ODENS & ODENS

FEDERAL CIRCUIT COURT OF AUSTRALIA

ODENS & ODENS

[2021] FCCA 575

Catchwords:
FAMILY LAW – Property – marriage in excess of 22 years – consideration of property entitlements in circumstances where the only asset available for distribution is superannuation – wife seeking 50% be split from the husband’s self-managed superannuation fund – husband opposes on the basis that the real property in which the fund is invested should only be sold upon the parties reaching retirement age in order to maximise their entitlements – considerations of justice and equity.

Legislation:

Bankruptcy Act 1966 (Cth), ss.58, 116, 116(2)

Family Law Act 1975 (Cth), ss.75, 79, 81, 90XC, 90XT, 106A, 117

Federal Circuit Court of Australia Act 1999 (Cth), s. 3

Federal Circuit Court Rules 2001 (Cth), rr. 21.02, 21.10, 21.15, 21.16

Cases cited:

Bevan & Bevan [2013] FamCAFC 116

Biltoft & Biltoft (1995) FLC 92-614

Clauson v Clauson (1995) FLC 92-595

C & C (2005) FLC 93-220

Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225

Ferguson & Ferguson (1978) FLC 90-500

Ferraro v Ferraro (1993) FLC 92-335

Hickey v Hickey and Attorney General for Commonwealth of Australia (2003)

FLC 93-143

Kohan & Kohan (1993) 93-340

Lee Steere v Lee Steere (1998) FLC 91-626

Russell v Russell (1999) FamCA 187

Wardman & Hudson (1978) FLC 90-466

Applicant:

MS ODENS

Respondent:

MR ODENS

File Number:

ADC 1582 of 2019

Judgment of:

Judge Brown

Hearing date:

16 December 2020

Date of Last Submission:

16 December 2020

Delivered at:

Adelaide

Delivered on:

24 March 2021

REPRESENTATION

Counsel for the Applicant:

Ms Miller

Solicitors for the Applicant:

Precision Legal

The Respondent:

The Respondent appearing in person

ORDERS

Pursuant to section 90XT(1)(a) of the Family Law Act 1975 (Cth) (“the Act”) there be a splitting order, in the sum of one hundred and forty one thousand nine hundred and sixty one dollars ($141,961.00), made in the wife’s favour out of the funds currently standing in the husband’s name in the Mr Odens self-managed Superannuation Fund (“SMSF”), with the husband to bear the incurred costs.
The trustee of the SMSF do all things necessary to give effect to order (1) hereof and within twenty eight days (28) of the making of this order to rollover the sum to be split in the wife’s favour to the superannuation fund as nominated by the wife.
The wife will serve a copy of these orders on the trustee of the husband’s SMSF within twenty eight days (28) of the date of these orders and thereafter the aforesaid trustee has liberty to relist the matter in the event that the trustee is unable to comply with order (1) hereof.
The trustee of the SMSF and the wife in accordance with the Family Law (Superannuation) Regulations 2001 shall do such acts and things and sign all necessary documents as are required to calculate the payment entitlements of the wife in accordance with order (1) hereof.
Pursuant to section 106A of the Act the Registrar of the Court at Adelaide is appointed to execute all necessary documents to give effect to these Orders if the trustee defaults in executing same.
Including but without limiting the effect hereof, the husband shall retain for his sole use and benefit absolutely free from any further claim or demand of the wife:
(a)the furniture and furnishings in his possession, power and control;
(b)any motor vehicle in his possession;
(c)all savings, shares and investments in his name;
(d)any superannuation entitlement, long service leave, annual leave or other work related benefits, standing in his name subject to order (1) hereof;
(e)his personal effects; and
(f)any other real and/or personal property and/or financial resources of the husband or in the husband’s name and/or possession not otherwise specified herein.
Including but without limiting the effect hereof, the wife shall retain for her sole use and benefit absolutely free from any further claim or demand of the husband:
(a)the furniture and furnishings in her possession, power and control;
(b)any motor vehicle in her possession;
(c)all savings, shares and investments in her name;
(d)any superannuation entitlement, long service leave, annual leave or other work related benefits, standing in her name;
(e)her personal effects.
(f)any other real and/or personal property and/or financial resources of the wife or in the wife’s name and/or possession not otherwise specified herein.
All outstanding applications are dismissed and the proceedings are removed from the list of matters awaiting finalisation.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT ADELAIDE

