ORMOND & ORMOND
[2014] FCCA 1536
•17 July 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ORMOND & ORMOND | [2014] FCCA 1536 |
| Catchwords: FAMILY LAW – Property settlement – lump sum maintenance – no application made for capitalisation of periodic maintenance. |
| Legislation: Family Law Act 1975 (Cth), ss.72; 74; 75; 79 |
| Bevan & Bevan (2013) FLC 93-545 Budding & Budding [2009] FamCAFC 165 Chapman & Chapman [2014] FamCAFC 91 NHC & RCH (2004) FLC 93-204 Clauson & Clauson (1995) FLC 92-595 Mitchell & Mitchell (1995) FLC 92-601 Norbis & Norbis (1986) 161 CLR 513 Stanford & Stanford (2012) 247 CLR 108 Vautin & Vautin (1998) FLC 92-827 |
| Applicant: | MS ORMOND |
| Respondent: | MR ORMOND |
| File Number: | HBC 900 of 2012 |
| Judgment of: | Judge Baker |
| Hearing dates: | 16 and 17 April 2014 |
| Date of Last Submission: | 17 April 2014 |
| Delivered at: | Hobart |
| Delivered on: | 17 July 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr Foster |
| Solicitors for the Applicant: | Murdoch Clarke |
| Counsel for the Respondent: | Mr Lewinski |
| Solicitors for the Respondent: | Butler McIntyre Butler |
ORDERS
Within seven (7) days the Husband transfer to the Wife any right, title or interest he may have in the following:
(a)The property situated at Property N;
(b)Any shares owned by the Wife;
(c)The Wife’s motor vehicle; and
(d)Any household chattels or furniture in the Wife’s possession.
Within seven (7) days the Wife transfer to the Husband any right, title or interest she may have in:
(a)The property situated at Property R;
(b)The Husband’s motor vehicle;
(c)(omitted) Pty Ltd and (omitted) Unit Trust and (omitted) Trust (including the motor vessel “(omitted)”);
(d)The mooring; and
(e)Any household chattels or furniture in the Husband’s possession.
To give effect to the provision of paragraph 2(c) herein, the Wife within seven (7) days:
(a)Resign as a director of (omitted) Pty Ltd;
(b)Transfer her shareholding in (omitted) Pty Ltd to the Husband or his nominee;
(c)Renounce any interest or entitlement in the (omitted) Unit Trust; and
(d)Renounce any interest or entitlement in the (omitted) Trust.
The Order for interim spouse maintenance be discharged as at 8 January 2014.
Paragraphs 6 to 11 inclusive of these Orders are binding on the Trustees of the Ormond Superannuation Fund (“the Fund”).
The Husband and Wife do all such acts and things and sign all documents to give effect to the splitting orders set out herein. The transfers of the assets of the Fund are regulated, in part, by the Superannuation Industry (Supervision) Regulations 1994.
In accordance with s 90MT(1)(b) of the Family Law Act1975 (“the Act”), whenever a splittable payment within the meaning of s.90ME of the Act becomes payable to or on behalf of the Wife from her interest in the Fund, the Husband be entitled to be paid (by the Trustees of the Fund), 100% of that splittable payment and there is a corresponding reduction in the entitlement the Wife would have had but for this Order.
In accordance with s.90MT(1)(a) of the Act whenever a splittable payment within the meaning of s.90ME of the Act becomes payable to or on behalf of the Husband, from his interest in the Fund, the Wife is entitled to be paid (by the Trustees of the Fund) the sum of Three Hundred and Eighty One Thousand Dollars ($381,000.00) and there is a corresponding reduction in the entitlement the Husband would have had but for this Order.
The operative time for this Order is four (4) days after service on the Trustees of the Fund.
The Trustees of the Fund 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 Act1975 and the Family Law (Superannuation) Regulations 2001, the Trustees can calculate the entitlement of, and make payment to, the Wife in accordance with paragraph 8 of this Order.
Contemporaneously with the allocation to the Wife pursuant to paragraph 8 of this Order the Wife either:
(a)Do all things necessary, including but not limited to, exercising her request pursuant to reg 7A.06(2) of the Superannuation Industry (Supervision) Regulations 1994 for the rollover or transfer of the transferable benefits out of the parties interest in the Fund to a fund of the Wife’s choosing in accordance with reg 7A.12 of the Superannuation Industry (Supervision) Regulations 1994; or
(b)Provide written instructions to the Trustees of the Fund to pay to the Wife an amount equivalent to the amount calculated pursuant to paragraph 8 of this Order whereupon the parties shall do all things necessary to ensure payment of that amount to the Wife.
Thereafter contemporaneously with the allocation or payment to the Wife pursuant to paragraph 11 of this Order, the Wife:
(a)Do all acts and things and sign all necessary documents submitted to her by the Husband so that she ceases to be a member of the Fund; and
(b)Resign and cease her role as a Trustee of the Fund and the Husband (excepting only the obligations of the Wife pursuant to paragraph 13 of this Order) indemnify the Wife against all liabilities attaching to the Fund thereafter.
