Regan and Regan
[2017] FamCA 406
•9 June 2017
FAMILY COURT OF AUSTRALIA
| REGAN & REGAN | [2017] FamCA 406 |
| FAMILY LAW – PROPERTY - Value of property – valuation of a hurt on duty pension – characterisation as a “pension payable for life” – ramifications of splitting a hurt on duty pension – assessment of contributions |
| Family Law Act 1975 (Cth) ss 75(2)(a), (b), (f), 79(4)(a)-(g) and 90MT(2) Family Law (Superannuation) Regulations 2001 Family Law (Superannuation)(Methods and factors for valuing Particular Superannuation Interests) Approval 2003 |
| Aleksovski v Aleksovski (1996) FLC 92-705 Cerini & Cerini [1998] FamCA 143 at [46] Coghlan & Coghlan [2005] FamCA 429 [63]-[64] Jones v Dunkel (1959) 101 CLR 298 Kouper & Kouper (No 3) [2009] FamCA 1980 |
| APPLICANT: | Ms Regan |
| RESPONDENT: | Mr Regan |
| FILE NUMBER: | SYC | 5737 | of | 2014 |
| DATE DELIVERED: | 9 June 2017 |
| PLACE DELIVERED: | Canberra |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Gill J |
| HEARING DATE: | 14-15 July 2016 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Livingstone |
| SOLICITOR FOR THE APPLICANT: | Gibson Howlin Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Gould |
| SOLICITOR FOR THE RESPONDENT: | MCW Lawyers |
Orders
That within six (6) weeks of the making of these Orders, the husband is to transfer to the wife all of his right, title and interest in the property situate and known as B Street, Suburb C (folio identifier …) (the Suburb C property) and simultaneously with the transfer the wife will pay to the husband $260,965.
That simultaneously with the transfer in Order 1, the wife do all acts and things and execute all necessary documents, instruments and writings to cause the mortgage to the Australian & New Zealand Banking Group (ANZ) to be discharged in full and the husband to sign any documents reasonably required by the wife in this regard and the wife to pay and be responsible for all costs associated with obtaining the discharge of the mortgage from ANZ in the parties joint names.
That if the wife defaults on her obligation pursuant to Order 2 by more than four (4) weeks, then the husband and the wife do all acts and things and sign and execute all deeds, documents, instruments and writings that are necessary to list the Suburb C property for sale in the following manner:
(a)The husband and the wife shall do all things and sign all documents necessary to list the Suburb C property for sale by public auction with such Real Estate Agent (agent) as the wife agrees to appoint with the costs of and incidental to such appointment to be borne by the husband and the wife as and when they fall due;
(i)The reserve price for the purposes of such auction shall be as the agent nominates;
(ii)In the event the bidding at the auction does not reach the reserve price, the parties may negotiate with the highest bidders or any other interested person and effect a sale of the Suburb C property at a price which is not more than 5 per cent below the reserve price or any other price as agreed to by the parties;
(iii)If the Suburb C property continues to remain unsold, the parties shall do all acts and things and sign all documents necessary to immediately re-list the Suburb C property for sale by public auction at a reserve price 5 per cent less than the previous reserve price and continue to list the Suburb C property for sale by public auction with progressive further reductions of 5 per cent in the reserve price until a sale is affected;
(iv)That the wife shall co-operate in every way with the agent including (without limiting the generality of the forgoing):
A.Making the keys available to the agent;
B.Authorising inspection of the Suburb C property at all reasonable times requested by the agent;
C.Doing or saying nothing to hinder or prevent a sale being effected;
D.Ensuring the Suburb C property including the grounds are in a neat and clean condition at the time of the inspection by the agent and prospective purchasers; and
E.Together with the husband, signing all documents requested by the agent in relation to the listing for sale of the Suburb C property, except a contract or agreement for sale which has not been authorised by both parties.
(b)That upon completion of the sale of the Suburb C property (if required pursuant to these Orders), the proceeds of sale shall be disbursed as follows:
(i)To pay all costs, commissions and expenses of the sale;
(ii)The sum required to discharge the ANZ mortgage encumbering the Suburb C property;
(iii)The balance remaining to be divided and paid between the parties so as to effect a 72.5 per cent to the wife and 27.5 per cent to the husband split of the non-superannuation interests, the manner of such division to be as agreed between the parties or otherwise as follows:
A - $1,272,600 (non-superannuation pool including relevant debt)
— B - $1,225,000 (agreed value of home)
+C - Sale price
—D - Costs, commissions and expense of sale
—E -Sum required to discharge mortgage
= F- _ (new net non-superannuation pool)
__________ That is: A – B + C – D – E = F
Husband to receive:
27.5 per cent x F (new net non-superannuation pool)
—$34,000 (reckoned as held by husband including proceeds of the Minibus)
= Amount payable to the husband following sale
(iv)The balance of the proceeds of sale after payment to the husband of the above amount to be paid to the wife.
That within fourteen (14) days of the date of these Orders, the husband is to sign all documents necessary to effect a transfer of the one ordinary share held by him in J Pty Ltd (ACN …) to the wife.
Except as otherwise provided for in these Orders, the husband and wife are each entitled to be the sole and absolute owner both at law and in equity with respect to all items of property including bank accounts, cash money, shares, motor vehicles, insurances, equities, superannuation entitlements and personal effects currently in their possession or control of each of them respectively.
The husband and the wife are each solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.
The husband and the wife are liable for and indemnify the other against any liability in their respective sole names, including but not limited to credit card debt, taxation debt and personal loans.
