OSF & OJK
[2004] FMCAfam 63
•19 February 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| OSF & OJK | [2004] FMCAfam 63 |
| FAMILY LAW – Property settlement – superannuation — meaning and effect of s.79(2) of the Family Law Act 1975 – whether there exists a substantive “fourth step” in the property settlement exercise – consideration of the Full Court's decisions in Hickey (2003) FLC 93-143 and Phillips (2002) FLC 93-104. |
Family Law Act1975
Pastrikos (1980) FLC 91-987
Lee-Steere (1985) FLC 91-626
Ferraro (1993) FLC 92-335
Clauson (1995) FLC 92-595
Whitely (1996) FLC 92-684
Norbis (1986) FLC 91-712
McMahon (1995) FLC 92-606
Russell (1999) FLC 92-877
Hickey (2003) FamCA 395
Davut & Raif (1994) FLC 92-503
Prpic & Prpic (1995) FLC 92-574
Townsend & Townsend (1995) FLC 92-569
Biltoft & Biltoft (1995) FLC 92-614
McLay & McLay (1996) FLC 92-667
JEL & DDF (2001) FLC 93-075
Phillips (2002) FLC 93-104
Figgins (2002) FLC 93-122
Waters & Jurek (1995) FLC 92-635
Kelly & Kelly (No 2) (1981) FLC 91-108
Hogan (1986) FLC 91-704
I & I (No 2)(1996) FLC 92-625
Penfold (1980) FLC 90-800
Murray (1990) FLC 92-173
Kowalski (1994) FLC 92-501
Steel (1992) FLC 92-306
Pennisi (1997) FLC 92-774
| Applicant: | OSF |
| Respondent: | OJK |
| File No: | MLM 3050 of 2003 |
| Delivered on: | 19 February 2004 |
| Delivered at: | Melbourne |
| Hearing Date: | 18 February 2004 |
| Judgment of: | Walters FM |
REPRESENTATION
| Counsel for the Applicant: | Mr Meier |
| Solicitors for the Applicant: | Meier Denison Pty Ltd |
| Counsel for the Respondent: | Mr Fatouros |
| Solicitors for the Respondent: | Victoria Legal Aid |
ORDERS
There be orders (not by consent but as agreed between the parties for the purpose of giving effect to the Judgment delivered this day) in terms of the Minute of Orders dated 19 February 2004.
Each party do bear his/her own costs.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLM 3050 of 2003
| OSF |
Applicant
And
| OJK |
Respondent
REASONS FOR JUDGMENT
(Ex Tempore)
Introduction/Background
Before the court are the parties’ competing applications for property settlement. The husband’s application was filed on 14 May 2003. The wife’s (amended) response was filed on 5 February 2004.
The husband relied upon the following documents:
b)his affidavit sworn 9 May 2003;
c)his affidavit sworn 12 February 2004; and
d)his financial statement sworn 12 February 2004.
The wife relied upon:
a)her affidavit sworn 13 June 2003;
b)her financial statement sworn 13 June 2003; and
c)her affidavit sworn 3 February 2004.
During the course of the proceedings, both parties tendered supplementary financial statements.
The husband and the wife are both presently aged 42 years. They married in November 1983. They did not cohabit prior to marriage.
There are three children of the marriage — B born 7 March 1986, S born 21 July 1988 and R born 28 February 1991.
The parties separated on 10 February 2002. They continued living under the same roof until August 2002, when the husband moved to rental accommodation. He returned to live in the former matrimonial home on 25 November 2002 — where he remained until the parties finally separated on 4 January 2003.
The children have resided with the wife since the date of separation. It is not in dispute that the children will continue to reside with the wife, and the parties have agreed to orders to that effect.
The Law
The general approach that should be adopted by the court in relation to a property settlement application has been described in many cases[1]. The court must first identify the property of the parties. It must then attribute a value to each item of property — usually as at the date of the hearing. Thereafter, it must assess the extent of each party’s contributions under the various subheadings described in section 79(4) of the Family Law Act. Finally, the court must consider the financial resources, means and needs of the parties, and the other matters set out in section 75(2) so far as they are relevant. An adjustment of the amount due to each party by way of contribution is then made by reference to the section 75(2) factors. It is not essential, however, that such an adjustment take place. Generally speaking, an adjustment is made because one party has greater needs and the other has stronger means.
[1] see, for example, Pastrikos (1980) FLC 91-987, Lee-Steere (1985) FLC 91-626, Ferraro (1993) FLC 92-335, Clauson (1995) FLC 92-595 and Whitely (1996) FLC 92-684
In relation to the contribution of the parties under section 79(4) generally, it has been held that a “global” approach will usually be more convenient than an “asset by asset” approach — although the application of an asset by asset approach does not (of itself) amount to an error of law[2].
[2] see Norbis (1986) FLC 91-712
Section 75(2) is concerned with the process of arriving at a just and equitable result. It follows that there may be circumstances in which the justice and equity of the case, and the specific provisions of section 75(2), support an adjustment in a party’s favour for matters which cannot comfortably be described as being of financial or economic significance.[3]
[3] see McMahon (1995) FLC 92-606 at 82,043
Under section 79(2), the court is required to be satisfied that the order to be made is just and equitable — not simply that the underlying percentage division of the net value of the parties’ assets is appropriate. In other words, in the consideration of whether the overall result of property settlement proceedings is just and equitable, it is the justice and equity of the actual orders, and not of the percentage distribution, which must be considered[4].