Within seven (7) days of receipt of a tax invoice from accountants “(omitted)” the costs of and associated with compliance by the Fund being costs of:
(a)Preparation of audited annual Financial Statements and Tax Returns for the financial year ended 30 June 2014; and
(b)Preparation of audited Financial Statements and Tax Returns for the year from the 1 July 2014 to the winding up of the Fund
shall be paid by the Husband and Wife in the proportion of 57% by the Husband and 43% by the Wife.
Unless otherwise specified in this Order:
(a)Each party be solely entitled to the exclusion of the other to all property in the possession of that party as at this date;
(b)Each party be solely liable for and indemnify the other party against any liability encumbering any form of property to which that party is entitled pursuant to this Order; and
(c)Each party remain solely liable for their respective debts.
The question of the Respondent’s costs of $13,455 be reserved.
IT IS NOTED that publication of this judgment under the pseudonym Ormond & Ormond is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT HOBART |
HBC 900 of 2012
| MS ORMOND |
Applicant
And
| MR ORMOND |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application filed on 22 November 2012 by Ms Ormond (“the wife”) for distribution of the property of the parties and for spousal maintenance. The Respondent to these proceedings is Mr Ormond (“the husband”). The parties were married for 32 years.
Background
The parties were married in 1980, having commenced cohabitation in 1978. Separation occurred in April 2012, and the parties were subsequently divorced in July 2013. The husband had an earlier marriage which ended in 1978.
During their marriage, the parties lived and worked in numerous countries, including Australia, (country omitted) and (country omitted). The parties returned to settle in Australia in 1984, and finally moved to Tasmania in 1991.
It is undisputed that the husband was the major income-earner for the family. He obtained work in a variety of positions and also had periods of unemployment, resulting from changes in positions. The wife worked full-time until 1982, following which she became the full-time homemaker and carer of the parties’ children (born 1983 and 1984). Apart from some part-time and casual work at various times, the wife has not worked outside the home since 2002.
The husband is a (occupation omitted). He has worked in a number of well-paid positions both domestically and internationally. He is 60 years of age.
After working in a number of positions in Tasmania, the husband established (omitted) Pty Ltd (“(omitted) Pty Ltd”) in 1996 as a business consultancy, jointly owned by him and the wife. In 2002 the husband commenced working with (business omitted) (“(omitted)”). (omitted) Pty Ltd was later utilised as a shareholding entity to receive dividends from (business omitted) and the (omitted) Unit Trust, with the dividends distributed to the parties in a tax effective manner.
The husband was employed with (business omitted) as a director from 2002 to January 2014. The position was terminated due a downturn in the (omitted) industry. Upon termination, the husband was provided with a lump sum of $100,000, of which $40,000 was returned to his employer to repay a personal loan (for the earlier purchase of a home unit).
During the marriage, the wife received an inheritance in 2010 of $105,000 in cash and $40,670 in shares (calculated at 2013 value). The husband received an inheritance of $5,000 in 2012.
The wife is currently in receipt of an age pension of $413 per week. She is 65 years of age.
The total property pool is agreed to be in the vicinity of $1.5m, with just over 50% of this ($888,593) invested in superannuation.
It was agreed by the parties that approximately 70% of their assets were accumulated in the last 10 years of their marriage (2002–2012). The husband said that, prior to joining (business omitted), the family assets consisted of the family home, superannuation (approximately $125,000) and household effects (no value given).
The husband claimed that he is now unable to work at the professional level he previously enjoyed, given his physical and mental health issues, and the unlikelihood of his skills being required in the current economic environment. As part of his termination package, he entered into a Restraint of Trade agreement with (business omitted), preventing him from working as an (omitted) in Tasmania for three years.
Following separation, the husband voluntarily paid $1,000 per week to the wife. He ceased payment of this sum in November 2012. A court order was made on 4 March 2013 requiring him to pay spousal maintenance to the wife of $785 per week, backdated to 22 November 2012 (approximately $16,000).
The husband ceased the weekly payments in May 2013 after he obtained a mortgage to purchase the Property M. unit. However, he subsequently made another lump sum payment to the wife on 7 April 2014 of $21,980, being the balance of maintenance due to 8 January 2014. He was ordered to pay the wife’s legal costs of $2,588 on 4 March 2013, as a result of her application for interim spouse maintenance.
Proposals
The wife sought that the distribution of the property 80%/20% in her favour, consisting of a 60%/40% distribution based upon contributions of the parties, and an adjustment of a further 20% “to take into account the potential disparity in future income earned by the parties, her responsibilities, and the fact that she would be unlikely to enforce any periodic maintenance order”.[1]
[1] Case Outline of the wife.
The wife sought to retain the family home at Property N, her shares, her motor vehicle, and the balance be obtained from the superannuation fund.
She also sought spousal maintenance in the form of a lump sum payment of $100,000. It was submitted by Counsel for the wife that a lump sum was sought on the basis that “it negates the need to estimate the husband’s future income and any need for an order for periodic maintenance”.[2]
[2] Case Outline of the wife.
The effect of the wife’s proposal was that she receive total property and superannuation of $1,190,670 with the husband to receive a total of $297,668. She also sought the additional sum of $100,000 spousal maintenance, giving her a total of $1,290,670 and the husband $197,668.