That the wife and husband shall each do all such things as are necessary and sign all such documents as are necessary to give effect to these Orders.
That in the event that the husband or the wife refuses or neglects to execute any deed or instrument necessary to give effect to these Orders, that a Registrar or Deputy Registrar of the Family Court of Australia, Sydney, be appointed pursuant to s 106A of the Family Law Act 1975 to execute such deed or instrument in the name of the husband or wife and to do all acts and things necessary to give validity and operation to the said deed or instrument and such Registrar shall be satisfied upon affidavit evidence of the party alleging the refusal or neglect that a party is in beach of these Orders.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Regan & Regan has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
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 r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT CANBERRA |
FILE NUMBER: SYC 5737 of 2014
| Ms Regan |
Applicant
And
| Mr Regan |
Respondent
REASONS FOR JUDGMENT
Property
The parties were married in 2002, shortly after moving in together. They bought a house, later selling it and purchasing the house they currently own. They have 3 children, aged 14, 12 and 10. The parties separated in December 2013.
Through the relationship the parties substantially shared both income earning and non-income earning responsibilities within the family. Each worked full time for periods. Each stayed at home on a full time basis for periods. Each has also engaged in work that is not full time.
The wife currently works full time and the children live primarily with her.
In 2007 the husband became unfit to carry on his duties as a public servant due to Post Traumatic Stress Disorder. He now receives a pension.
The bulk of what the parties now have is made up of the house they own (valued at approximately $1 million) and the pension received by the husband (valued at approximately $1.4 million).
The wife seeks orders to the effect that she receive either 65 per cent of the value of the family house plus 40 per cent of the lump sum version of the husband’s superannuation when he turns 55, or in the alternative 65 per cent of the value of the family house, plus $150,000, plus a split of $150,000 of the husband’s superannuation. The husband seeks a 70-30 division of the property in his favour.
Key to the exercise of jurisdiction in relation to the property of the parties is that it must be just and equitable, both to adjust the property interests at all,[1] and to adjust them in a particular manner.[2]
[1] Stanford v Stanford (2012) 247 CLR 108 per French CJ, Hayne, Kiefel and Bell JJ at [35].
[2] Bevan v Bevan (2013) 49 FamLR 387 per Bryant CJ and Thackray J at [86].
Each of the parties asserts that it is just and equitable to make an adjustment, although they disagree as to the nature of the adjustment. For eleven years the parties lived together, pooling their personal and financial resources and together raising their children. It is in these circumstances that the parties have together accumulated property and superannuation. The ending of those circumstances means that it is just and equitable to make an alteration of their property interests.
The property of the parties
The necessary first step in a consideration of whether it is just and equitable to make an order adjusting existing property interests of the parties is to identify “according to ordinary common law and equitable principles the existing legal and equitable interests of the parties in the property.”[3]
[3] Stanford v Stanford (2012) 247 CLR at [37].
The joint balance sheet prepared by the parties identified both agreed and disputed items. The parties included in their balance sheet current assets, matters for which a party asserted there should be a notional adding back of the asset into the pool, debts of each of the parties and the superannuation interests of the parties. I have disregarded those items that are asserted to have no value and for which the evidence is insufficient to allow a conclusion otherwise.
After the hearing of the matter ended, Mr K, the Single Expert who gave evidence in relation to the superannuation aspect of the case, alerted the Court as to the decision Campbell[4] being handed down by the Federal Court and, potentially affecting the basis by which the husband’s pension should be valued. This caused the parties to prepare further material and submissions. There were significant delays waiting for a response from the trustees for the fund that administers the pension. Eventually final further submissions were taken on 19 May 2017. This revealed that the parties were in dispute as to the appropriate basis for valuation of the interest. The matter was again reserved for judgment.
[4] Campbell v Superannuation Complaints Tribunal [2016] FCA 808.
For those matters that were disputed as to value, and for which there was no cogent evidence to otherwise establish a value (ie jewellery, bicycles and items removed from the Suburb C property) I have taken the lower of the values asserted by the parties on the basis that, in the absence of expert opinion the lower value represents an admission by the party that holds the item. In any event, the amounts involved have no appreciable impact upon a determination of what is just and equitable in this case.
Accordingly, the matters contended for by either of the parties as to the pool, subject to the above qualifications, are listed below:
Current assets
B Street Suburb C $1,225,000 (H&W)
Home contents Suburb C $10,000 (W)
Bank accounts Wife $200 (W)
Motor vehicle 1 Wife $800 (W)
Jewellery $2,000 (W)
Contents removed from home $500 (H)
Home contents $1,500 (H)
Husband’s bank accounts $4,000 (H)
Motor vehicle 2 Husband $500 (H)
Bikes $1,500 (H)
Joint accounts $600 (H & W)
Total of current assets $1,244,500
Asserted add backs
Minibus $26,000 (H)
Legal costs of Husband $32,000(H)
Total of asserted add backs $58,000
Debts of the parties
Mortgage $190,000
Credit card Wife $10,000 (W)
Loans legal fees Wife $60,000(W)*
Loan to Wife $6,000(W)*
Credit Union loan to Husband for legal fees $22,000(H)
Total of debts of the parties $266,000
Superannuation of the parties
Superannuation Husband $1,424,000 (H)**
Superannuation Husband $4,000 (H)
Superannuation Wife $129,000 (W)
Superannuation $1,557,000* The wife does not seek that this amount be taken into account in any manner in the proceedings.
