NORTHEY & NORTHEY

[2020] FCCA 951

FEDERAL CIRCUIT COURT OF AUSTRALIA

NORTHEY & NORTHEY [2020] FCCA 951

Catchwords:
FAMILY LAW – Property – division of property pool – no adjustments for financial contributions during relationship – adjustment for future needs in favour of the wife – division of the asset pool 57.5% to the wife 42.5% to the husband – wife made significant contributions to self-managed superannuation fund – wife primary carer of children – wife’s future needs are greater than husband.

Legislation:

Family Law Act 1975 (Cth), ss.75, 79, 106A

Cases cited:

Bevan & Bevan [2013] FamCAFC 116

Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143
In the Marriage of Pastrikos (1979) FLC 90-897
Rosati v Rosati [1998] FamCA 38

Stanford & Stanford [2012] HCA 52

Applicant: MS NORTHEY

Respondent: MR NORTHEY

File Number: MLC 8773 of 2018

Judgment of: Judge McNab

Hearing date: 6 February 2020

Date of Last Submission: 14 February 2020

Delivered at: Melbourne

Delivered on: 1 May 2020

REPRESENTATION

Counsel for the Applicant: Ms McCreadie

Solicitors for the Applicant: KCL Law

Counsel for the Respondent: Mr Trim

Solicitors for the Respondent: Hutchinson Legal

ORDERS

1. The asset pool will be divided:

   (a)for financial contributions there will be no adjustment in favour of the wife;

   (b)for domestic violence, no adjustment; and

   (c)for future needs, 7.5% in favour of the wife.

2. A division of the asset pool of 57.5% to the wife, and 42.5 % to the husband.

3. That both parties, within 14 days of the date of these Orders, do all acts and things, including but not limited to signing all necessary documents to:

   (a)transfer or otherwise pay out all funds held in the parties’ joint Commonwealth Bank of Australia account (ending #...02) to the husband;

   (b)transfer or otherwise pay out all funds held in the parties’ joint National Australia Bank account (ending #...13) to the husband;

   (c)close all joint accounts, including but not limited to savings accounts, term deposits, credit cards and the like, held by the parties at any financial institution save for the self-managed superannuation fund.

4. That the funds held on trust by KCL Law be distributed as follows:

   (a)the amount of $463,124.00 to be paid to the husband via EFT to his solicitor’s trust account; and

   (b)the balance to be paid to the wife.

5. Prior to any distribution of trust funds to the husband, any amount of child support arrears as at the date of Orders be paid to the wife from the husband’s share of funds held in the KCL Law trust account, and the wife will take all necessary steps to advise the Child Support Agency that such amount has been paid.

6. Within 60 days, the wife do all acts and things necessary, including signing any required documents, to sell her Shares E; and that she meets all costs associated with doing so, including any Capital Gains Tax payable on those shares.

7. That both parties each meet 50% of all educational costs of the children at kindergarten and/or state schools; and it is requested that the kindergarten and/or state school create separate accounts for each of the parents and invoice each parent separately for 50% of all costs.

8. That both parties do all acts and things necessary, including but not limited to signing all documents, to enrol Y into L School for the school year commencing 2021.

9. With respect to the self-managed superannuation fund:

   (a)that each party retains their superannuation entitlement within the fund;

   (b)that, within 30 days, the wife do all acts and things necessary, including signing any necessary documents, to roll out her entitlement in the fund to a superannuation fund of her choosing;

   (c)that, within 30 days the husband provide to the wife any documents that she is required to sign to transfer the self-managed superannuation fund into his sole name; and

   (d)that, within 60 days, both parties do all acts and things necessary, including signing any necessary documents, to enable the husband to retain the self-managed superannuation fund in his sole name; and the husband shall remain liable for all the costs associated with removing the wife from the fund and all ongoing costs associated with the management and compliance of the fund, and shall indemnify the wife with respect to any costs associated with the fund being past, present or future.

10. That the wife shall retain all her superannuation entitlements in Australian Super.

11. That funds held in bank accounts in the children’s names remain in those accounts to be held on trust for the children until such time the children are old enough to legally access those funds (i.e. 14 years old).

12. That each party retain their own vehicle and bank accounts in their name.

13. That each party retain any liabilities in their name and indemnify the other party with respect to all liabilities past, present and future in their respective names.