The husband sought that the property and superannuation be equally divided, and that he not pay spousal maintenance from 8 January 2014. On this proposal each party would receive property and superannuation to a value of $744,169.
In order to effect the equal distribution, the husband proposed that he transfer to the wife the house at Property N; her shares; her car; her household items; and the balance in superannuation. He proposed that he retain his unit; car; boat and mooring; household items and the balance in superannuation.
Issues
The main issues were:
i)The percentage division of the property, given the contributions and employment capacity of the parties; and
ii)Whether spousal maintenance is required following the property distribution.
The focus was largely on the husband’s capacity to earn income. He claimed a reduced capacity to earn an income.
Evidence
Each party filed a Case Outline. A further ‘Revised Property/Resources and Liabilities List’ was provided during the hearing. Included in the list were several items of disputed value.
The wife relied upon her affidavit and financial statement filed 22 November 2013.
The husband relied upon his Further Amended Response; his affidavit and financial statement filed 11 April 2014; and an affidavit of Mr P filed 12 July 2013.
The wife, the husband and Mr P were cross-examined.
Relevant law
Division of property
Section 79 of the Family Law Act 1975 (“the Act”) provides that the Court may make orders in property settlement proceedings to alter the interests of the parties to the marriage to the property.
Section 79(2) of the Act requires that any such order must be “just and equitable”. Section 79(4) provides the matters which are to be taken into account when considering what Order should be made.
In light of the decision of the High Court in Stanford & Stanford,[3] the Court must satisfy the requirement of s.79(2) before it examines what Order should be made pursuant to s.79(4). This was confirmed in Bevan & Bevan,[4] where, in discussing the previously well-established “four stage process”, Bryant CJ and Thackray J noted that the decision in Stanford & Stanford, “serves to refocus attention on the obligation not to make an order adjusting property interests unless it is just and equitable to do so”;[5] and warned against conflating the issues arising under ss.79(2) & 79(4).[6]
[3] (2012) 247 CLR 108.
[4] (2013) FLC 93-545.
[5] Ibid at para 65.
[6] Ibid at para 87.
The independence of s.79(2) from s.79(4) was considered by the Full Court of the Family Court of Australia in Chapman & Chapman.[7] The Full Court agreed that Bevan & Bevan correctly stated the law in relation to the Court’s consideration of whether making an order is just and equitable pursuant to s.79(2) of the Act. In their joint judgment, Strickland and Murphy JJ confirmed that s.79 “demands a consideration, separately, of all of its requirements without conflation”.[8] Their Honours however noted their disagreement with any intention of the plurality in Bevan that the Court must consider the matters in s.79(4) when addressing s.79(2), given the opposite approach of the High Court in Stanford.[9] In a brief separate judgment, Bryant CJ agreed that, in relation to s.79(2), consideration of the s.79(4) matters is not mandatory, but also noted that such consideration may be helpful:
Whatever differences may exist as to the meaning of [84] and [85] of Bevan, I am in agreement with Strickland and Murphy JJ that it is not a requirement to take account of the matters in s 79(4) when considering the question of whether it is just and equitable to make any order under s 79(2). But as long as they are seen as separate and not conflated, the factors in s 79(4) have the potential to inform the decision under s 79(2) …[10]
[7] [2014] FamCAFC 91.
[8] Ibid at para 19.
[9] Ibid at para 25–26.
[10] Ibid at para 9.
Consequently, in order to determine whether it is just and equitable to make an order, I must first identify the existing legal and equitable interests of the parties in the property. Having determined that it is just and equitable to make an order, I will then consider what order should be made assessing the factors in S79(4). The requirement of justice and equity is a consideration in respect of the final order that will be made.
The property
During closing submissions, the parties provided an agreed list of property and liabilities, as follows:
Agreed Assets $
House at Property N (Joint) 450,000
Property M. (Husband) 270,000
Shares (Wife) 22,302
Cash (Husband) 9,208
Car (Wife) 3,000
Boat ((omitted) Pty Ltd) 52,500
Mooring ((omitted) Pty Ltd) 500
Superannuation (Joint) 888,593
Sub-total 1,696,103
Agreed Liabilities
Mortgage on unit (Husband) 198,065
Mastercard (Wife) 4,400
Uni fees (Wife) 1,300
Credit card (Husband) 4,000
Sub-total 207,765
Agreed Net Total 1,488,338
There was dispute as to the inclusion or failure to include several items in the property, as follows:
Disputed Assets
Cash not included (Wife) 21,980
Car (Husband) 35,000
Disputed Liabilities
Legal fees (Wife) included on Mastercard 5,800[11]
Car loan (Husband) 45,506[12]
[11] Exhibit H2.
[12] Exhibit H3.
The husband claimed that the wife had failed to include $21,980 cash, resulting from the maintenance arrears payment made by him in April 2014.
I consider that this sum should not be included in the property list, as it is spouse maintenance to be used by the wife for her expenses.
