contributions.
Since separation a greater parenting load continued to fall to the wife. The wife thinks it is less time but even on his own case, the husband has the children for about 60 days a year. For the other 5/6ths of the year they are with the wife. For example, the husband has the children for 2 of their 16 weeks of school holidays.
The wife often drives the children to and from their school and extracurricular activities. The wife attends to the children when they are sick and arranges medical and related appointments.
Jurisdiction
This Court does not have unrestricted jurisdiction in relation to fixing child support liabilities. However, the effect of s 116 of the Child Support (Assessment) Act 1989 (“the Assessment Act”) on this case is that I may consider the applications for departure, notwithstanding that certain administrative reviews have not occurred, because the husband and wife are already before this Court on another matter, provided I am satisfied that it would be in their interests to do so. It is possible that even the component of the proceedings dealing with education expenses[21] would be sufficient to found the application of s 116, let alone the property proceedings.
[21] See McGuiness v Cowie (2002) 29 Fam LR 441; [2002] FamCA 461.
Here both parties have applied. I can see the sense in there being a settlement for the time being of all of the financial issues between the parties. Therefore I am satisfied that it would be in the interests of the husband and the wife to consider the departure applications.
The Law
The effect of s 117 of the Assessment Act is that the Court may depart from an administrative assessment if the Court is satisfied of the following matters:[22]
1)That one or more grounds for departure under s 117(2) of the Assessment Act exist (each ground being prefaced by the requirement “in the special circumstances of the case”);
2)That it would be just and equitable as regards the children, the carer entitled to child support and the liable parent [s 117(4)]; and
3)That it would be otherwise proper within the meaning of s 117(5) to make a particular order.
[22] In the Marriage of Gyselman (1991) 15 Fam LR 219; (1992) FLC 92-279.
The effect of s 124 of the Assessment Act is that the Court may order the payment of child support otherwise than in form of periodic amounts paid to carer entitled to child support if, except for the need to establish a ground, it is similarly satisfied.
The Exercise of Discretion
Jurisdiction is based on there being a child support assessment. The most recent assessment is to the following effect:
Assessment issued
Period
Husband’s Child Support income
Wife’s Support income
Annual Rate
Weekly rate
6/1/2012
12/9/2011 to 30/11/2012
$1,101,773
$9,455
$30,411
$582.83
As to the period during which the departures are sought, the applications call for a departure commencing from the date of the order but they seek different terminating events.
Section 12 of the Child Support (Assessment) Act 1989 (Cth) sets out various terminating events. Child support will be terminated in relation to a child if, for example, the child dies, turns 18 years of age or becomes a member of a couple.
Orders sought by the wife specify terminating events as those set out in the legislation referred to above.
The husband additionally seeks that the departure be conditional his net income not falling below $500,000 and on the wife not entering into a de facto relationship for a period of more than three months or re-marrying.
Grounds for Departure
Learned counsel for the wife proposed the following grounds within s 117(2):
(b) that, in the special circumstances of the case, the costs of maintaining the child are significantly affected:
….
(ii) because the child is being cared for, educated or trained in the manner that was expected by his or her parents;
AND
(c) that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
….
(ia) because of the income, property and financial resources of either parent; or
(ib) because of the earning capacity of either parent; or
Special circumstances are facts peculiar to the particular case that set it apart from other cases.[23]
[23] Savery & Savery (1990) 13 Fam LR 812; (1990) FLC 92-131.
The identification of a ground was not a matter of controversy for the parties and it seems to me that the grounds identified in the wife’s case, apply. The administrative assessment does not accommodate school fees of the order of those incurred for the parties’ children and the husband’s income and earning capacity are many times the cap rate.
Only one ground is required. In particular, I am satisfied that, in the special circumstances of the case, the costs of maintaining the children are significantly affected because they are being cared for, educated or trained in the manner that was expected by their parents.
Just and equitable
Going to the relevant matters outlined in s 117(4) of the Assessment Act:
The nature of the duty of a parent to maintain a child
The effect of s 3 of the Act is that the parents have the primary duty to maintain the children. That duty has priority over all commitments of the parents other than commitments necessary to enable them to support themselves and the other children. The duty of each parent is not is not affected by the duty of any other person to maintain the children.
The thrust of this provision is to ensure that child support liabilities are based on the income, earning capacity and financial resources of the parents, to have the parents meet that liability equitably as between themselves and to have eligible children share in the financial fate of their parents.
It follows that it should not fall to Ms F or a future partner of the wife, to support the children. For this reason the condition in relation to the wife entering into a new relationship, that the husband seeks be included in the order, is not appropriate.
