Rabino & Rainsford (No. 2)
[2021] FamCA 551
•29 July 2021
FAMILY COURT OF AUSTRALIA
Rabino & Rainsford (No. 2) [2021] FamCA 551
File number(s): BRC 4468 of 2019 Judgment of: BAUMANN J Date of judgment: 29 July 2021 Catchwords: FAMILY LAW – PROPERTY – Dispute as to what constitutes the pool of interests – non-vested severance pay – ‘add back” for alleged excessive post separation expenditure – further submissions as to what orders achieve justice and equity required Legislation: Family Law Act 1975 (Cth) ss 79, 75 Cases cited: Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337
Chorn & Hopkins (2004) FLC 93-204
Clauson & Clauson (1995) FLC 92-595
Hickey & Hickey (2003) FLC 93-143
Line and Line (1997) FLC 92-729
M & M [1998] FamCA 42
Omacini & Omacini (2005) FLC 93-218
Rabino & Rainsford [2020] FamCA 142
Rix & Rix [2020] FamCA 165
Sand & Sand [2012] FamCAFC 179
Stanford & Stanford (2012) 247 CLR 108
Townsend & Townsend (1994) 18 Fam LR 505
Trevi & Trevi (2018) FLC 93-858
Watson & Ling (2013) FLC 93-527
Number of paragraphs: 89 Date of last submission/s: 15 May 2020 Date of hearing: 14 and 15 May 2020 Place: Brisbane Counsel for the Applicant: Mr P Hackett Solicitor for the Applicant: Hirst & Co Counsel for the Respondent: Mr R Maurice Solicitor for the Respondent: Fox & Staniland Lawyers ORDERS
BRC 4468 of 2019 BETWEEN: MS RABINO
Applicant
AND: MR RAINSFORD
Respondent
ORDER MADE BY:
BAUMANN J
DATE OF ORDER:
29 JULY 2021
THE COURT ORDERS:
1.That these proceedings be adjourned for pronouncement of final property orders at 10.00am on 18 August 2021, for further submissions and if possible the pronouncement of orders, in the Family Court of Australia at Brisbane.
2.That within seven (7) days of the date of this Order, the wife provide to the husband’s solicitors a draft minute of order consistent with the Reasons for Judgment delivered 29 July 2021.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Rabino & Rainsford has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BAUMANN J:
INTRODUCTION:
The property dispute between the Applicant wife, Ms Rabino, and the Respondent husband, Mr Rainsford, raises some interesting and unusual issues about what interests exist and are available for division or alteration by Court order. As these Reasons demonstrate, some of those issues arise from the somewhat unique employment of the husband overseas, and some are from the fact that although the parties separated, I find, around December 2016, evidentially since the wife and the children returned to Australian in January 2008, the husband’s overseas employment meant his time in Australia was significantly reduced.
Although I describe the parties as “husband and wife,” I am aware that they were divorced on 17 December 2018 and that the husband has remarried. I do my best to assure in these Reasons that when I refer to the husband’s current wife, it is clear I am not referring to the Applicant.
THE FINAL HEARING
Although the wife commenced proceedings in April 2019, the trial conducted on 14 and 15 May 2020 proceeded during the early days of what is now commonly described as the COVID‑19 pandemic. The wife’s Counsel, Mr Hackett, the wife and Counsel for the husband, Mr Maurice from the Sydney Bar (and his instructor) appeared by Microsoft Teams as did the husband, who resides in Country B.
This trial was one of the first conducted by this process in Brisbane where I sat, however I pay tribute to the efforts of both legal teams in their preparation for and conduct during the hearing, which allowed the trial to proceed with few interruptions. Certainly, the high level technology skills of the husband meant that accessing some significant documents electronically during cross-examination was achieved generally without difficulty.
At this point, it is proper that I express my regret that these Reasons were not published more quickly. Delay is never optimal and although, as I will observe, some of the evidence produced and tested was before the full extent of the pandemic (and its continued longevity) was known, neither party has sought to reopen the proceedings. The Court, of its own initiation, briefly considered doing so, but decided that where the parties made no such application, the Court should not do so either.
Statements of fact that follow should be construed as findings of facts.
CONTEXTUAL HISTORY
The husband is now 54 years of age and the wife is now 52 years of age, with the parties commencing cohabitation in 1995 on a Defence Force base, as a result of both parties’ military engagement. They were in their late twenties with few assets save for a modest equity the husband had in a home unit in Sydney, purchased by him for approximately $180,000 in 1990, with the assistance of a mortgage of around $150,000.
Post separation, in 1996 the parties purchased a property in Suburb N for $235,000 which was subsequently sold in 2001 for $343,000 releasing an equity of approximately $90,000.
After marrying in 1997, the parties were blessed with the birth of their two children, Ms O in 2001 (now aged 20 years) and Mr P born in 2002 (who will turn 19 years in September 2021).
Seemingly, buoyed by the capital gain achieved from the sale of the Suburb N property, the couple embarked on a strategy of creating a property portfolio, with seven properties purchased and sold through an entity called “Q Pty Ltd”. I infer because of the husband’s good income from his employment in Country B for H Company, some tax benefits may have accrued.
The family (of three at the time) having moved to live in Country B in 2002, continued to live there after the birth of Mr P until 2009 when the couple decided the wife and two children should return to Australia for the children’s schooling. To accommodate this permanent move, in January 2008 the parties purchased the family home at R Street, Suburb S for $1,015,000. Initially the home was rented and then renovations were undertaken, funded by proceeds available from the sale of the investment properties as they sold, as well as available funds from the husband’s income.
In 2011, the wife returned to employment, initially part time but then (as subsisting at the time of the trial) full time. Few other significant financial events took place before separation, save for the wife’s interest in animals resulting in the establishment of T Company. This venture did not prove to be profitable. Also, in 2014 the parties established a self-managed superannuation fund called the Rainsford Super Fund, the corporate Trustee being U Pty Ltd, on which both parties are directors and shareholders, although at the time of the trial, only the husband was a member. Some transactions in the self-managed superannuation fund were the subject of controversy and are dealt with below.