The husband disputed the inclusion of the wife’s Mastercard liability of legal fees of $5,800 paid by the wife in February 2014. In NHC & RCH,[13] the Full Court of the Family Court reviewed the case law in respect of the treatment of legal fees. The Full Court held that the treatment of such funds is a matter of discretion for the trial judge, although regard should be had to the source of the funds.
[13] (2004) FLC 93-204, at para 56.
The Full Court stated:
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.[14]
[14] Ibid, at para 58.
The funds were borrowed by the wife post-separation to pay her legal fees. In accordance with this Full Court decision, I consider that the liability should not be taken into account in the calculation of the net property of the parties. The wife should be solely responsible for the liability.
The husband sought to have his car and the loan to purchase the car included in the property division. He purchased the new car in April 2013 for $58,000, with a loan of $51,000. At this time, he was negotiating a property settlement with the wife. A spouse maintenance order had just been made against him. He said that he replaces his car “every four years” and that the type of car purchased was “not unbefitting of a senior professional person”. At this time, he was employed at (business omitted). Although he said during cross-examination that he was confident of his earning ability to afford to borrow the sum of $51,000, he knew that his employment was being monitored by Mr P and that his future was not certain.[15] He also wrote to the wife’s solicitor on 7 November 2012 to inform the wife that his employer was looking for him to substantially reduce his involvement as part of the firm’s succession plan and wrote that it was certain that his remuneration will decline.
[15] Affidavit of Mr P, sworn 10 April 2013.
The husband’s evidence was that car is now worth $35,000 and the liability on the car is $45,506.[16]
[16] Exhibit H3.
The trial date is the appropriate date upon which to ascertain the property of the parties. This is also the appropriate date to ascertain the liabilities of the parties. However, given the circumstances discussed above, I consider that the husband has incurred the liability unreasonably and recklessly.[17] I consider that the car and the liability should not be included in the pool.
[17] See: In the Marriage of Antmann [1980] FLC 90-908 at pg 75,744; In the Marriage of Prince [1984] FLC 91-501 at pg 79,076–79,077. Discussed in Dickey, Anthony, Family Law (2007, 5th Ed, Lawbook Co), at pg 529–530.
I find that the property and liabilities of the parties are as set out in the above list totalling the sum of $1,488,338.
Is it just and equitable to make an order pursuant to s.79(2)?
The parties were in a relationship for 34 years and were married for 32 years. They were divorced in July 2013. They are the joint legal owners of the former matrimonial home at Property N, and the husband has a sole interest in a home unit purchased after separation. They each have possession of other items resulting from their marriage, including cars and household items. They have each asked the Court to make orders to determine their financial relationship as they do not wish to continue any common use of the former matrimonial home.
I consider that it is just and equitable to make property orders.
What approach should be taken by the Court?
The usual approach in property proceedings is for the court to consider the property of the parties as an overall pool; however it is open to the court to undertake the asset-by-asset approach. In Norbis & Norbis[18] the High Court held that both the global and asset-by-asset approaches are legitimate.[19]
[18] (1986) 161 CLR 513.
[19] Ibid at pp 523–524, 533 and 540–541.
Given the long marriage of the parties, I am satisfied that a global approach is appropriate in the circumstances of these parties.
Should there be a separate pool for superannuation?
The value of the superannuation was agreed. Both parties proposed that the superannuation be included in the one pool. The fund is a self-managed fund consisting mainly of cash. It is readily accessible to the parties. In accordance with the parties’ approach, I consider that it is appropriate for the entitlement to be included in the one property pool.
Contributions
At the commencement of cohabitation the parties did not have any significant property.
The wife was the primary care-giver to the children. She was the home maker and undertook all domestic duties and attended the needs of the children.
The wife made financial contributions by working on a full-time basis until the births of the children. She made financial contributions by working on a part-time and casual basis until 2002.
The husband was the primary income earner throughout the marriage and made financial contributions from his income, which he continued to make after separation.
The husband undertook repairs and maintenance tasks, landscaping and building works. He participated in a parenting role when at home and attended various school and sporting activities.
It was not disputed that approximately 70% of the parties’ assets were accumulated in the last 10 years of the marriage (2002–2012). The husband’s financial contributions during this period enabled the parties to accumulate property and superannuation. The wife continued to perform her role as a homemaker and to support the husband in his role as the income earner.
The husband contributed a small inheritance of $5,000 in 2012.
The husband continued to earn income after separation. He contributed some of it towards a deposit on his unit.
The wife had the benefit of continuing to live in the unencumbered former matrimonial home after separation.
The wife’s inheritance was received late in the marriage. The sum of $60,000 from the inheritance was used to reduce the parties’ mortgage on the home. At separation the wife had about $20,000 left from the inheritance and $40,670 in shares. The shares currently owned by the wife to a value of $22,302 are included in the pool. The husband did not contribute to this inheritance. I consider that weight should be given to it.
Weighing all the respective contributions of the parties over a lengthy marriage, I am of the view that the contributions of the parties favour the wife to an extent of 2%. This will result in the wife receiving property and superannuation to the value of $773,936 and the husband to the value of $714,402.
I will turn to discuss s.79(4)(e) and the matters referred to in s.75(2) so far as they are relevant.