The proper needs of the children
I refer to the earlier findings in relation to the parties’ expenditure on the children. There was no significant challenge to the items or quantum of expenditure on the children in either household.
The problems with the husband’s Financial Statement demonstrate the difficulty in placing complete reliance on the parties’ estimates. The husband currently pays $2,300 to the wife for periodic child support and he pays more than $1,000 a week for school fees and expenses. He also pays $1,351 per week to provide for the living expenses of the children when they are with him and for their medical expenses. In the latter regard the wife seeks that the husband continue to meet all orthodontic and dental expenses referable to the children. Those sums total more than $4,651 per week. There would also be some part of his other fixed expenses – mortgage payments, rates, insurance etc referable to the children. Because of the mortgage, if assessed on a pro rata basis, the children’s allowance for the fixed costs of the husband’s household would be very substantial. The property settlement will not free the husband to reduce the mortgage and therefore it is likely to remain high.
The wife pays $2,038 per week to provide for the living expenses of the children when they are with her. There would also be some part of her other fixed expenses – rates, insurance etc. referable to the children. The property settlement should enable the wife to discharge the Suburb L mortgage and so that fixed expense should no longer apply.
The wife’s expenses associated with the children are estimated at more than $2,150 per week.
No doubt the parties could spend less on the children’s activities, clothes etc but for the purposes of these proceedings, I find that expenses of the order of those claimed, are proper.
The order I am asked to make could remain in force until M turns 18. There will no doubt be changes in the needs of the children or one or more of them, over more than 8 years until she attains that age. The order proposed on behalf of the wife allows for movement of the liability with changes in the CPI. That should accommodate the impact of inflation on the rate.
J and M attend School 2, an independent school for girls. B attends School 3. The husband’s evidence about the school expenses is confusing. In his Financial Statement he puts the figure for the children’s education expenses at $1,000. However, he also deposed[24] that for the first nine months of 2011 he spent $73,878 on school expenses for the children. There was a concession from him in cross-examination that that sum incorporated the lion’s share of the education expenses for 2011. I gather that the major expenses such as fees, uniforms and extracurricular expenses were levied in the first half of the year. In her Financial Statement the wife puts the “private school fees” paid by the husband at $1,100 per week. The husband seeks that his contribution for education related matters be capped at $50,000. I do not understand the basis on which that calculation is made. Given the differences in the husband’s evidence I do not understand the import of the figure set by the husband.
[24] Paragraph 111 of the husband’s affidavit.
The wife seeks that the husband pay “all school fees including private school fees in respect of each of the children from the date of the making of this Order until the date each child leaves secondary education and such fees shall mean and include tuition fees, reasonable excursion fees, incidental sporting costs, school books, school uniforms and reasonable extracurricular activities”. The wording leaves room for interpretation. The parties are highly intelligent and have shown themselves able to negotiate on important issues to do with the children. I will apply the wording advocated on behalf of the wife. I am confident that if there is an unusual expense in relation to excursions or extracurricular activities the parties will be able to negotiate a proper outcome. I will not apply a money limit.
The husband seeks that the departure, including in relation to education expenses be terminated upon his after tax income falling below $500,000. During the course of his cross-examination I understood the husband to concede the following inconsistent propositions:
He is happy with the private schools attended by the children;
He does not anticipate the children being removed from those schools;
The after-tax income he predicts for 2012 will be under $500,000 and therefore, under his child support proposal, his payment of education expenses would cease; and
Therefore the children will need to leave their schools.
No effort was made by the husband to rationalise these propositions and in cross-examination he seemed as bemused by those conflicting propositions as I was. I was left with the strong impression that the husband does not anticipate the children being removed from their schools in the medium term. Indeed he said as much. The arbitrary trigger proposed in his case seems out of character with the generous provision made for these children to date.
One of the objects of the child support legislation is that children share in changes in the standard of living of both their parents.[25] However, that does not necessarily mean that long term commitments are curtailed because of short term fluctuations in the financial fortunes of the parents. It pleases many families and individuals to maintain a particular expense through a difficult period, knowing that it is likely that the financial set back will be reversed. For example, the husband and Ms F did not sell the Suburb R property just because Ms F was out of paid employment. To take a silly example and notwithstanding that it would be the outcome of the husband’s application, if the husband was to have an after tax income just under $500,000 in 2012 and then he returned to the pre tax incomes of the last several years of more than $1M, I very much doubt that the husband would call for the children to change schools in those circumstances. It is likely that the impost on the husband will be substantially reduced as the children respectively reach majority. In a bit over 4 ½ years J is likely to be completing the HSC. At 2 year intervals thereafter the younger children too will probably finish secondary school.
[25] Child Support (Assessment) Act 1989 (Cth) s 4 (2)(d).
