PJM & STM

[2005] FamCA 1245

[2005] FamCA 1245

FAMILY LAW ACT 1975

IN THE FAMILY COURT OF AUSTRALIA

AT PARRAMATTA

Appeal No. EA 32 of 2005
File No. PAM 1693 of 2002

IN THE MATTER OF:

PJM

Appellant/Husband

- and -

STM

Respondent/Wife

REASONS FOR JUDGMENT

BEFORE:  JUSTICE I R COLEMAN
HEARD:  29^th day of November 2005
JUDGMENT:  23^rd day of December 2005

APPEARANCES:               Ms Reynolds of counsel (instructed by Elliot & Sochacki Lawyers), appeared on behalf of the appellant husband

Mr Maddox of counsel (instructed by Ian Harper & Co Solicitors) appeared on behalf of the respondent wife

Name of Appeal  PJM & STM

Appeal Number  EA 32 of 2005

Date of Appeal Hearing                   29^th day of November 2005

Date of Judgment  23^rd day of December 2005

Bench  Coleman J

Catchwords:  Appeal against orders of Federal Magistrate for settlement of property and spousal maintenance.

Federal Magistrate found to have erred in making s 75(2) adjustment by reason of pension only superannuation interest of the husband in the payment phase, having earlier included such interest at its valuation under the Regulations and, by the contribution finding, awarded the wife a proportion of such interest.

Federal Magistrate found to have erred in continuing order for spousal maintenance without considering the impact on the financial circumstances of either party the impact of the proposed orders for settlement of property on the financial circumstances of either party.

Appeal allowed – discretion of the Federal Magistrate re-exercised at the request of both parties.

Appeal allowed – exercise of discretion.

Costs certificates.

1. For reasons which have been given, the Court allowed the husband’s appeal against orders of the Federal Magistrates Court of 28 February 2005.  At the completion of the hearing of the appeal, and delivery of the Court’s reasons in relation to the appeal, counsel for both parties invited this Court to re-exercise the discretion of the learned Federal Magistrate.  Both counsel confirmed that their respective clients had been made aware that, if this Court were to re-exercise the discretion of the learned Federal Magistrate, and either party was dissatisfied with the outcome of such re-exercise of discretion, the only avenue by which to seek a review of this Court’s decision would be an Application for Special Leave to Appeal to the High Court, the likely success of which would be very limited, whereas, if the matter were remitted for hearing by a Federal Magistrate, the re-exercise would be able to be challenged as a right by way of another appeal to this Court.  Not without some misgivings having regard to the consequences for the parties of so doing, this Court feels able to re-exercise the discretion of the learned Federal Magistrate. 

2. As is apparent from the record of proceedings in the Federal Magistrates Court, the evidence concluded in October 2003, some 16 months prior to the learned Federal Magistrate delivering judgment in the proceedings.  This Court is thus re-exercising the discretion of the learned Federal Magistrate on evidence which concluded 26 months ago.  Counsel for both parties confirmed that their respective clients did not seek to adduce further updating or other evidence in reliance upon the decision of the High Court in Allesch v Maunz (2000) 203 CLR 172, essentially, it can be inferred from statements made by counsel, on the basis that, in relative terms, the financial circumstances of the parties had not changed sufficiently to justify the expense and delay associated with so doing. Given the time since the parties separated, the time they had to wait for a decision from the learned Federal Magistrate, albeit that decision did not withstand appellate challenge, their ages and understandable desires for finality, electing to have the matter determined on potentially outdated evidence is probably wise.

3. As the learned Federal Magistrate observed in his reasons for judgment, it is conventional to approach the proceedings by a series of “steps”, the first of which is to identify and quantify the property of the parties to the marriage.  Save in the respects to which reference will shortly be made, this Court has little option than to make findings with respect to the net asset pool of the parties in identical terms to those made by the learned Federal Magistrate (paragraphs 22 – 26 of his reasons for judgment). 