Although both parties concede that by December 2016, discussions were taking place about the deteriorating martial relationship, the husband disagrees with the wife’s evidence that she regarded separation occurring at that time – preferring to assert that separation occurred nearly nine months later in September 2017. Little turns on this fact and I make no finding about the date of separation other than noting the case before me seemed to progress on a separation occurring in December 2016. The husband filed a Divorce Application, and a decree nisi was granted on 17 December 2018.
After the divorce was granted, the husband unilaterally varied the voluntary payments he made regularly to the wife from $2,000 a month; then to $1,000 a month; then in March 2019, to $500 a month. As much as any other factor, the wife’s financial position, she says, became precarious and was the catalyst for her decision to commence proceedings in this Court on 17 April 2019.
The passage of the proceedings from that date to the trial in May 2020 was noteworthy for at least the following Orders made:
(a)As discussed in more detail later in these Reasons, the husband, who had been employed in Country B, via H Company as a consultant for the Country B government, ceased working in September 2018 and received medical advice (which the wife accepts) that he was no longer able to perform his role as manager. This change manifested at least by October 2019 and the wife’s amended Initiating Application filed 8 October 2019 sought a number of interim orders. When the matter first came before me on 1 November 2019, the then uncertain developing situation with the husband’s employment (and particularly his entitlements) meant the Court ordered further urgent discovery; restrained the husband by injunction from dealing with any property (including his Motor Vehicle 1) so as to transfer to Mr D, and listed the matter for further consideration on 9 December 2019;
(b)On 9 December 2019, the Court, after some exchanges with Counsel then retained by the parties, ordered by consent:
1. That Court notes that further to Order 2 of the Orders of 1 November 2019, the husband maintains that he again anticipates a likely significant reduction in his income (which has still not occurred), however, should such a reduction in income materialise then the husband shall pay to the wife at least the following sums referable to each of the following expenses:
a. All private school fees for the child, Mr P born … 2002 (“Mr P”);
b. Private health insurance for Mr P (at no less than the current level of cover);
c. $500 per month by way of child maintenance for Mr P;
d. Half of all utilities, rates and land tax for the property situated at R Street, Suburb S, Queensland;
e. $2000 per month referable to the Westpac Investment Property Loan, presenting ending #...09 (but to including any new facility that may arise in the event of a refinance); and
f. $1,100 per month referable to the Westpac Loan, ending #...22.
2. That the husband must provide to the wife’s solicitors twenty one (21) days prior written notice of the anticipated receipt of any severance payment, loss of management role compensation payment, insurance payment (including but not limited to income protection insurance or total and permanent disability insurance), or other payment that he receives from his employer or arising from his employment (other than his usual remuneration, to include discretionary income, gratuity payments and bonuses) other than in accordance with these Orders.
3. That all outstanding Applications be adjourned for Directions Hearing at 12.00pm on 13 February 2020 before a Registrar in the Family Court of Australia at Brisbane.
4. That the issue of costs be reserved.
The intent of the Orders, as much as was possible, was to preserve the status quo until some clarity around the husband’s entitlements developed. It transpired that at 9 December 2019, some communication between the husband and his employer (and within the contractual relationship between his employer and ‘contractor’ in Country B) was taking place. I suspect that as a result of her suspicions, the wife caused a subpoena to issue to the Australia entity, H Company for documents, produced during January 2020. A Registrar was required to rule on an objection raised to the inspection of some documents produced on subpoena, however after inspection, the wife filed an Application in a Case on 25 February 2020, seeking orders which related to an asserted entitlement of the husband to a “severance” payment;
(c)On 5 March 2020, that Application was heard by me and for Reasons published on 10 March 2020 (see Rabino & Rainsford [2020] FamCA 142) the Court ordered as follows:
1. That until trial or earlier Order, the Respondent husband is hereby restrained, whether by himself, or by his servants or agents, from:
a. Entering into any new contract of employment without:
i.first exhibiting the full terms of such employment contract to an Affidavit to be filed and served upon the Applicant wife; and
ii.twenty one (21) days having expired from such filing and service,
or earlier with the written consent of the wife.
b. Taking any steps that may impact in any way, his entitlement to a severance payment under his existing contact of employment.
2. That noting that the solicitors on the record for the husband have provided the husband’s email address, the Court shall, upon this Order being made, forward a copy of the Order to that email address for the husband’s attention.
3. That the husband pay the wife’s costs of and incidental to the Application in a Case filed 25 February 2020 and heard today, with the quantum of such costs and the date for payment to be reserved to trial.
and made trial directions for the hearing that did commence on 14 May 2020.
PRINCIPLES:
Shortly stated, but more concisely and elaborately described in the Full Court decision in Hickey & Hickey (2003) FLC 93-143, in a property settlement case, the Court must adopt a well-known four-step process, essentially:
(a)to identify the pool of assets and liabilities generally, and usually at the time of hearing;
(b)to assess the relative contributions of both the financial, non-financial, direct and indirect nature as specified by s 79(4) of the Family Law Act (1975) (Cth) (“the Act”);
(c)to consider the factors as are relevant contained in s 75(2) of the Act; and
(d)finally, consider the ultimate analysis to determine whether the order the Court proposes to make is just and equitable to both parties.
Neither experienced Counsel specifically submitted on whether, within the meaning of s 79(2) of the Act, it is just and equitable to make an order, however both cases were argued on the basis it was, and considering the principles identified by the High Court in Stanford & Stanford [2012] HCA 52, I am satisfied that the assumptions and undertakings between the parties during the relationship came to an end with separation and each parties’ proposed order reflects the anticipation that the Court will make order that alter the parties legal and/or equitable interests in property at the time of the hearing.