Relevant s.75(2) matters
The relevant provisions of this section are paragraphs (a), (b),(d),(g),(k),(n) and (o).
The wife said that she has “no expectation of finding employment because of my age, my health and my lack of work experience”. She said that she has a thyroid condition (Graves Disease), pulmonary hypertension for which she takes medication and osteoarthritis in her hip. She is currently 65 years of age.
The husband is 60 years of age. He said that he is “unable to concentrate for more than a couple of hours and [is] exhausted after three or four hours”. He said that his physical capacity for work is diminished due to suffering depression and given he is “permanently damaged”.
Neither party produced any medical evidence in respect of their claims of ill-health.
Section 75(3) does not preclude the income from means-tested benefits from being taken into account for a property settlement as opposed to a spouse maintenance claim. The wife is in receipt of an old age pension of $413 per week.
The wife has not been employed since 2002, when she ceased her part-time work for (omitted) Pty Ltd. Prior to that, she had ceased full-time work in 1982. Currently, she undertakes some voluntary work for a number of organisations. She said her lack of work experience and her age would prevent her from getting paid work in the future.
I consider that given her age and lack of work experience for many years, the wife does not have a capacity for employment.
The husband’s capacity for employment
The husband ceased full-time work with (business omitted) on 8 January 2014. Prior to that, he had been receiving a high income as a director of that company. The wife detailed the husband’s income which was around $290,000 per annum, paid as a base salary of about $150,000 and bonuses. The husband did not dispute her claims about his income.
The husband said that his termination was due to the “very difficult trading conditions” for (occupation omitted). He said that “entering my sixties and having not operated in normal (occupation omitted) matters for twelve years I would consider the likelihood of any employment extremely remote”. He said that he “would not be attractive to a prospective employer”, and consequently his future earning capacity is greatly reduced.
As part of his termination package, the husband received $100,000 from (business omitted). The package required him to enter into a Restraint of Trade agreement, preventing him from working as an (occupation omitted) for other firms in Tasmania for three years.
The husband claimed that he is now unable to work at the professional level he previously enjoyed, given his physical and mental health issues, and the unlikelihood of his skills being required in the current economic environment. He estimated that his future income to be in the order of $40,000 per annum, and said that this would be unlikely to ever exceed his basic living costs.
He said he hoped to gain enough employment through (business omitted) to enable him to earn sufficient income to cover his living expenses. During the period from his termination in January 2014 to March 2014, the husband worked a total of 72 hours. He has received no remuneration, as he is indebted to Mr P for expenses previously incurred.
The husband said he has not sought alternative employment because his only relevant current skill is in the (omitted) area and he is aware that a sixty year-old (occupation omitted) is not attractive to any employer in Tasmania. He said that, having operated at a very senior professional level for many years, he does not intend to humiliate himself by applying for jobs that will never be offered to him, and in which he could not properly perform in any event. In respect of (omitted) work, he said that there was no possibility of work in Tasmania, except with Mr P. He said that the three other (omitted) practices in Tasmania are competing for one full-time job. The three practices are part-time, one person practices.
The evidence of Mr P
Mr P is the Principal of (business omitted), an (omitted) practice established by him in 1996.
In his affidavit sworn in April 2013, Mr P outlined the reduction in the husband’s generation of chargeable hours from 2010 to December 2012, and the increase in the percentage of fees written off during that period. He indicated that he was disappointed in the sharp reduction in the husband’s productivity from the time he separated from the wife. He said he had intended to monitor the situation and make a final determination in respect of the husband’s future employment status around the time of his 60th birthday in September 2013.
On 25 November 2013, Mr P wrote to the husband and confirmed that his contract of employment dated 30 June 2005 was terminated effective from 8 January 2014, due to the operational requirements of the firm.
In the letter, Mr P referred to the soft trading conditions that had been evident for some time, and that, after shedding six staff through natural attrition, a reduction was necessary at the director level. He wrote that the (omitted) appointments under the husband’s control had substantially run their course, and that there was no indication of any up-turn in the foreseeable future. He wrote that he hoped that the husband would be in a position to provide advice and assistance from time to time, and he proposed that for the following 12 months the husband be reimbursed for professional membership fees, mobile phone expenses, and agreed professional development expenses in anticipation of that support. He wrote that, as a token of appreciation, the husband would receive a redundancy payment of $100,000, in addition to any unused leave entitlements. Mr P indicated that he would retain $40,000 in repayment of the personal loan provided to him, as agreed.[20]
[20] Exhibit W5.
On 5 December 2013, an agreement headed, “Restraint of trade collateral to sale of shares” was entered into by the husband.[21] The agreement contained the following recitals:
1.Ormond has been employed by (omitted) since April 2002 and is a (occupation omitted). Ormond is also a director of (omitted).
2.(omitted) has shares in (omitted) and has agreed to transfer the shares to Mr P or his nominee.
3.Ormond’s position with (omitted) has been made redundant and he will resign as a director of (omitted).
4.As part of the terms of settlement between the parties and to protect the goodwill of the practice Ormond agreed to the restrictive covenants set out in this deed.[22]
[21] Exhibit W7.