4. Where this Court differs from the learned Federal Magistrate, albeit this Court has had the benefit of the decision of the Full Court in C v C (2005) FLC ¶ 93-220 which the learned Federal Magistrate did not have, is that this Court prefers an asset by asset approach to the evaluation of contributions rather than the global approach adopted by the learned Federal Magistrate. This Court prefers to consider “two pools” of property, they being the net assets referred to by the learned Federal Magistrate and totalling $844,000.00 less the sum of $248,774.00 referrable to the husband’s “DFRDB pension”, which the Court prefers to consider in a second “pool”.

5. The reasons the Court prefers this approach are essentially that the evidence establishes that the husband’s DFRDB pension is and will in future continue to be a fortnightly pension benefit which can never be commuted or otherwise converted to a lump sum, either of $248,774.00 or any other amount.  Thus, whilst undoubtedly, in accordance with the regulations, the value of the superannuation interest is as found by the learned Federal Magistrate, consistent with the judgment of the majority in C v C, this Court considers the preferable approach in terms of achieving a just and equitable resolution of the proceedings between the parties to be to consider the superannuation interest separately from the remaining assets of the parties.

6. It is necessary then to consider the contributions to the assets of the parties to the marriage.  As counselled by the majority in Coghlan, considering the contributions to the husband’s superannuation interests, which constitutes the second “pool” is also appropriate.  That issue can more simply be dealt with than can the issue of contributions to the assets comprising the first pool of property of the parties.  The husband’s DFRDB superannuation interest is referrable to a period of service by the husband with the Royal Australian Air Force from February 1967 until July 1988.  Upon leaving the RAAF on the latter date, the husband became entitled to and commenced to receive his DFRDB pension.  It was not until some 9 years later that the husband and the wife commenced cohabitation. 

7. To determine the contributions to the acquisition of the DFRDB superannuation interest to be other than entirely by the husband would be nonsensical.  There is no evidence that the husband actually had to do anything to conserve the entitlement after the commencement of cohabitation, nor is there any evidence that he had to do anything to “improve” the interest, or for that matter that the interest was in fact improved.  However, the husband’s DFRDB superannuation interest is treated, on no rational basis could it be regarded in terms of contributions as other than wholly the interest of the husband.

8. So far as the assets comprising the other pool are concerned, it is clear, as it was before the learned Federal Magistrate, that the husband’s contributions were greater than those of the wife, the issue being to what extent that was so.  When the parties commenced cohabitation the husband owned a block of vacant land in Queensland which was unencumbered and realised approximately 12 months after cohabitation commenced for $25,000.00.  That value is not evidence of the value of the property at the commencement of cohabitation, or of the equity in it at the time, but it does provide some guidance as to the likely value of the husband’s interest in the property at the commencement of cohabitation. 

9. When the parties commenced cohabitation the husband was the sole registered proprietor of the townhouse.  The property was encumbered, the husband meeting all mortgage payments and other outgoings on the property, which became the first matrimonial home of the parties.  The evidence is less than clear as to the husband’s equity in that property at the commencement of cohabitation.  The wife had been living in rented accommodation prior to the commencement of cohabitation.  What nexus, if any, existed between the rent the wife was paying and the outgoings on the townhouse is unclear.

10.  On 19 September 1997 the husband’s mother died.  The husband was her sole beneficiary and received a [country town property] which was subject to a small mortgage to Defence Service Homes of about $8,160.00.  That mortgage was paid out by the husband using funds which came to him from his late mother’s estate.  The acquisition can be seen as wholly a contribution by or on behalf of the husband.  The house was worth $300,000.00 at the date of trial and is reflected in the inventory of property of the parties at that sum for present purposes. 

11.  In May 2000, approximately about two years before their cohabitation ceased, the parties commenced to occupy the [country town property].  Thereafter, [country town property] provided rent free accommodation for the parties.  Between the date of death of the husband’s mother and May 2000 the property produced gross rental income of not less than $150.00 per week which the parties had the benefit of. 

12.  To regard the acquisition of [country town property] as other than entirely referrable to contributions by or on behalf of the husband would not be justifiable on the evidence.  Once it was acquired, the property assumed significance, firstly by providing income for the parties and thereafter by providing rent free accommodation. 