[4] see Russell (1999) FLC 92-877
Section 79(2) and the so called "Fourth Step"
One of the most recent authorities dealing with the correct approach to be applied in property settlement cases is the Full Court decision in Hickey (2003) FamCA 395, where Their Honours said:
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case: Lee Steere (1985) FLC 91-626; Ferraro (1993) FLC 92-335; Davut & Raif (1994) FLC 92-503; Prpic(1995) FLC 92-574; Clauson (1995) FLC 92-595; Townsend(1995) FLC 92-569; Biltoft (1995) FLC 92-614; McLay(1996) FLC 92-667; JEL & DDF (2001) FLC 93-075 and Phillips (2002) FLC 93-104 (emphasis added).
During the course of the trial, counsel for the wife submitted that the issue of justice and equity referred to in section 79(2) might be an independent consideration — completely separate from the usual steps in the property settlement exercise to which I have made reference.
There have indeed been cases in which the application of the consideration as to whether a proposed order is just and equitable has been described as the fourth step in the property settlement exercise. Hickey is just such a case.
In my view, however, the testing of any proposed orders by reference to section 79(2) is not a fourth substantive step (properly so called) in the property settlement exercise, and there is no fourth step in that sense.
In Russell[5], consideration was given to precisely that question. It has been considered in other cases as well[6].
[5] (1999) FLC 92-877 (at 86,439)
[6] see JEL & DDF (2001) FLC 93-075; but see Phillips (2002) FLC 93-1041
The problem with considering the application of section 79(2) as a stand alone requirement or consideration is that it is impossible to determine what factors may direct the court in its consideration of what may or may not be a just and equitable result in proceedings. Nygh J, in early cases, referred to concepts such as “palm tree justice” or “a soup kitchen approach” in relation to subjects such as these. It is impossible to look at the question of whether an order or a result is “just and equitable” without measuring or assessing that consideration by some yardstick. The approach set out in section 79 requires that the court use the considerations in section 79(4) as the yardstick, and not other (wholly undisclosed) considerations.
I note that the Full Court in Hickey did not refer to the so called fourth step as a substantive adjusting process. It clearly indicated that the process relates to the form of the orders that are ultimately to be made (and, in that regard, I refer to the words to which I have given emphasis in the passage from Hickey quoted above).
The high point (as it were) of the Full Court's approach in this regard is to be found in Phillips (2002) FLC 93-104. In that case, the Full Court said (on page 88, 986):
In determining an application pursuant to section 79 findings will usually be made as to the entitlements of the parties expressed as a percentage of the net assets of the parties having regard to the matters of contribution and the other factors. However, when considering whether or not the overall result is just and equitable a further adjustment may be warranted depending on the circumstances of the case.
Earlier in its decision[7], the Full Court metaphorically described this process as follows:
... it is necessary to “stand back” and consider if overall the ultimate award was just and equitable to both parties...
[7] see paragraph 70 on page 88, 986
In my view, Phillips is not and cannot reasonably be interpreted as authority for the proposition that a Court exercising jurisdiction under the Family Law Act in relation to property settlement should “stand back” and make substantive alterations to the result that has been reached after the application of what has been described as the first three steps in the property settlement exercise. The Full Court in Phillips recognised that the order which it considered to be just and equitable in all the circumstances (after allowing the appeal and exercising its own discretion) was an order that itself fell within the range of reasonable and appropriate orders having regard to the specific findings made by the trial Judge. The Full Court did not suggest that any form of additional “loading” could or should be added to (in that case) the wife's overall entitlement. Clearly, the “further adjustment” to which the Full Court referred in the passage quoted above[8] could only comprise an adjustment to the form, structure or balance (for want of a better description) of the relevant orders. Alternatively, the Full Court could only have intended to mean that the “further adjustment” associated with the “fourth step” would be an adjustment from one (slightly less) just and equitable result based on the first three steps of the property settlement exercise to another (slightly more) just and equitable result based on those same three steps.
[8] see paragraph 20 above
I am strengthened in my view in this regard by the fact that the Full Court in Phillips gave no guidance (in the form of guidelines or otherwise) as to the types of factors that might be relevant in the exercise of the discretion so obviously involved in the application of this so called “fourth step”.
The Full Court’s use of the expressions “overall result” and “ultimate award” in the passages quoted above does not alter my view of nature of the so called “fourth step”. These expressions do not obviously relate to the financial result of the proceedings, and in my opinion, can only fairly be understood as referring to the actual orders that the court may be minded to make. Once again, there does not seem to be any clear suggestion that the process associated with the so called “fourth step” could possibly lead to a significant change in the overall financial consequences to the parties of the result achieved following the proper application of the first three steps.
Section 79(2) is Phrased in the Negative
Section 79(2) is phrased in the negative. It reads:
The Court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order. (Emphasis added)
The preamble to s.79(4) directs the Court to take into account the matters set out in s.79(4)(a) to (g) for the purpose of determining what order (if any) should be made under s.79 in property settlement proceedings. Section 79(1) empowers the Court to make “such order as it considers appropriate” altering relevant property interests (amongst other things).