[22] “Ormond” is the husband; “(omitted)” is (omitted) Pty Ltd; “(omitted)” is Mr P “(omitted)” is (omitted) and “(omitted)” is (omitted) Unit Trust.
The agreement provided that, in consideration of the matters referred to in the recitals, Ormond and the Vendor give the restrictive covenants set out to (omitted), (omitted) and Mr P. The restrictive covenants provided that Ormond agrees not to practise as an (omitted) within Tasmania in the areas specified for the periods specified from between three years and three months.
During cross-examination, Mr P said that the husband’s position was terminated firstly, because of his reduced performance consistent with a marriage breakdown, which absorbed his focus, concentration and time; and secondly, due to the reduction in work undertaken by the company, with revenue down by one-third.
Mr P attributed the significant reduction in work to the global financial crisis in 2008, when the banks stopped lending money. He said that, at that time, there was a lot of work, however, five years later, “nobody was going broke”, and that he is now seeing the effect of that, as are his colleagues in his profession throughout Australia. He indicated that his staff numbers have reduced from 16 to 10 in the last 12 months but are now back to 11. He does not believe that there will be much up-turn in work for about three to four years, and he has scaled back and does not have any expectation to expand again.
Mr P said that the timing of the decision to terminate the husband’s position and the current proceedings were coincidental. He said that the husband was not the only person he had had to let go, and referred to an employee with seven years of experience in (omitted).
Counsel for the wife challenged Mr P about the termination letter and described it as a “letter of appreciation”. Mr P explained that writing such a letter is his usual approach on termination. He imposed a restraint of trade agreement on the husband because he is a businessman and that he needed to protect his interests. He was concerned that, if the husband worked for his competitor Mr B, there would be conflict of interest issues between the firms. He said that there are five or six files still involved in litigation in which the husband is a joint appointee. Mr P wanted to secure the husband’s services to complete the files, because otherwise he would be at a significant disadvantage if he had to go back and reacquaint himself with those files.
He explained that these are commercial issues. He said that he did not want to restructure, and that he would prefer to have available work. He said that, as a (occupation omitted), he often criticises employers for not laying off employees early enough. He had had to make a tough decision and he was covering himself on all bases. He said he wanted to protect himself in a continuing relationship with the husband.
Mr P said that it was a commercial decision to pay the husband $100,000. He acknowledged that agreements about restraint of trade can be “difficult”. While he entered the agreement with the expectation that the restraint would be for the full three years, he said that it provides for a minimum restraint of three months, in the event that it is made void by a court on the basis of the longer time-frame. He said that the letter to Mr Ormond was part of a package of the severance agreement, which included the restraint of trade agreement. He said the letter of termination would not have been written unless Mr Ormond had agreed to the restraint of trade agreement.
Mr P confirmed that he has continued to employ the husband to manage company files, which were already in train before his position was terminated, and to undertake (omitted) tasks. He also provided ongoing support for the husband to cover professional indemnity costs and to ensure he remains a (occupation omitted) (to enable him to manage the existing files). He said that the husband is currently paid at $75 per hour, although it may be as much as $150 per hour depending upon the task. He said that he hoped to employ him in the future to continue some (omitted) tasks and “selected projects” for the company. He was not asked to estimate how much the husband was likely to earn with the company. He said that the preparation of the quarterly management reports would amount to approximately one day’s work per month. He noted that the husband is “the oldest practising (occupation omitted) in the state”. He said in his affidavit that (omitted) practice is very demanding and it is normal for practitioners to steadily reduce their output from about the age of 55.
Mr P was extensively cross-examined by Counsel for the wife. I found him to be a credible witness and I accept his evidence about the husband’s employment position and the downturn of work. In her oral evidence, the wife conceded that she accepts that Mr P is an honest businessman.
There was no medical evidence to support the husband’s claim that he is incapacitated for employment due to his health. However I accept that it is likely that the stress of these proceedings has affected his concentration and energy as described by Mr P. The husband described the separation of the parties as traumatic. The husband became upset and frustrated in negotiations with the wife’s lawyer. Once the proceedings have been finalised he should be able to refocus. I consider that he has a capacity for employment as a (omitted). Given his age and experience only as a (omitted) over the past 12 years, and the evidence about work available in Tasmania, I consider that his reliance upon receiving work from Mr P is reasonable in the circumstances.
At his age I do not consider it unreasonable for him not to seek work in areas for which he is not experienced. In any event, there was no evidence of any available employment.
The husband has a greater earning capacity than the wife. He is 60 years old. The wife conceded that, before separation, the husband was slowing down. She said that she could not see him retiring at 60; she thought he would retire around 65 years of age.
I am of the view that the husband has an earning capacity of $40,000 per annum until he retires.
As outlined in her financial statement, the wife has a total weekly expenditure of $1,095. She has liabilities of $11,500.
As outlined in his financial statement, the husband has a total weekly expenditure of $1,890. He is not currently paying the maintenance of $785 per week. He has liabilities of $247,571, inclusive of his mortgage on the home unit in Property M., his car and credit card. His evidence was that when he receives his property award, he will reduce his liabilities. He believes he will earn sufficient income to pay his reduced living expenses.