13.  The parties purchased a house at Quakers Hill, borrowing $250,000.00 for that purpose.  The borrowing was secured over [country town property] and the Quakers Hill property itself.  The mortgage over the property was reduced by the payment of approximately $40,000.00 from the sale of the husband’s townhouse.  [The townhouse] was ultimately sold for $280,000.00. 

14.  Each party had a motor vehicle at the time they commenced cohabitation.  There were other assets bought and sold of no particular significance. 

15.  Included in the property of the parties was the sum of $211,174.00 referrable to the husband’s Australia Post superannuation.  The husband commenced work with Australia Post upon his discharge from the RAAF, retiring from the Post Office in 2001, at which time he received severance pay of $53,350.00 after tax.  That sum was rolled into the Australia Post Superannuation scheme and gives rise to the figure which currently represents the available cash value of that interest. 

16.  It is evident that, of the 13 years during which the husband worked for Australia Post, he cohabited with the wife for approximately four years.  Without suggesting any precise apportionment, to regard the wife’s entitlement in the superannuation fund as approximately one sixth and that of the husband as five sixths would tend to reflect, if only on a “time served” basis, the years of Australia Post service prior to and subsequent to commencement of cohabitation.  Recent decisions of the Full Court suggest such an approach to be less heretical than in earlier times.

17.  The evidence is unclear as to the relative earnings of the parties although it is evident that from May 2001 the husband was solely dependent upon his superannuation entitlements whilst the wife ceased to be employed, also by reason of health factors, later in 2001. 

18.  No findings of fact were made by the learned Federal Magistrate with respect to home making duties.  The case outline statements relied upon before the learned Federal Magistrate provide little guidance in that regard although it was asserted on behalf of the wife that:

1The wife carried out all the housework from the date of co-habitation to the date of separation, except for a period in May 1997 to October 1997, when she was confined to bed.  The husband did not do any housework during this period of time so it was just not done.  The wife carried out the housework in great pain, including the period recuperating from a back operation in August 1999, against doctors [sic] orders, so that it would be done.

19.  It was submitted in concluding submissions on behalf of the wife by her learned counsel that “the wife’s contribution as home-maker has been greater” than that of the husband (Transcript of 13 November 2003, page 93, line 14).  On behalf of the husband it was submitted by his then learned counsel that the wife “did undertake the role of homemaker, your Honour, the wife discharged that undertaking” (Transcript of 13 November 2003, page 102, line 5).  The Court has been unable to otherwise find anything to shed light on the topic.  Although it is regrettable that the learned Federal Magistrate did not make findings in that regard, it seems reasonably apparent that the wife’s contributions as homemaker were somewhat greater than those of the husband. 

20.  The pool of assets having a net worth of approximately $595,226.00 can be seen in two quite different parts, although it can be seen as containing three elements, they being, the [country town property] which was acquired solely as a result of contributions by or on behalf of the husband, that property presently being worth $300,000.00.

21.  The husband’s Australia Post superannuation was worth $211,174.00, the contributions to acquisition and conservation of which could be seen as five sixths to the husband and one sixth to the wife ($35,195.67 the wife and $175,978.33 to the husband) and the balance of the assets worth approximately about $84,052.00.  The contributions to which could be seen as approximately equal ($42,026.00 each).

22.  Complicating the [country town property] is the reality that it was the matrimonial home of the parties for almost two years prior to their separation, albeit the fact remains that it was made available, and for rent or mortgage, as a result of contributions by or on behalf of the husband as the time of its acquisition.  To see the wife as having no indirect contribution entitlement to the property by virtue of her financial contributions to the marriage from income and as a homemaker would be somewhat harsh on the wife although her entitlement should be seen as vastly less than that of the husband.  To regard the wife’s entitlement in respect to the property as of the order of 5% ($15,000.00) would be a realistic reflection of what the evidence reveals in relation to the direct and indirect contributions of the parties to the acquisition, conservation or improvement of that property.

23.  On behalf of the husband a number of submissions were made. So far as contributions were concerned, it was submitted that the contribution entitlement of the wife to [country town property] should be assessed at 2 per cent or $6,000.00, whilst the wife’s contribution entitlement to the Australia Post pension should be seen as 2 per cent and the contribution to the husband’s DFRDB nil.  It was submitted that by way of s 75(2) adjustment there should be a sum of $45,000.00 which represented 7.5 per cent.

