R & M - [2004] FMCAfam 77

FEDERAL MAGISTRATES COURT OF AUSTRALIA

R & M

[2004] FMCAfam 77

FAMILY LAW – Children – residence/contact – property – the wife wishes to retain the matrimonial home and in return to forgo superannuation – the husband seeks a split in superannuation and a share of matrimonial home – discussion as to the rationale behind the superannuation amendments to the Family Law Act – discussion of the way s.75(2) factors should be applied to a superannuation split.

Applicant:

D M R

Respondent:

A H M

File No:

CAM2687 of 2002

Delivered on:

26 February 2004

Delivered at:

Canberra

Hearing dates:

28 & 29 January 2004

Judgment of:

Brewster FM

REPRESENTATION

Counsel for the Applicant:

Mr Nash

Solicitors for the Applicant:

Anne Marie Proctor & Associates

Counsel for the Respondent:

Mr Gill

Solicitors for the Respondent:

Farrar Gesini & Dunn, Family Lawyers

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
CANBERRA

CAM2687 of 2002

D M R

Applicant

And

A H M

Respondent

REASONS FOR JUDGMENT

Introduction

This case involves a dispute between the parties as to contact arrangements for their children and the division of their property. The children’s issues are not such as to justify being reported and are omitted from the externally published version of this judgment.

Background

The husband and wife are both aged 38. They commenced to live together in 1987 and married on 16 April 1988. They physically separated in September 2001 when the husband left the former matrimonial home. In this respect however it is to be noted that the wife maintains that they separated under the one roof in June of that year.
There are four children of the marriage aged 15, 12, 9 and 8.

The parties' applications

The husband seeks an order that he receive an amount equal to fifty per cent of the equity in the former matrimonial home and that there be a split in relation to his superannuation whereby the base amount to be received by the wife is equal to forty per cent of the value of that superannuation. The wife seeks in effect to trade off superannuation entitlements for property. She seeks that the husband keep the whole of his superannuation and given the whole of her superannuation as well. She seeks that she retain the former matrimonial home and pay the husband the sum of $29,000.

Discussion

The assets of the parties comprise real estate, shares, chattels and superannuation. As a result of amendments to the Family Law Act operative from 2003 superannuation is now treated as property. As will be explained below however I do not propose simply to lump superannuation in with the other property so for convenience I will refer to that part of the property that consists of real estate, shares and chattels as “property” and when I use that term it will not include superannuation.
As I have indicated the wife seeks to retain the former matrimonial home and proposes that the husband keep all the parties’ superannuation as a quid pro quo.
The amendments to the Family Law Act referred to above permit superannuation to be split between parties to a marriage. It is apparent from the Explanatory Memorandum to those amendments that there were two reasons for their enactment. These are
(a)To protect a spouse where the other spouse has significant superannuation and there is no other property or no other sufficient property from which an order could be made which would be just and equitable in the circumstances. Under the law prior to 2003 the non superannuated spouse could not receive any share of the other’s superannuation and was thus left with nothing or very little. Under the present regime the non member can be given a part of the member’s superannuation.
(b)To achieve a just and equitable result where one party has substantial superannuation but there is also substantial property. The amendments to the law allow greater flexibility. Previously a superannuated party's interest in his or her superannuation would mean that realisable property would often have to be, in effect, traded away in exchange for an asset that may not be able to be realised for many years. This would leave one party with substantial realisable or useable assets but little or no provision for his or her future after retirement and the other party with little or no realisable or useable assets but significant provision for his or her future after retirement. Under the new regime this can be avoided and a more just and equitable balance achieved.
The second of these considerations is germane to the present case. In my view, it would not be just and equitable to deprive the husband of a significant share of presently accessible property to which he has made contributions over a long period of time on the basis that he will one day be able to enjoy substantial superannuation benefits. I do not propose to adopt the course urged on me on behalf of the wife.
I propose to apply the usual four stage process. The first stage involves making findings as to the pool of property and superannuation. The second stage involves a consideration of contributions of various types made by each party both during and after their relationship. If appropriate an adjustment will be made on this basis. The third stage involves a consideration of such matters in s.75(2) as may be applicable and an adjustment may be made on this basis. The final stage involves taking an overview of the result obtained from the second and third stages to determine if overall it is just and equitable.