The most obvious controversy is what constitutes the parties’ property and interests, and before I move to findings about the pool of assets and liabilities (many of the items being agreed, or compromised, as identified in Exhibit 1), much of what follows in these Reasons is shaped contextually by the husband’s employment, future employment and likely entitlements. I deal with this issue discretely next.
HUSBAND’S EMPLOYMENT
As earlier noted, the husband secured employment in around July 2001 with H Company and at the time of the hearing, the affidavit evidence of the husband was:
(a)he was still employed by H Company;
(b)H Company subcontracts to HB Company, which is a subsidiary of H Company UK;
(c)he is no longer medically fit to remain in a management role and needs to transition to a new employment role in the company. He anticipated continuing to work in Country B for “the immediate future,” though in a different capacity, transitioning to a new role;
(d)at paragraph 169 of his affidavit sworn 24 April 2020, the husband deposed that he is “…uncertain about my employment income and what my future will hold”, and at paragraph 170 deposed that:
170.In any event, my current understanding from verbal conversations in that:
a.my salary will remain unchanged until my 55th birthday in mid-2022. This is just over 2 years away.
b.This is my original contractual retirement date.
c.My salary is [sic] will then reduce to a significantly lower grade until a new retirement age of 60, to about $75,000 per annum (down from $404,400 per annum).
d.My service in H Company will be considered ‘Continuous Employment,’ but my gratuities and other benefits will be reduced as I am no longer in my management role.
The internal correspondence revealed at least initially in the subpoenaed records produced, serious issues about how the transition in the husband’s work could affect entitlements that accumulated through his years of service under his conditions of employment. In this respect, his employment continued with H Company for over fifteen years until separation in September 2016. Consistent with authority, the wife points to her support of the husband’s career during that period as evidence of her indirect contribution to his employee entitlements.
The controversy that occupied much of the trial time and final submissions (both written and oral) was what are those entitlements; when might (if at all) the husband be entitled to require payment and the level of certainty as to the calculation of any future entitlement, including tax implications.
In respect of the entitlements, the fact that at all relevant times the husband’s employment contract was with the Australian H Company entity and that he has been regarded as a non-Australian resident for income taxation purposes (as his income tax returns filed annually attest) and the letter from his accountants, W Accountants dated 6 January 2020 confirms, this made the Order ordered on 9 December 2019 (and continuing) enforceable in a way which may not have been possible if, for example, the husband lived out of the jurisdiction and obtained his income from an overseas entity into an overseas bank account.
As to the future entitlements, the husband was (over objection by the wife), permitted to rely upon the affidavit of Mr J, one of the husband’s “supervisors” at H Company Australia, who affirmed an affidavit on 10 May 2020. Mr X, although I recall was available for cross‑examination by electronic means, was not required for cross-examination. His evidence was, inter alia that:
(a)he was aware of the husband’s medical conditions that prevented him from maintaining a management within H Company;
(b)the husband is not eligible for loss of professional insurance due to age;
(c)the husband offers “significant value” to H Company and accordingly, the executive team provided approval to find Mr Rainsford a new role within H Company and offered him a position to work for me,” which necessitated the husband moving from City Y to City Z;
(d)as at 10 May 2020, the husband had moved from City Y to City Z and had commenced working under Mr X “however he has not yet formally transferred from the employment of H Company;”
(e)once in his new position, the husband’s current monthly salary will reduce to £15,782 and once he turns 55, his new projected monthly salary will be £6,604; and
(f)The husband’s entitlement to severance “is a matter of H Company policy. I have no authority over how severance entitlements are applied.” Further, as the husband will maintain continuous service within the H Company organisation “his discretionary severance benefit would be applied once he finally leaves H Company.”
Under cross-examination the husband said that:
(a)After being referred to the ‘Conditions of Service’ document (“Annexure A3”) – being conditions of service as at December 2019 for H Company, in respect to employees engaged in providing services in Country B – the husband did not suggest the conditions were not applicable to his employment;
(b)He did not sign the authority requested by the solicitors for the wife in their letter dated 13 February 2020, delivered to H Company, to enable them to provide the wife with information with regard to his employment and particularly the conditions of employment. His response suggested his wife had already contacted his employer for that information;
(c)He had requested Ms G (project manager for H Company) to provide the letter delivered to “whom it may concern” dated 13 February 2020 (“Annexure A11”) confirming the husband had moved to City Z to commence his new role “with an effective date of 1 March 2020;”
(d)He did not previously disclose emails around 16 September 2019 (see “A12”) at the time, as he did not believe they were relevant at that time, nor had he previously seen the emails passing between Ms G and Mr J, produced to him after the subpoena was answered;
(e)As to the email exchange on 16 December 2019, (between Mr J and Ms G) the husband says he was not aware of this exchange. It is noted however (referring to the severance payment) that:
(i)Mr J (at 2.00pm) indicated the husband may wish that his severance payment to be paid out at the time of his “AUD severance;”
(ii)then at 3.01pm, Mr J says to Ms G that “he doesn’t want his severance paid out;”
(iii)then on 22 December 2019, Mr J says he had just received a note (I infer from or on behalf of the husband), that “he’d like to take his severance on transfer to the UK contract. That’ll be easier all round;”
(iv)then, I infer after some communication between Mr J and a person named as Mr X, Mr J writes:
Ok Mr X; lets stick with what the policy says. I expect when he moves to a V contract in February 2021 (after this year) his severance would be adjusted accordingly.
(f)The husband did receive the “draft severance calculation” (pages 59/60 of the wife’s annexures) on or about 2 January 2020. But did not provide the calculation to the wife, despite the Order made on 9 December 2019. The calculation at January 2020 reveals:
ETP Gross $547,635.06
ETP Tax $225,888.00
ETP Nett $321,747.06
As a non-resident for tax purposes, the eligible termination payment is not taxable in Australia.
(g)At the commencement of cross-examination by Mr Hackett for the wife, the following exchange took place:
COUNSEL: Thank you. You mentioned that you’re employed as a manager bur you’re not working in that role are you? ---No, I’m not.