24.  Whilst the determination of contribution entitlements involves the exercise of a wide discretion, and does not readily permit mathematical precision, the figures indicated above are useful for present purposes.  To regard the wife as having a contribution based entitlement to the net asset pool worth $596,000.00 of $92,221.67, 15.5 per cent, would in the Court’s view represent a realistic reflection of the evidence, and where there are findings in that regard, the unchallenged findings of the learned Federal Magistrate with respect to contributions.  It remains then to consider s 75(2) factors.

Pool 1
H	W
Country town property	$285,000.00	H 95%
$15,000.00	W 5%
Australia Post	$175,978.33	H 5/6
35195.6667	W 1/6
Remaining	$42,026.00	$42,026.00	50%
Total	$503,004.33	$92,221.67
%	84.5064452	15.4935548

SECTION 75(2)

25.  Neither party enjoys good health.  The findings of the learned Federal Magistrate in that regard make that clear.  There was no challenge in the appeal to the finding of the learned Federal Magistrate that neither party “will be able to undertake gainful employment in the foreseeable future”.  It may be that in terms of health it “appears that the wife may be slightly worse off, but the difference is not great”, but there does not seem to be a nexus between that conclusion and either the likely cost consequences of that for the wife in the future or its impact upon her lack of earning ability. 

26.  The standard of living of the parties was sought to be relied upon by counsel for the wife.  In the circumstances of this case, the only issue is whether each party will have a standard of living which is reasonable in all the circumstances, rather than whether there should be some “balancing up” in that regard.  There is no evidence that the wife does not have or will not continue to have a standard of living which is reasonable in all the circumstances.

27.  The husband enjoys a superior standard of living to the wife, but in all probability has done so from prior to the commencement of cohabitation in 1997.  The section refers to a standard of living which is reasonable in all the circumstances.  There is no evidence that either party will have other than a reasonable standard of living.  In all the circumstances of this case, to adjust in favour of the wife by virtue of this factor would not seem appropriate. 

28.  The duration of the cohabitation has not affected the earning capacity of either party, the clear reality being that their respective states of health have had that impact. 

29.  The factor of most significance in the context of s 75(2) is the husband’s DFRDB superannuation benefit.  On the only figures available to the Court, albeit they are now well out of date, the husband receives $365.00 per week by way of pension from the DFRDB.  That is unmatched by anything available to the wife to which regard can be had under the legislation.  The benefit exists for the balance of the husband’s life.  The benefit is indexed.  Given that the husband has secure rent free accommodation, and will continue to do so in the future, the benefit is very substantial in real terms.  A s 75(2) adjustment in the wife’s favour is demanded by virtue of the husband’s superannuation pension entitlement, the only issue being the quantum of such adjustment.  The Court inclines to the view that 10 per cent of the assets comprising the pool valued at $596,000.00 would in the circumstances be a reasonable s 75(2) adjustment.  That figure approximates four years of the husband’s pension payments.  Given the ages of the parties, and their potential life expectancies, that benefit is of very substantial and of continuing benefit to the husband and is something which the wife cannot hope to match in the future. 

30.  As a number of the superannuation appeals decided by benches of five judges in 2005 confirm, very careful care needs to be exercised to ensure that superannuation interests are not double counted.  It will be remembered in this case that the Court has earlier considered contribution based entitlements to the husband’s DFRDB superannuation interest.  Having concluded the contribution based entitlement to be entirely that of the husband’s and for reasons earlier given, the value of the interest in accordance with the Regulations has not been added to the pool of other assets for the purpose of determining contribution entitlements. In those circumstances, to revisit superannuation in the context of s 75(2), a permissible approach in itself, does not entail any double counting in ways which would potentially arise had the wife been found to have a contribution based entitlement to the superannuation interest.

31.  It is apparent that, albeit by a somewhat different process of reasoning to that of the learned Federal Magistrate, this Court concludes that the wife’s entitlement should be to receive a sum of $151,734.27 which represents approximately 25 per cent of an asset pool worth $594,000.00.