The property pool

The parties are agreed as to the values of the parties’ property. These are as follows:
·Matrimonial home (equity)  $429,000
·IAG shares  $941
·Husband's furniture and effects  $3,000
·Wife's furniture and effects  $6,417
TOTAL  $439,358
The parties each have superannuation entitlements. The husband is in the PSS Scheme and his entitlements have been valued in accordance with the regulations at $122,635. The wife is also in the PSS Scheme and her entitlements are valued at $14,285. She also has entitlements under the National Catholic Superannuation scheme valued at $7,187. I assume the latter is an accumulation scheme. It is rather artificial simply to add the values of the two schemes together as the methods of valuation are different but for simplicity I propose to do so. If the amount in the accumulation scheme were large I would make a separate splitting order with respect to it. Given that it is not a large amount I do not consider the inconvenience and expense of doing so is justified and neither party urged such a course on me.
The wife also has a motor vehicle valued at $20,400 but there is a loan with respect to that vehicle that exceeds its value so I propose to disregard this item.
The wife claims an amount of $10,000 should be added to the pool as notional property in the possession of the husband. This relates to cash taken by him at separation. I do not propose to add it to the pool. It came from a larger amount of money received by way of an inheritance and from money contributed by the husband's father. I will take into account money received by the parties from the husband's family when I come to consider contribution issues. I will take into account the fact that $10,000 of this money was not used for the benefit of the family.
The husband had debts at separation totalling $2,700. Given the fact that I am disregarding the $10,000 taken by him I do not propose to deduct these debts from the pool.
The wife has a taxation debt of $8,125. This was incurred in the 2001/2002 financial year. It relates to a business carried on by the wife. It will be recalled that the parties physically separated at about the end of the first quarter of this financial year. The issue arises as to what account should be taken of this debt.
It was urged on me on behalf of the husband that I should disregard the debt entirely when fixing the pool on the basis that it was the wife's contention that the parties separated under the one roof in June of 2001. It was pointed out that there is no evidence of any sharing of financial matters after that time. I agree that there is no direct evidence of such sharing but I am prepared to infer that the income earned by the wife in this period was used for the benefit of the family. I therefore do not propose to ignore the entirety of the debt.
The records of cashflow of the wife's business are in evidence. They show that in the 2001/2002 financial year the business had a net cashflow of $33,655 in the first quarter, $14,474 in the second quarter, a negative net cashflow of $14,319 in the third quarter, and a negative cashflow of $18,009 in the last quarter. It would appear therefore that the majority of the tax debt would relate to the first quarter when the parties occupied the same house.
Whilst the approach I propose to take is somewhat arbitrary I will allow two thirds of the tax debt as a debt to be deducted from the pool. This amounts to $5,416.
This results in a total property pool of $433,942 plus superannuation to a value of $144,107.

Contributions

I find that there is no basis for differentiating between the contributions made by or on behalf of one party as opposed to the other except in relation to four aspects. These are:
a)Monies received from the husband's family
b)The impact of the injuries received by the wife in a motor vehicle accident
c)The impact of studies undertaken by the wife
d)The post separation contributions by the wife as homemaker and as a parent.
During the marriage the husband's family gave the parties money. They received $17,500 in 1988, $10,000 in 1991 and $14,000 in 2001. The gift of $17,500 in 1988 is of particular significance as it was used as a deposit on the first home the parties acquired. Further amounts of $5,000 in 1994 and $8,000 in 1998 were advanced to the parties by way of what the husband’s father describes as interest free loans. There is no indication that this $13,000 will ever be required to be repaid so for the purpose of this exercise I propose to treat these advances as gifts. The $8,000 given in 1998 was used to assist in buying the present matrimonial home. In addition in 1994 the husband’s family gave the parties a 1988 Commodore vehicle. In addition in 2001 the husband received an inheritance of $12,000. As I indicated previously I take into the fact that an amount of $10,000 which can be sourced to this inheritance and the 2001 gift was taken by him on separation
The wife also received benefits from her family in the form of gifts of a washing machine, dryer, television set, furniture and clothing. Her family also paid amounts totalling a little over $5,000 during the marriage to assist paying various bills.
The gifts and the inheritance are significant factors in favour of the husband. As will be seen they will not be reflected in a monetary adjustment equivalent to their value. The exercise to be undertaken under s 79 is not an accounting exercise and in any event the significance of some of the gifts has been eroded by the effluxion of time.
In the mid-1980s the wife suffered injuries in a motor vehicle accident. As a result of this she had a number of operations during the marriage. I am satisfied that for periods of time she would have been unable to perform household tasks. On the other hand, she received damages of $20,000 in relation to her injuries. In the circumstances I regard this as offsetting the additional non-financial contributions made by the husband during her periods of incapacity.
During the marriage the wife completed a Bachelor of Arts degree and a Masters degree. She obtained this latter degree in 1996. I am satisfied that, whilst she did her best to minimise the impact of her studies, they did have an effect on the extent to which she was able to be involved in the care of the children and household tasks.
Since separation the wife has had the care of the four children. The husband has contributed towards D's school fees at St Edmund's College but otherwise has paid no child support. This apparently was by agreement with the wife. It was submitted on his behalf that given this fact an adjustment should not be made to reflect the additional financial burdens suffered by the wife in bringing up the children.