** This item became the subject of dispute following the handing down of Campbell.
Add backs
In dealing with the questions of add backs, it should be noted that adding items back into the pool is the exception rather than the rule. This is because
parties are entitled to reasonably conduct their affairs post separation in a manner that is consistent with properly getting on with their lives.[5]
[5]Cerini & Cerini [1998] FamCA 143 at [46]
It is important to consider the principles regarding whether an add back should be made.[6] Those principles were distilled into five questions by Murphy J in Kouper & Kouper (No 3) [2009] FamCA 1980 at [108]:
(a)Is it contended that property (including money), that would otherwise be available for distribution between the parties if a s 79 order is made, has been dissipated with a consequential loss to the property otherwise potentially divisible between the parties at the date of trial?;
(b)If so, is it alleged that the dissipation of property was in respect of things other than what, in the particular circumstances of this particular marriage, can be classified as “reasonable living expenses”?;
(c)If it is asserted that any loss to the divisible property results from dissipation of property other than in respect of such expenses, why is it asserted that the result should be a sharing of that loss by the parties other than equally?
(d)If it is contended that this be the result, why should there be an add back (which brings to account, dollar for dollar, such past expenditure in current dollars) as distinct, for example, from there being an adjustment being made pursuant to s 75(2)(o)?; and
(e)How should either any “add back”, or adjustment pursuant to s 75(2)(o), be quantified?
[6]Shinya & Taylor [2011] FamCA 271 per Bryant CJ at [71]
Specifically, three clear categories where an add back is supported were identified in Omacini & Omacini (2005) FLC 93-218:
a) Where money has been expended on legal fees;
b)Where there has been a premature distribution of matrimonial assets;
c)Waste in the manner specified in Kowaliw & Kowaliw (1981) FLC 91-092.
In this case the wife contends that the husband’s expenditure on legal fees and his disposal of the family automobile (Minibus) ought to be dealt with as add backs. The husband for his part conceded that the wife is entitled to half of the proceeds of the Minibus. There is little practical difference between either causing the husband to pay to the wife half of the proceeds and reckoning the amount as added back in.
It is appropriate that each party’s expenditure on legal fees should fall upon that party and not the other. The extent to which legal fees constitute a drawing against matrimonial resources ought to therefore be catered for. For the husband, his evidence was that he paid $31,000 in legal fees by February 2016. This was paid through a credit union loan of $22,000 with the balance coming from other funds he had, including from the sale of the Minibus. It is important that there not be a double counting in relation to the fees. This is achieved by disregarding the loan in relation to legal fees and adding back in the money derived from the Minibus. For the wife, the debt of $60,000 for legal fees will also be disregarded. Accordingly, debts and expenditure related to legal fees will not be deducted from the pool.
Further for the wife, the loan of $6,000 was not a matter that she sought to have taken into account in relation to the pool. Accordingly it will not be deducted from the pool.
This disregarding of particular debts, and notional adding back in relation to the Minibus ultimately allows for a consideration of what is just and equitable. It is a notional exercise only.
Given the values set out above, with a notional adding back of the Minibus and a disregarding of the debts related to legal fees, the pool can be characterised as follows:
a)Current property held by the Wife $13,000
b)Current property held by the Husband $34,000[7]
c)Current property jointly held $1,225,600
d)Current property total $1,272,600
e)Superannuation held by the Wife $129,000
f)Superannuation held by the Husband $1,428,000
g)Superannuation total $1,557,000
h)Relevant debts held by the Wife $10,000
i)Relevant debts held by the Husband Nil
j)Relevant debts jointly held $190,000
[7] Includes add back re the Minibus
k)Relevant debts total $200,000
The wife identified in her oral evidence that she holds a tax loss of approximately $107,000. This requires a capital gain against which it can be offset to be of use. At present the wife anticipates no capital gain against which it can be used. There was no evidence suggestive of a pending or likely capital gain. The evidence is not sufficient to allow me to regard this financial resource as having significance in assessing the wife’s position with respect to s 75(2)(a).
Contributions s 79(4)(a), (b) and (c)
Initial contributions
The parties commenced living together in October 2001. The parties previously lived together in 1995 and 1996, however neither sought to attribute any significance to that period of cohabitation. At about the time of cohabitation commencing, or slightly thereafter, the husband had $6,000 cash and a life insurance policy that matured to the value of $29,900. Exhibit W1 shows that in October and November 2002 the wife received approximately $118,000 which was explained to be a redundancy.
At about the time that cohabitation commenced, the parties bought a home together in Suburb L. This was purchased on 20 December 2001 for a sum of $400,000 from the husband’s grandmother. The husband claimed that a contribution ought to be attributed to him by reason of what he asserted was a discounted purchase price for the property. No direct evidence was brought to bear on an intention on the part of the grandmother to sell the property at a discounted value. There was no recounting of any conversations to the effect that it was sold at a discounted level. At its height the contention was supported by evidence called from a valuer, Mr M. By virtue of Mr M’s evidence it was said that the property at the time of this purchase had been worth $475,000 - $500,000 and therefore there had been a discount applied of $75,000 to $100,000. The home was later sold in 2004 for $690,000 (a price negotiated between the wife and a neighbour who was a developer).
Due to a number of significant deficiencies, I do not accept the opinion expressed in the expert report of Mr M. In the report annexed to his affidavit signed 1 July 2016 on page 17, he notes that retrospective valuations of real estate are highly subjective, and reliant upon “data researched in the analysis of sales of the relevant period”. He then provides a number of properties for analysis. The analyses he provides, however, do not contain enough information for me to accept that a proper comparison has taken place. Each property listed on pages 18 and 19 contains a brief one sentence description that does not seem to take into account the size and features of the property in question. For example, four of the five properties used in comparison have garages, whereas the property in question does not, and all five of the properties have more bedrooms. The lack of explanation, methodology or reasoning in valuing these features and their contribution to the overall value of each property makes it extremely difficult to accept this expert report. At no stage does Mr M clearly explain his method of selection and comparison, nor where and how he attributes value in order to arrive at his final retrospective evaluation.