ADC 1582 of 2019

MS ODENS

Applicant

And

MR ODENS

Respondent

REASONS FOR JUDGMENT

Introduction

These reasons for judgment relate to the settlement of issues associated with the division of matrimonial property following marital breakdown, particularly how superannuation holdings should be allocated between former spouses.
The applicant in the case is Ms Odens “the wife”. The respondent is Mr Odens “the husband”. The parties married in 1985 and finally separated in December 2008. They are now divorced.
Accordingly, the marriage between them was one in excess of 22 years in duration. The marriage produced two children. They are Ms B, born in 1991, and Ms C, born in 1993.
Regrettably, there are no real or personal assets currently available for division between the parties, notwithstanding the length of their relationship, which for reasons to be delineated shortly, was a financial debacle for each of them.
What modest financial resources are available for distribution between them is constituted in superannuation holdings standing in their respective names. This case turns on issues relating to the nature of those holdings and how, if at all, they are to be allocated between the parties.
The wife has holdings in a large industry fund. In somewhat controversial circumstances, the husband withdrew his holdings in a retail superannuation fund and rolled them into a self-managed fund, which he controls. This fund has invested the monies held in a piece of domestic real estate, which is leased to a tenant.
The husband contends that this is a prudent and sound investment and, when the parties come to retirement age, it will provide each of them with sufficient funds to purchase a comfortable home to support them, once each has withdrawn from the workforce.
The wife does not agree. For a variety of reasons, she does not trust the husband and does not wish to be beholden to him in respect of her future financial security. In these circumstances, she does not want to have any interest – either direct or tangential – in any financial enterprise subject to his control or judgment.
Rather, she wishes there to be a clean break, so far as her financial involvement with the husband is concerned, given the marital relationship between them has been over for many years and the two have no other form of involvement with one another.
It is further her position that such an outcome is consistent with the legislative provisions applicable to the alteration of property interests following divorce, which are contained in section 81 of the Family Law Act 1975. In general terms, these place a duty on the court to end financial relations between separated spouses.
From the wife’s perspective, the precipitating factor leading to the breakdown of the parties’ marriage was the failure of a business venture, in which she and the husband were both involved. It is her case that this failure is largely attributable to the husband’s conduct and she knew little, if anything about it.
The corporate entity, controlling the business concerned, was placed into liquidation, by its creditors, and in conjunction with this corporate failure, the husband himself became bankrupt, on his own petition, in 2009, following the parties’ final separation. The debts involved, on the wife’s case, were in the vicinity of $700,000.00.
It is essentially the wife’s case that the failure of the business was due to a combination of the husband’s incompetence; his financial overreach; and his general disregard for the interest of others, including both herself and the trade suppliers and financiers of the business.
It is her position that she knew nothing of the financial disaster engulfing the business and the level of its debts, which arose because it expanded too quickly, without adequate provision to remain solvent.
The wife herself had prior retail experience in sales as the owner of a small shop. With the success of her business, the husband left paid employment and persuaded her to expand operations. She remained involved in the practical side of the business but left management and financial matters to the husband.
The husband does not agree, asserting that it was the wife who was financially profligate, aspiring to a lifestyle which the parties’ finances could not support and in effect, he carried the can, with his bankruptcy, for the wife’s ineptitude.
Given this complex emotional dynamic, which the court need not attempt to resolve definitively in the course of the current proceedings, it is axiomatic that the parties neither trust nor particularly like one another.
As a consequence of the failure of the business, marital assets, including the parties’ family home, were seized and sold to pay creditors. The wife herself was rendered homeless and became severely depressed as a consequence. She was left with only a car valued at $2,000.00. She remains bitterly disposed towards the husband, whom she regards as reckless and irresponsible.
One of the consequences of bankruptcy is that, pursuant to the provisions of section 58 of the Bankruptcy Act 1966, all the property of a bankrupt person vests in the trustee appointed to administer the resulting bankrupt estate. Thereafter, pursuant to the provisions of section 116 of the Bankruptcy Act 1966, such property is used to pay the established debts of the bankrupt person.
However, there are some exceptions to the property which so vests in the trustee. These exceptions are delineated in section 116(2) of the Bankruptcy Act 1966 and relevantly to these proceedings, include any interest the bankrupt holds in a regulated superannuation fund.
In strictly technical terms, superannuation, whilst in its accumulation phase, is not owned by the individual in whose name it stands but rather it is owned by the trustee of the relevant superannuation fund, until its release is triggered by a specified event, usually permanent retirement from the workforce or the attainment of a specified age, usually 65 years.
Over the period since the late 1980’s, particularly since the inception of compulsory superannuation in 1991, superannuation has become an increasingly important repository of wealth for Australians, particularly as life spans in this country have extended and, as a consequence, preparation for retirement has become more important for a large proportion of its citizenry.
As a consequence of these societal changes, in 2001, the legislature inserted Part VIIIB into the Family Law Act 1975. This part of the Act enables courts, such as this one, to split the superannuation interests of separated spouses between them, according to principles delineated in the Act, in the event of marital breakdown.
The legal principles to be applied to this process of apportionment of superannuation interests are the same as those which relate to the alteration of interests in more conventional property contained in section 79 of the Family Law Act 1975. However, the nature of the proprietorial interest is different.
Superannuation is a form of compulsory but deferred saving designed to equip the person entitled to it to have some financial support in retirement. As such, it is not readily convertible to cash. Rather, its availability to its holder depends on the occurrence of specific events, most usually permanent retirement from the workforce or the attainment of the age of 65.
As a consequence, Part VIIIB envisages one spouse’s superannuation holdings being split off and rolled over into a fund standing in the name of the other relevant spouse, prior to the vestment of such funds as a consequence of the triggering event, which authorises distribution. Necessarily, given such a rationale, each spouse concerned has complete autonomy in respect of how his/her superannuation is to be invested until it vests.
Prior to the advent of Part VIIIB, the court was somewhat hamstrung in how it approached the equitable apportionment of superannuation holdings, particularly in cases where one spouse had large holdings in respect of superannuation and the other only modest holdings. This being a not unusual occurrence, given many women have historically left the workforce to engage in home duties.
Accordingly, prior to 2001, the court approached superannuation either by compensating a spouse without superannuation with a greater proportion of whatever conventional assets were available or creating a formulaic process of allocating the relevant superannuation on the date it actually vested. Necessarily, this was both a complex and somewhat haphazard exercise given the obvious uncertainty as to when that date would actually be and what would be the extent of the holdings at that time.
The controversy arises in this case because the wife wishes that, whatever interest the court assesses she has in the husband’s currently self-managed funds, should be split off into a fund, standing in her name, which she should be authorised to nominate.
In theoretical terms, she is also open to the court taking the same approach in respect of her holdings in her industry fund and it making whatever split it deems just and equitable out of it into any fund nominated by the husband.
The husband opposes this course and asserts that this would lead to the dismantling of his self-managed fund with dire financial consequences for him personally. It is his case that it makes more sense for the financial stratagems, which he has devised in respect of his fund, to be allowed to mature, which will benefit not only him, in due course, but also the wife.
I have indicated the wife’s theoretical acquiescence to the court taking this approach in respect of her industry fund advisedly. The husband has been self-represented throughout the proceedings to date, which from the wife’s perspective have been unduly protracted due to the husband’s delay and unreasonable disinclination to agree to what she considers to be the only legally acceptable outcome in the case.
She would characterise the case as being not unduly complex. It being her position that it is largely axiomatic that she should not be beholden to the husband’s self-managed fund, if she does not wish to be. In these circumstances, she asserts that she is entitled to costs.
Through her legal representatives, she contends that the husband’s intransigencies in refusing to enable her to split any of her superannuation entitlements out of the husband’s self-managed fund have led to the need for this final hearing, in which she has been represented but the husband has not.
Her industry based superannuation holdings are modest, standing currently in an amount of around $79,000.00. In these circumstances, she would wish there to be no split made from her fund to take into account the costs which she has incurred in the matter going to final hearing.
Needless to say, the husband greets this proposal with a significant degree of disapprobation. It is his position that he has consistently offered the wife the opportunity to have an equal division of superannuation to reflect the length of the marriage but would want this to reflect her interest in the self-managed fund.
As previously indicated, it is his position his fund is prudently managed and astute and will benefit both parties, as it matures, but will be deleterious to each of them, but particularly he himself, if it has to be dismantled. In these circumstances, he contends that it would be grossly unfair to him if the wife retains significantly more superannuation than him through the award of costs in this way.