32.  In order to receive her full entitlement the wife should retain the property which she currently has which is worth $19,121.00.  She thus needs to receive a further $132,623.27 from the husband to complete her entitlement.

33.  It is then necessary to consider the application for spousal maintenance.  The wife currently receives $140.00 per week by way of interim spousal maintenance.  The findings of the learned Federal Magistrate as to the capacity of the wife to earn have not been challenged in any way and were, and remain, amply supportable on the evidence which was before the learned Federal Magistrate.   

34.  On behalf of the wife it was submitted that the husband’s income, which significantly exceeded that of the wife, included director’s fees of $21.00 per week.  It was further submitted that the:

only issues which the husband and his treating GP, Dr Kingston, could identify as causing the husband’s depression were his inability to work and these legal proceedings. (Wife’s Submissions, page 2)

It thus being submitted that the husband was, at the date of trial, “capable of physical work, albeit light duties”.

35.  The absence of any successful challenge in the appeal to the trial Judge’s findings with respect to the work capacities of either party suggests that this Court ought not go beyond or behind the findings of the learned Federal Magistrate in that regard. The learned Federal Magistrate saw and heard the witnesses, an advantage this Court does not have. The Court thus proposes determining the proceedings on the basis of the unchallenged findings of fact of the learned Federal Magistrate in relation to the earning capacity of each party.

36.   The submissions made on behalf of the wife in relation to the question of ongoing spousal maintenance raise matters which require careful consideration.  Reliance was placed upon the fact that the husband’s veteran’s affairs pension was not means tested.  Nor were either of the husband’s superannuation pensions means tested.  The wife is on a disability pension which is means tested and therefore not able to be taken into account in consideration of spousal maintenance. 

37.  It was thus submitted that the wife’s income is “effectively nil”. The husband’s disclosed income was $708.00 per week on the only evidence before the Court, his fixed expenses, inclusive of interim spousal maintenance of $120.00 per week totalling $256.00 per week.  The Court has been referred to evidence of the husband at trial in the Federal Magistrates Court which leaves no doubt that the husband had the ability to pay spousal maintenance given that he was “unable to account meaningfully for this difference between his income and his expenses”. The husband agreed that the Court has been referred to evidence which establishes that all of the husband’s medical expenses were covered by his TPI DFRDB pension and that he has no medical expenses at all, whereas the wife’s evidence was that not all of her medical expenses are covered.

38.  The wife’s only sources of money to live on, not all of which can be taken into account under the legislation, are a disability pension of $269.00 per week and spousal maintenance of $140.00 per week. The expenses claimed by the wife in financial statements, albeit some years out of date now, vary between $394.00 and $440.00 per week.  It was thus submitted that the wife’s expenses:

greatly exceed her income, as the income-tested pension is not to be taken into account (s 75(3)), and as in the table below, any income from the s79 award will be far less than $440.00 per week. (Wife’s Submissions, page 4)

It thus being submitted that the wife would be “clearly unable to support herself without an income-tested pension, and the husband has a financial capacity to pay spousal maintenance”.  It was thus submitted that a “continuing award of $140.00 is an appropriate award for spousal maintenance”. 

39.  Reference was made to the decision of the Full Court in Bevan v Bevan (1995) FLC 92-600, a 4 per cent “post-tax figure” being suggested to be a more appropriate rate for present calculations, albeit counsel made a series of projections based on a rate of 5 per cent which the Full Court adopted in Bevan’s case. 

40.  A range of possible lump sum payments to the wife, and the income likely to be produced by them, was provided by counsel for the wife.  A payment to the wife of $65,279.00 was calculated to predict a weekly income of $62.65, or $3,263.95 annually, whilst a payment of $86,379.00 would produce $82.90 or $4,318.95 annually.  A payment of $107,479.00 would produce $103.15 per week or $5,373.95 annually, whilst a payment of $128,597.00 would produce $123.40 per week or $6,429.95 per annum.  It was thus submitted, that even after the receipt of any capital awarded to her pursuant to the Part VIII application, on the one hand the wife would have income falling well below her reasonable weekly needs whilst, on the other, allowing for the husband’s income to have been reduced by a corresponding amount, the husband would still retain the capacity to satisfy an award in the wife’s favour.  The wife had no objection in principle to any award in her favour, $140 per week being sought, being capitalised. 