It was put for the husband that I ought to draw an inference pursuant to the so called rule in Jones v Dunkel[8] against the wife in relation to the valuation evidence from Mr Brook. This rule “concerns the inferences that can be drawn from a party’s unexplained failure to call a witness who might be expected to have been called.”[9] In R v Lao (2002) 137 ACrimR 20 Buchanan JA summarised the rule as follows:
When a party appears to be able to prove the true facts and fails to do so, in the absence of explanation, an inference which is open on the facts that is favourable to the other party may be more readily drawn.
[8]Jones v Dunkel (1959) 101 CLR 298.
[9] Ross on Crime 5th Edition [10.700]
The husband sought such an inference on the basis that the wife called no valuer in opposition to Mr M. While it is true that in the absence of conflicting evidence I might more readily rely on the evidence of the Mr M, I do not otherwise draw an inference favourable to the husband in relation to the valuation. The seeking of the drawing of an inference pursuant to Jones v Dunkel here appears misplaced. Who was the witness the wife failed to call? In what way was the wife “able to prove the true facts”? In what way did she fail to do so? The height of the argument put by the husband is that the wife could have engaged another expert in relation to the historical valuation. This is insufficient to lead me to more readily draw an inference favourable to the Husband in relation to the historical valuation.
It was also put by the husband that I would be required to find that the discount was made to the sale price unless I was able to be satisfied that it was more probable then not that the report prepared by Mr M was not carried out in a professional manner. This is not correct.
The assertion of contribution by the husband requires proof on the balance of probabilities. There is no presumptive starting point that requires the evidence of an expert be accepted. The question that arises in respect of the expert is whether his evidence by itself, or in combination with other evidence, persuades me on the balance of probabilities that the discount was applied and thereby became an additional contribution on the part of the husband.
Given the absence of other evidence and given my assessment of the evidence of Mr M I am not persuaded that a discount was provided.
This finding accordingly means that the initial contributions of the husband and wife in relation to the non-superannuation of the parties favour the wife by approximately $80,000.
Ongoing contributions during the relationship
During the relationship there was a significant sharing of the various types of contribution. Each of the parties, at various times, functioned as the primary income producer and each at other times functioned to provide the primary support of the family within the home. At various times each worked less than full time outside the home. Each had accepted that the other had made good contributions to the welfare of the household.
In 2007 the wife received, in relation to her employment, approximately $107,000 of shares from her employer. These are now worthless. However, as a result of the shares, the wife received and applied distributions of income as set out at Annexure H of her affidavit. From 2007-2009 this constituted $176,000.
Prior to the final separation, while still the subject of the pension, the husband worked on a fly-in fly-out basis. This provided additional income for the family although of course, it also meant that for the periods he was away a heavier load fell upon the wife within the household. For this period of time the income from the husband was increased, the payments from this work coming on top of the pension (although at about this time there was a decrease in the pension). This came at a heavy price for the husband as the return to work was unhealthy for him in the context of the illness which sees him receiving the pension.
The written submissions for the wife assert that “up to the point of separation the contributions of the parties are equal”. It was put that the wife’s post separation contribution ought be assessed as requiring a 5 per cent adjustment in her favour. For the husband it was asserted that “his contributions overall should be assessed at 60 per cent based on his extensive contributions during the period of the relationship and additionally the introduction of the benefit of the windfall received by the parties in relation to the husband’s grandmother’s home”.
In assessing the contributions made during the relationship, the period that the husband has been receiving the pension is of particular significance. He commenced to receive the pension in April 2007. For periods of time while still receiving effectively a full time income, he was the person who provided the primary care for the children. This is not to diminish the role of the wife who had a strong involvement in the home around her working hours. Further, the wife reduced her working hours to part-time so that she could have a greater involvement within the home. However, what it means in terms of contribution, is that for a period of time the husband was providing a full income through his pension while also providing the primary care of the children.
Considering the various contributions made up until the end of the relationship, in particular the higher initial financial contribution from the wife and the dual pension-work and pension-home based contributions by the husband, it is reasonable to assess the various contributions in relation to the non-superannuation property of the parties up until separation as equal.
Post separation contributions
Contributions by the parties post separation can be divided into two parts. The first is the period from separation in December 2013, where the parties remained in the same house, until the husband moved into rental accommodation in June 2015. Although the wife has had the occupation of the home, she has paid all of the mortgage repayments since June 2015.
There is little clarity regarding this period, although I accept the evidence of the wife that the husband’s role with the children was diminished during this time. Since the husband has moved out of the home his involvement with the children (except for his daughter) has broken down. The husband has paid child support. The wife has otherwise financially supported the children. It can fairly be inferred that the contribution made by the wife during this period exceeds the husband’s because of her primary care role for the children.
I assess this period as resulting in an overall difference in contributions, in relation to the non-superannuation property as 5 per cent, meaning an assessment that to this point the husband has contributed 47.5 per cent, the wife 52.5 per cent.
Superannuation contributions
The preferred approach to a property case is the separate identification of property and superannuation interests, and a corresponding assessment of the contributions to each.[10] It is necessary to give specific consideration to the contributions made by each to the superannuation interest.