What role are you working in? --- I’m working in the – a management position in City Z.
And that’s for a United Kingdom company? --- That’s H Company UK.
This direct testimony appears to be confirmed by the unchallenged evidence of Mr J, that the husband had commenced working with Mr J although his employment had not been formally “transferred” from H Company. The wife’s annexure “A 22” supports a conclusion that at 27 March 2020, the husband’s salary, paid by H Company, had been reduced to $200,714.07 from 1 April 2020.
Mr Hackett in final written submissions contends that:
23.The severance payment is an accrued contractual entitlement upon the husband ceasing his employment with H Company (and which occurred on or before 29 February 2020) and going on a UK contract with H Company UK (on Mary 2020 at the latest) as the above correspondence makes plain. On that basis it is property and should be included in the divisible pool.
In further oral submissions, it is contended that the conditions of service have been satisfied and as Mr J says, he must transfer, payment should be available.
Mr Maurice for the husband contends that (drawn from the husband’s case summary filed 7 May 2020) that“[i]t is beyond argument that the expectation of a severance payment is not property within the meaning of the Act” (relying upon Sand & Sand (2012) FLC 93-519 at p. 86,657 per Coleman J sitting as the Full Court and Rix & Rix [2020] FamCA at pp. 160 to 165” and further “[a]s it has not been paid the position is further complicated by the discretion afforded to the employer about when and how much will be paid and the entitlement is not certain.”
I note that the case summary was prepared before the evidence at the hearing had been tested and by final oral positions, the husband’s position was that although the husband agrees he will get a severance payment at some time in the future, it will come from H Company and it should not be arbitrarily included in the balance sheet (as the wife contends) but should be regarded as a ‘financial resource’ within the matrix of s 75(2) factors of the Act.
CONCLUSION ON THE SEVERANCE PAY
At the time of the trial, although the husband commenced by saying he was employed at that time by H Company UK, other documentary evidence suggests his employment with H Company was still intact (see Exhibit 8) – although it is intended he “transfer” to the UK entity and work under Mr J in the longer term.
The significance of his employment with H Company ceasing is that, as conceded by Mr Maurice, the condition for payment of the severance pay is then satisfied.
I am satisfied, by the delays and initial failure of the husband to make timely and full disclosure of his changing contractual arrangements, that the Court must be cautious in accepting the husband’s evidence about not if, but when, the severance payment is payable. The lump sum payment, for both the husband and wife, represents a sizeable sum in the context of the remaining pool. As earlier noted, I am satisfied that the entitlement, based in part on the years of service, accumulated both to the time of separation and thereafter, that it would not be just and equitable for the gross payment of around $547,635 to be ignored.
Mr Maurice for the husband says the future entitlement, not having vested, should be treated as a financial resource to be considered within the matrix of the s 75(2) factors. Mr Hackett for the wife says it should be treated as property and included in the pool.
Although Mr Maurice relied upon the decision of Coleman J (sitting as the Full Court) in Sand & Sand [2012] FamCAFC 179, for the proposition that “the expectation of a severance payment is not property within the meaning of the Act”, in my view, the facts of Sand & Sand are distinguishable. In Sand & Sand, the trial Federal Magistrate had quantified the property pool at $7,855 but because of the inclusion of a sum of US$171,894.56 as “notional” property, which had once existed, and should have remained in existence, the Federal Magistrate made an order in favour of the Respondent of $120,000.
In this case, the husband’s entitlement will vest upon the cessation of his employment with H Company – a certain event as a result of his (at the time of the hearing) pending employment with H Company UK. Accordingly, I find the right or entitlement to the severance payment does exist, although the actual date of vesting (and the possible end quantification) is not certain (see Sand & Sand at [53]). Furthermore, the circumstances of the husband’s decision – essentially forced upon him – to take up the offer of employment with H Company UK because of his inability to fly, means the payment to the husband is available in the foreseeable future. As I discuss below, this may be one of those unusual cases, where the power to adjourn the pronouncement of final orders pursuant to s 79(5) of the Act, is enlivened.
For the reasons given, I propose to include the future severance payment at the notional value of $547,635 in the pool, but as a separate pool because of its characteristics.
LOSS OF JOB ALLOWANCE
Even Mr Hackett, doing the best he could in his advocacy for the wife, relied on the correspondence referred to at length in his written submissions, ultimately had to concede in light of the unchallenged evidence of Mr J and the position taken by the insurer, that having reached the age of 50 years, the husband has no claim or “the chose action is valueless.” The wife at paragraph 26 of her Counsel’s submissions asserted a property calculation of the LOJA would have been in the region of $791,123.48.
It is clear that the wife, having doggedly pursued this enquiry (with little assistance from the husband) is disappointed such a large sum in the pool cannot be included. Clearly the husband felt his inability to claim LOJA as “disingenuous” and had “left him without LOJA coverage for which I was contracted and believed to be covered with.” After his medical condition caused a cessation of his management position, and having had his claim for LOJA rejected by the insurer, he even pleaded his case to his employer arguing, it seems, some form of misrepresentation. However whilst on 26 November 2019 the husband told Ms G after his claim for LOJA was rejected that he would “be taking this legal,” no legal action has been commenced.
There seems little or reasonable prospects of success of any claim based on the precise terms of the insurance cover and the termination of cover at age 50 years.
As a result, no LOJA payment will be included in the pool of assets.
ADDBACK FROM HUSBAND’S POST SEPARATION INCOME
The husband’s evidence as to post separation income available to him is:
(a)his income during the period from separation (taken to be December 2016) was $1,326,400;
(b)after identifying what he had paid towards the maintenance of the wife and expenses for the family home (including the mortgage), he estimated that he had paid a total for the period of $517,578 for the wife’s benefit; and
(c)he paid school fees for Mr P of $76,508 and for Ms O of $62,098.
At paragraph 227, the husband calculated that he therefore “had income of $670,276 since December 2016 to use for my own expenses, including the support of my wife and adult daughter”. As a matter of law, the husband has no legal duty to support Ms O who, at the time of the hearing was an adult and was living in the United Kingdom. She was estranged from her mother at the time.
The husband has a duty to support his new wife who lives in the United Kingdom. Mr Hackett submits that the husband has not made full disclosure about the circumstances of their cohabitation. The husband, for example, did not complete Part E or Part F of his Financial Statement affirmed 24 April 2020. He denied his new wife was “wealthy”.
Although he had significant credit card liabilities, (totalling approximately $100,000 – see Item 51) at Item 30, his payments of $1,835 per week are higher than the minimum payment required.
This is not a case where it can be asserted the husband, whilst generating a steady and good income, did not continue post separation to support the family unit. Furthermore, the wife had, at her disposal, the use of her income of approximately $1,247 per week nett (see her Financial Statement filed 7 May 2020). Over the period since separation to trial, I estimate the wife’s income would have been approximately $200,000 over that period.
In final submissions, Counsel for the wife contends that:
(a)as revealed in Exhibit 7, the husband’s solicitor by letter dated 29 May 2018 (two years before the hearing), on instructions, informed the wife’s solicitors, summarised at paragraph 7(b)(vi) the following distributions on a monthly basis from the husband’s income:
Typically that gives the following:
1.Typical pay – 95,700 [LCY]
2.Paid to Australia – 82,718 [LCY] (Average)
3.Expenses per month – 4,500 [LCY] (Average)
4.Remainder = 9,022 [LCY] or $3,176 for travel and other recreational expenses.
(b)the husband withdrew cash during the period, often at ATMs at work, totalling $216,654.43 (see Exhibit 6);
(c)on the basis of these figures, the wife submits that approximately $370,000 of post separation income available to the husband has been used by the husband without any reasonable explanation, being:
Nett available after payments to Australia $670,276 Allow the husband’s living expenses of say 4,500 [LCY] ($2,057 per month) x 40 months $82,280 $587,996 Less allowance for cash withdrawals $216,654 $371,342
which, over 40 months, amounts to approximately $9,000 per month
On the basis of the husband’s most recent Financial Statement, he has accumulated $100,000 in credit card liabilities with no discernible increase in liquid funds. The total personal expenditure above ($82,280 + $216,654) amounts to approximately $300,000 over 40 months or about 172 weeks, equating to a weekly spend (additional to payments to Australia as allowed) of $1,744 per week. The husband (at Item 32) estimated, without any details, his “other expenditure” of $4,459 per week which is much higher than the allowance the wife is prepared to concede of $1,744 per week.
On balance, I accept the husband has not fully explained what he has used some of his post separation income for, absent any discernible increase in savings or other assets.
When discussing guidelines for adding back to the property available at trial (other than legal fees), the Full Court in Trevi & Trevi (2018) FLC 93-858 said at [29] and [30]:
29.The fundamental precept that addbacks are exceptional, reflected in the decisions just referred to, also mirrors what has been said in earlier decisions of the Full Court that, for example, “the Family Court must take the property of a party to the marriage as it finds it”[1] at trial. An important parallel proposition is that the parties do not “go into a state of suspended economic animation” after separation.[2] Thus, reasonably incurred expenditure does not usually come within accepted categories of addback.
30.Two fundamental premises emerge from Omacini [& Omacini (2005) FLC 93-218] and the authorities preceding it. First, “adding back” is a discretionary exercise. When the discretion is exercised in favour of adding back, it reflects a decision that, exceptionally, in the particular circumstances of a case, justice and equity requires it. The second premise is its corollary: in cases that are not “exceptional” justice and equity can be achieved, not by adding back, but by the exercise of a different discretion – usually by taking up the same as a relevant s 75(2) factor. Indeed, it has been said that the latter is “a course which is, perhaps, technically more correct” than adding back to the list of existing interests in property.[3]
(footnotes included)
[1] Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 at 355. See also, Stanford v Stanford (2012) 247 CLR 108.
[2]Marker & Marker sub nom M & M [1998] FamCA 42 at [2.11].
[3] Line and Line (1997) FLC 92-729 at [4.72] as quoted in Chorn at 79,317 [38] (noting that, at [4.71], legal fees were said, in obiter, to be different and there is reference to the “notional property” approach). It has also been said that premature expenditure might be taken up in the assessment of contributions, for example by a party making a disproportionately greater indirect contributions to the existing property by reason of other property having been dissipated (see, Watson & Ling (2013) FLC 93-527 at 86,924 [33]).
Mr Maurice for the husband submits there should be no “addback” as it does not exist and the husband has no obligation to account to the wife for his use of his income anymore, I infer, than the wife must account to the husband for her use of her income post separation. Mr Maurice conceded that if the Court found some of the husband’s use of income was unreasonable, then it would be open to the Court to consider such use under s 75(2)(o).
I agree that neither the husband nor the wife have an obligation to account for every cent they earned post separation. I accept the husband’s income was vastly superior, however he continued to use a significant proportion of his income to ensure the mortgage was satisfied; the school fees were paid and expenses running with the ownership of the home were met. He also paid spouse maintenance and some child support.
The husband has re-partnered, but I do not find, on the evidence, that his current wife requires significant support. They have no children. She owns a home in the United Kingdom and has some interest in extended family property interests. However, he worked hard for the income he generated, living mostly alone and, not unreasonably, takes opportunities to return regularly to the UK to be with his wife. It is likely, in these circumstances, that the husband’s living expenses do exceed those of the wife – but that is not the test.
In the exercise of my discretion, on the facts of this case and where it is not even possible to quantify the amount that could fall into “excessive” lifestyle payments, it would not be just and equitable to arbitrarily include a figure – even the now reduced claim of $370,000 into the pool as notional property.
When I come, later in these Reasons, to discuss s 75(2) factors, I will return to this issue.
ADDBACKS – LEGAL EXPENSES
Exhibit 2 (the parties’ costs notifications) reveal that:
(a)the wife had paid $167,810.67 of which amount only $6,661 were paid by the wife. Further anticipated costs of the Final Hearing of $40,000 were estimated. The balance of costs paid (including a sum of $18,176.21) is said to have been paid by friends or relations K & K, L and M. The wife, at Item 50, reveals some personal loans amounting to $131,365.97 but no substantial credit card liabilities; and
(b)the husband had incurred costs of $113,635.05, with estimated costs of the Final Hearing of $35,850 – of which sum $80,214 had been paid by the husband – including some on his credit card.
In Chorn & Hopkins (2004) FLC 93-204, the Full Court said:
56.In summary, we consider that the above mentioned decisions of the Full Court establish that, while the treatment of funds used to pay legal costs remains ultimately a matter for the discretion of the trial Judge, in determining how to exercise that discretion, regard should be had to the source of the funds.
57.If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the party, who has had the benefit of them.
58If funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset; nor would any borrowing undertaken by a party post-separation to pay legal fees be taken into account as a liability in the calculation of the net property of the parties. Funds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.
Murphy J in Trevi & Trevi considered these passages in Chorn & Hopkins and said at [41] and [42], that:
41.The passages from Chorn, quoted above, draw a distinction between legal costs met from property that would otherwise be available at trial and legal costs met from funds “generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance)”. The proposition there advanced, that such expenditure “would generally not be added back”, also needs to be seen as a guideline informing the relevant discretion rather than determining it. A further distinction is suggested in Chorn between funds generated in that manner and “[f]unds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement”.
42.The latter suggestion recognises the discretion inherent in the task and also, perhaps, that in the particular circumstances of a case, adding back sums generated post-separation in the different manners suggested might create injustice as much as it might cure it.[4]
(footnotes included)
[4] See, Doolan, P., “Now you see it, now you don’t: notional property and add-backs in family law”, Families, broken, blended, mended: conference handbook: 13th National Family Law Conference, p 255 at [2.3]ff. The paper itself provides examples of the potential injustice and inequity that can occur by a strict adherence to the “source of funds” distinction referred to in Chorn.
Considering this “guideline”, I have come to the conclusion that in the exercise of my discretion:
(a)the sum of $6,661 should not be added back, as against the wife, as the source of payment was her income, loans from others to pay her legal expenses, considering her income, were necessary but are not sought to be included in the pool of assets and liabilities. I agree that is the correct approach;
(b)I have previously discussed the evidence touching on the husband’s income. It is open to find, as I do, that he has used post separation income and access to his credit cards to pay his legal expenses. It is not possible to understand, without more evidence, why the husband’s credit card liabilities are so high however, I infer, this might relate to the manner in which the chooses to pay for discretionary items or even food, travel costs etc. The parties have been separated a long time, and it would not be just and equitable to allow the husband to include in the balance sheet his credit card liabilities, the effect of which would be to require the wife to contribute effectively to those liabilities. However, I find it would not be just and equitable to “add back” legal expenses paid by the husband from his income. Rather, I accept the use he made of those funds shapes the discretion about the additional income at his disposal arising from the excess his Financial Statement concedes.
THE RAINSFORD SUPERANNUATION FUND (“SMSF”)
Although some time in cross-examination of the husband was devoted to some transactions in the SMSF, the husband’s Counsel says that in circumstances where the husband says he will take the SMSF balance at the agreed value of $477,928, little purpose is served in making findings about the husband’s decisions, unilaterally made, about the use of the funds in the SMSF – and in particular the loan to Mr D.
Whilst there is some merit in this submission – accepting as it does that the husband will entirely bear the consequences of any non-compliance in management of the SMSF and/or the inability to recover the loan made to Mr D, I regard it as relevant to make some findings about certain transactions. It may be, for example, that the wife’s argument that the husband has failed to make disclosure in a timely manner resonates as a s75(2) issue or perhaps even ultimately an issue, if the question of costs under s 117 needs to be determined after, as is the usual procedure, final orders are made by the Court.
The wife’s concerns about the husband’s use of funds in the SMSF were raised in the interlocutory proceedings heard by me on 5 March 2020. In my Reasons for Judgment delivered 10 March 2020 at [5(d)] and [5(g)], the Court said:
5. …
d)Another significant uncertainty at 1 November 2019 was the status and recoverability of a loan made by the parties’ self-managed superannuation fund (“SMSF”) called “Rainsford Super Fund”, of which the parties were the joint Trustees. The wife asserts that the husband, without her knowledge or consent as a joint Trustee, caused a loan to be made by the SMSF to Mr D on or about 1 December 2016 for $500,000. The husband had earlier indicated to the Court that Mr D intended to repay the “loan” by February 2020. It has not been repaid;
e)At the hearing before me on 5 March 2020, a copy of the loan agreement and the draft financial statements for the SMSF were produced and tendered. Although the nature and circumstances of this “loan” are likely to be a significant transaction to be analysed at the Final Hearing (and the Court has indicated that the husband should call Mr D as a witness), at the current time this unpaid “loan” is:
i)essentially unsecured. Clause 4.1 of the Loan Agreement purports to charge Mr D’ “right, title and interest in the SPA and any property whether real property or otherwise, of any nature or kind and wherever situate in which the Borrower now or in the future has a legal, equitable and/or caveatable interest”;
ii)Although the Loan Agreement (at Recital D) says the Sale and Purchase Agreement dated 21 June 2016 was attached to the Loan Agreement, the copy of the Loan Agreement tendered in evidence has no attachment;
iii)The Loan Agreement refers to the Borrower having “secured an allocation” from the E Corporation for the mining of commodities and having entered in the SPA with F Company for the sale of 48 million units of the commodity;
f)Although the interest rate payable of 15% per annum is commercially attractive, the wife’s understandable concern is that the funds paid by the SMSF to Mr D are lost;
g)The financial statements of the SMSF (in draft form, at least because the wife feels she is unable to sign same and satisfy her fiduciary duties), reveals a balance for the Fund at 30 June 2019 of $477,928.27 (up from $351,529.42 for the previous financial year), almost totally made up by “Loan Receivables” of $469,199. It is very difficult to reconcile this figure with the asserted loan $500,000 and an alleged “Rollover” amount since 1 July 2018 of $130,000 (the source of which is unknown). However, at first blush, the wife’s concerns that if the funds “loaned” by the SMSF to Mr D are irrecoverable, then the pool of assets (estimated at paragraph 44 of her Affidavit filed 25 February 2020) is drastically reduced are reasonable;
Testing these allegations by cross-examination of the husband at the Final Hearing did not advance the matter greatly, save that the wife’s submissions at paragraph 59(b) that “his uncommercial dealings with the entire funds of a self-manage superannuation fund” which it is asserted “were plainly in breach of his obligations” as a Trustee, go to the husband’s credit. I do find the transaction peculiar – making a loan on an unsecured basis given that the husband conceded he had made investments recommended by Mr D that were not profitable and he lost money as a result, and of all his funds in the SMSF.
However, ultimately when my task is to do justice and equity between the parties, and the wife does not contend that the balance sheet of the SMSF (and therefore the husband’s member benefit) showing at 30 June 2019 net assets of $477,928 should be increased, the fact that this figure is adopted by both parties persuades me to look no further at the transactions. The husband, who apart from being a manager has both accounting and financial qualifications, is aware of his obligations and happy to accept them. As the wife was previously a Director of the Trustee company for the SMSF, she should receive an indemnity from the husband against any claims brought against her in respect of the SMSF. The unusual character of the husband’s unilateral decisions makes such an indemnity proper.
POOL OF ASSETS
I rely upon the findings earlier made as to the inclusions and/or exclusions as to the balance sheet – a draft balance sheet, as an aide memoire, being marked as Exhibit 1. Before making a finding of the items, interests and values, I further find:
(a)in the absence of either party offering probative evidence of the value of the household furniture in the possession of the wife (and noting the husband has been out of Australia for some years), I am prepared to adopt the wife’s lay estimate of $15,000 (Item 42 in her amended Financial Statement) as a statement against interest;
(b)the parties invite the Court to include a number of very modest bank accounts in the balance sheet, however where I propose to exclude the parties’ individual credit card liabilities, I see it as artificial (separation having occurred some years ago) to include solely personal bank accounts – some of which have very modest balances. I do intend to include however the joint ANZ Overdraft Account ending …33 (-$9,957) and the joint Westpac Cash Investment Account ending …20 ($2,959);
(c)the husband’s solicitor in the letter of 29 May 2018 conceded that the husband “owns a trail bike. The bike is 10 years old in average condition”. The husband gave evidence that he has sold the trail bike but has made no disclosure nor produced any documents dealing with the sale or use of the proceeds. In this circumstance, I find the sale was a premature disposition in a Townsend & Townsend (1994) 18 Fam LR 505 sense and on the best evidence available “add back” $7,000 as funds received by the husband.
Based on these findings, I set out the interests of the parties available for consideration of alteration under s 79, in Appendix One.
CONTRIBUTIONS
The parties in final submissions appeared to agree that after a relationship of this length and considering the myriad of different financial and non-financial contributions, they should be assessed as equal. At paragraph 52 of the wife’s submissions, with which I agree, the point is made that although the husband was the income producer and continued to provide support for the family, including post separation to maintain and preserve the family home (whch I regard as a contribution by the husband where he did not have the benefit of residing in the home), the wife:
(a)sacrificed her career to both care for the children and to travel overseas to support the husband’s career; and
(b)was the sole carer of the children from 2008, when she returned to Australia with them whilst the husband remained working overseas.
However, whilst I agree that they made an equal contribution to the Pool One interests, I find that the husband made a slightly greater contribution to the Pool Two interest in the severance pay that has accumulated. This is because his continued employment post separation and the benefits that flowed from the increased salary, built on the calculation that is used for estimating the payment. I also accept that both parties will benefit from the tax exempt status of the husband, which means, on the evidence, the payment will be received by the husband tax-free.
Considering these factors, I regard the contribution-based entitlements to the Pool Two interest as being 55% to the husband and 45% to the wife.
SECTION 75(2) FACTORS
The parties are of similar age, however the medical challenges which have prevented the husband from maintaining his higher level employment are likely to also cause lifestyle impediments. Neither parent has a legal duty to maintain their adult children, although I accept the husband intends to support Ms O in the United Kingdom with her education and I find the wife will continue to support Mr P. The husband has a duty to support his new wife, although on the evidence it is not possible to estimate the level of that support.
I take into account that before the severance pay is distributed, as is the Court’s intention, the husband’s share in Pool One is almost entirely superannuation, whilst the wife’s share, although equal, will include the home. Of course, she will be responsible for the mortgage over the home and if unable to refinance the property mortgage to discharge the husband’s indebtedness and liability, the home will need to be sold – providing the wife with the flexibility of a cash sum.
The wife contends that “an adjustment in her favour is appropriate because of the disparity in earning capacities” and sought a 5% adjustment in her favour (10% overall) – but this was estimated on an asserted pool of over $2 million. Mr Maurice for the husband points to the reduction in salary the husband will suffer at age 55 years, on the evidence of Mr J, to a sum of approximately £6,604 per month – which on an exchange rate of say £1 = $1.87 equates to $12,350 per month or $148,000 per annum. This is superior to the wife’s estimated gross salary of approximately $100,000 per annum gross. The husband also has the benefit of his tax-free status – whilst the wife pays Australian income taxed at source.
I also take into consideration, under s 75(2)(o), the fact that the husband did have the benefit of excess income which, although not quantifiable, in my view compels some very modest allowance to the wife.