Background

The wife was born in 1964. The husband was born in 1964. During the parties’ marriage, the husband worked for Employer D and became its Manager. He worked for the company for about fifteen years. The wife was also employed, in retail, in the first ten years of the parties’ marriage.
In his affidavit material, the husband deposes that he was made redundant by the company. He describes himself as being a successful executive during his period with Employer D. I presume he was able to accrue some superannuation, during this period. However, what was its extent is not known to me.
It is his position that it was the wife who wished to go into the sales business, whilst he was more cautious. He deposes that initially the business prospered under his guidance. He asserts things began to unravel financially, when the wife decided to build a new home from scratch.
On the other hand, the wife asserts that she began a modest one outlet shop at E Shopping Centre, which she ran, with great success alone, for around nine years. After the husband left Employer D, he became involved in this business, which established outlets at other shopping centres and took on more staff.
It is the husband’s case that he put his redundancy of around $200,000.00 into the business. For her part, the wife is critical of the husband for failing to pay staff entitlements during this period and for borrowing imprudently to expand the business, using the parties’ home as collateral for the expansion.
In 2009, the parties’ financier froze the parties’ various accounts. It is the wife’s position that this was the first time she had become aware that the business was not prospering. In this context, she deposes as follows:
“The respondent had lied to me about our financial situation during the marriage as I only later found out about the extent of the debt we were in at the end of the relationship. The respondent would ask me to sign certain things in relation to the businesses during the relationship and our personal finances and assured me that everything was fine so I signed what he put in front of me. For example he would say it was for credit in relation to stock purchases.”[1]
[1] See wife’s trial affidavit filed 24 September 2020 at [3]
For his part, the husband refutes these claims. I do not find it easy to understand his affidavit, which responds to this aspect of the wife’s evidence. As best I can glean, it would appear to be his position that the wife did not allow him to run the new stores properly and made a number of bad decisions. He is critical of Ms Odens’ legal team for portraying her as a victim, who does not understand how loans work, when the contrary is the case.[2]
[2] See husband’s trial affidavit filed 10 November 2020 at [41] – [43]
In my view, it is not necessary to resolve these disputes, even if I had more evidence to enable me to do so. Rather, what the evidence demonstrates is that the parties do not trust the business acumen of the other. In these circumstances, the wife objects to being beholden to financial decisions made by the husband in respect of any of her future superannuation entitlements.
In 2003, the husband had superannuation entitlements with Super Fund F), an industry fund, which he later transferred to Super Fund G, a retail superannuation fund. These were accrued during his employment with Employer D.
It is his case that his superannuation holdings were significantly greater than those of the wife due to his superior income at the time. It is his case that he worked extremely hard and made many sacrifices to advance his career at Employer D over many years.