41.  A basis of capitalising the sum was suggested to be dividing $109,742.00 by $140.00 and multiplying the resultant figure by the award which the Court made.  To the extent that any award this Court made may fall below $140.00 weekly, there would be a corresponding reduction in the lump sum payable.

42.  It was thus submitted that the wife should receive 17.5 per cent of the assets of the parties and $140.00 per week spousal maintenance.

43.  So far as spousal maintenance was concerned, it was indicated that the husband sought that “any spousal maintenance order be by way of a lump sum so that financial matters between the parties are finalised” (Husband’s Submissions, page 4).  It was submitted that the wife’s periodic spousal maintenance should be reduced from $140.00 by the amount of interest able to be generated by the lump sum cash payment which she is awarded in the proceedings.  Whilst it was submitted that the husband “prefers to pay spousal maintenance by way of a lump sum” it was also submitted that the husband sought that the orders:

give him the option of paying either a lump sum or periodic payments, as he will not have the capacity to raise a loan and does not know how much he will have left from the Australia Post Superannuation after paying property settlement, tax, and legal expenses. (Husband’s Submissions, page 4) 

44.  In the circumstances of this case, given that the wife did not have a home of her own before cohabitation, and, with all due respect to her, has no sufficient basis for now seeking to quarantine any portion of her property settlement award for that purpose, the whole of her property settlement award can be regarded as able to generate income by way of interest.  The income likely to be generated by the wife as a result of investing not more than $130,000.00 approximately has been calculated by counsel for the wife in the sum of $123.40 per week.  At their lowest, the wife’s reasonable weekly needs of $394.00 comfortably exceed that figure. 

45.  Whilst it can be suggested that the wife has maintained herself on the current order for spousal maintenance of $140.00 per week, the evidence suggests that this has only been possible by virtue of the receipt of pension benefits to which the Court is not allowed to have regard for present purposes. 

46.  Whilst, on one view of it, the wife’s entitlement to maintenance could simply be approached on the basis of the differential between what she might reasonably receive after investing the cash component of her property settlement award and the sum of $140.00 per week, that really ignores the reality of the situation. Given however that the wife invited the Court to adopt such an approach, and the husband seeks to have his obligation to pay spousal maintenance capitalised and extinguished, it is not unreasonable to approach the matter on the basis asserted by counsel for the wife.  In round figures the “short fall” is approximately $20.00 per week, the capitalisation ($109,742.00/7) results in a lump sum figure $15,677.43.  The husband would be well able to pay such sum.  The Court accordingly proposes that, upon payment of such sum, in addition to the wife’s property settlement entitlement, the husband’s liability to pay spousal maintenance be extinguished.

COSTS

47.  It was agreed, sensibly, that both parties should have a costs certificate with respect to the appeal to this Court and the Court will so order.  Whilst the order for costs made by the learned Federal Magistrate should be set aside, it remains for the parties to make such submissions as they are disposed to make in relation to costs of the original trial, and the Court will reserve that question.

ORDERS

1. That the appeal be allowed.

2. That within 30 days the husband pay to the wife by way of settlement of property the sum of $132,623.27.

3. That within 30 days the husband pay to the wife by way of lump sum spousal maintenance the sum of $15,677.43.

4. That upon compliance with the foregoing orders, the order for spousal maintenance be discharged.

5. That the Court grants to the appellant wife a costs certificate pursuant to the provisions of s.9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant wife in respect of the costs incurred by the appellant wife in relation to the appeal.

6. That the Court grants to the respondent husband a costs certificate pursuant to the provisions of s.6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent husband in respect of the costs incurred by the respondent husband in relation to the appeal.

I certify that the preceding
47 paragraphs
are a true copy of the reasons
for judgment delivered by this
Honourable Court.
A.C.
Associate
Date: 23/12/2005