[10] Coghlan & Coghlan [2005] FamCA 429 [63]-[64] per Bryant CJ, Finn and Coleman JJ
Firstly it must be accepted that the contributions identified above in relation to the non-superannuation property have also constituted contributions to the superannuation interests of the parties. Their significance in respect of the superannuation will be assessed below.
Secondly, the husband commenced his contribution to his superannuation when he joined the public service in 1987. The parties’ relationship did not commence until 2002. It could not be argued that the wife made a contribution to this fund for the first half of the fund’s existence.
However, the current value of the fund is not related to contributions made by the husband. He became unfit for work in 2007 and was assessed as entitled to the pension under the relevant legislation. At that point the husband’s contributions to the superannuation fund became irrelevant (save for circumstances that I will outline immediately below). That is, whatever superannuation accumulated was subsumed into the husband’s pension.
The circumstances under which the contributed amounts could be relevant are, firstly, if the husband should cease to receive the pension, any remainder from his pre pension superannuation, that is, after the pension payments have been taken from it, is retained in superannuation for the husband. Should he die, this same remainder would become a death benefit. Mr K, who valued the interest and who gave evidence as to the effects of various orders upon the pension, indicated that once the deduction is made it is unlikely that there would be any lump sum left.
Rather than taking its value from the contributions made, the pension derives its value from the husband’s salary at the time he became incapacitated for work in 2007. That is, the pension correlates to his income at the time of the incapacity rather than to any superannuation contribution that he has made. The pension is calculated at 72.75 per cent of that salary (adjusted by CPI).
At the time of his incapacity the husband had been with the public service for about 20 years. As was said in Linch & Linch [2014] FamCAFC 69 the salary of the husband has a significant connection to the time that he had been with the employer. During that time the husband progressed his career. This progression is through the husband’s direct efforts. However, acknowledgment ought to be given to the context of the husband being able to do this, that is for the last five years of his work, in the context of the marriage and their joint efforts in raising children. There is an element of indirect contribution to this position by the wife. There is, however, little clarity in respect of the impact of this contribution upon the husband’s final income. It ought to be recognised that whatever this contribution might have been, it was only present for a short period of the husband’s career with the public service and has not been established to be significant in relation to the size of the husband’s income at the time of incapacity.
For the wife it was submitted that the pension was in part to acknowledge what the wife had to deal with in consequence of the husband’s incapacity. No evidence was led to substantiate this claim.
Where the pension is derived from the husband’s status at the time of his incapacity, and from the fact of his incapacity, it is only in a very limited sense that the wife can be said to have contributed to the pension. Given that it is derived from the injury of the husband, there is some analogy with a damages claim in a personal injuries case. The majority in Aleksovski[11] said of such:
In our opinion, in most cases, a damages verdict arising from a personal injury claim, whenever received, is a contribution by the party who suffered the injury. It should not be considered in isolation, for the reason that each and every contribution, which each of the parties makes to the relationship, must be weighed and considered at the same time.
[11]Aleksovski v Aleksovski (1996) FLC 92-705
Accepting that contributions do not require direct causal links with particular items of property in order to be contributions, and accepting that in this instance, the pension is not readily amenable to assessment in terms of contributions by virtue of the fact that it is in large part referable to the status of the husband as injured, rather than to the accumulation of an item of property through contributions made by the parties, I assess the wife’s contribution to the pension as 5 per cent.
Thirdly, the wife’s superannuation interests were agreed to be approximately $129,000. The evidence did not show when the wife started to accumulate this interest, that is, whether it was before or after the commencement of the relationship. Given that the wife was in employment for a significant part of the relationship it can be assumed that she continued to contribute to this superannuation interest through most of the relationship and after separation. For the unidentified, but presumably significant portion that was accumulated during the relationship, the direct contributions came from the wife, with indirect contributions from the husband as described previously. Those contributions, as I have previously assessed, are the equivalent of the wife’s during the relationship.
Since the end of the relationship the husband cannot be seen to have contributed to this interest.
I assess the parties’ contributions to the wife’s superannuation interest as marginally favouring the wife. No orders are sought to split this fund.
Fourthly, since leaving the public service the husband has accumulated a small amount in superannuation presumably while working at his recent job. It was a small amount, obtained over a short period. The parties contributed in a roughly equal fashion. No orders are sought to split this fund.
The husband’s hurt on duty pension/superannuation and future income earning capacity
The nature of the pension scheme is such that even if the husband becomes fit for some form of work, the pension will continue for so long as he remains unfit for work as a public servant. There is no indication that, and it was not suggested that he will ever be fit to return to work as a public servant. Under these circumstances this is an income stream that remains in place until the husband’s death, unless either he converts it to a lump sum on retirement, or this Court makes an order in relation to it.
Should the husband find work of a different character such work will supplement the pension payments rather than displace them.
In issue at the trial was the question of whether the husband would be able to undertake further employment in the future.
The husband did not consider that he has the capacity to work in a position where he is answerable and is to be relied upon day in and out. He was challenged as to his capacity.
The husband gave evidence that he had tried to obtain work in an allied field. The attempt was unsuccessful. After what the husband called a robust conversation with a prospective employer he was not called back.
The husband has been able to undertake overseas travel. This, it was said for the wife, would indicate sufficient organisation and ability to deal with stress as to indicate capacity for work. His evidence (supported by his treating psychiatrist) was that it was very different travelling for a holiday as opposed to working.
The husband, during the relationship and while on the pension, undertook supplementary work. He reported that due to this his PTSD symptoms worsened, although he did not recognise this at the time. He was challenged in relation to this on the basis that he delayed 7 months after his return from finishing this employment before seeing his psychiatrist. He explained that during the interim he saw a counsellor. This work, together with a delay in seeking assistance after such was suggested support a finding that the husband has a capacity for work and hence to earn further income.
The husband has been attending upon a psychiatrist, Dr G, for a number of years. Over the previous two years he saw the husband on as many as fifteen occasions. Dr G gave evidence and was cross examined. He expressed that he thought that the husband is highly unlikely to maintain a job in the open labour market, that is, he lacks the ability to relate in a stable manner 8 hours per day. He may, in due course, be able to work on a part time or casual basis.
A challenge was directed to the husband’s treating psychiatrist’s opinions as to the ability of the husband to work. The challenges came in a number of forms.
It was pointed out that Dr G had been unsuccessful in returning the husband to the workplace. This was said to undermine his credibility as an expert. The use of such a factor involves significant circularity of reasoning. This is only a factor if there was the capacity for the husband to return to work that has not been realised. That is, I would need to be in a position to conclude that the husband had the capacity before I could find a deficit in Dr G that might indicate that the husband has the capacity.
Dr G was further criticised because he has not administered psychological testing. Dr G indicated that it was not a part of his role to administer psychological testing. He is a psychiatrist not a psychologist.
Dr G was also criticised on the basis that he was lacking in objectivity regarding the husband. As the treating psychiatrist he has prepared a number of forensic reports for the husband. This also means that Dr G has had substantial and long term involvement with the husband upon which to base his opinion.
Dr G was further criticised as he uncritically accepted the negative statements made by the husband regarding the wife and did not question the wife regarding assertions about her made by the husband. However, at no point was there a necessity or importance identified to indicate that he should have done so.
Further, other cases in which Dr G has been the subject of criticism were pointed to. As I understood the use to which they were put, it was to suggest that Dr G was deficient in his approach because he had not taken on board previous criticism. Without being in a position to assess such criticism, I am unable to draw such a conclusion.
Material was identified in relation to a contest in other litigation concerning the pension regarding the husband’s capacity to work. Exhibit W3 comprised a series of reports from a Professor N (psychologist) and a Dr O (psychologist). I was directed to a number of tagged passages within the various reports. Although they expressed views in conflict with Dr G, they were of little assistance in resolving the issue of the husband’s capacity to work. These extracts from reports, apparently prepared for other litigation, absent any calling of the witnesses and absent the support of affidavits from the authors, are not evidence that I am prepared to give any significant weight to.
It was pointed out that the husband produced further psychiatric material at the commencement of the proceedings. It was suggested for the wife that the husband ought to have obtained further evidence as to his mental state for the proceedings and that his failure to do so meant that I ought draw a Jones v Dunkel inference in relation to evidence of assessment of the husband. Given that the husband’s treating psychiatrist gave evidence and was cross examined, it is unclear who the witness is that the husband failed to call who would found such an inference, and how the inference might be directed.
The end point of these challenges is the submission on behalf of the wife that the husband has some further capacity for work. There is an acceptance by Dr G that he may have further capacity for work, in the future. I accept that there is some capacity for work, although the nature and degree of such work, and its level of remuneration, is highly uncertain. Far more certain is the fact that the husband will struggle in the workforce and struggle to retain work.
Since becoming incapacitated he has undertaken work for a limited period in circumstances that seem to have done him no good. He has had little involvement in the work force since becoming incapacitated almost 10 years ago.
The husband’s capacity to earn income over and above the pension is limited and uncertain in extent.
However, even with uncertainty as to additional work, the husband has certainty of income through the balance of what would be his working life and his retirement by virtue of the pension. While the wife has stable long term employment, she does not have the same certainty of income through her retirement.
The effect of splitting the Pension
At trial, prior to the handing down of Campbell, the value of the interest was agreed to be approximately $1,424,000. Following the handing down of Campbell this became the subject of dispute. The issue was as to the value to be assigned to the interest.
In order to determine these issues the case was reopened and further submissions were received. On 19 May 2017 submissions were taken and three further items were exhibited, being a supplementary report by Mr K (Ex H3), and correspondence from Pillar administration (the trustee) on 11 November 2016 regarding the characterisation of the interest (Ex W7), on 18 April 2017 setting out contributions to the scheme, interest and management fees (Ex C1).
Section 90MT(2) provides that before any splitting order may be made, the interest must be valued in accordance with the method set out in the Regulations as applicable to that interest. If there is no such method, then valuation is to be in the manner that the Court considers appropriate. As a necessary first step this requires the Court to identify whether there is an applicable method set out in the Regulations.
The regulations provide different schemes for valuations depending upon a number of factors. The first issue to be determined is whether the interests is in the growth phase or payment phase.
If it is in the growth phase then Division 5.1 applies, and valuation is reliant upon how the interest is characterised as a defined benefit and/or accumulation interest. Campbell would have been relevant to this point as it would have caused the interest to be characterised as an accumulation interest, whereas previously it was thought to be a defined benefit interest.
If, however, the interest is in the payment phase then Division 5.2 applies specific methods to specific cases. Where Division 5.2 does not specify a method, the court must then, in accordance with s 90MT(2), determine the method to be applied to the valuation.
This means that the first step is to determine whether the interest is in the growth or payment phase as defined by Regs 6, 7 and 8. In this case the interest is in the payment phase[12] which means that Division 5.2 must be considered in order to determine whether it specifies a method in relation to this interest.
[12] Mr K affidavit 21.6.16 at [6]
Here the benefit is paid as a pension and is in the payment phase. This means that Reg 42 must be considered. Reg 42 sets out valuation methods where the benefit is characterised as a “pension payable for the life of the member spouse.” The question identified by the parties is whether the benefit falls within this description. If it does not, then there is no specified method of valuation in the regulations.
Is the pension a “pension payable for life”?
Whether the benefit can be described as such is a question of fact.
There is no statutory definition for the phrase “pension payable for life.”
Reg 42(2) requires that it is the character of the benefit at the “relevant time” which is determinative of whether it falls within the provision. The “relevant time” is the time of the determination of the value, here being the time of delivery of judgment on the issue. That is, the character of the benefit at the present instant is the critical matter.
For the husband it was argued that he is still subject to potential review of his condition. Absent some evidence that there would be no further reviews this was said to mean that the pension is not payable for life. For the wife it was argued that the evidence showed the unlikelihood of the husband returning to work, meaning that as matter of practicality the pension will continue for life.
The pension comes about as a result of a person having an incapacity for the work as a public servant at the time of the cessation of employment, whether by discharge or by retirement or resignation.
There was no dispute that the pension will continue for the husband’s life, unless an interrupting event occurs. The pension may change in the future, but until there is such a change it is payable for life. The interrupting events are variously an election by the husband to commute the pension into a lump sum, or the husband’s incapacity having ceased, or the husband’s incapacity no longer precluding him from serving as a public servant again[13].
[13] As under the relevant legislation
While it is true that the husband might be subjected to further review, and the consequence of such review could be the ending of the pension, unless and until that happens the pension is payable for life.
This means that at the time of the proceedings the husband is entitled to receive the pension for the rest of his life. This is sufficient to bring the benefit under Reg 42.
If there was doubt about this characterisation, there was, as indicated above, no suggestion that the husband would ever be fit to return to work as a public servant, which is the underlying requirement for the pension to be brought to an end. That is, neither party suggested that the pension would be brought to an end by an improvement in the husband’s position. Given the state of evidence at the proceedings, I can conclude that the pension will remain for life as the husband will not become fit to return to work as a public servant.
The consequence of either of the conclusions above is that the husband is in receipt of a pension that is “payable for the life of the member spouse.” For such a pension there is an approved method at Division 5.3 of the Family Law (Superannuation)(Methods and factors for valuing Particular Superannuation Interests) Approval 2003 (‘the Approval”).[14]
[14] Exhibit H3 [18]
The parties accepted that, if the benefit is to be valued in accordance with the approved method then the value to be assigned to the interest for the purpose of making a splitting order was $1,418,301.76.
Consideration of the Pension
In considering this interest it is necessary to bear in mind what was said in Coghlan:
[B]ut the real nature of the superannuation interests in question can also be taken into account, both in consideration of the s 75(2) matters and in the final assessment of whether the ultimate order is just and equitable.
68. When we refer to “the real nature” of the relevant superannuation interest, we are referring to the fact that notwithstanding that its value according to the Regulations may well be calculated to be a very significant amount, that superannuation interest may be no more than a present or future periodic sum, or perhaps a future lump sum, the value of which at date of receipt is unknown.
That is, it is necessary to consider the significance of the manner in which the interest impacts upon the parties rather than simply consider the assessed value. This was reinforced in the more recent Full Court case of Welch v Abney [2016] FamCAFC 271 which involved the consideration of a pension. The assessed value has limited application as it is:
important to understand that this capital amount is the mandated amount applicable under s 90MT(2) only if a splitting order is to be made…That section does not mandate that the amount determined for the purpose of a splitting order is to be adopted for any other purpose.[15]
[15]Welch & Abney at [31] and [33]
While s 90MT(2) facilitates the making of splitting orders, and the valuation for the purpose of making a splitting order, it does not end the process of consideration of the interest and the real impact upon the parties of the interest for the purpose of an order pursuant to s 79, which requires that the order be just and equitable.
In the context of proceedings in which no splitting order was to be made, the Full Court in Welch & Abney observed that:
[T]he nature, form and characteristics of this particular interest required a consideration of matters affecting both the manner in which it should be treated if justice and equity was to be achieved and the value attributed to it in the process.
The real significance of the pension is that it constitutes the husband’s future income, both before and after retirement. It is reliant on the fact that he can no longer work in the public service and replaces a portion of the income that he can no longer earn. Although it is a superannuation interest and represents in part the husband’s post retirement income, it is, at the same time, his current income.
The effect of any split in favour of the wife in relation to the husband is an immediate proportional reduction in the pension that he receives now and post retirement, and a proportional reduction of whatever lump sum he may ultimately take as a commutation of that pension. That is to say that if the husband’s interest was to be split 50 / 50 between himself and the wife, she would then receive 50 per cent of the valued amount, in cash[16] or at her election rolled over into superannuation, and he would receive 50 per cent of his pension amount.
[16] According to Mr K, a split to the wife would entitle her to take an immediate cash lump sum if she chose to.
That 50 percent reduction would not just impact his post retirement income, but would impact his current income.
At the same time, a splitting order gives to the wife an immediate entitlement to the split sum, either taken in cash by her, or rolled into a superannuation fund for her.
The wife primarily sought orders that the husband commute part, or all, of his pension into a lump sum when he reaches 55 years old, such as to allow the wife to take a portion.
The husband can choose on one occasion, at either 55 or 60 years old, to commute part, or all, of his pension into a lump sum. The form of orders sought by the wife would be restrictive on how the husband could deal with whatever may be left in his hands.
The option of compelling the husband to commute is deficient. A necessary component of this approach is dealing with what would happen should the husband not live to that point. The evidence indicates that there would be neither a reversion nor death benefit available to the wife. On taking such an approach the wife is at risk that, even with full compliance with the orders, she may be left with nothing. Should the husband not live to the commutation age, the wife would be left with nothing from such an order.