14. That if either party refuses or neglects to sign or execute and return a document within fourteen (14) days of a written request to do so then the Registrar of the Family Court of Australia at Melbourne is hereby appointed under section 106A of the Family Law Act 1975 (Cth) to sign and/or execute such document on behalf of the party in default upon the non-defaulting party’s lodgement of such a document with the Registry and contemporaneously filing an affidavit of a solicitor on behalf of the non-defaulting party as to the said neglect and/or refusal. The non-defaulting party be at liberty to apply for his or her costs which costs shall be set out by the non-defaulting party in the affidavit to the Registrar with the costs sought to be specified in such affidavit.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLC 8773 of 2018

MS NORTHEY

Applicant

And

MR NORTHEY

Respondent

REASONS FOR JUDGMENT

Introduction

1. This is a property dispute where the applicant wife by further amended application on 20 November 2019 seeks a division of the property pool in a 59.5% split to the wife and a 40.5% split to the respondent husband.

2. On 13 December 2019 the parties agreed to final parenting orders. However the parties did not reach agreement on the appropriate division of the property.

Proposals of the parties

The wife’s proposal

1. The wife’s Outline of Case of 14 February 2020 contends that a division of assets of 59.5% in her favour would be just and equitable.

2. Regarding superannuation, in her affidavit affirmed 20 November 2019 the wife deposes that:

   168. The superannuation accrued during the relationship, and therefore the amount that should be divided between us, is as follows:

   (a) The Husband: $89,163

   (b) Myself: $72,968

   being a total of $162,131.

3. She seeks that the husband transfer her superannuation of $8,097.50 ‘in order to equalise’ their superannuation contributions during the relationship.

The husband’s proposal

1. The husband’s Minute of proposed Final Orders and brief submissions of 13 February 2020 states that:

   a)an equal division of assets should occur;

   b)from the funds held in trust by the wife’s lawyer for the parties (being $1,392,623 from the sale of the house at A Street, Suburb B, Victoria (‘the property’)) the husband should forthwith receive $885,198.00 and the wife shall receive the balance;

   c)with respect of the parties’ self-managed superannuation fund (‘the SMSF’):

   i)      the parties do all things and sign all documents necessary to transfer and split from the SMSF;

   ii)     the wife receive $300,000 worth of entitlements to her nominated fund;

   iii)    the wife then be removed from membership of the SMSF and any entity associated with it; and

   iv)    the wife allocate to the husband any of her balance entitlements,

   d)the wife retain:

   i)      all funds in the parties’ joint National Australia Bank and Commonwealth Bank of Australia bank accounts (being approximately $2,321,206) and the parties forthwith sign all necessary documents and do all necessary things to facilitate this, then close accounts;

   ii)     her Motor Vehicle 1;

   iii)    her shares (currently valued at approximately AUD$152,667), or the net proceeds from sale of them if she chooses to sell them (with the husband to bear half of any Capital Gains Tax liability from the potential share sales); and

   iv)    her part of the property settlement funds already received, or what remains of it,

   e)the husband retain:

   i)      his Motor Vehicle 2, plus the finance secured against it;

   ii)     the SMSF and his entitlements in it, following the wife’s entitlements in it being transferred out of it (as provided at subparagraph 6(c) above); and

   iii)    his part of the property settlements funds already received, or what remains of it, and

   f)the husband pay half the children’s public school and kindergarten fees, in addition to his child-support obligations.

Evidence

1. The wife relied on the following documents:

   a)the wife’s further amended initiating application filed 20 November 2019;

   b)the wife’s affidavit affirmed and filed 20 November 2019;

   c)the wife’s financial statement filed 20 November 2019;

   d)the affidavit of Ms Northey affirmed 20 November 2019;

   e)the affidavit of Ms Northey affirmed 28 January 2020;

   f)the wife’s affidavit affirmed and filed 28 January 2020; and

   g)the wife’s Outline of Case filed 4 February 2020.

2. The husband relied on the following documents:

   a)the husband’s further amended response filed 28 November 2019;

   b)the trial affidavit of Mr Northey affirmed and filed 2 December 2019;

   c)the husband’s financial statement filed 2 December 2019;

   d)the family report of Ms C filed 29 November 2018; and

   e)the family report of Ms C filed 18 November 2019.

Agreed or Uncontroversial Matters

1. The wife is aged 45 and the husband is aged 49. The parties began cohabitation in 2012, married in 2013 and finally separated in September 2016. They are not yet divorced.

2. The parties’ eldest child X was born in 2013.

3. The parties’ second child Y born in 2015.

4. The parties agree that prior to and at the time of cohabitating:

   a)the wife owned a property at D Street, Suburb B that was retrospectively valued at $875,000, with a mortgage of $190,816 leaving equity of $684,184; and

   b)the husband owned a property in Suburb B that had a value in which he had equity of about $1.08M.

5. The husband submits that the contributions from the commencement of the relationship and continuing were roughly equal. The wife submits that the contributions of the parties at the commencement of the relationship were about equal however contributions during the relationship were slightly in her favour as she was the primary caregiver, provided financial support to the family through her wage and assisted the husband in development projects.

6. The asset pool is largely uncontested, with both parties assessing the total pool including superannuation to be worth approximately $2.8 million.

The asset pool

1. The wife’s asset pool summary is as follows:

ASSET	OWNER	VALUE
Funds held on trust	Joint	$1,392,623
Funds held in CBA account #...02	Joint	$229,782
Funds in NAB account ending #...13	Joint	$1,416
Wife’s shares (Shares E) accrued prior to relationship $152,667 minus CGT of $27,057	Wife	$125,610
Funds that the Husband has already had the benefit of as partial property distribution	Husband	$288,390
Funds that the Wife has already had the benefit of as partial property distributions	Wife	$282,290
Funds held in children’s expense account ending #...96	Wife	$4,270
TOTAL ASSETS		$2,324,381
LIABILITIES
Tax overpaid on Wife’s behalf and owed to F Family Trust	Wife	($7,197)
Credit card	Wife	($4,920)
TOTAL LIABILITIES		$12,117
TOTAL NON-SUPERANNUATION ASSET POOL		$2,312,264
SUPERANNUATION
Wife’s superannuation (SMSF)	Wife	$318,095 (as per 2019 tax return of SMSF)
Husband’s superannuation (SMSF)	Husband	$147,179 (as per 2019 tax return of SMSF)
TOTAL SUPERANNUATION AS AT 30.06.2019		$465, 274

1. The husband’s asset pool summary is as follows:

Assets	Owner	Approx Value
Proceeds of A Street, Suburb B (in trust at KCL Legal)	Joint	$1,392,623
Part-property already received	Wife	$282,000
Part-property already received	Husband	$288,100
Joint bank accounts	Joint (NAB + CBA)	$231,206
Shares	Wife	A$152,667
TOTAL ASSETS		E$2,346,596
Superannuation	Owner	Value
SMSF – bank account	Joint	$463,225
TOTAL SUPERANNUATION		$463,225
TOTAL PROPERTY POOL		E$2,800,000

Approach to property proceedings

1. The Full Court in Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC ¶93-143 (‘Hickey & Hickey’) identified a preferred four-step process in property matters under the Family Law Act 1975 (Cth) (‘the Act’):

   a)to identify the pool of assets and liabilities generally, and usually at the time of hearing;

   b)to assess the relative contributions of both the financial, non-financial, direct and indirect nature as specified by section 79(4) of the Act;

   c)to consider the factors as are relevant contained in section 75(2) of the Act; and

   d)to determine whether the Order the Court proposes to make is just and equitable to both parties.

2. This approach was approved in Bevan & Bevan [2013] FamCAFC 116, where the Full Court of the Family Court of Australia considered the High Court’s decision in Stanford & Stanford [2012] HCA 52.

3. Neither party in this case contends that it is not just and equitable for the Court to make property Orders.

Consideration

The asset pool

1. I accept the wife’s formulation of the asset pool. There were no written submissions, or detailed oral submissions directed at determining the differences between the respective estimations of the asset pool.

2. One difference in the estimation of the value relates to the wife’s shares which she acquired prior to the commencement of the relationship. As at trial the estimation of the value of those shares was agreed at $152,667.

3. The wife contended that the value should include a liability for Capital Gains Tax (‘CGT’) of $27,057. As noted above, the husband sought Orders that the wife retain:

   her shares (currently valued at approximately AUD $152,667.00), or the net proceeds from sale of them if she chooses to sell them – with the Husband to bear half of any CGT liability associated with this if the Wife sells them within two months (and the parties shall do all necessary things to apply the Wife’s capital loss from the A Street, Suburb B property to offset possible CGT from the potential share sales).

4. Doing the best I can without the assistance of submissions, it seems that the better approach is to take into account the CGT liability to determine the value of those shares in the property pool. It is likely that those shares will have to be sold to fund the purchase of a home or to otherwise provide for the wife and children. The question of tax offsets can be dealt with by the parties with the benefit of accounting advice. That approach seems to accord with the guidance provided by the Full Court in Rosati v Rosati [1998] FamCA 38 at [6.36].