Considering these factors, in respect of the Pool One interests, I would make an adjustment to the equal contribution assessment to the wife of 6.5% or a differential of 13% on the Pool One interests amounting to $1,217,320. As authorities such as Clauson & Clauson (1995) FLC 92-595 direct, the real difference amounts to approximately $158,251 – or put another way, the husband pays from his entitlement $79,000.
I regard such an adjustment as appropriate.
Having taken the effect of a split of the severance payment (55% to the husband; 45% to the wife) into account above, I would make no further adjustment to the Pool Two contribution assessment.
WHAT ORDERS ACHIEVE JUSTICE AND EQUITY?
If the wife was to receive 56.5% of the Pool One interests totalling $1,217,320, this amounts to $687,785 made up as follows:
Equity in family home $392,002 Joint bank accounts -$6,998 Motor vehicle 2 $20,400 Motor vehicle 3 $10,000 Furniture and contents $15,000 Superannuation $214,647 $645,051 Plus payment by husband $42,734 $687,785
If the husband was to receive 43.5% of the Pool One interests totalling $1,217,320, this amounts to $529,535 made up as follows:
H Company shares $5,009 Motor vehicle 1 $12,000 Furniture and contents $10,000 Proceeds of trail bike $7,000 Superannuation $538,260 $572,269 Less payment to wife $42,734 $529,535
These entitlements, if combined with the notional distribution from the future anticipated severance pay, would constitute a total pool of $1,764,955 and the respective shares would, on that pool, be as follows:
Wife Pool One share $687,785 Pool Two share $246,436 $934,221
which computes to 53% of a combined pool.
Husband Pool One share $529,535 Pool Two share $301,199 $830,734
which computes to 47% of a combined pool.
I am satisfied that orders which achieve this distribution are just and equitable to both parties.
FORM OF ORDER
An order which provides that:
(a)the husband transfer to the wife his interest in the Suburb S home, with the wife to simultaneously refinance the current mortgages or otherwise extinguish the husband’s liability;
(b)if the wife is unable to refinance, then the home will need to be sold, with the wife entitled to the balance of the nett proceeds of sale;
(c)from the time of the orders, the wife will be responsible for the mortgage payments and other charges running with the ownership of the property;
(d)the husband can elect to pay the wife the sum of $42,700 (rounded down) in cash and preserve his superannuation entitlements or in the alternative, a splitting order in favour of the wife over the husband’s BB Super Fund would be made; and
(e)otherwise the parties will retain all other property or interests in their possession, power and control (save for the severance pay entitlement).
The severance pay entitlement should be the subject of a further order. The evidence at the hearing was that, for whatever reason, the payment had not been made to the husband. With the delay since the trial ended (and noting the direction earlier ordered by the Court was directed to preserving the payment in Australia), it is not certain that the transfer of the husband’s employment to H Company UK has now been perfected – in which case the severance payment would now be payable.
Both parties have an interest in seeing the payment made – in the wife’s case to assist with the refinancing of the mortgage (if she seeks to retain the home) and in the husband’s case it will represent some cash funds to defray his credit card liabilities and to provide him with some cash.
In the preparation of these Reasons, the Court considered whether this is one of those unusual cases where a partial property order as set out above could be made, and to use the power under s 79(5) to otherwise adjourn the proceedings until the severance payment actually crystallises.
The preferred approach would be to achieve finality and shape an order with appropriate inunctions to ensure when in the future the severance payment is received, the distribution as to 55% to the husband and 45% to the wife is achieved.
The husband would, if he has not already done so, inform the wife as to the status of his “formal” transfer from H Company to H Company UK, which the evidence at the trial seemed to be in the pre-condition to the liability on H Company to pay the severance payment to the husband arises.
I will direct that the matter be adjourned to me at 10.00am on 18 August 2021 for further submissions and if possible the pronouncement of orders, with the Applicant wife to provide a draft order consistent with these Reasons to the husband’s solicitors within seven days.
Costs of the hearing and the proceedings generally, including reserved costs, should be dealt with and considered (if pressed) after final orders are made – as is the usual practice. In this regard, the affidavit of Ms CC gave evidence in respect of procedural fairness to superannuation funds and attempts of serve Mr D with a subpoena, but also the affidavit of the wife, filed 13 May 2020, supported a claim by the wife that the husband pay her costs of and incidental to her interim Application filed on 8 October 2019 and the hearings on 1 November 2019 and 9 December 2019.
Furthermore, on 5 March 2020 I made an order for costs in favour of the wife in respect of the Application in a Case filed 25 February 2020 and the hearing on 5 March 2020, with the quantum and timeframe to be reserved to trial.
These costs matters were not the subject of further submissions, or submissions in response, at the hearing and I propose to set a timetable as well for these issues to be considered in chambers.
I certify that the preceding eighty-nine (89) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Baumann j. Associate:
Dated: 29 July 2021
APPENDIX ONE
POOL ONE Ownership Description Value Assets Joint R Street, Suburb S $1,425,000 Joint ANZ Overdraft Account ending …33 -$9,957 Joint Westpac Investment Account ending …20 $2,959 Husband H Company shares $5,009 Husband Motor vehicle 1 $12,000 Wife Motor vehicle 2 $20,400 Wife Motor vehicle 3 $10,000 Husband Furniture and contents $10,000 Wife Furniture and contents $15,000 Addback Husband Sale proceeds of trail bike $7,000 $1,497,411 Liabilities Joint Westpac Property Loan $849,998 Joint Westpac Rocket Loan $183,000 $1,032,998 NETT BEFORE SUPERANNUATION $464,413 Superannuation Wife DD Super Fund $111,915 Wife EE Super Fund $102,732 $214,647 Husband BB Super Fund $48,534 Husband FF Super Fund $11,798 Husband SMSF $477,928 $538,260 NETT POOL ONE $1,217,320 POOL TWO Husband Severance payment $547,635 COMBINED POOLS $1,764,955
2
6
1