Thus ss.79(1), (2) and (4) all refer to the making of orders and not, for example, to the division of property. In my opinion, a careful reading of ss.79(2) and (4) – without more – leads to the inevitable conclusion that s.79(2) does not contain any power to vary or recast a substantive division of property reached after the application of what have been described as the first three steps in the property settlement exercise. That proposition can be tested in the following way:
a)Section 79(2) directs the Court not to make an order (under s.79) unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
b)"The order" referred to in the last two words of s.79(2) can only mean the order that the Court is or may otherwise be minded to make under s 79.
c)But s.79(4) compels the Court to take into account the matters set out in s.79(4)(a) to (g) in the process of considering what order (if any) should be made under s.79.
d)In other words, if the Court scrutinises a proposed order that it is minded to make for the purpose of determining whether that proposed order is indeed just and equitable — as it is obliged to do pursuant to the provisions of s.79(2) — and concludes that it is not just and equitable to make that particular proposed order, then the Court has no option but to revisit s.79(4) to determine what other, alternative or additional order or orders should be made.
e)Section 79(4) must be revisited because that subsection clearly states that the considerations set out in it must be taken into account in determining what order (i.e. what order altering the interests of the parties in their property, including, if appropriate, an order for a settlement of property) should be made.
f)If the property settlement exercise was carried out correctly by the Court on the first occasion, then it is clear that the same overall division of the property of the parties must be achieved when the court revisits s.79(4). All that is left in such a circumstance is to alter the form, structure or balance of the orders required to give effect to that overall division, in order to ensure that s.79(2) is not offended.
g)The only other possibility, it seems to me, is that the Court may conclude – after due consideration of s.79(2) – that it did not carry out the property settlement exercise correctly on the first occasion, and that that is why it now considers that the proposed order that it was minded to make is not just and equitable. Such a conclusion will necessarily lead the Court to either reassess the parties’ contributions (in all their various guises), or to attribute different weight to the various s.75(2) factors (or both). Either way, the overall process can only, ultimately, involve three substantive steps (being the first three steps referred to in Hickey).
In other words, and as I have already explained, the determination of the proportional or other distribution or division of the property between the parties must necessarily be concluded before one looks at the justice and equity of the actual orders that are utilised to effect that distribution or division.
In any event, and as I have inferred in paragraph 27(g) above, I am of the view that the consideration and application of the factors referred to in s.75(2) in the "third step" of the property settlement exercise provide the Court with ample scope to ensure that the provisions of s.79(2) are not offended. Section 75(2)(o), in particular, enables the Court to take into account a miscellany of relevant circumstances.
"Needs" Test is Inappropriate
Counsel for the wife also argued that a fair and proper determination of the wife’s entitlement might be arrived at by applying some form of “needs” test. I do not wish to labour this subject, but I do refer counsel and the parties to the Full Court decisions in Lee-Steere[9] and Figgins[10]. In those cases the Full Court emphatically rejected the concept of property settlement being based upon a party’s needs (as opposed a strict application of the factors otherwise set out in section 79 of the Family Law Act), and explained how section 79(2) might actually operate.
[9] (1985) FLC 91-626
[10] (2002) FLC 93-122
Material Facts
Much of the background and financial history of the parties was not in dispute in these proceedings. In paragraph 9 of his trial affidavit, the husband said that, when the parties commenced cohabitation, neither of them “... had any significant assets or liabilities or financial resources. Everything that we have accumulated has been accumulated during the course of the marriage.”
The husband was employed on a full-time basis throughout the marriage. There appears to be no dispute that his earnings were “...devoted to household purposes”.
The wife was initially employed as a secretary on a full-time basis. She ceased paid employment outside the home after the birth of the parties' first child, and became the principal homemaker and caregiver for the children.
According to the husband, he contributed to the welfare of the family “to the best of his ability”. When he was home, he helped the wife with the care of the children, and with various housekeeping tasks. He also involved himself in “garden maintenance” and household repairs.
After separation, the children continued to live with the wife in the former matrimonial home. The husband moved out of the home and, for a short period, lived with his brother. In February 2003, the husband moved from his brother's home to live with his current partner, Ms M. Ms M lives directly opposite the former matrimonial home — in the same street. Her three children (aged 18, 16 and 7) live with her and the husband.
Since the date of separation, the husband has not arranged for his children to stay overnight with him at Ms M's home. According to the wife, Ms M's home is large. It contains five bedrooms, and the husband and Ms M could accommodate the parties’ children — together with Ms M's children — if they were minded to do so.
In paragraph 7 of the wife’s trial affidavit, she deposes to the following:
Even though he lives directly across the road from the children, (the husband) does not invite the children to his home in between contact weekends. If he sees the children in our front garden or in the street he rarely acknowledges them. He never contacts them by telephone just to see how they are.
This assertion was not denied by the husband in his trial affidavit. Nor did the husband's Counsel see fit to cross-examine the wife on the subject of the husband's contact with the children.
Although the wife's principal role during the marriage was as homemaker and caregiver for the children, paragraph 9 of her trial affidavit reveals that she worked in paid employment from time to time. In January 2002 the wife started working for Bayside Canteens (where she is currently employed) for 15 hours each week as a canteen assistant. She works from 10:30 a.m. to 1:30 p.m., Monday to Friday. The wife finds this form of employment convenient and appropriate, because it enables her to look after the children before and after school and at weekends.
There appears to be no doubt that the wife's earnings during the marriage (and following separation) were applied to day-to-day living expenses.
In paragraph 10 of her trial affidavit, the wife states as follows:
I have always been the primary carer of the children, however, during the marriage major decisions were made jointly by (the husband) and me. Since separation I have made all day-to-day and long-term decisions regarding their care. (The husband) has completely withdrawn his support for the children in this regard. He has not shown any interest in their schooling or extracurricular activities...
The assertion contained in the previous paragraph was denied by the husband in his trial affidavit. The husband refers to taking R to football training twice per week (and attending the football match on the weekend) during 2003. He also refers to taking S to indoor soccer in 2003. In essence, the husband’s approach to contact issues has been “to respect the children's wishes”. Irrespective of whether or not the wife (or the court, for that matter) considers the husband’s approach in this regard to be reasonable, the fact of the matter is that the wife has had almost sole responsibility for the day-to-day care and supervision of the children at all times since the parties separated. Clearly, that responsibility has required the wife to carry out more housekeeping, supervision and general parenting tasks than would have been the case if the husband had exercised contact on a more expansive basis.