As delineated above, these funds survived the husband’s bankruptcy. In this context, although the wife asserts that the husband disposed of some other items of property, namely a houseboat and a ski boat, outside of his insolvency, she does not contest that otherwise there are now no conventional items of property, available for distribution between her and Mr Odens, relating to the parties’ marriage.
It is, however, her position that it is open to the court to make an order in respect of the parties’ respective superannuation holdings, which each of them accumulated during their lengthy marriage and afterwards. The husband does not appear to dispute this submission.
Time limits apply to the commencement of proceedings under the Family Law Act 1975 in respect of orders relating to the alteration of property interests, including in respect of the splitting of superannuation entitlements. Such applications must be brought within 12 months of a divorce order having been made dissolving the relevant marriage between the parties concerned.
In 2017, the wife became aware that the husband had set up a self-managed superannuation fund entitled the Mr Odens Superannuation fund (“the superannuation fund”) utilising his superannuation from Super Fund G, which had been rolled into this fund.
The major asset of the fund is a property situated at H Street, Suburb J. This property is subject to a mortgage in favour of Bank SA and is tenanted. It is her position that the husband’s superannuation fund, particularly its equity in the H Street, Suburb J property, is valued at $283,000.00.
Following the parties’ separation, the wife has been employed in a variety of positons in retail and has been a member of Super Fund F. Currently, she is employed as a store manager by Employer K at an annual salary of approximately $65,000.00. At the present time, she holds superannuation entitlements in Super Fund F to an amount of approximately $78,712.00.[3]
[3] See Exhibit B
It would appear to be the case that much of these holdings were accrued after the parties’ separation and she had only modest superannuation during the marriage. In this context, she has provided a statement, from Super Fund F, indicating a closing balance of $11,579.21 as at 30 June 2008.[4]
[4] See Exhibit C
The effect of the husband’s evidence is that he has no confidence in professionally managed forms of superannuation, which he asserts are strongly reliant in investing in companies listed on the stock exchange. In this context, he prefers to invest literally in concrete assets, which is the reason why he has elected to commence a self-managed fund, the principle asset of which is a piece of real property.
Mr Odens has deposed as follows:
“In around 2017 I contacted my wife to advise her I had set up a self-managed super fund and even in bankruptcy I was able to buy a home, I did not want the mother of my children living in poverty and borrowing money regular from her children so I told her I thought she could do the same and I never once told her this was entirely done to look after myself, my children deserve something for the sacrifice they put in helping us build a once very substantial wealth.
…
I explained to her how an equalisation could still be achieved using the new property to maximise our retirement pool by granting a share of the property and the future valuation be shared on the sale of this property on her/my retirement age date. I felt the significant loss from buying at the top of the market, selling to soon would destroy our superannuation pool after settlement and I would effectively be left with nothing to house myself in and Ms Odens’ share would disappear as well, and nothing to leave my kids would be heart breaking for me.”[5]
[5] See husband’s affidavit filed 10 June 2019 at [11] – [13]
The wife agrees that Mr Odens met with her to discuss this proposal, which she did not favour. The evidence indicates that Mr Odens established his self-managed fund on 16 February 2016. It was managed by a corporate trustee – Odens Pty Ltd, of which the husband was the sole director and shareholder.
When the wife learnt of the change in the nature of the husband’s superannuation fund, she sought legal advice and commenced proceedings, in this Court, on 18 April 2019. The following year, the husband commenced divorce proceedings and a divorce order became absolute, in respect of the parties marriage, on 2 November 2020. Accordingly, the wife’s application, notwithstanding the parties’ long separation, does not require the court’s leave to proceed.
Currently, Mr Odens is self-employed. He operates a business known as L Group. He hopes to expand the business and operate it as a franchise. In May 2018, the business received some media coverage in the Newspaper, which indicated that Mr Odens had been bankrupted again after his bankruptcy in 2009.
In oral evidence provided to the court, Mr Odens confirmed that this was the case but had again been discharged from bankruptcy. This further bankruptcy has heightened Ms Odens’ concerns regarding any personal exposure she may have to the husband’s self-managed fund. She is also concerned regarding the legality of Mr Odens being a director of Odens Pty Ltd, particularly as the company was deregistered by ASIC on 30 June 2019.
As a consequence of taking advice about the husband’s self-managed superannuation fund, the wife’s solicitors wrote to the accountant who has been retained by Mr Odens to prepare the financial statements for the fund requesting a report into the fund’s status. The accountant concerned is Mr M of the firm N Accountants.
Mr M prepared the requested report in September of 2020 and Ms Odens relies upon it.[6] As previously indicated, Mr M reported that Odens Pty Ltd was deregistered on 30 June 2019 due to a failure to pay ASIC fees and remains so. Mr Odens is apparently in the course of preparing documentation to have himself and another family member appointed as trustees of the fund.
[6] See Exhibit A
More significantly, Mr M advises that he has prepared the fund’s financial statements for 30 June 2019, which indicate it holds the following assets:
·H Street, Suburb J, valued at $410,042.00;
·It is subject to a loan to Bank SA in an amount of $203,174.00;
·A loan to Mr Odens in an amount of $78,889.00;
·Cash at bank in an amount of $1.00; and
·Owes tax in an amount of $2,693.00.
Accordingly, Mr M values the fund at $283,922.00. If the H Street, Suburb J property is sold for more than its net proceeds, it would attract capital gains tax. Of itself, such an outcome would not trigger any requirement for the loan made to Mr Odens to be repaid, as Mr M regards it as a separate asset to the property.
However, from Ms Odens’ perspective, she is alarmed at the prospect for the fund to lend further amounts to Mr Odens, which may potentially affect her entitlements, if she remains in the fund as the husband advocates. Her recent discovery of the loan reinforces her desire to have her entitlements to the husband’s superannuation split off into a fund to be nominated by her.
As such, the major controversy, which the court is required to resolve, concerns the husband’s superannuation fund. It is the wife’s position that she has no desire to be beholden to Mr Odens and the potential vagaries of his self-managed superannuation fund. Essentially, she wishes to sever any financial relationship with him.
In these circumstances, she seeks the sale of the H Street, Suburb J property, so that there can be a split of the superannuation funds’ assets, made in her favour, which she can roll over into the superannuation fund of her preference.
On the other hand, it is the husband’s position that this will be an exercise in financial imprudence and it is better for there to be an allocation, in the wife’s favour, in respect of his superannuation fund. This will not require the sale of the H Street, Suburb J property, which he would categorise as an astute purchase, as the property is growing in value and so is likely to provide both he and Ms Odens with significant financial security, when they reach the age of retirement.
In order to finalise the proceedings, the wife seeks that the husband’s interest in his self-managed fund be divided 50/50% between the parties in recognition of what she would regard as their disparate but equal contributions towards the acquisition and preservation of the fund during their lengthy marriage. As previously indicated, she would want such a split to be rolled into a fund of her preference.
In respect of her own superannuation, the larger proportion of which she acquired in the period after the parties separated, she proposes a 65/35% division to reflect what she assesses to be her superior contributions in this period. As previously indicated, the amount concerned is $78,712.00.[7] Her balance was $11,579.21 as at 30 June 2008.
[7] See Exhibit B
35% of this figure is represented by the sum of $27,549.00. It is the wife’s case that this sum should not be split off from her superannuation. Rather, it is her position that this sum should be notionally allocated to her as costs due to her from the husband, whom she contends has unduly and unreasonably delayed the proceedings, adding to her expense.
Essentially, it is her case that it is unarguable that she should be authorised to split off her entitlements in the husband’s superannuation to the fund of her choice and the conduct of the husband, in delaying this outcome and requiring the matter to proceed to final hearing, should be penalised.
Needless to say, the husband opposes this outcome and contends that it would be grossly unfair to him and leave him with only token superannuation and so ill-prepared for retirement. He proposes that each party should bear his/her own costs. These reasons for judgment are directed to resolving these controversies between the parties.