5. Further, there is a lack of finality in the terms proposed by the husband. No written submission was made by the husband as to why the CGT liabilities in relation to the shares should not be taken into account. I note that the Orders provide for the shares to be sold within 60 days.

6. Otherwise I accept the wife’s estimation of the assets and liabilities of the parties in circumstances where there is no significant difference between them. I find that the total net non-superannuation assets to be $2,312,264 and the superannuation assets are in the sum of $463,225.10.

Section 79 factors

Section 79(4)(a) – Financial Contributions

The husband’s submissions regarding contributions

1. Prior to cohabitation the husband owned a property at G Street, Suburb B.

2. The husband deposes that he is ‘unemployed/self-employed as a sole trader in property development’. He has been out of the paid work-force since about 2013 and says that he ‘intends to use capital tied up in this matter to continue developing properties moving forward’.

3. The husband’s current income is $7,000 per annum, whilst previously it was up to $250,000 per annum. He gave evidence that if he were to become an employee again he expects to earn about $150,000 per annum.

4. The husband also claims that he designed floor plans, prepared the drawings and performed and supervised renovation works on two of the pair’s real property developments in H Street, Suburb J, Victoria, and relies on the wife’s evidence during cross-examination to support the proposition that these projects achieved profits of about $200,000 due to the work he completed.

5. Regarding superannuation, the husband submits that all growth from the SMSF ‘was a direct result […] of my selection of the investment property and the capital improvements that were made to it, directly through my own planning, managing and labour.’ That is, the husband says that the parties’ SMSF has increased in value due to a profit on a real property development in Suburb J upon which the husband asserts that he performed most of the renovation works.

The wife’s submissions regarding contributions

1. The wife works full-time as a Professional at Employer K, earning approximately $150,500 per annum, plus approximately $18,000 in allowances.

2. The wife deposes that:

   a)the initial contributions to the non-superannuation pool were roughly equal;

   b)contributions during the relationship were slightly in favour of the wife because she was the primary caregiver during the relationship, including during periods of time when the husband was not working;

   c)she did the bulk of the homemaker duties even whilst the husband was not working;

   d)in the course of the relationship she received a redundancy package from Employer E of $256,124 accrued over 17 years of working;

   e)she made significant post-separation contributions financially and through her primary care of the children; and

   f)the husband should not benefit from her significant superannuation that she owned prior to the separation (approximately $192,171), or any superannuation earned by her post-separation ($15,143).

Finding on contributions

1. Whilst there were disputes that are carried through the affidavit material regarding contributions, in my view the evidence supports a finding that the parties’ contributions to non-superannuation assets prior to separation was equal. Both parties make submissions to that effect.

2. In the period since separation, the wife has made a greater contribution both as a home maker and carer for the children and through her income.

3. Since separation the husband’s has been minimal. He gave evidence that his earnings as a property developer have been minimal. The husband does not appear to hold qualifications as a developer or manager of developments which will have impaired his capacity to provide for his children. The periods of modest success as a developer (with the assistance of the wife when they were in an intact relationship) are taken into account in finding that contributions to non-superannuation assets were equal.

4. The Court finds that the parties made roughly equal financial contributions, on average, taking into account the contributions from when the husband was earning before 2013. From 2013 until the present, the significant financial contributions have been made by the wife, as the husband ‘barely makes any money’ since becoming unemployed. I also note that wife’s contribution has been made whilst caring for the X and Y.

1. The wife seeks adjustments in relation to care of the children, income earning capacity and the husband’s failure to financially contribute to the children’s needs.

2. The husband seeks an adjustment for contributions and income earning capacity.

Future needs

1. The wife seeks an adjustment of the pool in her favour, pursuant to section 75(2) factors, being:

   a)her primary care for the two children, aged 6 and 4 (currently 10 nights, and 9 nights longer term);

   b)her lower income earning capacity than her husband, saying that while her husband previously earned $200,000-$250,000 and still has the capacity to earn this much but he currently chooses not to work;

   c)the husband not making regular child support payments; and

   d)the husband not contributing to the children’s living or educational costs.

2. The husband says that the parties’ future needs are equal, and notes that while there is currently a ‘10:4’ parenting arrangement with approximately half of holidays, this will move to a ‘9:5’ arrangement and half holidays in the first term of 2021.

3. The husband also submits that, while he is in general good health, his ‘earning capacity at this point is low’ because he does not ‘have the capital to really get [his] business started.’

s. 75(2) – matters to be taken into consideration

1. The wife is aged 45 and the husband 49. She has the substantial care of the children, although the parenting Orders made in December 2019 provide that the husband will move from a ‘10:4’ to a ‘9:5’ (plus half the school holidays) in the first school term of 2021.