The evidence reveals that the husband has paid appropriate child support since the date of separation. In Clauson (1995) FLC 92-595, however, the Full Court said (at page 81, 911):
... It should not be forgotten that the payment of child support in no way compensates the custodial parent for the loss of career opportunity, lack of employment mobility and at the restriction on an independent lifestyle which the obligation to care for children usually entails.
The wife (and the children) have continued to reside in the former matrimonial home since separation. On the other hand, the husband did not contribute to the payment of the instalments in respect of the mortgage presently encumbering the property.
According to the husband, the wife lives in a de facto relationship. In paragraph 18 of his trial affidavit, the husband asserts that the wife and her de facto husband have “been together” for about 10 months. The husband also asserts that the wife’s de facto husband has five children, and that at least one of those children lives with the wife and her partner on a full-time basis. The wife, for her part, denies that she is living in a de facto relationship.
The wife’s partner is Mr H. According to the wife, Mr H commenced living with her — on a temporary or trial basis — at the beginning of February 2004. Prior to that time, his principal place of residence was in Mount Eliza — approximately 15 minutes from the former matrimonial home.
The wife did not deal with the subject of her relationship with Mr H in her affidavit material. The evidence referred to in the previous paragraph was adduced during the course of cross-examination of the wife. It appears that Mr H was renting a property in Mount Eliza, and that the lease expired on 6 February 2004. As far as the wife is concerned, Mr H presently lives in her house “as a guest”. He is now looking for alternative accommodation in the area.
The wife does not deny that Mr H’ son (Y) has lived with her since October 2003. Mr H pays $80.00 per week to the wife to cover Y’s expenses. He pays nothing in respect of his own expenses.
There can be no doubt that Mr H has spent a considerable amount of time at the former matrimonial home. Nor can there be any doubt that his relationship with the wife is a very close one. After all, his son has lived with her since October 2003. Nevertheless, the wife’s evidence is that she is “not sure if (she is) ready for the commitment yet”.
I watched both parties carefully as they gave evidence, and at other times during the course of the proceedings. Both parties gave their evidence in a calm and balanced fashion. Both made appropriate concessions. I have no reason to suspect that either party may not be a witness of truth. Indeed, I was impressed by both parties, and find that — generally speaking — both were honest and open witnesses.
I find that, although the wife clearly has a close and supportive relationship with Mr H, she cannot fairly be regarded as being in what is colloquially described as a de facto relationship with him. There is a strong possibility that their relationship will develop to the extent that it could be categorised as cohabitation in the usual sense, but I find that it has not developed to that extent yet.
I accept the wife’s evidence to the effect that she does not have a financial relationship with Mr H — beyond the arrangement regarding Y’s board. That is not to say that Mr H ought not to be contributing to the costs which are obviously associated with the wife’s provision of accommodation for him. I accept the wife’s evidence, however, to the effect that she is unaware of Mr H’ income or financial position generally.
If the husband wished to explore the financial relationship (or alleged financial relationship) between the wife and Mr H, then it was open to him (or, more accurately, his legal advisers) to issue a subpoena to Mr H requiring him to give evidence and/or produce documents relating to his financial situation. For reasons best known to the husband and his legal advisers, that course of action was not adopted.
I have not ignored the fact that the husband made full and frank disclosure of the financial aspects of his relationship with Ms M. His financial statement reveals Ms M’s income, and his contributions to her household. Nevertheless, I find that the husband’s relationship with and attachment to Ms M are both stronger and more secure than the wife’s relationship with and attachment to Mr H.
Property of the Parties
I turn now to consider the first step in the property settlement exercise — which relates to the identification and valuation of the property of the parties at trial. During the course of the trial, the identity and value of each item of property was clarified. I find that the property available for distribution between the parties is as follows:
Former matrimonial home
$220,000.00
Less: mortgage
$80,561.00
$139,439.00
Husband's motor vehicle
$2,000.00
Wife's motor vehicle
$12,000.00
Furniture, chattels and effects
$8,000.00
Husband's Hella superannuation
$108,000.00
Husband's AMP superannuation
$1,941.00
$109,941.00
Wife's superannuation
$135.00
Total:
$271,515.00
Some of the above items require explanation:
a)The husband argued that the mortgage balance should be brought into account at the figure that was owing at the date of separation. According to the husband, the balance owing in respect of the mortgage was $73,489.00 as at 1 January 2003. By 16 December 2003, the balance had risen to $80,561.00. The mortgage repayments amounted to $442.00 per month (or $102.00 per week). According to the husband, they were “well within the wife’s capacity to pay”.
b)I do not accept that the balance owing as at the date of separation is the appropriate figure. Ordinarily, the assets and liabilities of the parties must be taken into account as at the date of the trial. The wife was not in a strong financial position following separation, and the payment of child support by the husband did little to alleviate the financial difficulties which she obviously experienced. Had it not been for the wife’s receipt of the Government benefits referred to in her financial statement, she would not have had the ability to meet the significant expenses associated with the running of her household and the care of the three children. I have already referred to the fact that the husband did not have significant contact with the children after the date of separation — notwithstanding the fact that he lived directly across the road from the former matrimonial home. I have also dealt with the husband’s assertion that the wife has been residing in a de facto relationship with Mr H. In my opinion, there is no adequate reason to stray from the usual approach in property settlement proceedings. In any event, the husband’s argument to the effect that the wife should have met all mortgage payments after the date of separation is relevant to the contribution exercise (being the so called second step in the property settlement exercise), and not to the ascertainment of the size of the property pool (being the first step).
c)The values of the other assets (including the value to be attributed to the parties' superannuation) were agreed at trial.
d)The orders sought by the husband envisage the sale of the former matrimonial home. No evidence was presented to me regarding the selling costs associated with such a sale. Clearly, if the former matrimonial home is to be sold, then selling costs will be incurred and the net proceeds of sale will be significantly less than the net value of the former matrimonial home set out in schedule. Having regard to the orders that I propose to make in this matter, however, I am of the view that the likely selling costs of the former matrimonial home are irrelevant.