Conduct of the proceedings to date

The wife commenced these proceedings on 18 April 2019. Her application was personally served on the husband on 24 April 2019. The husband filed his responding documents (but not a statement of his financial circumstances) on 10 June 2019 proposing a division of assets 75/25% in his favour and more importantly seeking an order that the H Street, Suburb J property not be sold until the parties reached retirement age.
On the first return of the parties’ respective applications (13 June 2019), they were referred to a conciliation conference which was appointed for 15 August 2019. The matter did not resolve at the conciliation conference.
In these circumstances, the registrar concerned made a number of procedural orders which required the husband to obtain advice, at his sole expense, regarding whether the self-managed fund was compliant. In addition, he was required to provide to the wife’s solicitors all documents relevant to the superannuation fund. A further conciliation conference was appointed and the case adjourned until mid-December 2019.
The re-appointed conciliation conference did not take place. It was consensually administratively adjourned. The husband did not appear on the adjourned date. As a consequence, the case was adjourned until 13 February 2020. The husband was directed to attend court on this date and he was forewarned that, if he did not, the wife would be granted leave to proceed with her application on an undefended basis.
The husband did not attend on 13 February. In these circumstances, the wife was directed to file any amended application by 21 May 2020 and the matter was fixed for undefended hearing on 24 June 2020. The hearing did not proceed, as the wife had recently discovered that the superannuation fund had apparently been deregistered. In these circumstances she requested the adjournment of the undefended hearing, which was listed for 12 August 2020.
When the husband learnt of this date, he sought that it be re-scheduled. This led to a listing on 9 October 2020. On this occasion, each party attended. The husband indicated a willingness to attempt to resolve the issues consensually. However, this could not be achieved in the time available and the case was adjourned for about a week to enable further discussions to occur.
These discussions did not lead to the resolution of the case, which was fixed for final hearing on 16 December 2020. This hearing proceeded. It is the wife’s position that the husband’s conduct has unreasonably delayed the proceedings and he has missed a number of significant occasions during the course of the proceedings.
It is further Ms Odens’ contention that Mr Odens has been recalcitrant in providing details of his self-managed fund and it was she who was required to seek the required information about it from Mr M, at a cost to her of $550.00.
Ms Odens’ solicitor has calculated the disbursements incurred by her client, including counsel’s fees, to be in the vicinity of $3,056.50. These do not include Ms Miller’s fees for the hearing of 16 December.
In addition, if the cost of the proceedings is calculated by reference to the schedule annexed to the court’s rules, the costs so calculated come to $6,682.00. However, it is Ms Odens’ evidence that her total legal fees, including disbursements and counsel’s fees, are significantly greater and total $28,128.00, justifying her submission that considerations of justice dictate that there should be no split made out of her superannuation in the husband’s favour.
The wife concedes that the order which she seeks in respect of costs can only be characterised as an indemnity costs order. It is her case that such an order is justified in the circumstances given the husband’s stringent opposition to allowing her interest in the self-managed fund to be split off and the other delays in the case, which she characterises as being solely attributable to his conduct.
More significantly, she asserts that any order for the husband to pay her a fixed sum of cash is likely to be nugatory given his financial circumstances and prior conduct. She doubts that he will comply with such an order. In these circumstances, she is prepared to defer the payment of her costs until she reaches retirement age.

The legal principles applicable

The process to be followed for the division of the parties’ property is well established by law.[8] The relevant legal principles are primarily contained in sections 79 and 75(2) of the Family Law Act 1975. I am required to follow a number of specific steps.
[8] See Lee Steere v Lee Steere (1998) FLC 91-626; Ferraro v Ferraro (1993) FLC 92-335;
In the first step, I must ascertain what are the parties’ assets and liabilities available to be divided between them. The normal rule is that those assets are to be determined as at the date of trial.[9]
[9] See Wardman & Hudson (1978) FLC 90-466; and Biltoft & Biltoft (1995) FLC 92-614
In the second step, I must ascertain the contributions, which each party has made towards the matrimonial pool of assets, as I have found them, following the first step. Contributions fall into two broad categories.
The first kind is contributions to the property: financial contributions and non-financial contributions, made directly or indirectly, by or on behalf of a party to the marriage to the acquisition, conservation or improvement of any of the property.
The second kind is contributions to the welfare of the family: in the words of the section, “the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage, including any contribution made in the capacity of home maker or parent.”[10]
[10] See Family Law Act s79(4)(c)
It is clear from the authorities that this second kind of contribution must be given appropriate weight and is not to be treated as a token matter or as a contribution which is inherently less valuable or important than a financial contribution to property.
The third step involves the assessment of the parties’ prospective needs, by reference to the factors set out in section 75(2) of the Family Law Act 1975. Pursuant to section 75(2)(o), the court is entitled to take into account “any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account”.
Finally, in determining what order the court should make under section 79, the court must be satisfied that in all the circumstances, it is just and equitable to make the relevant orders. Overall, it is the justice and equity of the actual orders that the court must consider.[11]
[11] See Russell v Russell (1999) FamCA 187
Accordingly, the fourth step is for the court to take a step back and examine whether the orders it proposes are just and equitable. These considerations must also inform each of the preceding steps. [12]
[12] See Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 at 78,386 [39] and Bevan & Bevan [2013] FamCAFC 116 at [60]
Pursuant to section 90XC of the Family Law Act, superannuation interests are to be treated as property. As such, they attract the provisions of section 79(4) of the Act.
In C & C,[13] the Full Court of the Family Court has described superannuation as a different “species of asset” from other forms of property.
[13] C & C (2005) FLC93-220
This is because superannuation, particularly in its accumulation phase, cannot be easily translated into cash, unlike other more “conventional” assets, such as land and personal property, and so have its value accurately determined by sale.
Superannuation is a form of compulsory saving for retirement. As such, it must be preserved until its crystallisation on the occurrence of some specified event, usually permanent retirement from the workforce.
In C & C, the majority of the Full Court of the Family Court held as follows:
“In summary, then, the trial Judge has a discretion as to how superannuation interests will be treated in a particular case. If superannuation is not included in the list of property but rather made the subject of a separate pool, it will be necessary where a splitting order is sought, or extremely prudent where no such splitting order is sought (in order to ensure that justice and equity is achieved) to:
a)value the superannuation interest (according to the Regulations if an order under Part VIIIB is sought or according to the Regulations or otherwise if no order is sought);
b)consider and make findings about the types of contributions referred to in s 79(4)(a), (b) and (c) which have been made by the parties to the superannuation interests on either a global approach or an asset by asset approach depending on the circumstances;
c)consider the other factors in s 79(4) being the matters in s 79(4)(d), (e), (f) and (g); and
d)ensure that pursuant to s 79(2) the orders in relation to the parties’ property, and any order under Part VIIIB in relation to superannuation interests are just and equitable.
In the context of a consideration of the matters referred to in sub-paragraphs (b) and (c) of the last paragraph, the following matters may well be relevant: the relationship between years of fund membership and cohabitation (if applicable), at separation and at the date of hearing; preserved and non-preserved resignation entitlements at those times; and any factors peculiar to the fund or to the spouse’s present and/or future entitlements under the fund.”[14]
[14] See C & C (supra) at 79,646
The rationale behind the majority’s reasoning in C & C appears to be that, by reason of its special nature, it is often appropriate to assess contributions to superannuation interests separately to contributions made towards other more “conventional” assets.
This is so one or other of the parties’ contributions to that superannuation may be given “proper recognition”. In order to ensure this “proper recognition,” it is necessary for the court to consider what is the “real nature” of the relevant superannuation interest – namely whether it is likely to be received as a recurrent pension or a lump sum or in some other manner.

Section 81 of the Act contains what lawyers describe as the clean break principle. The section reads as follows:
“…the court shall, as far as is practicable, make such orders as will finally determine the financial relationship between the parties to the marriage and avoid further proceedings between them.”
It is the wife’s contention that it is untenable that she and Mr Odens remain as members of the same superannuation fund, under the management of Mr Odens, until they reach retirement age, given her mistrust of him. In such circumstances, she submits that it is inevitable that there would be further proceedings between the parties, particularly if Mr Odens seeks to borrow further funds from it or it becomes non-compliant.
Section 117(1) of the Family Law Act abolishes for the purpose of family law proceedings, the general rule that, in civil proceedings, costs follow the event. It provides that each party should bear his or her own costs in such proceedings.
However, pursuant to section 117(2), if the court is of the opinion that there are circumstances that justify it in doing so, it may, subject to a number of stipulated considerations, make such order as to costs as it considers just.
The relevant considerations are set out in section 117(2A) of the Act and are as follows:
·The financial circumstances of each of the parties to the proceedings;
·Whether any party to the proceedings is in receipt of legal aid;
·The conduct of the parties to the proceedings, including in respect of issues of discovery and production of documents;
·Whether the proceedings were necessitated by the failure of a party to comply with previous orders of the court;
·Whether any party to the proceedings has been wholly unsuccessful in the proceedings;
·Whether any party has made an offer in writing to settle the proceedings and the terms of any such offer;
·Such other matters as the court considers relevant.
The court’s discretion to make an order for costs is a wide one and includes the authority to make an order for indemnity costs. However, the discretion remains one which must be exercised carefully and judicially.
In this context, orders for indemnity costs are extraordinary or exceptional in nature. In Kohan & Kohan,[15] the Full Court of the Family Court characterised an order for indemnity costs as “being a very great departure from the normal standard”. In this context, the Full Court said as follows:
“The court should not depart lightly from the ordinary rules relating to costs between party and party and the circumstances justifying the departure should be of an exceptional kind.”
[15] See Kohan & Kohan (1993) 93-340 at 79,614
There is no closed category of cases in which indemnity costs may appropriately be awarded. However, in Colgate Palmolive Co v Cussons Pty Ltd[16] the Full Court of the Federal Court indicated that the kinds of situation in which indemnity costs might be considered included those in which a litigant had:
·Commenced or continued an action knowing it to have no chance of success;
·Made false or irrelevant allegations of fraud;
·Made groundless allegations, which prolonged the case concerned; and
·Imprudently refused an offer to compromise.
[16] See Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
If the court determines to make an order for costs, it has a wide discretion as to the calculation of such costs. Pursuant to Rule 21.02(2) of the Federal Circuit Court Rules 2001:
“In making an order for costs in a proceeding, the Court may:
(a) set the amount of the costs; or
(b) set the method by which the costs are to be calculated; or
(c) refer the costs for taxation under Part 40 of the Federal Court Rules or under Chapter 19 of the Family Law Rules; or

(d) set a time for payment of the costs, which may be before the proceeding is concluded.”