No successful attack was made during cross-examination on any expense type or amount claimed by the parties.
Parenting issues are not before me and therefore the question of the schools attended by each of the children remains a matter for the parties. Insofar as that issue is relevant to child support I find that the children will be retained at their current schools or similar fee paying schools into the foreseeable future.
The Financial Circumstances and the Earning Capacities of the Parties
The parties seek a departure well into the future. I have made findings above in relation to the financial circumstances of the parties.
I found that the wife earns about $500 per week. The effect of the property settlement outlined above will be that she will retain the Suburb L house, the car she drives and the remaining personalty in her possession. After paying out the Suburb L mortgage, fixing the roof and paying her legal fees she will have in excess of $300,000 in the bank. The wife could invest those funds or could apply them to her expenses, including those of the children.
I found for the purposes of the property proceedings that the wife has unexercised earning capacity to the extent of a modest increase in hours but not full-time and subject to updating her professional development obligations, perhaps at a greater rate of pay. In the child support context the legislation makes particular provision for the circumstances under which a finding of unexercised earning capacity can be made. S 117(7B) provides:
(7B) In having regard to the earning capacity of a parent of the child, the court may determine that the parent's earning capacity is greater than is reflected in his or her income for the purposes of this Act only if the court is satisfied that:
(a) one or more of the following applies:
(i) the parent does not work despite ample opportunity to do so;
(ii) the parent has reduced the number of hours per week of his or her employment or other work below the normal number of hours per week that constitutes full-time work for the occupation or industry in which the parent is employed or otherwise engaged;
(iii) the parent has changed his or her occupation, industry or working pattern; and(b) the parent's decision not to work, to reduce the number of hours, or to change his or her occupation, industry or working pattern, is not justified on the basis of:
(i) the parent's caring responsibilities; or
(ii) the parent's state of health; and(c) the parent has not demonstrated that it was not a major purpose of that decision to affect the administrative assessment of child support in relation to the child.
None of (a)(i), (ii) or (iii), (b)(ii) or (c) applies. The only provision that might apply is (b)(i) if read “the wife’s decision not to work for more hours than she does is not justified on the basis of her caring responsibilities.” I am not sure why it would be permissible to place that gloss on the provision. In my view it is not possible in this context, to find that the wife has unexercised earning capacity.
In any event there are likely to be consequential costs if the wife is to update her qualifications or extend her hours of paid employment.
The husband’s income is likely to be in a range between his 2010-2011 taxable income of $1,081,687 ($20,800 per week) and his 2012 Fixed Remuneration of $700,724 ($13,475 per week).
If Ms F is not able to return to the paid workforce and for the first time in many years the husband’s income is limited to his fixed remuneration, he might have a weekly deficit of the order of $2,170. If for example he continued to earn at the 2010-2011 rate, he would show a small surplus.
The findings in relation to the financial circumstances and earning capacities of the parties for a period of more than 8 years into the future necessarily involve a level of prediction.
The orders proposed by the husband deal with the potential for a reversal in his fortunes. Under his proposal, the administrative scheme would apply if his income falls below $500,000 after tax. One can see the logic of the approach proposed on behalf of the husband but the particular trigger does not make much sense. The cap rate under the formula for 2012 is based on a taxable income of about $162,000 per annum. There is no justification provided to me that would warrant the support for children of a father earning $499,000 per annum after tax, being assessed as if he earned $162,000 before tax. If an arbitrary line in the sand is required then an after tax income of $500,000 would not be the line. In any event either party can make application for a change in the assessment in the event that there is a significant change of circumstances and the agreed or imposed outcome can be then tailored to the specific circumstances and not an arbitrary figure.
The commitments of each parent who is a party to the proceeding that are necessary to enable the parent to support themselves and the children
I have made findings above about the parties’ commitments. The parties live beyond their incomes but there is no basis for finding that they will change their general living standard. The husband’s circumstances will improve when Ms F returns to paid employment.
The direct and indirect costs incurred by the carer entitled to child support in providing care for the child;
I have made findings above about the wife’s current commitments in respect of the children.
Hardship caused to a child or parent
I was not taken to any particular potential hardship.
Conclusion
It is agreed that there should be a child support departure and that there should be payments in a form other than periodic payments to the wife. The issue here is the proportions in which the parents should contribute to the financial costs associated with the children. Logically and necessarily the husband will have the lion’s share of the obligation. The issue is the extent to which the wife’s expenses associated with the children should be met by the husband. The husband makes a very considerable contribution in the form of education expenses and their orthodontic and dental expenses other than those covered by health insurance. The wife must also bear some of the costs of the children. I have found that the proper costs of the children in the wife’s household are of the order of $2,150 per week. In my view, in addition to the direct payment of education expenses and their orthodontic and dental expenses the husband should pay $1,725 per week or $575 per week, per child. That will leave the wife to pay $425 per week. Subject to the husband receiving no more than his fixed remuneration; Ms F returning to the workforce; the wife increasing her earnings; or either of the parties rationalising their accommodation costs; that will leave each household with more outgoings than income if they continue to spend at the same rate.