Both parties seek an order that will maintain a standard of living that is reasonable. The wife has claimed that, following the loss of the husband’s support, she has reduced her social activities, and deferred house and personal maintenance costs. She said that she needs to update her car to something that is cheaper to run.
However, the wife has continued to live in the former matrimonial home worth $450,000, which is unencumbered. The husband lived on his boat until he purchased a unit for the sum of $270,000. I consider it was not unreasonable that he purchased a modest unit to live in, rather than live on his boat. He obtained a mortgage loan and a loan from Mr P to purchase it, as he did not have sufficient available funds.
The parties were married for 32 years. The wife ceased employment in 2002 and was a full-time home-maker from that date. I consider that she now has no capacity to earn an income from employment, given her age and lack of work experience.
As a result of my findings as to contributions, the wife will receive property and superannuation to a value of $773,936. The husband will receive property and superannuation to a value of $714,402. There is a disparity of $59,534.
The husband made claims pursuant to s.75(2)(o). He claimed that the wife deliberately frustrated his attempts to negotiate a property settlement by failing to provide a complete Financial Statement, by attempting to conceal assets (shares), and her mis-statement of the values of family assets (house, boat, moorings and household effects).
I am not persuaded that there was deliberate non-disclosure by the wife. The property and values of the property were agreed at trial, apart from the issue of inclusion of the items discussed.
The husband claimed that the wife caused the (omitted) Bank to effectively freeze the accounts of the parties’ self-managed superannuation fund, of which he says 85% is in his name. He said his request to roll-over a portion of his benefits into another fund where he could obtain higher interest was refused by the wife. There was no evidence of the amount of any loss incurred.
The husband claimed that the wife has made requests of discovery that were onerous and beyond that required by the Federal Circuit Court Rules 2001. I am not persuaded after examining the relevant exhibits that the requests were unreasonable in the circumstances of the wife trying to ascertain the husband’s income and earning capacity.
I do not consider any of these claims are such as to justify an adjustment under s.75(2)(o).
I consider that there should be an adjustment of 5% in favour of the wife for the s.75(2) factors. I am of the view that the factor which favours the wife is a disparity in the earning capacities of the parties. The husband has the capacity to earn an income of around double more than the wife until he retires.
The property will therefore be divided so that the wife receives net property and superannuation to a value of 57% in her favour. The husband will receive property and superannuation to a value of 43% of the total.
The effect of the order I intend to make is that the wife will receive the following:
House at Property N $450,000
Shares $22,302
Car $3,000
Superannuation $378,751
Less
Mastercard $4,400
Uni fees $1,300
Total $848,353
The husband will receive the following:
Property M. $270,000
Cash $9,208
Boat ((omitted) Pty Ltd) $52,500
Mooring ((omitted) Pty Ltd) $500Superannuation $509,842
Less
Mortgage on unit $198,065
Credit card $4,000
Total $639,985
Both parties will have a home and superannuation. The wife will receive property and superannuation to value of $208,368 more than the husband will receive. However, the husband has a capacity to earn income of $40,000 until he retires.
I am of the view that the order I intend to make is just and equitable.
Spousal maintenance
The wife sought spousal maintenance of $100,000, in the form of a lump sum payment. This was opposed by the husband.
An application for spousal maintenance should be considered following the division of property. This was made clear by the Full Court of the Family Court in In the Marriage of Clauson.[23]
[23] (1995) FLC 92-595.
Further, s.75(2)(n) requires the Court to consider any property settlement pursuant to s.79 as a relevant matter in relation to spousal maintenance.
Section 72(1) of the Act provides for the right of a spouse to maintenance, subject to the conditions contained within the section:
A party to a marriage is liable to maintain the other party to the extent that the first‑mentioned party is reasonably able to do so if and only if that other party is unable to support herself or himself adequately whether:
(a) by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b) by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c) for any other adequate reason
having regard to any relevant matter referred to in subs.75(2).
The wife must therefore first satisfy the threshold question of whether she is unable to support herself adequately by reason of the matters set out in paragraphs (a), (b) or (c) of the section by having regard to any relevant matter in s.75(2). If the answer to that question is the affirmative, then I must consider whether the husband is reasonably able to provide that support.
In Mitchell & Mitchell,[24] the Full Court of the Family Court held that the question of whether a person could support her or himself adequately should not be determined by reference to any fixed or absolute standard, but by having regard to the matters referred to in s.75(2), specifically to ss.75(2)(a), (g), (j), (k) and (l).[25]
[24] (1995) FLC 92-601.
[25] Ibid at 81,995.
Section 74 then provides that the Court may make such order as it considers “proper for the provision of maintenance” in accordance with the principles outlined in s.72(1).
Consequently, the question is not to be determined upon a subsistence level but upon consideration of whether the wife can support herself adequately in accordance with a standard of living which is reasonable in the circumstances.[26] It is not necessary for the wife to use up all of her assets and capital in order to be satisfied that she is unable to support herself adequately.[27] The question as to what is the standard of living which is reasonable depends on the circumstances of each case.
[26] Brown and Brown (2007) FLC 93-316.