I reject that contention. It seems to me that the only way I could decline to take these matters into account would be if some form of estoppel were to operate in the husband's favour. I do not propose to dilate on the law in this respect save to observe that the principles of estoppel do not apply to applications under s.79. In any event, there is no evidence that the husband has acted to his detriment in reliance on the wife's conduct. I propose to take into account both the financial and the non-financial aspects of the wife's care of the children since separation.
It can be readily seen from the foregoing why some of the monies contributed by the husband’s family and the gift of the car can be categorised as a contribution made on behalf of the husband to the acquisition of property under paragraph (a) of s.79(4). As such they are relevant to the contribution based division of the parties property. The gifts of chattels by the wife’s family are in the same category. It is not possible to so categorise those contributions when considering the contribution based division of superannuation. By this I mean that the gifts and the inheritance in no way contributed to the acquisition conservation or improvement of the husband’s superannuation entitlements. For this reason I propose to adopt an asset by asset approach to this process and treat superannuation separately. I propose to apply the contribution based differential flowing from the matters set out in paragraph 20 to the pool of property and not to the parties’ superannuation.
The property pool amounts to $433,942. I make a five percent adjustment in favour of the husband with respect to the matters that are referred to in paragraphs 21 and 25. This makes the contribution based differential between the parties of ten percent or $43,394. I make a two per cent adjustment in favour of the wife to reflect her contributions post separation as a parent. This equates to a differential of four percent or $17,358. The result is a contribution based division adjustment of three per cent in the husband's favour.
One complication in making a contribution based division of superannuation is that part of the husband’s and the whole of the wife’s PSS entitlements were acquired post separation. The logical approach had it been open would have been to quarantine the wife’s PSS entitlements and to quarantine that portion of the husband’s superannuation that accrued post separation. However there is no evidence of the value of the husband’s superannuation at separation and given the rather artificial nature of valuing defined benefits schemes it may not have been a satisfactory approach in any event.
In the circumstances I propose to ignore the fact that all of the wife’s and some of the husband’s entitlements accrued post separation. As they are in the same scheme this should not result in any significant injustice.
It can be seen that given the way I have approached the matter there is no basis for making other than an equal contribution based division of superannuation.

Section 75(2) factors

The wife has a Masters degree in psychology and works in this field in the public service. She also conducts a part time business from her home. Her income is in the order of $80,000 a year. The husband has no tertiary qualifications. He is employed as a police officer and I infer that this employment is secure. He earns in the order of $68,000 from his employment. I take into account the income disparity between the parties but I recognise that after tax the difference is only about half of the difference in the gross incomes.
The wife has the primary care of the four children. It will be some ten years before the youngest attains the age of 18 years. This is clearly a significant factor to be taken into account in her favour. I take into account however that as a result of the orders I made in relation to the children the husband will have the children in his care for four nights a fortnight. The wife could if she wished obtain child support in the order of $90 a week from the husband and, when I consider this aspect of the case, I do not propose to take into account the fact that she may choose to forego this income.
There are no other relevant matters under s.75(2) in so far as property is concerned.
When making a s.75(2) based adjustment it can be readily appreciated why an allowance should be made in favour of a party having the responsibility for caring for children of the marriage when dividing property. Apart from anything else that party has to find accommodation for both himself or herself and the children. This was at the forefront of the reasoning of the Full Court of the Family Court in the seminal case in relation to s.75(2) of Dench (1978) FLC 90-469. One can also readily appreciate the logic behind making an allowance in favour of a party where that party’s income is less than that of the other party. However it is not at all apparent to me why these considerations should apply to a division of superannuation in the circumstances of this case. The parties will not be able to access their superannuation until at least 2021 and perhaps not until 10 years after that date. By that time the children will have grown up. It would involve a great deal of speculation to attempt to predict which of the parties will be in the stronger financial position at this time.
For these reasons I propose to put superannuation in a separate category when applying s.75(2) considerations.
In my opinion the wife’s continuing responsibilities for the care of the children substantially outweigh the disparity in incomes between the parties. In the circumstances I make a fifteen per cent adjustment in favour of the wife with respect to property.
As mentioned above at present the wife’s income is greater than that of the husband. Notwithstanding the caveat in paragraph 35 about predicting the future I consider it likely that, given her present income and her qualifications, she will acquire greater superannuation entitlements from now onwards than will the husband. In my opinion this justifies an adjustment in favour of the husband when making a s.75(2) based adjustment in relation to superannuation. I propose to make a fifteen percent adjustment in his favour.

Overview

The end result is a division of property 62%/38% in favour of the wife and a division of superannuation 65%/35% in favour of the husband.
The husband will therefore receive $164,898 from the property pool. and the wife $269,044. Whilst this is a substantial differential when I have regard for her ongoing responsibility in caring for the children I am satisfied that this is appropriate. The husband will receive superannuation to a value of $93,670 and the wife superannuation to a value of $50,437. In the light of the matters set out in paragraph 38

I am satisfied that this is a proper order.

Orders

I propose to order that the husband receive the IAG shares which are valued at $941. He has contents to a value of $3,000. This leaves an amount to be paid to him of $160,957 which I round off to $161,000.

I will order that the wife pay him this amount. If she is unable to do so the home will have to be sold. The amount of $161,000 represents 37.5% of the equity in the home and orders for a division will be made on this basis. I will also make a splitting order whereby the base amount the wife will receive from the husband’s superannuation is $50,437.

I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of Brewster FM

Associate:

Date: