Radecki & Radecki
[2009] FMCAfam 240
•20 March 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| RADECKI & RADECKI | [2009] FMCAfam 240 |
| FAMILY LAW – Property settlement – issues of disclosure – husband’s employment benefits – contributions. CHILD SUPPORT – Departure application – application dismissed. FAMILY LAW – Spouse maintenance – application dismissed. |
| Child Support (Assessment) Act 1989, ss.116(1)(b), 117(2), 117(4), 117(5) Family Law Act 1975, s.75(2) |
| Black & Kellner (1992) FLC 92-287 C & C (2005) FCAFC 429 NHC & RCH (2004) FLC 93-204 DJM & JLM (1998) FLC 92-816 Farnell (1996) FLC 92-681 Gyselman (1992) 15 FLR 219 HDM and MM and SJM (Kay, Holden and Coleman JJ) delivered 14 February 2006 Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 AJO & GRO (2005) FLC 93-218 Townsend (1995) FLC 92-569 Weir (1993) FLC 92-338 |
| Applicant: | MS RADECKI |
| Respondent: | MR RADECKI |
| File Number: | SYC 4113 of 2008 |
| Judgment of: | Baumann FM |
| Hearing date: | 3 March 2009 |
| Delivered at: | Sydney |
| Delivered on: | 20 March 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr Gould |
| Solicitors for the Applicant: | Swaab Attorneys |
| Counsel for the Respondent: | Mr Kearney |
| Solicitors for the Respondent: | Barkus Edwards Doolan |
ORDERS
That the parties do all acts and things and sign all necessary documents in order to effect a sale of the former matrimonial home, situate and known as Property N (“the home”) by way of public auction on
16 April 2009 (“the first auction”), or on such other date as agreed between the parties, at a minimum reserve price of $1,700,000 or such other minimum reserve price as agreed between the parties.
If the home does not sell at the first auction, then the parties immediately thereafter do all acts and things and sign all necessary documents in order to place the home on the market for sale by way of private treaty at a minimum contract price of $1,700,000 or such other minimum contract price as agreed between the parties.
If the home is not sold within two months of the date of the first auction, then the parties do all acts and things and sign all necessary documents in order to place the home on the market for sale by way of a second auction at the best price possible.
If there is a dispute as to the minimum reserve price or minimum contract price or best price possible, the parties shall appoint the President or his nominee of the Australian Property Institute (Inc) to determine the minimum reserve price, contract price or best price possible (as the case may be) and the parties shall abide by his/her determination and equally pay the costs of his/her determination.
That the parties to all acts and things in order to distribute the proceeds of sale of the home as follows and in the following priority:-
(a)Agent’s costs and other sale expenses;
(b)Legal costs pertaining to the sale;
(c)Discharge of all loans secured against the home;
(d)Adjustment of water rates and council rates;
(e)The balance as to 62.5% to the wife and 37.5% to the husband.
That the husband pay to the wife no later than the date of settlement of the sale of the home the sum of $133,590 by way of property settlement.
That pending settlement of the sale of the home that the parties do all acts and things and sign all necessary documents in order to pay the mortgage facilities secured over the home by redrawing upon the National Australia Bank investment loan, number [3].
That the wife forthwith do all acts and things and sign all necessary documents, which are to be prepared by and at the expense of the husband, in order to:-
(a)Cause the lodgement at the Australian Taxation Office of all taxation and other statutory returns for [D] Pty Ltd and the [D] Trust for all years to that ended 30 June 2008 (including, if necessary, signing all such taxation returns);
(b)Transfer to the husband her shareholding in [D] Pty Ltd;
(c)Resign as director of [D] Pty Ltd;
(d)Relinquish her interest, if any, as a beneficiary of the [D] Trust;
(e)Assign to the husband any credit or debit loan accounts she has in the [D] Trust; and
that the husband thereafter indemnify and keep indemnified in relation to any liabilities she may have to [D] Pty Ltd and/or the [D] Trust and in relation to any liabilities arising out of her officeholding or shareholding in [D] Pty Ltd.
Immediately after the date of these orders that the parties do all acts and things and sign all necessary documents in order to apply to the general partner/partners of the [T] Program (“the Program”) to obtain his/their consent to transfer to the wife one half of the units held by the husband in the Program and immediately thereafter the husband shall do all acts and things and sign all necessary documents to effect the transfer of one half of the said units to the wife, provided that if the general partner/partners of the Program does/do not consent to the transfer of the husband’s units in the Program to the wife, whenever a distribution is received by the husband, the husband shall pay to the wife within 28 days of receipt of the said distribution an amount equivalent to one half of the net distribution received by him (that is, the amount of the distribution less any tax payable by the husband on receipt of such distribution).
That the husband forthwith upon being able to do so, do all acts and things and sign all necessary documents in order to lodge his personal tax return for the year ended 30 June 2009 and to cause an assessment to issue in respect of all tax payable by the husband in respect of the receipt by the husband of the distribution from the [F] in September 2008 (“the Distribution”) and upon issue of such assessment a copy of said assessment be provided to the wife and simultaneously:
(a)pay from the Commonwealth Bank of Australia, account number [5] (“the Account”) such monies as are necessary to pay such assessment;
(b)pay to the wife an amount equal to 62.5% of the net balance of the Account then remaining; and
provided that if the husband is assessed at any other time to pay any further taxation, interest, penalties and/or any other amount as a result of the receipt by him of the Distribution, then within 28 days of the issue of any requirement for the husband to pay such amounts (2) the wife shall pay to the husband an amount equal to 62.5% of such amount(s) as are then payable by the husband.
That the husband and the wife each be declared the sole legal and beneficial owner of the [R] shares held in his or her name.
That the wife retain the furniture and contents currently situated in the home and that the husband retain the furniture and contents in his current possession.
That except as otherwise provided in these orders, each party shall retain, to the exclusion of the other party, all other property registered in his or her name or in his or her current possession or control.
That except as otherwise provided in these orders;
(a)The husband shall indemnify the wife from and in respect of all actions, claims, suits and demands as may be made against the wife in relation to all liabilities in the name of the husband; and
(b)The wife shall indemnify the husband from and in respect of all actions, claims, suits and demands as may be made against the husband in relation to all liabilities in the name of the wife.
That the wife’s application for final orders for spouse maintenance and child support departure be dismissed.
That paragraph 10 of the orders dated 23 September 2008 and paragraph 3 of the orders dated 3 March 2009 be discharged.
That subject to order 18 hereof each party pay his/her own costs of and incidental to these proceedings.
That if either party refuses or neglects to sign any document necessary to implement these orders that a Registrar of the court sign the necessary document in lieu of the defaulting party and the defaulting party shall pay the costs of obtaining the Registrar’s signature on the necessary document on a lawyer/client basis.
Liberty to restore on 48 hours notice in relation to implementation of these orders or in relation to any further machinery required to implement these orders.
IT IS NOTED that publication of this judgment under the pseudonym Radecki & Radecki is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYC 4113 of 2008
| MS RADECKI |
Applicant
And
| MR RADECKI |
Respondent
REASONS FOR JUDGMENT
Introduction
The husband and wife met and married when in their twenties and rode the economic boom times in Australia through hard work and diligence. During the period of marriage until separation which incurred in July 2007 (a period of over 11 years) the parties were blessed with three daughters.
Regrettably, the breakdown of the relationship was followed some
12 months later with the husband’s well paid employment in the property funds management industry being terminated – not as a result of any conduct on his part, but seemingly a person who became a victim of the global credit crisis. Although these proceedings were on foot, the termination of the husband’s employment from a position reaping a annual salary and benefits of over $500,000 to unemployment on two days notice was a dramatic event which shaped the proceedings before me. Suffice to say both the husband and wife have been required to adjust to a significantly different lifestyle.
The issues for determination whilst simplistically categorised as property settlement, departure of child support and spouse maintenance, involved as much an examination of what is left to divide justly and equitably as any other factor.
At the commencement of the hearing Counsel for the wife (Mr Gould) on behalf of the wife sought the hearing be adjourned primarily because of the uncertainty of the husband’s future income and earning prospects. For reasons which I gave orally at that time and which I do not repeat, I dismissed that application. Mr Kearney on behalf of the husband opposed the adjournment.
The reasons which follow I hope demonstrate the pathway I have adopted in ascertaining the ultimate orders likely to do justice and equity to both the parties – although I accept that the fall in their financial position and security has been so quick and dramatic that neither probably regards any result as fair to them.
Principles
The preferred or usual approach to determining property proceedings under s.79 of the Act was the subject of a succinct summary by the Full Court in Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143) at [39] where the Court said:-
“39. The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions for the parties within the meaning of ss79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s79(4)(e), the matters referred to in s75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case: Lee Steere and Lee Steere (1085) FLC 92-626; Ferraro and Ferraro (1993) FLC 92-335; Davut and Raif (1994) FLC 92-503; Prpic and Prpic (1995) FLC 92-574; Clauson and Clauson (1995) FLC 92-595; Townsend and Townsend (1995) FLC 92-569; Biltoft and Biltoft (1995) FLC 92-614; McLay and McLay (1996) FLC 92-667; JEL and DDR (2001) FLC 92-075 and Phillips and Phillips (2002) FLC 9.-104.”
Credit/Disclosure
Counsel for the wife says I should make a finding that where the evidence of the wife differs from that of the husband I should prefer the evidence of the wife. He contends that this is open to me because:-
a)The husband did not, and he concedes he did not, fully complete timely disclosure of his financial position when requested to do so during the interlocutory stages of these proceedings.
b)The husband’s explanation for the delivery to the wife’s solicitors of document “L2” when a complete version (document “EE”) was, or ought to have been available, was intended to mislead the wife as to the value of his entitlements in the [T] Program and/or distribution entitlements.
c)The husband’s explanation for not informing the wife of his receipt of a distribution cheque for approximately US$27,000 was unconvincing.
d)The husband’s failure to make proper disclosure of entering into a “Domestic Agreement” with his partner Dr M on the Friday before the hearing commenced is just another example of the husband’s tendency to tell the wife, and the Court, only as much as he chooses to reveal.
As is apparent from these reasons, ultimately there were few issues of significance which needed to be determined and where the versions of the parties could only be distinguished by a finding of credit.
I am satisfied, and the wife did not otherwise contend, that by the time of the hearing sufficient discovery had been made to enable:-
a)Single experts to make a proper examination of the market value of the husband’s entitlement in the [T] Program and the CGT implication of a distribution received in September 2008; and
b)The Court to be satisfied that all available assets and liabilities had been identified.
It may be that the wife’s complaints about the husband’s tardiness at times might resonate in some costs consequences but until I am asked to determine such an issue I do not speculate further on this point.
I agree with the submission of Mr Kearney that this is not a “non-disclosure case” within that range of cases considered by the Full Court in Black & Kellner (1992) FLC 92-287 and Weir (1993) FLC 92-338 where guidelines to trial adjudicators to not be “unduly cautious in making findings in favour of the innocent party” were enunciated.
Mr Kearney relied upon the unreported Full Court decision in HDM and MM and SJM (Kay, Holden and Coleman JJ) delivered
14 February 2006 where, at [27] the Court said:-
“there is a distinction between cases where the inadequacy of disclosure suggests the likelihood of undisclosed assets or income, and those where, despite such inadequacy, there is no real basis for so concluding.”
As in that case, I find this is a case where the Court is satisfied that by the hearing there are no undisclosed assets or income.
Pool
Ultimately after proper concessions were made by the experienced Counsel who appeared for the parties, Mr Gould for the wife; and
Mr Kearney for the husband – the issues in dispute in respect of the pool were quite narrow.
The pool is notional, to the extent that the major asset, the former matrimonial home at Property N is to be sold and is currently on the market. Sale proceeds will inevitably be reduced by the level of sale costs, such as advertising and agents’ commission, however the form of order I propose to make will incorporate an allowance for their payment, such that including them in the pool as a (contingent) liability serves no purpose.
Furthermore as it is agreed by the parties that the husband’s interest in the [T] Program is to be divided equally in specie, it is not necessary to attribute any value to those interests. In essence if any benefit is received in the future, the parties will share equally in the gross benefit – with any incidence of taxation or such payments being the responsibility of the party at that time on the distribution received. The same arrangement is to apply to the [R] units.
To the extent that the wife, post separation, appears to have created some small bank accounts for the children [X] ($1610); [Y] ($972) and [Z] ($1002) it was agreed these small accounts should be excluded from the pool on the basis that the funds are deemed to be held in trust for the children.
Ultimately then the major issue for determination involves the approach to be adopted to certain funds received by the husband post separation from or related to his employment with [T]. I deal with this issue shortly.
In terms of liabilities an earlier dispute existed about the level of capital gains tax likely to be assessed against the husband for the distribution received in September 2008 of $239,713.62. The evidence of Mr E (at paragraph 12), and for the reasons referred to in his report, is that it would be reasonable for the husband to include in his assessable income the amount of $69,517... and this would involve an estimated Australian tax liability on the distribution of $32,325. On the basis of the self assessment regime which applies to Australian taxpayers, the parties now agree that seeking a binding private ruling is not required and that it is appropriate to include as a liability, the estimate of CGT, with an appropriate “claw back” provision in the orders to allow for a subsequent claim for contribution against the wife should CGT be higher than the estimate.
I deal with other dispute liabilities below as well.
Benefits from [T]
In circumstances where from the date of separation in July 2007 until at least April 2008 the husband’s income from his employment with [T] was credited to the same account and disbursed and utilised by the parties in the same manner as occurred during the period to separation, little benefit is served by exhaustively examining transactions during that period. Suffice to say the lifestyle enjoyed by the parties, and therefore the children, was high and reflective of the taxable income achieved by the husband for the year ended 30 June 2008 of $545,812. During this period at least the wife had access to the joint cheque account and to the husband’s credit cards by way of supplementary accounts. The husband, who at all times controlled the funds available to him, often moved funds between accounts. An example was the use of the $107,000 (net) from which the husband released $10,000 to each party and used $80,000 to reduce the investment loan account balance and credited $7,000 to one of the offset accounts.
The relevant facts post April 2008 seem to be as follows:-
a)In or about April 2008 the husband decided to stop paying his income into the joint account and commenced to pay the wife a sum of $4500 per month. The husband describes this payment as a combination of child support and spouse maintenance.
b)On 12 June 2008 the husband emailed the wife saying that he was unilaterally reducing the payments to the wife by $1000 per month (to $3,500 per month) to enable him to repay the overdrawn joint cheque account. The wife says from those funds she did not have sufficient funds to meet the mortgage repayments, which resulted in the mortgage converting to a “100% offset arrangement”.
c)The husband says he entered into an arrangement with NAB to pay funds to them in reduction of the overdraft and credit card.
d)As dealt with earlier in these reasons, it is now known that although the husband did receive a cheque for US$27,322 in July 2008, he did not deposit the cheque until some time later into, and against, his CBA Mastercard Account in September 2008 (converted to A$33,392.81).
e)The wife having commenced proceedings in this Court on 15 July 2008 (the catalyst appearing to be the reduction in monthly payments to the wife), by the time the Application came before the Court for a substantive interim hearing on 23 September 2008, the wife was aware of the receipt by the husband of the distribution of US$27,322 and of an impending substantial distribution. An interim order was made by consent which required the husband to pay the wife $4,500 per month as well as school fees, day care and medical insurance costs and he was able to draw down on the NAB Investment Loan for mortgage payments on the Property N home.
f)The husband received on or about 19 September 2008 a distribution totalling $239,713. This is the payment the subject of expert evidence by Mr E. The husband at paragraphs 73 and 74 of his Affidavit deposes as to the use of those funds. Apart from creating a 90 day term deposit styled “distribution tax provision account” with the CBA for $127,400, the balance of the funds were used to reduce borrowings. To the extent that some of the funds were paid to the husband’s solicitors ($25,000) they have been included in the funds to be “added back” for legal expenses.
g)By final submissions three withdrawals from that distribution are sought by the wife to be added back as a premature disposition being:-
$10,000
Paid to Mr R
$6,000
Paid to Ms R
$7,058
Paid to husband’s NAB Mastercard
h)On 31 October 2008 the husband’s employment with [T] was terminated (on two days notice), and at paragraphs 6 and 7 of his Affidavit filed 6 February 2009, the husband sets out how the net payment of $124,396.50 has been spent (as received to date). The net payment estimated was inclusive of accrued annual leave. The husband says that since 31 October 2008 he has received $89,840.89 in income (including three payments towards the redundancy entitlement and, I infer included in the payment for November 2008, a payment for his accrued leave).
i)
At paragraph 8 of the husband’s second Affidavit he sets out payments made totalling $84,159.59 since 31 October 2008 including legal fees (some of which it is agreed ought to be added back) and payments under the order made 23 September 2008. That order, it should be noted, was extended by order made
21 January 2009 when the trial had to be reset due to an expert report not being available (see order made 12 December 2008 after the unsuccessful private mediation).
j)Although not strictly within the category of payments due or received from [T], the husband acknowledged that he also received in October 2008 a tax refund of $66,194 arising from the three previous tax years. At paragraph 127 (first Affidavit) and paragraph 12 (second Affidavit), the husband deposes how the tax refund was spent. Apart from loan repayments, most noticeably he paid $17,000 to Macquarie Lending to payout the lease on his motor vehicle. He also made a contribution to the single expert fees of Mr E. Although as previously discussed, the wife raised concerns about the husband’s decision to elect to pay out his car lease, the husband gave an explanation for that decision. The car, by agreement is included in the pool of assets. As a result, the wife is not disadvantaged by the payment (from a net pool perspective), and by final submissions the wife’s Counsel did not contend for any “add back’ from the tax refund received.
It has become somewhat fashionable in property cases to try and contend that many payments received or made after separation should be notionally “added back”. However as the Full Court continues to observe the principles enunciated in decisions such as NHC & RCH (2004) FLC 93-204 and AJO & GRO (2005) FLC 93-218 the categories for add backs, although not a fixed code, have generally fallen within three clear cases. This as much reflects the principle that when parties separate they are not expected to freeze day to day living and consequential expenditure in a form of “animated suspension”.
Equally, and this seems to lie at the centre of many of the wife’s arguments in this case, a partner to a marriage who does not have access to the source of income post separation often feels disadvantaged by no longer enjoying the fruits of the other party’s labour – often when that employment may have arisen from the loyal support of the partner. This sense of unfairness arose in the remarks of Nicholson CJ in Townsend (1995) FLC 92-569 at 81,654 when he said it was “unjust in the extreme” to allow a husband to distribute to himself an “asset” to which the wife had a legitimate interest.
Considering the arguments advanced by the parties, I find that:-
a)The redundancy payment received post separation and the accrued leave entitlements were not an asset to which the wife had, in my view, a legitimate interest. The husband would perhaps have been entitled to rely upon those payments and take his leave. He in fact sought and obtained immediate employment – although not of a permanent tenure. I find he did so at least because he had a responsibility to continue to support his family and himself. Whilst it is true that the husband had access to significant (compared to the wife) funds from [T]; his tax refund; and his salary from [P] he also generally met the mortgage payments and orders for payment to the wife for her benefit and the children.
b)I accept that the husband made some choices to have holidays, buy a motorbike, and pay out a car of which the wife was critical. However the balance sheet is not disadvantaged by these payments as the motorbike and car (at full value) are included. In short, on the whole of the evidence, I am neither satisfied that the husband has wasted the income or had not generally used same, as income for the expenses of the family and himself.
c)
Having said that, the husband’s access to funds was certainly superior to those available to the wife after separation and certainly since April 2008. In the absence of evidence from the husband’s family members Ms R (sister) and Mr R (father) about the need for him to borrow from them, I do not accept that he was entitled to pay them back from the [T] distribution received in September 2008. In circumstances where the husband says the sum of $33,392.81 was used to pay expenses incurred on his Mastercard, I am not prepared to accept the additional funds paid of $7,058.07 were a joint expense. I rely upon the Mastercard statement for CBA account [4] (pages 95-96 of the wife’s Annexure to her trial Affidavit) and “Exhibit 6”, which shows that he account which the wife had access to until April 2008 and thereafter was used by the husband for living expenses. With the funds credited to that account it seems the credit card at
10 September still had a liability of $4,476.11. It seems likely that the payment was used for the joint expenses accumulated and not paid, so that the expenses on the other credit card (NAB Mastercard [9]), are less likely to be a joint liability. Accordingly, I propose to “add back” the sum of $23,058.07 paid from the [T] distribution.
I do not add back, for the reasons given, the redundancy payments or the earlier [T] distribution of $33,392.81.
Liabilities
The Court reserved an “aid memoire” constituting the balance sheet agreements apparently reached as to a number of items. However when preparing these reasons I was uncertain whether it was agreed that the Court should incorporate in the liabilities:-
a)$36,625 for the husband’s CBA Mastercard – although I understand the husband’s evidence that $30,000 was raised on the credit card towards legal expenses has been included in the husband’s legal fees of $152,716 “added back”.
b)Whether the post separation debts of $9,039 (wife’s NAB Visa); $163,013 (Quantum Litigation Funding) and $3000 (wife’s brother) were in fact conceded by the husband. I accept that if not accepted, they are claimed post separation liabilities of the wife which may be considered within the matrix of the s.75(2) factors. In the notional pool I have found below, I have incorporated both of the parties’ current credit card balances – which are similar.
c)The evidence is unclear about why legal fees for the wife should be added back (presumably in reliance upon decisions such as Farnell (1996) FLC 92-681 and DJM & JLM (1998) FLC 92-816) where the wife did not use joint funds or assets at her disposal to pay legal expenses, but apparently borrowed the funds from a litigation lender. If I am right on the evidence, and I shall give the parties an opportunity to make further submissions, then at the very least the legal costs of the wife should not be added back. The debt should not be included as a liability in the pool just because it exists at the hearing, although save for the apparent disparity of $31,368.05, the effect of adding and subtracting for the wife’ legal fees are balance sheet neutral. If in fact the wife has actually paid $31,368.05 of legal fees over the funds borrowed it is unclear what the sources of those payments are.
d)Because of the uncertainty in this regard (and considering the extent of the liabilities for legal expenses when the net pool is established), I do propose to give both parties an opportunity to be further heard on this issue – but for the purposes of these reasons shall assume the concessions apparently made at the hearing are correct.
For completeness I do not intend to include in the pool, the claim by the wife for “legal fees incurred but not yet billed”; the accountancy fees incurred by the wife with Staill/Miller (which seem to relate to her own legal expenses) or the counselling fees incurred with Van Beekum Consulting.
With the reservations already noted, I find the notional pool of assets, liabilities and other interests to be as follows:-
Property N
$1,700,000
Motor Vehicles
- Kluger (wife)
- Subaru (husband)
- Honda motorcycle (husband)
$26,650
$34,200
$6,700
Bank Accounts
- NAB joint DR
- NAB wife
- NAB husband
- CBA term deposit
- CBA husband
$-734
$849
$377
$113,733
$7,367
Furniture
- wife
- husband
$12,500
$2,500
Jewellery wife
$4,500
Shares
- [W] (husband)
- [G] Pty Ltd
- [D]
$3,009
$710
Nil
Add Backs
- Legal fees husband
- Legal fees wife
- Funds from [T] payment of $239,713 (husband)
$152,716
$194,381
$23,058
Gross Assets
$2,282,516
Liabilities
Mortgage to Homeside Lending
- home loan (fixed)
- home loan (floating)
- Investment loan
$553,576$239,499
$156,034
CGT liability
$32,325
Credit cards
- husband
- wife
$36,640
$9,039
Quantum Litigation Funding (wife)
$163,013$1,190,126
Net Assets
$1,092,390
Superannuation Interests
Husband
- Colonial First State
- AMP
- MLC
$64,795
$293
$14,067
Wife – NGS
$25,291
Total Superannuation
$104,446
Total Combined Net Pool
$1,196,836
Both Counsel agreed that because of the relatively small value of superannuation interests, the pool should be considered as one combined pool, notwithstanding the preferred approach following the decision in C & C (2005) FCAFC 429.
Contributions
The factual history of this relationship from the time of cohabitation in March 1996 until the date of separation in July 2007 and through to trial is not really controversial. To a large extent, the parties’ material and cross examination was directed more to the post separation events which have been dramatic, emotional and have caused a significant fall in the parties’ perceptions of their net worth – particularly arising from the husband’s employment with [T] and through that engagement the opportunity to share in the [T] Program which at one stage post separation, was said to have a value exceeding $4 million.
Not surprisingly, faced with such a dramatic fall in value in the units and trusts – perhaps to nothing – in such a short time the parties undertook extensive expert examination of those entities.
At the time of cohabitation/marriage both parties were in their mid twenties with few assets – although the husband claims savings in the region of $10,000 to $20,000 and a motor vehicle. The wife was employed [in the Education Industry] and the husband was employed in the [Financial Industry].
The wife has generally maintained some employment [in the Education Industry] at [M] interrupted by maternity leave and parental responsibilities arising from the birth of the couples’ three children [X] (born in 2000 – now nine years old); [Y] (born in 2002 – now 7 years old); and [Z] (born in 2006 – now two and a half years old).
The husband properly concedes in submissions that the wife was the primary carer and homemaker and although the husband assisted when available, this was the almost traditional division of roles undertaken and supported by each party.
Certainly the husband’s career continued to rise, with employment with [T] being the culmination of responsible positions with major corporations [omitted]. As earlier noted, the husband’s employment with [T] commenced in February 2005 and ended in October 2008.
The wife acknowledges the husband was the money manager and his positions in the property management and funds industry enabled access to benefits such as employee options. The wife, in a lower taxation bracket to the husband, was the beneficiary of assignments from the husband of some such options and with the benefit of a margin loan and, I infer, timely sales the husband says by October 2003, a gross profit (before tax) of nearly $200,000 had been achieved from [W] options. Furthermore the utilisation of a family company [D] Pty Ltd in January 2002 enabled investments in shares and managed funds to be undertaken.
The property transactions undertaken by the family are set out in detail in the husband’s Affidavit and were not challenged, chronologically including:-
·The purchase by the husband of the Unit at Property D in May 1996;
·Sale of Property D unit in August 2002 with a sizeable capital gain;
·Purchasing the former matrimonial home at Property N for $1.4 million in June 2005 after a period renting in Property B.
The husband also deposes to some commercial ventures with his brothers and sister in [L], the proceeds of which were retained and shared in part and then $130,000 of which was invested with another person in February 2005.
It is not necessary to provide details of each transaction as the evidence given by the husband is not seriously challenged by the wife. Although there was, not doubt, significant debt raising and some commercial risks undertaken, it must be said the husband and wife, through their joint efforts were generally successful.
The post separation period has been a little chaotic and uncertain, for the reasons already advanced, but in circumstances where the husband had the superior income and generally maintained living expenses for the two households and maintained mortgage payments whilst the wife, admittedly with the benefit of living in the home, devoted herself to the care and emotional needs of the children whilst also working – I would not regard the post separation period as disturbing the contribution based entitlements of the parties at separation.
By final submissions, Counsel for the wife contended that contributions should be assessed as equal. Counsel for the husband contended for a 5% adjustment to his client – on account of:-
a)The small disparity in initial contributions;
b)The forgiven loan provided by the husband’s father of $40,000 in May 1996 to assist the husband to purchase the Property D unit;
c)The sum of $15,000 provided to the husband by his father, to enable his three siblings and himself to place a deposit on the [L] property in August 1999. Each of his siblings similarly received the benefit of $15,000.
I do not regard the husband, in effect receiving the first 10% of the pool (or $120,000) as appropriate considering the other contributions made by the wife during the marriage, although I assess a small adjustment in the husband’s favour is fair – to the extent of 2.5%.
Section 75(2) Factors
By final submissions the husband conceded that an adjustment to the wife in the region of 10% is warranted whilst Mr Gould for the wife urged an adjustment of 20%.
The relevant factors were identified as:-
a)Both parties are about the same age (husband 37 years; wife 36 years) and enjoy good health.
b)The wife’s income and earning capacity is likely in the future to be limited to the opportunities offered to her [in the Education Industry]. She appears to have [been employed] almost all her career at the same [workplace]. Until the end of this year she says, because of extra hours, her gross wage will increase to $1172 per week plus superannuation – a gross wage component of $60,944 pa. This is a significant increase over the wage disclosed in her Financial Statement of $562 per week (approximately $29,000 pa). I accept the increase occurred after the swearing of the Affidavit. It must also be remembered that the wife, as primary carer (approximately 10 nights out of 14) of the three children has an impediment to extra hours; night work etc which does not impact on the husband in the same way.
c)The husband has, over a long period of time demonstrated he is able to secure a high income. To be fair to the husband, the income which he details in paragraph 16 of his Affidavit has at least since 2003 been achieved in a robust Australian economy. The income (and bonuses) earnt with [T] since 2005 have been much higher as the table demonstrates. Although the husband says he continues to seek positions through personal contact with people in the industry, to date his only success was to secure a temporary consultancy with the [P] at a gross rate of $1000 a day. That position was to cease in March 2009. At the time of hearing the husband, whilst expressing confidence he would secure some further work, did not have any secure position. He is it seems, highly qualified and experienced in the “property funds management” industry particularly with listed entities. I am prepared to accept the husband’s evidence that a position at his level is likely to be found by “word of mouth” rather than through the newspaper job advertisements or internet recruitment sites. Although there could be a period where secure employment might be more difficult to find, on the evidence of the husband’s industry experience and skills, and comforted by the confidence he shows I believe he will find employment or a consultancy. It is not likely, on the evidence, to reach the levels provided by [T]. However it is likely to be superior by, I would speculate two to three times the gross income achievable by the wife.
d)The husband was able to continue to explore career opportunities during the marriage because of the support the wife offered to him – in not only caring primarily for the children but also supporting his long hours and stressful business environment. Simply, one does not earn the levels of remuneration the husband did with [T] without a concentrated focus on work responsibilities.
e)I am satisfied the husband will meet his child support responsibilities, however assessed from time to time provided he has the income to do so.
f)Some attempt was made by the wife to persuade me that the circumstances of the husband’ relationship with Dr M (with whom he has been cohabitating for some four months) was a relevant factor, as it can be. However, despite some inferences that can be drawn that Dr M is a lady of some means, I am satisfied that the husband pays his own way and is not supported by Dr M. They have entered into a Domestic Agreement under NSW state law but do not own property together at this time.
g)The respective entitlements which the parties will ultimately retain from the proceeds of sale of the home will be modest and not significantly disparate although favouring the wife. The husband will retain slightly more superannuation but the levels of superannuation are not significant.
Clearly these factors compel an adjustment in the wife’s favour. The uncertainties about the husband’s full time income persuade me that the wife’s claim for a 20% adjustment is outside the range.
In my view, a 15% adjustment in the wife’s favour is appropriate considering the smaller pool – this computes to the wife receiving the first 30% or $350,000. This is a sizeable factor but the youngest child is only two and a half years old and at the age of 37, the global economic crisis is unlikely to exist for so long that the differential in income will not allow the husband to make up the adjustment. I also take into account that the husband, seized with his share of the property division, has a greater capacity because of his prior successful commercial ventures, to make his share grow whilst the wife is likely to be more conservative and seek primarily to reaccommodate herself.
Just & Equitable Order
It follows from the analysis undertaken, and subject to the reservations about the assessment of the divisible pool which I have already recorded in these reasons, that an order that divides the pool as to 62.5% to the wife and 37.5% to the husband may create an order that achieves justice and equity for both the parties.
The Court is required to assess the real effect of such an order.
If the wife, on the pool as found, was entitled to receive 62.5% of the pool, this would amount to a total of the combined pool of $748,022 which would be comprised as follows:-
Kluger Motor Vehicle
$26,650
NAB Account
$849
Furniture
$12,500
Jewellery
$4,500
Add back legal fees
$194,381
Superannuation
$25,291
$264,171
Less
Credit card
$9,039
Quantum Funding
$163,013
$172,052
$92,119
Share of net proceeds of sale of home
$655,903
$748,022
The net proceeds of sale, without allowing for sale costs (which are inevitable) or any increase in the indebtedness secured over the property (which can only occur if all interest costs and mortgage payments are maintained) would be:-
Gross sale proceeds say
$1,700,000
Less three mortgages
$949,109
Net
$750,891
Simply, after allowance for agents’ commission and marketing expenses (for the trial, whilst excluded, being estimated at $60,564) there would be hardly any proceeds of the sale of the home available to the husband.
On my estimates, the husband’s 37.5% share of the pool would amount to $448,814 made up as follows:-
Subaru motor vehicle
$34,200
Honda motorcycle
$6,700
NAB bank accounts (including joint account overdrawn
$-357CBA cheque account (1 and 2)
$7,367
CBA term deposit
$113,733
Furniture
$2,500
[W] shares
$3,009
Share in [G] Pty Ltd
$710
Superannuation (3 funds)
$79,155
Add back
- legal fees
- funds from [T]
$152,716
$23,058
$422,791
Less liabilities
- CGT tax liability
- Credit card
$32,325
$36,640
$68,965
$353,826
Share of net proceeds of sale of home
$94,988
$448,814
It is fair to observe that the “add back” of legal expenses does inflate the pool for both parties. For the husband the reality is that with the wife securing the majority of the net proceeds of sale – he will be left with a small cash sum after payment of debts – at best on these calculations (admittedly artificial without allowance for costs of sale) of around $146,000. In this respect the husband’s share of cash would be increased if the superannuation entitlements of the parties (total value $104,446) were split as to 62.5% to the wife and 37.5% to the husband which would be achieved by a super split in the wife’s favour of $39,987. The husband seeks a superannuation splitting order. In my view however, as a result of the likely long term disparity in incomes,
I accept the submission of Mr Gould that the wife needs to have access to as much cash as possible to be in a position to reaccommodate herself and the children. Her borrowing capacity is likely to be inferior to the husband’s and she has the substantial debt to Quantum Litigation Funding to meet.
In my view, an order which distributes the available pool in the manner above is just and equitable to both provided the order also includes the following additional provisions:-
a)To maintain the integrity of the division, the payments (are as required on the three homeside mortgages) ought to be paid from the redraw facility. In that regard the facility in total has a limit of $1,300,000 and only $949,109 has been used. Allowing the redraw facility to be used to pay the minimum payments required by the mortgage pending sale, also acts as an incentive to the parties to meet the current market as each will (although in different proportions) effectively be losing a part of the likely distribution the longer the home remains on the market.
b)Paragraph 9 and 10 of the husband’s minute of order relating to the units in [R] and the [T] Program should be included.
c)Paragraph 11 of the husband’s minute of order, relating to the capital gains tax assessment and payments – as well as the “claw back” proviso should be included, save that the wife’s share ought to be 62.5% not 55%.
d)The interim orders made pending the hearing and the injunctions ordered should be discharged by the final property orders.
In respect of the non operating [D] Pty Ltd, the parties should be encouraged to find the method of winding up that entity (probably being deregistration) that is most cost effective. The husband seeks two alternatives in his proposed order 3 – and either is acceptable to the Court. If the parties, when preparing the final form of orders, are unable to agree on which alternative to adopt I will hear further submissions and decide the issue.
Because of the concerns raised in these reasons about the add backs for legal expenses, coupled with the need for the parties to liaise as to the form of the final order (consistent with these reasons), I propose that the solicitors for the husband prepare a draft final order and submit same to the wife’s solicitors and any substantial drafting dispute I will determine before pronouncing a final order (after hearing any further submissions as invited by the Court), at 2:00 p.m. (Queensland time) on Tuesday 31 March 2009.
Child Support Departure Application
The wife as the primary carer of the three children [X], [Y] and [Z] sought an administrative assessment against and payable by the husband, as the father and liable parent. The application was made on 5 May 2008 and resulted in an assessment issuing on 17 June 2008 to
4 August 2009 requiring the husband to pay $24,969 pa ($2080.75 a month) by way of child support (see Exhibit 11).
It seems common ground that no application for administrative departure was instigated by the wife who relies upon s.116(1)(b) of the Child Support (Assessment) Act 1989. Whilst Mr Kearney for the husband did not oppose leave being given (such application having been made orally) and in circumstances where the Court was satisfied it was appropriate when dealing with the pending application for property settlement to consider whether a departure order should be made, leave was given.
There was no evidence that the Registrar had been served with a copy of the Application and could not, it seems, have been in a position to as a result to consider intervening as permitted by s.145 of the Act. Although this failure may have been fatal to the Court dealing with the application at this time, Mr Kearney did not press for such a ruling.
In any event, as I have decided that there are no special circumstances at this time in this case established by the wife and that I must dismiss the application, it is unnecessary to examine further this issue.
The process in respect of a departure application has been settled for many years by the decision in Gyselman (1992) 15 FLR 219 involving a three step examination, prefaced by the finding of special circumstances and then establishing that:-
a)A ground for departure under s.117(2) of the Act exists; and
b)It is just and equitable under s.117(4); and
c)Otherwise proper under s.117(5)
to make a particular order under Division 4, may make such an order.
The wife at paragraphs 115 to 120 of her trial Affidavit gives details of what is asserted to be high child care costs for [Z]; private school fees for the attendance at [M] College for [X] and [Y]; a range of extra curricular activities and therapy. The wife was not cross examined on these expenses. The commitment made by the wife in particular was made at a time when the husband’s income from employment with [T] exceeded $500,000 pa.
Similarly whilst it is clear that these parents had, I am sure, expected the children to “be cared for, educated or trained” in this manner such an expectation was shaped by the anticipated high income of the husband continuing. As I have already found that is not the case.
The assessment is based on the “2007 taxable income” of the husband being $500,000. Had there been a cross application by the husband for a departure on the grounds of his significant reduction of income post the termination of his employment on 31 October 2008, that may have demonstrated at least a special circumstance for that application.
To some degree the wife’s application is premature. The husband merely seeks an order that the application be dismissed. In circumstances where the wife has not established special circumstances I must dismiss the application. I will so order. Such a finding also extends to the application for child support in a form other than a periodic amount, which was designed to secure an order for the husband to pay school fees for the children.
Of course, considering the age of the children, it is likely that there may be an administrative departure as provided for by the Act sought when the husband’s income situation becomes more certain. She is of course not restricted by this order for dismissal from doing so. For completeness, I reject the application that I make some form of interim order. Simply, unless special circumstances are established as a threshold requirement under the Act, the Court’s discretion under the Act to consider making any order is not enlivened.
Spouse Maintenance
In many ways the wife’s good fortune in securing extra hours at her [workplace] at about the time of hearing significantly altered her income and, therefore, the capacity for her to demonstrate that she is unable to adequately support herself – being the threshold finding required under s.72 of the Family Law Act. The law is clear that the liability of the husband to maintain the wife (not the children which is otherwise considered within the context of child support principles and legislation) only arises for consideration, “if, and only if, that other party is unable to support herself or himself adequately”.
At the time the application was made in July 2008 little criticism of the wife seeking such an order could properly be made however in the circumstances where:-
a)The wife’s current income from employment (and disregarding as I must her entitlement to any income tested benefit) has increased from a gross weekly figure of $562 to approximately $1172 (to apply to the end of the year); and
b)The wife at Part N of her Financial Statement estimates her personal average weekly expenses at $661, and this included clearly discretionary expenses such as tennis ($60). The wife conceded she may be able to reduce her expenditure but she really had not given it “much thought”. I do not wish to be seen as overly critical of the wife for this answer as until April 2008 she had “unfettered” access to the husband’s substantial income and the interim order, to some degree, buffeted her from having to give these questions earnest consideration; and
c)At least initially, allowing for expenses she must meet for legal costs, the wife’s available cash entitlements under the property order will be superior to the husband and are a form of available investment. Furthermore, because of the Order I propose to make for the loan repayments to be redrawn from the facility secured over the home, the wife will not have any direct payments from her income for either rent or mortgage payments to make; and
d)Even in circumstances where the wife says her hope is to use the net cash entitlement as a deposit or a home in “the eastern suburbs relatively close to [omitted]” no evidence was offered to the Court as to either the likely costs of housing and level of borrowings for such accommodation. It may be that the wife will have to rent accommodation but the Court was not told what the costs of renting a family home would be; and
e)The wife herself concedes that she is uncertain of her position after December 2009 as “my earnings may reduce to my current earnings, if the [employee] who is going on maternity leave returns to work”. The Court is unable on this evidence alone to be satisfied that the wife’s earnings will, on the balance of probabilities, reduce back to previous levels.
When all these factors are considered I have come to the conclusion that the wife’s application must, at this time, fail as she cannot demonstrate that she is currently unable to adequately support herself.
The foundation for this decision would not seem to operate as an estoppel to a future action (within the permitted time limits) if the wife’s position changed. Of course it would still be necessary if the wife, at that time satisfied the threshold test, for a Court to consider the husband’s capacity to contribute. That is a matter possibly for another day it seems to me.
For the reasons given I will order the wife’s application for spouse maintenance, modified I note, to operate for a period of five years, shall be dismissed.
I certify that the preceding seventy-one (71) paragraphs are a true copy of the reasons for judgment of Baumann FM
Associate: L Parke
Date: 19 March 2009
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