As to the manner in which the parties’ superannuation should be dealt with, I refer to the discussion on this subject in Hickey — at paragraph 75:
Although... the definition of property in section 4 (of the Family Law Act) was not amended to include a superannuation interest or deem such an interest to be property, the effect of section 90MC is that in proceedings in relation to property under section 79 a superannuation interest is to be treated as property irrespective of whether or not a splitting or flagging order is sought or proposed to be made... The expression "treated as property" should be understood as meaning "treated as if it were property even though it is not" and that it should be so treated for the purposes of section 79... Because a superannuation interest is to be treated as property in section 79 proceedings it follows that it will be included in the list of property and valued at what is step one of the preferred four step approach to the determination of an application pursuant to section 79. At step three of the superannuation interest may be taken into account, as are other items of property and financial resources, pursuant to the provisions of section 75(2) if the interest is relevant. The superannuation legislation introduced reforms which are directed to how a court will deal with a superannuation interest at steps one and four of the preferred four step approach in the determination of an application under section 79. The legislation did not amend sections 79 or 75.
I have already referred to the approach described in the previous paragraph, but will return to the subject later in these Reasons.
Contribution
I turn now to consider the contribution issues. There was a concession during the course of the trial that the parties’ contributions in all their various guises to the property available for distribution between them are approximately equal. Certainly, the husband made just such a concession in his affidavit material.
There are, however, two areas in which the parties disagree regarding that proposition. The first area is in relation to the wife's motor vehicle. The contention of the wife is that the contribution made by her parents to the acquisition of the car traded in for the purpose of purchasing the present car was a significant financial contribution, and causes the scales to be weighted in her favour when contribution is considered.
The husband argues that the wife’s failure to contribute to the whole of the mortgage instalments after the date of separation skews the balance in his favour insofar as financial contributions are concerned.
I refer to the discussion of contributions of this nature in cases such as Money (1994) FLC 92-485, Bremner (1995) FLC 92-560 and Pierce (1999) FLC 92-844. It is for the court to determine at the end of the day what weight should be attributed to the various contributions of the parties in all their various guises. I recognise that the wife’s parents contributed some $15,000.00 to the assets available to the parties in the early 1990s. Those funds were used for the purpose of acquiring a motor vehicle. To the extent that it may be relevant, I find that the wife’s estimate of the trade-in value of the vehicle is much closer to the real value than the husband's estimate of the trade-in value.
At the end of the day, however, I am of the view that the offsetting contributions made by the husband since that time (in all the various ways recognised under the Family Law Act), including the contributions that he notionally made after the date of separation by allowing the wife and the children to remain in the former matrimonial home whilst the wife paid something less than the full amount of the mortgage, offsets, dilutes or erodes the contribution initially made by the wife’s parents for her benefit (and there can be no doubt that the contribution was indeed made by or on behalf of the wife alone).
When I have regard to other factors such as the contributions made to the welfare of the family by the wife since the date of separation – which, in my view, significantly outweighed the contributions made by the husband in this regard – I am of the view that, on balance, the only fair result that the court can possibly reach in relation to the general issue of contribution is that contributions, overall, were equal.
There is no justification, in my view, for a different contribution percentage to be applied to the superannuation entitlements as opposed to that to be applied to the other property available for distribution between these parties (being the realisable assets).[11] Although there may be a perception that the value (in this case, the agreed value) of the superannuation is somewhat “artificial”, the fact of the matter is that this court has been legislatively directed to treat superannuation as if it were property. The prescribed valuation process takes into account a number of actuarial factors, adjustments or considerations. It provides no less an indication of the true “value” of the item than does the valuation process that is applied to other items of property – such as a business or residential or commercial real estate. Indeed, the valuation process as it applies to superannuation is arguably fairer and more reliable than that which may apply to certain other items of property. There is always the possibility that the sale price of a business, a work of art or real estate (for example) will be very different from the value attributed to it during the course of property settlement proceedings. The sale price might be higher or lower than that indicated by the valuation – or higher or lower than the agreed value or the value determined by the court after hearing evidence from competing expert valuers. Or a party may find that he or she cannot find a buyer for the item of property at all. Such considerations have never prevented courts from determining the value of all types of property in a multiplicity of contexts.
[11] Cf, for example, the approach adopted by Coleman J in Cahill (2003) FamCA 172 (unreported)
In Cahill (2003) FamCA 172, Coleman J chose – after referring to Norbis (1986) 161 CLR 513 – to attribute different contribution percentages to different items of property. In that case, one of the items of property was the husband’s DFRDBA pension, which could never be commuted to a lump sum. His Honour’s view was that such a pension “... is not, and can never be, capital. It is as simple as that”. With the greatest of respect, I do not entirely agree with His Honour’s conclusion in that regard. Although the husband’s entitlement to the pension may not be “capital”, it is certainly property – and its value can be fairly and accurately ascertained. Indeed, in Cahill it was agreed.
His Honour decided not to make any “contribution finding” in relation to “this notional asset”. In other words, it was removed from the pool of property available for distribution between the parties. It was treated “within the context of s.75(2)” on the basis that “... it is income, it will always be income and it is a powerful s.75(2) factor”.[12]
[12] see Cahill (2003) FamCA 172 at paragraphs 76 to 82
In my opinion, the procedure or method mandated by the Full Court in Hickey does not sanction the approach adopted by Coleman J in Cahill. There is no reason, it seems to me, why the parties’ respective contributions to each of the various components of the property pool (including the DFRDBA pension) could not have been assessed in the usual way – and in Cahill there were certainly factors which operated in favour of the court adopting an “asset by asset” approach to contribution (as opposed to a “global” approach). There is no reason why the court could not then have made such adjustments to the result so obtained (i.e. the split or division of the property pool on the basis of contribution alone) as it thought necessary having regard to the s.75(2) factors – which adjustments may well have led it to the same ultimate result as was reached in any event. (even before any restructuring, restyling or balancing of the proposed orders to avoid potential injustice or inequity).
Even if I am wrong in relation to his Honour’s approach to the DFRDBA pension in Cahill, the reality is that no such pension exists in the case now before me. The value of the parties’ superannuation entitlements have been agreed, and it was also agreed that those entitlements are to form part of the property pool. As well, it was agreed that the parties’ overall contributions to that pool (in a “global” sense) are approximately equal – subject to the two relatively minor areas of disagreement referred to above.
Section 75(2) Factors
So far in considering the question of property settlement I have addressed the question of the identification of the property and resources, their valuation and the question of contribution. Clearly the court is entitled to make an adjustment to a party's property settlement entitlement on the basis, amongst other things, of both parties’ respective means and needs. The Family Court has been critical of shorthand terms being used to describe this, the last step in the property settlement exercise, preferring to refer to it simply as the section 75(2) factors (see Clauson). In essence, section 75(2) is concerned with the process of arriving at a just and equitable result (see, in that regard, Waters & Jurek (1995) FLC 92-635).
I turn now to consider the section 75(2) factors. The first of those factors is the age and state of health of each of the parties. I have already recorded the parties’ ages. There is no relevant evidence before me as to the parties’ state of health, and it seems that that is not a relevant consideration in these proceedings.
The court must consider the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment.
The financial statements of the parties reveal the income that each of them is receiving. If I ignore the wife's Government benefits, it is clear that her earnings are very modest indeed. She has no skills which would enable her — at this stage — to earn a higher income than that which she is presently receiving. Even if she were to earn double the amount that she is presently earning, she would still only be receiving a fraction of the amount that the husband earns. His financial statement reveals that his salary or wages before tax are $1109.00 per week. And the husband resides with Ms M whose income is in the order of $600.00 per week.
The husband sets out other aspects of his expenditure in his statement of financial circumstances. It is clear that superannuation acquired during the course of the parties’ relationship is available to each of them, depending upon the orders that the court may be minded to make. I heard evidence from the wife as to her intentions regarding acquiring an appropriate earning capacity. I find, however, that the husband's earning capacity is very significantly greater than that of the wife, and I find that it is likely to continue to be so.
The next consideration is whether either party has the care of a child of the marriage who has not attained the age of 18 years. The fact of the matter is that the wife falls within that category. True it is that the oldest child of the marriage is soon to attain the age of 18 years, but the reality is that the husband has such little contact with the children (although perhaps for very valid reasons) that, in my view, this is a very important consideration. There appears to be no doubt that the wife will continue to have the responsibility for at least one of the children of the marriage for a number of years to come.
The next factor is the commitments of each of the parties that are necessary to enable that party to support himself or herself and a child or another person that the party has a duty to maintain. In the circumstances of the present case, the only persons that these parties have a duty to maintain are their children. The husband has no obligation to maintain Ms M, and certainly the wife has no obligation to continue to absorb the costs of Mr H’ accommodation at the former matrimonial home. Nevertheless, that factor is not one which, in my view, looms large in the context of this case.
The next factor comprises the responsibilities of either party to support any other person. In my view, any comment that I would wish to make under this heading has been dealt with in the brief discussion directed towards the previous consideration.
The next factor is the eligibility of either party for a pension, allowance or benefit under any law of the Commonwealth, State or Territory, or any superannuation fund. I have already made reference to the superannuation entitlements of the parties, and details of the husband’s policies have been attached to his affidavit. The value has been agreed for the purposes of these proceedings and little now needs to be said about this factor. What is important, however, is the question of what is to be done with those superannuation entitlements. Currently the husband’s superannuation entitlements far outweigh those of the wife — as is to be expected having regard to the fact that he has been the principal breadwinner throughout the marriage. There can be no doubt, however, that the husband is not immediately entitled to his superannuation entitlements. He must wait approximately 13 years (at least) until he receives the vast bulk of them (although the information attached to the husband's affidavit reveals that he could receive something in the order of $18,500.00 if he were to leave his current employer)[13].
[13] see the report from Totally Independent Financial Planning Pty Ltd dated 19 August 2003, being part of annexure A to the husband’s trial affidavit
The next factor directs the Court's attention to a standard of living for the parties that in all the circumstances is reasonable. In the context of this case this is a factor that is of some relevance. The wife wishes to continue to reside with the children in the former matrimonial home. The husband has a stable relationship with Ms M, and is able to live comfortably in exactly the same street as the wife. It seems to me that the husband is likely to be able to maintain his standard of living into the future. He has a significant earning capacity — particularly when compared with the earning capacity of the wife. From the wife’s point of view, if the former matrimonial home is to be sold, then there is considerable doubt as to whether she would be able to acquire equivalent accommodation elsewhere.
The next factor relates to the payment of maintenance to a party. It is not relevant to these proceedings.
The next relevant factor deals with the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration. Here, maintenance (in the strict sense) is not under consideration — because there is no application for maintenance before the court. The duration of the marriage — in itself — has not affected the wife's earning capacity. It would appear that she had few qualifications even at the commencement of the marriage. This factor is ordinarily directed to a scenario in which, for example, one of the parties had significant income earning, professional or trade skills at the commencement of the relationship but — as a result of the duration of the relationship — those skills no longer exist, and perhaps extra training is required to ensure that the party can acquire an improved earning capacity.
In the circumstances of this case, the position is that the wife has never had a significant earning capacity, and the evidence before me reveals that she is unlikely to have one in the future. The husband has been able to continue in his field of employment throughout the period of the marriage, and is now earning a reasonable wage.
The next factor is the need to protect a party who wishes to continue his/her role as a parent. I have already commented upon the fact that the wife bears the principal responsibility in a parenting sense. She wishes to continue to exercise that role whilst residing in the former matrimonial home.
The next factor is the one to which I made reference during the course of the proceedings. That is, whether either party is cohabiting with another person. If a party is cohabiting with another person, then the court must take into account the financial circumstances relating to the cohabitation. I have already referred to this elsewhere in these reasons.
The court is also obliged to take into account any child support that a party has provided or is to provide for a child of the marriage.
I recognise that the husband is making a proper contribution in the form of child support, and he is not to be criticised in that regard. Nevertheless, and as is made clear by the quote from Clauson to which I referred earlier, the simple payment of child support by one party does not mean that any adjustment which would otherwise properly flow to the other party should be significantly minimised or eradicated entirely.
Having regard to all the evidence before me, I conclude that the most significant of the section 75(2) factors are the following:
a)The children reside with the wife.
b)The husband, although he has contact with the children, has what may fairly be described as modest or minimal contact. I have no evidence that that is likely to change in the near future.
c)The husband's earning capacity is very significantly greater than that of the wife.
d)The husband has provided proper child support.
e)The husband is cohabiting with Ms M in the circumstances to which I have referred earlier.
f)The wife strongly desires to remain in the former matrimonial home.
Further, I recognise that the parties’ superannuation entitlements have been valued and included within the pool of property available for distribution. It follows that any adjustment to take account of the s.75(2) factors need not be as pronounced as would have been the case prior the amendment of the law to enable such entitlements to be treated as if they were property.
On the basis of the evidence before me, and having regard to the fact that the purpose of the section 75(2) adjustment is to assist the court with the process of arriving at a just and equitable result, I conclude that an adjustment should be made to the wife's entitlement on the basis of contribution alone by increasing that entitlement from 50 per cent to 60 per cent of the total property pool of $271.515.00.
How Should the Orders be Structured?
I have recognised that within the total amount of $271,515.00 are realisable assets (as it were) amounting to $161.439.00 and, for want of a better description, superannuation entitlements amounting to $110,076.00. If the wife's entitlement were to be a “straight” 60 per cent, then it is at least arguable that the wife ought to receive 60 per cent of the realisable assets and 60 per cent of the superannuation entitlements.
But the question then becomes whether justice and equity, as referred to in section 79(2), might somehow demand that both types of property be divided in the same way. Indeed, the question might just as easily be posed as to whether every item of property (and, I suppose, every liability) comprising the property pool ought not to be divided in the same proportions. The answer to such a question is obvious. The Family Court (and this Court) has always had power to allocate individual items of the parties’ property as it sees fit, and in such a way as to achieve what it considers to be an appropriate division of the entire property pool. It is in the course of this process that the structure, style and balance of the actual orders that the court proposes to make are considered. And as I have explained above, it is in the course of this process that s.79(2) must be considered.
Sixty per cent of $271,515.00 is $162,909.00. The question for the court to determine under section 79(2) in endeavouring to do justice and equity to these parties in the context of these proceedings, therefore, is how that figure of $162,909.00 is to be apportioned between the realisable assets and the superannuation entitlements.
The Court is well aware of the ages of the parties and the fact that the superannuation entitlements of the husband will not realistically be available for many years to come.
Nevertheless, as the decision in Hickey makes clear, the superannuation entitlements, once valued (and in this case they are agreed), are to be treated as if they were property. The court has already taken into account the reality that these assets are unlikely to become available for some years in the future. It did so as part of the third step in the property settlement exercise – when considering the movement of the wife’s overall entitlement from 50 per cent to 60 per cent on the basis of the s.75(2) factors.
In my view, the correct, just and equitable split of the categories of property in order to provide the wife with a total amount of $162,909.00 (being 60 per cent of the overall property pool available for these parties) is something between 10 and 20 per cent of that amount to be in the form of superannuation entitlements, and something between 80 and 90 per cent to be in the form of realisable assets. It would be intellectually dishonest of me to do other than choose the midpoint of each range. I have concluded, therefore, that the total amount of $162,909.00 to which the wife is entitled should be allocated as to 15 per cent in the form of superannuation entitlements and 85 per cent in the form of realisable assets. The dollar figures are as follows: 15 per cent of $162,909.00 is $24,436.35. 85 per cent of $162,909.00 is $138,472.65.