2. At the time of hearing the wife works full time and earns about $156,000 per annum plus a motor car allowance. As noted above, the husband’s income as a property developer has been minimal with a current income of about $7,000. The evidence of the husband’s efforts to obtain paid employment from the date of separation were 5 responses to job advertisements with 3 in 2017 and 2 in 2019 (Exhibit 1). Those efforts were desultory. The husband gave evidence that he expected to be able to obtain employment with a salary of about $150,000 per annum which would accord with what he was receiving as salary prior to pursuing property development.

3. Curiously, the husband was asked in re-examination regarding his qualifications as they are disclosed in his résumé. That document indicates that he holds qualifications from University. The husband volunteered in re-examination (in circumstances where no question had been put regarding the matter in cross examination) that he did not hold those qualifications either from the named universities or at all.

4. Whilst no submission has been made by the husband regarding this evidence, I presume that he volunteered this evidence as a means of establishing that he may have difficulty obtaining well-paid employment because of a lack of qualifications. The husband has not made it a point in his case that he is unqualified and there has been no disclosure in relation to this evidence. No academic transcript was produced either to the wife or the Court.

5. I do not regard the husband’s evidence regarding his qualifications as conclusive nor do I regard it as a basis for finding that he will have difficulty in the future to obtain reasonably well-paid employment. The husband has worked in various fields of employment since about 1997 and consistently held well paid jobs. This is notwithstanding his asserted lack of formal qualifications.

6. The husband has been recalcitrant in relation to child support responsibilities and I presume that the wife will have to bear the burden of that into the future. The husband has withheld child support payments due in the course of this proceeding and make payments sporadically and often close to the date of court events.

7. The Orders proposed by the wife regarding any unpaid child support payments being subtracted from payments to the husband are appropriate and supported by the evidence in this proceeding: see wife’s trial affidavit at [183], [207], [237] – [245].

8. The husband’s conduct in failing to make timely payments of child support, or to make reasonable efforts to obtain employment so as to make an adequate contribution to the maintenance of the children, is reasonably indicative of the fact that the wife will continue to have the greater share of cost of supporting the children.

9. The wife’s future needs will be greater than the husband because of her having a greater share of the care of the children.

10. I note what said by the Full Court of the Family Court in In the Marriage of Pastrikos (1979) FLC 90-897 at 70-653:

    Without excluding other significant factors from consideration, any disparity between the parties’ financial resources and the obligation of either to provide a home for the children may make it just and equitable for the Court to increase the share of a party beyond that amount which would be justified solely by the contribution of that party to the property.

Conclusion

1. According to the reasons above, the asset pool will be divided:

   a)for financial contributions, there will be no adjustment in favour of the wife;

   b)for domestic violence, no adjustment; and

   c)for future needs, 7.5% in favour of the wife.

2. This results in a division of the asset pool of 57.5% to the wife, and 42.5% to the husband.

3. To give effect to these Orders, the husband shall receive a payment of $463,124 calculated as follows:

   a)$2,312,264 x 42.5 = $982,712.20.

   b)$982,712 - $288,390 (funds the husband has already received) = $694,322.20.

   c)$694,322 - $231,198 (balance of joint accounts) = $463,124.

Superannuation

1. As at the date of hearing, the superannuation funds comprise $463,225.13, with $318,095 comprising the wife’s contributions.

2. The husband seeks Orders equalising those funds. An Order of that kind would not be just or equitable. The wife’s contribution was about 70% of the funds ‘rolled in’ to create the joint fund. The funds have increased in proportion to the amounts invested and the wife continued to make contributions. The initial contributions made by the wife derived from her long term employment.

3. The husband should not obtain the benefit of a share of the wife’s superannuation accrued post-separation given that there are long periods where he either has not worked or has not earned income (when he has the capacity to do so).

4. Each party should retain their own superannuation entitlements. The submission that the husband contributed $200,000 to the fund as a result of his labours in managing the renovation of investment properties is not supported by admissible evidence. In any case, the wife was also involved in managing the renovations.

5. The Orders that the wife contends regarding superannuation (as set out in her final submissions) are appropriate, subject to adjustment to reflect the division of the non-superannuation assets.

I certify that the preceding fifty-nine (59) paragraphs are a true copy of the reasons for judgment of Judge McNab

Date: 1 May 2020