Accordingly, the discretion provided by Rule 21.02(2) provides potential different mechanisms, for the awarding of costs, under either the rules of this court or the Family Court or indeed on a generic discretionary basis. This is reflective of the potential differences, particularly in respect of issues of complexity, which may arise from the nature of the jurisdiction conducted in each court.
However, Rule 21.10 of the Federal Circuit Court Rules 2001 provides a minimum level of entitlement, in respect of any award of costs, if made by the Federal Circuit Court. The rule provides as follows:
“Unless the Court otherwise orders, a party entitled to costs in a proceeding (other than a proceeding to which the Bankruptcy Act applies) is entitled to:
(a) costs in accordance with Parts 1 and 2 of Schedule 1; and
(b) disbursements properly incurred.”
Pursuant to Rule 21.15 the court may certify that it was reasonable for any party to employ an advocate to appear on his or her behalf in a proceedings. If such a certification is made, the amount payable for counsel to appear is the “daily hearing fee and advocacy loading in accordance with parts 1 & 2 of Schedule 1” [see Rule 21.16].
Rule 21.10 and the schedule under it create a scale of costs by reference to the occurrence of fixed events. The procedure in question is clearly designed to allow the ready calculation of costs incurred following the various procedural stages of litigation from filing to finalisation with judgment.
It is a system which is most amenable, in its application, to less complex forms of litigation. In my view, this mechanism was in keeping with the objects of the Federal Circuit Court as set out in section 3(2) of the Federal Circuit Court Act 1999,which include the following:
·To enable the Federal Circuit Court to operate as informally as possible in the exercise of judicial power; and
·To enable the Federal Circuit Court to use streamlined procedures; and
·To encourage the use of a range of appropriate resolution dispute processes.