[27] Ibid.
In relation to the second question posed by s.72(1), being the husband’s liability to support the wife should she be unable to support herself, the Act requires such support to be to “the extent that the [husband] is reasonably able to do so”. This section also particularly references s.75(2)(b) regarding the “physical and mental capacity of [the party] for appropriate gainful employment”. This will largely be determined by the future income capacity of the husband.
The general approach of the Court in determining a spouse’s ability to provide maintenance is “that a spouse should engage in appropriate gainful employment where this is both possible and reasonable in the circumstances”.[28]
[28] Dickey, Anthony, Family Law (2014, 6th Ed, Lawbook Co), at [28.170].
Section 80 of the Act provides for the Court, in exercising its power, to “do any or all” of the actions and orders provided within that section. Consequently, among other things, the Court may order spousal maintenance to be paid by “lump sum, whether in one amount or by instalments” (s.80(1)(a)) or through periodic payments (s.80(1)(b)).
In relation to lump sum payments, I refer to Budding & Budding,[29] in which O’Ryan J quoted the Full Court of the Family Court in Vautin & Vautin[30] as follows:
It has been pointed out on a number of occasions in this Court that in the exercise of the power to order lump sum maintenance caution is usually appropriate because of the apparent finality of lump sum orders and the difficulties in making predictions into the future. However, it is a power, the exercise of which may be appropriate in particular cases.[31]
[29] [2009] FamCAFC 165.
[30] (1998) FLC 92-827.
[31] Budding & Budding [2009] FamCAFC 165, at para 29.
In Vautin & Vautin, the Full Court noted that claims for lump sum maintenance are not confined to the capitalisation of periodic maintenance, nor to situations where it is unlikely that periodic maintenance will be paid by a party.[32] In that case, the lump sum claim was allowed given the applicant was able to demonstrate that the claim was for non-periodic expenditure, such as the replacement of white goods and other furnishings, the purchase of a new car, and repairs and renovations to the home.
[32] (1998) FLC 92-827, at para 43.
The wife’s claim
The wife has sought a lump sum maintenance payment of $100,000. Counsel for the wife did not refer to a capitalisation of periodic payments and submitted that a lump sum order negates the need to estimate the husband’s future income.
I have detailed the financial positions of the parties when considering the s.75(2) factors and those considerations are relevant in the determination of the wife’s spouse maintenance claim, except for her income tested pension which is disregarded for this application.
The wife said that she intended to replace her car “next year” and that she has minimised her living expenses, by cancelling the newspaper delivery, avoiding buying clothing and rarely going to the theatre or cinema. She said that she had “avoided spending anything on house maintenance” and that she estimated such maintenance to be “around $10,000”. She did not produce any details or expert evidence in support of her claim.
The wife did not seek to capitalise periodic maintenance. I therefore treat the claim as one for non-periodic maintenance.
I consider that there was insufficient evidence to justify the payment of $100,000 as lump sum maintenance. The only amount specifically claimed was for house maintenance of $10,000.
The wife’s application is to be considered in light of the distribution of property made in these orders. She will have property and superannuation to a value of $848,353. She will retain the former matrimonial home worth $450,000. She could sell the home and purchase a unit of around the same value as the husband. She could earn income from the funds realised. She is 65 years old and can access her superannuation of $378,751.
I am not persuaded that the wife cannot support herself adequately with this award of property and superannuation.
If I am wrong about that, I consider that the husband is not reasonably able to support the wife by payment of the sum of $100,000. Whilst the husband will receive property and superannuation to the extent of $639,985, he has liabilities which he intends to discharge so he can reasonably support himself.
The wife’s claim for a lump sum payment therefore fails.
Should the interim maintenance order be discharged at 8 January 2014 or at the date of these orders?
The husband claimed that the interim maintenance order should be discharged as at 8 January 2014, due to his incapacity to pay the sum of $785 per week. His position with (business omitted) was terminated effective from that date.
Until these orders are made and the wife receives her property entitlement, I consider that the wife does not have the capacity to support herself adequately.
As a result of the termination of the husband’s employment, I am of the view that he did not have the capacity to pay periodic maintenance after 8 January 2014.
Whilst I have found that his future capacity is to earn an annual income of $40,000, his evidence was that between January and March 2014 he did not receive any remuneration. He has total weekly expenses of $1,890, excluding the maintenance order payment. If he had sold his car and reduced the lease payments of $205 per week, and reduced his alcohol consumption from around $125 per week, I consider that he did not have the capacity to pay periodic maintenance.
From the sum of $100,000 (pre-tax) received from Mr P, he repaid the $40,000 loan to Mr P, he paid arrears of maintenance of $21,980 to the wife and used the balance for living expenses. He had $9,800 savings left in his bank account at trial, which is included in the property division.
I consider that the change in the husband’s circumstances as at 8 January 2014 justifies the order being discharged from that date.
I certify that the preceding one hundred and thirty-five (135) paragraphs are a true copy of the reasons for judgment of Judge Baker
Associate:
Date:17 July 2014
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Remedies
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Costs
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Fiduciary Duty
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Constructive Trust
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