Otherwise proper [s 117(5)]
No submissions were made on this point. I refer to the findings above as to the parties’ duty to maintain the child. The wife is in receipt of an income tested benefit and there is no evidence as to the likely impact on that benefit of the reduction in child support that I propose. I take it that there is no relevant impact on the wife’s benefit. On that basis I find that the order proposed would be otherwise proper.
Duration of the Departure
Finally, there is the issue of the period for which the departure should apply. There is something like 8 years to go before the legislative terminating events will arise for M. For the reasons that I have given, the income trigger proposed by the husband does not seem appropriate. No justification was offered for the husband’s proposal that the departure or non periodic payments be vacated upon the wife entering into a de facto relationship or marriage. Given the objects of the legislation and in particular the fact that the obligation of support falls to parents, the necessary relevance of the wife entering into a new relationship escapes me. I will put the arrangement in place for the period sought on behalf of the wife.
Conclusion
Section 118 of the Child Support (Assessment) Act 1989 (Cth) allows the Court to make a range of orders once satisfied of the matters discussed above. Both parties are seeking orders that provide for the husband to make some direct payments and to pay a periodic sum to the wife.
I am satisfied that it would be just and equitable and otherwise proper to order that the husband make direct payment of the education expenses of the children, their non-rebated orthodontic and dental expenses and pay by way of periodic sum to the wife, a total of $1,725 per week or $575 per week, per child.. Expressed monthly, that is about $2,492 per child, per month.
Spousal Maintenance
The wife seeks the following order:
9.That pursuant to Section 74 of the Family Law Act 1975 the husband pay or cause to be paid direct to the wife or as the wife may direct from time to time in writing maintenance for the wife in the sum of $3,000 per calendar month, the first payment to be made within seven days of the date of this Order and thereafter on the same date each month until the first of the following events:
9.1.the wife resides in a de facto relationship for more than three months or remarries; or
9.2.the youngest child of the marriage commences secondary school.
10.That the maintenance to be paid pursuant to Order 9 herein, be varied on 1 January in each year (“the review date”) commencing 1 January 2013 to such sum as shall be determined by multiplying the maintenance being paid on the review date by the fraction N/B when ‘N’ is the Consumer Price Index (All groups for Sydney) published by the Australia Bureau of Statistics (“CPI”) in respect of the quarter year immediately preceding the receive date and ‘B’ is the CPI in respect of the quarter year ending 12 months prior to the review date.
The husband opposes such an order.
The Law
The effect of s 74 is that spousal maintenance is a remedy available between parties to a marriage, whether the marriage is on foot or not. Where one party can establish that he or she cannot adequately support themselves from their own resources for any adequate reason, the other party can be called on to provide support to a reasonable extent. The matters relevant to those considerations are set out in s 75(2).
The Exercise of Discretion
The wife seeks $3,000 per week in spousal maintenance. M is in Year 4 in 2012. It is likely then that she will commence secondary school in February 2015. Thus the wife seeks spousal maintenance payments for the next three years. Ignoring for this purpose adjustments in line with movements in the CPI, and assuming that the wife does not enter into a new relationship, that would mean a total payment of $108,000.
I refer to the findings made above under s 75(2).
As to the wife’s need for maintenance, the effect for the wife of the orders for property settlement outlined above will be that she will retain the Suburb L house, the car she drives and the remaining personalty in her possession. After paying out the Suburb L mortgage, fixing the roof and paying her legal fees she will have in excess of $300,000 in the bank. The wife could invest those funds or could apply them to her expenses. In addition the wife will have superannuation entitlements to the value of about $550,000. The wife is only 44 years of age and those interests are unlikely to be accessible before she turns 55.
The wife will receive a proper rate of child support as indicated above.
In this context, the wife has some unexercised capacity for paid employment. That is in the form of a modest increase in hours. On the basis of her answers in cross-examination it is possible that the wife could return to work as a business professional which is likely to provide a better hourly rate than her current work as a clerk.
In the circumstances I do not propose to order spousal maintenance.
I will make provision for the parties to bring the matter back before me in relation to the wording of the orders.
I certify that the preceding two hundred and seventy six (276) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan.
Associate:
Date: 24 February 2012
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