I have reached the above conclusion because of the wife’s desire to retain the former matrimonial home as the home for herself and the children. The husband has secure accommodation with Ms M, and a significant earning capacity in comparison with that of the wife. The wife needs a significant share of the realisable assets. The husband does not. He wants a larger share than I have determined is appropriate (and just and equitable), but to allow him to receive it would lead to an unjust and inequitable result when all relevant factors have been considered.[14]
[14] see, by way of comparison, the approach taken and factors considered by Moore J in Levick (2003) FamCA 40 (unreported)
The wife is to retain the former matrimonial home, subject to the mortgage. It has a net value of $139,439.00. She will also receive her car and the furniture. She must then pay to the husband just under $21,000.00. The husband will retain his superannuation, his motor vehicle and any other assets in his possession. He must transfer to the wife $24,301.35 from his superannuation. It seems sensible to me that those two figures should be set off against each other – but that is not an order that I am going to make. I have already ruled that, in my view, the orders that I have indicated are just and equitable. I will stand the matter down to enable the parties to prepare a minute to give effect to the orders that I have proposed.
Costs
Before the court is an application on the part of the wife for an order that the husband pay her costs in relation to these proceedings. The question of costs in family law proceedings is dealt with in section 117 of the Family Law Act. The trial judge, or in this case the federal magistrate, has a broad discretion in costs matters. The Full Court has indicated that it will not ordinarily intervene unless the order is plainly unreasonable. Indeed, the court has almost unlimited jurisdiction in relation to costs, although any costs order must be just (see Kelly & Kelly (No 2) (1981) FLC 91-108, Hogan (1986) FLC 91-704 and I & I (No 2)(1996) FLC 92-625).
It is not the law that a costs order can only be made in a clear case. Thus, although a finding of justifying circumstances is an essential preliminary to the making of a costs order, there is no additional or special onus on an applicant for an order for costs. Although the general rule is that each party shall bear his or her own costs, that general rule is expressed to be subject to section 117(2), and must yield whenever the court finds that there are circumstances justifying the making of a costs order (see Penfold (1980) FLC 90-800).
All admissible offers, whether or not they are subsequently withdrawn, can be taken into account. This includes offers contained in correspondence in which it is stated that the letter in question will be used on the question of costs (see Murray (1990) FLC 92-173, Kowalski (1994) FLC 92-501 and Steel (1992) FLC 92-306). The court's attention is not limited to offers which are greater than the amount awarded where the offeror is the payer, or less than the amount awarded when the offeror is the payee. Where a payer’s offer is under the amount finally awarded, then the closer that the offer is to the award, the more the weight that should be given to it as a relevant factor in relation to the question of costs. Similarly, if a payee’s offer is above the final award, then the closer that the offer is to the final award, the more weight it is likely to carry (see, for example, Pennisi (1997) FLC 92-774).
In the present case the wife’s solicitors wrote to the husband's solicitors on 13 January 2004. They put forward an offer to settle the proceedings. The offer records that the wife was prepared to pay to the husband the sum of $25,000.00 — which is some $4,000.00 (approximately) more than the amount that I have ordered her to pay. On the other hand, part of the offer is to the effect that the wife was to receive 45 per cent of the husband's superannuation entitlements. On the basis of the calculations that I have done, the wife has in fact been awarded approximately half of that percentage. In my view, it cannot be seen — on the basis of this correspondence — that the wife has beaten (or even matched) her offer.
Nevertheless, the court is obliged to have regard in applications for costs to a number of matters. Those matters are set out in section 117(2A) and I propose to deal with them seriatim. The first is the financial circumstances of each of the parties to the proceedings.
I have dealt with this subject in my Reasons. The financial circumstances of the parties are described in their statements of financial circumstances. It is the case, and I have found, that the husband has a much more significant earning capacity than does the wife. That is a relevant factor, and one that was taken into account in the proceedings.
On the other hand, the reality is that, as a result of the orders that I have now made, the wife will receive a much greater proportion of the available assets of the parties than will the husband. In the long term, the husband will be better off than the wife because he has a greater earning capacity than she does. As well, he has superannuation of a greater value than she has, or than she can ever expect to attain. Nevertheless, in the short term the clear result of the proceedings is that the husband will not have a great deal of funds available to him and the wife will have the benefit of the use of the former matrimonial home which is to be transferred to her.
The second factor (under s.117(2A)) is whether either party to the proceedings is in receipt of assistance by way of legal aid. I am told that the wife is in receipt of assistance by way of legal aid. I am not aware of the terms of the grant of that assistance.
The next matter is the conduct of the parties to the proceedings in relation to the proceedings. This provision means that the court must have regard to the parties' conduct as litigants. It is not directed to their behaviour as partners to each other or in any other form. In this case no criticism can be directed at either party in relation to his/her conduct as a litigant. Both parties have presented their cases properly and fully to the court, and no time was wasted at trial or in any of the interlocutory stages leading up to trial.
The next consideration is whether the proceedings were necessitated by the failure of a party to comply with previous orders of the court. That provision is clearly irrelevant.
The next consideration is whether any party to the proceedings has been wholly unsuccessful in the proceedings. Neither counsel argued that this provision applies. It seems to me that neither party has been wholly unsuccessful in the proceedings. It is true, however, that neither party received all of the orders which he/she sought.
The next consideration relates to the making of an offer, and I have already dealt with the terms of the offer contained in the letter from Legal Aid dated 13 January 2004.
The last consideration is such other matter as the court considers relevant. In this case I can think of no other matter that may be relevant to the discretion which I must exercise.
When I have regard to all those factors, I conclude that there are no circumstances which would justify the making of an order for costs in this case, that the usual or default provision contained in section 117(1) should apply and that each party should bear his or her own costs.
I, Paul O'Halloran, certify that the preceding one hundred and nine (109) paragraphs are a true copy of the Reasons for Judgment of Walters FM
Associate:
Date: 10 March 2004
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