Discussion

The parties agree that it is just and equitable that the husband’s self-managed superannuation fund should be divided equally between them, as this would represent a just and equitable recognition of their various financial and non-financial contributions during their lengthy marriage.
I agree that this is both a proper and just and equitable outcome. Given the parties are the same age and neither is in a strong financial position, necessarily, each must be considered ill-prepared for the economic consequences of retirement.
The husband describes himself as a self-employed entrepreneur, who is on the verge of commercial success with his businesses. I wish him well with this enterprise but have reservations, which the wife shares, at its prospects. He estimates his annual income at approximately $41,000.00.
The wife is employed in retail and earns a modest income of around $65,000.00 per annum. Regrettably, the parties’ long marriage did not result in the parties being able to accumulate any significant sums of marital capital, the vast bulk of which was consumed in the failure of their business. In my view, in these circumstances, it is not appropriate to make any further alterations, in respect of the self-managed fund, on account of any consideration arising under section 75(2).
Where the parties fundamentally disagree is how the court should approach the issue of what is to be done in respect of the wife’s entitlements, particularly whether they should be split off into a separate fund of her nomination. Significant practical issues, with potentially serious financial implications, also arise as to how the equalisation of the self-managed fund is to be achieved.
I acknowledge that the husband may prove to be correct and the H Street, Suburb J property may prove to be an astute investment which rapidly appreciates in value over the course of the next decade or so. However, this cannot be guaranteed.
In addition, it was the husband’s decision alone which resulted in his superannuation entitlements, which had previously been held in a conventional industry fund, becoming self-managed with the resulting acquisition of a residential property with debt associated with it.
As previously indicated, superannuation is a form of compulsory saving, directed by the legislature, to enable individuals to fund their retirement. The Australian Government, as a consequence of the Superannuation Guarantee, directs that all employers provide a minimum of 9.5% of their employees’ gross income into superannuation.
In technical terms, the individuals concerned do not own the superannuation allocated on their behalf until it vests. It must be allocated to a trustee. Many individuals are not comfortable with making decisions regarding how this money is to be invested, given the potential long term moment and complexity of such decisions, which necessarily have to be made with a long horizon.
As a consequence, their preference is to utilise professional trustees to invest on their behalf. Many industry funds allow their member some degree of flexibility about how funds are to be invested on their behalf. Chiefly, such individuals can choose between safer investment forms, such as bonds and cash, or more speculative investments, such as shares or property.
Many, if not the vast majority, elect to invest in balanced funds. In this way, individuals are able to invest superannuation in diverse areas and have exposure to a variety of investments, whilst having the protection of investment expertise. They derive advantages of scale, investing with others and the protection of relevant investment experience and knowledge.
Of equal importance to many such individuals is the portability of the sums invested on their behalf in industry funds and those operated by commercial trustees. It is comparatively easy to transfer between funds as specific assets do not have to be liquidated and costs incurred. This is not necessarily the case with self-managed funds, particularly those which chose to invest in one particular area.
The wife did not agree to the husband commencing the self-managed fund. In effect, she was shanghaied into it prior to her commencing the current proceedings. The husband’s decision denies her the prospect of having exposure to a diverse range of investments and the protection of expert financial management and decision making. She is also denied easy portability of her entitlements.
More significantly, the wife is entitled to make her own decisions in respect of how her superannuation is to be invested and is not required to be beholden to the husband’s financial decisions in regards to it. With the end of the parties’ marriage, she is entitled to financial autonomy. These concerns are heightened as a consequence of her mistrust of the husband, which is understandable given what occurred during their marriage in respect of their shared finances.
I acknowledge that the split off of her entitlements will create serious financial repercussions for the husband, chiefly because it will almost certainly result in the sale of the H Street, Suburb J property, as it seems unlikely that the fund will be able to access sufficient liquidity to pay the required sum to the wife. As such, it will derail his plans to fund his own retirement.
However, in my view, this fact alone, particularly given that the wife did not agree to the property’s purchase, as part of her retirement stratagem, is not sufficient to abrogate the wife’s entitlement to financial independence.
Ms Odens does not trust Mr Odens. Given the parties’ previous financial history together, in my view, it cannot be considered unreasonable for her to view him in this way. In these circumstances, in my view, it would be fundamentally unfair and, indeed, unworkable, to compel her to remain an unwilling participant in the husband’s self-managed superannuation scheme.
So far as the wife’s current superannuation entitlements are concerned, it is clear that by far the greater portion of these were acquired in the period in excess of a decade since the parties’ finally separated. During this period, the husband has added little to his superannuation entitlements.
Accordingly, in my view, any assessment of financial contribution to this superannuation greatly favours the wife. Given the relatively modest amount of this fund, I agree with the wife’s submission that it is appropriate that it be divided 65/35% in her favour on the basis of an assessment of contribution factors. This must be the case given that she acquired the larger proportion of the fund following separation.
In my view, the most vexed issue in these proceedings is that of costs. In my assessment, this is not necessarily an unduly complicated matter in terms of whether the wife should be recompensed for the significant legal costs incurred by her in having to take the case to final hearing. However, how that recompense is to be provided to her is not without its challenges.
The evidence indicates that the wife was entitled to a significant component of the husband’s superannuation given the length of the marriage between the parties and her undoubted contributions. The husband conceded this fact. However, the case still went to final hearing, which occasioned the wife significant costs. The sole issue being whether the wife should be compelled to park her entitlements in the husband’s self-managed fund, pending a decision to shift the fund from its accumulation to payment phase.
How this decision was to be managed and when it was to occur was unclear to me. Presumably, it would have been at a time when each of the parties had retired permanently from the workforce or had reached the age of sixty five years. At this stage, the H Street, Suburb J property would have been sold and its proceeds distributed.
Given the absence of any intimate relationship between the parties and their long history of mistrust, in my assessment, it was patently apparent that such an arrangement was unworkable. In addition, it is axiomatic that it would be unjust to the wife to compel her to be beholden to the husband, in the operation of such a scheme, given her obvious doubts about both his financial acumen and fidelity.
Nonetheless, the husband persisted with his opposition to the wife’s case and his conduct during the proceedings overall resulted in the case being delayed on several occasions – adding to the expense incurred by the wife. In my view, these factors render it just that the husband pay costs to the wife.
The question for the court being how should such costs be calculated and what should be the mechanism for their payment. I am concerned that to allow the wife to retain the entirety of her superannuation entitlements in lieu of costs smacks of both artificiality and expediency and, as such, runs the risk of appearing arbitrary or capricious. Certainly, this is the husband’s position.
However, on the other hand, in my view, the husband maintained his position, which in objective terms, had no chance of success. The wife’s financial position is not a strong one. Her stance in the proceedings has been wholly vindicated. The evidence indicates that the husband was not entirely transparent in respect of the self-managed fund, requiring the wife to commission the report from Mr M, at her expense.
I share the wife’s concerns that, in practical terms, if an order for costs is made in her favour, there is little likelihood it will be honoured given the husband’s present financial circumstances. The only source of payment is from superannuation. In my view, these singular circumstances justify the unusual order sought by the wife for indemnity costs.
The only realistic source of the payment of the costs to which the wife is entitled is through her retaining her portion of the superannuation, to which the husband would otherwise have been entitled. In my view, I am entitled to make such an order pursuant to the provisions of section 75(2)(o) of the Act.
In Ferguson & Ferguson [17] the Full Court of the Family Court held that section 75(2)(o) was to be read ejusdem generis with the other matters listed in section 75(2), which enabled the court to bring into account “conduct which has an economic significance in the parties’ dealing with each other or the property in dispute.”
[17] See Ferguson & Ferguson (1978) FLC 90-500 at 77,607
The costs she has incurred in bringing the matter to trial clearly have economic significance for Ms Odens. In my view, notwithstanding the fact that the actual payment of the costs will be deferred, her retaining the entirety of her superannuation entitlements is the most equitable manner of reimbursing the costs to which I have determined she is entitled.
The precise mechanics of how the split will be made from the husband’s self-managed fund are not obvious. In practical terms, the sum required to be paid to the wife is not immediately capable of liquidation. The fund’s capacity to borrow may be limited. The only source of funds is likely to be the H Street, Suburb J property.
Given it was his decision which led to this situation, when combined with the fact that the manner in which the fund was managed suited Mr Odens but not necessarily Ms Odens, it seems to me to be fair that he should bear the cost of satisfying the splitting order to be made in respect of the wife.
The reality is that this is likely to come out of the fund itself, if the H Street, Suburb J property has to be sold. This will result in selling costs and agent’s fees. These should come out of Mr Odens’ share of the fund.
I will allow Mr Odens twenty eight days to comply with the order. There is uncertainty as to who is the actual trustee of the fund. In the past, Mr Odens was the sole director and controlling shareholder of its corporate trustee.
In these circumstances, if the trustee fails to execute any documents required to be executed to give effect to the court’s orders, I will appoint the registrar of the court to execute them in lieu of the trustee, most likely this person will be Mr Odens or someone associated with him, pursuant to the provisions of section 106A of the Act.
For all these reasons the orders of the court will be as set out at the commencement of these reasons for judgment.

I certify that the preceding one hundred and fifty-one (151) paragraphs are a true copy of the reasons for judgment of Judge Brown.

Associate:

Date: 24 March 2021

Clauson v Clauson (1995) FLC 92-595; Hickey v Hickey and Attorney General for Commonwealth of Australia (2003) FLC 93-143 at 78,386

[2021] FCCA 575

24 March 2021

Key Legal Topics

Areas of Law

Family Law

Equity & Trusts

Legal Concepts

Remedies

Costs

Jurisdiction