To deal with this the wife sought that the husband obtain and maintain an insurance policy in the favour of the wife. No evidence was led to establish the cost, conditions for, or availability of such a policy.
In the alternative, a splitting order was sought that would have the immediate effects that I have outlined above. The split sought was for a base amount of $150,000.
The husband sought that there be no split.
Section 79(4)(d)-(g) factors
The husband is now aged 49, and the wife is 47 years old. The husband is unable to return to work as a public servant. There is great uncertainty as to his capacity to further participate in the workforce other than possibly on a casual or a part time basis. It is not possible to predict if or when this might occur, nor the level of remuneration it might attract.
The wife is in secure employment. Her weekly income from employment before tax is $1,385. She receives $207 per week in Family Tax Benefits and $135 from the husband in child support.
The husband is in receipt of the pension. His income is $1,442 per week before tax. The husband is assessed to pay child support at $135 per week.
The wife has the primary care of the three children of the relationship, now aged 14, 12 and 10.
The financial statements filed by each of the parties indicate that, at present, before an alteration of property interests, their income more than meets their expenses.
Discussion
As I have earlier indicated, the contributions to the non-superannuation interests favour the wife, such that I assess her contribution at 52.5 per cent and the husband’s at 47.5 per cent.
I have assessed the contributions to the pension (assessed as having a value for splitting of $1,418,301.76) as 5 per cent for the wife, 95 per cent for the husband. If split this equates to an approximately $70,915 interest for the wife, $1,347,386 for the husband.
For the wife’s superannuation I assess the parties’ contributions as approximately equal although marginally favouring the wife. Its value at $129,000 equates to approximate $65,000 interests for each of the parties.
For the remaining superannuation interests of the husband I have assessed the parties’ contributions as roughly equal, equating to approximately $2,000 for each of the parties.
Turning from contributions to considering the parties’ positions with respect to s 79(4)(d) and s 75(2)(a), (b) and (f), the pension gives the husband a certainty of income into his retirement that the wife does not have. Some indication of wife’s current position in relation to post retirement superannuation as opposed to the husband’s can be seen from the valuation evidence provided by Mr K.
Having identified at [13] of his report that the valuation of the husband’s interest represents, in general terms “an amount that would be required to meet the contingent liability that an ordinarily prudent trustee would have under its prudential supervision for investment at the relevant date having regard to the nature of the superannuation interest, its form and the age and gender of the member and life expectancy of that member”, Mr K then differentiated between the amounts that correlate to the pre and post retirement age pensions for the husband [paragraphs 26-33]. Of the total value (as he then assessed it) of $1,423,845.81, $834.393.13 is attributable to the post 60 pension. Of course, this is not an amount that will increase by virtue of contributions being made by the husband leading up to the retirement age.
In contrast, at present the wife has a superannuation interest of $129,000. It is reasonable to expect that this will increase by virtue of further contributions being made by the wife during her working life. The evidence does not allow me to find to what degree the gap will decrease, but does indicate that currently there is a vast disparity. In dealing with that disparity, the wife’s income at present approximates that of the husband.
The combination of the future role in caring for the children and the issues relating to the to the s 79(4)(d) and s 75(2)(a), (b) and (f) factors, indicate that an adjustment of the property interests is required in order to achieve a just and equitable outcome.
Before turning to this further adjustment it is important to be conscious that my assessment of contributions is such that there is only a small differential between the husband and the wife on the non-superannuation property, being a 5 per cent difference between them.
In relation to the superannuation there is a strong difference on contributions, such that, when considering the interests each holds in superannuation, no significant net adjustment is called for. If no adjustment is made the wife is receiving $8,000 less than a strict reflection of her 5 per cent contribution to the pension and their equal contributions to the other funds would warrant.
As I have previously indicated, the commutation orders sought by the wife are deficient. I do not propose to make such orders, at the very least because they leave the wife vulnerable to a frustration of such orders.
The remaining options for adjustment fall to a splitting order or other division of property or a combination thereof.
Given the effects of a splitting order on the husband, that is, an immediate and permanent reduction of his income stream, great care must be taken before resorting to this approach. Recognising this effect, and further recognising that the parties have sufficient non-superannuation property to allow it to be done in a just and equitable manner, the better approach is to make any adjustment in relation to the non-superannuation interests of the parties.
Given the factors I have outlined above, being the issue of continuing primary care of the children and the s 79(4)(d) and s 75(2)(a), (b) and (f) factors, it is appropriate that there be an adjustment to the wife. Given that the adjustment will not be across the entire pool of the parties’ property, but will only be in relation to a part of the pool, being the non-superannuation interests, the percentage split will necessarily be higher than if it was in relation to the whole of the parties’ property.
On the basis that there is no adjustment in relation to the parties’ superannuation interests, recognising the shortfall of $8,000 to the wife in relation to contributions to the superannuation pool, I make an adjustment of 20 per cent of the non-superannuation property of the parties to the wife, giving thereby 72.5 per cent of the non-superannuation property to the wife.
The net non-superannuation pool is primarily constituted by the former family. It equates to $1,272,600 less $200,000 relevant debts. That is, the non-superannuation pool is $1,072,600.
A split of 72.5 per cent to the wife of this part of the property equates to $777,635 to the wife and $294,965 to the husband.
I recognise that this places the wife in a position that, immediately, is far superior to that of the husband. This allows for the pension to remain untouched and for the preservation of his income from now into retirement. Unlike the wife, he does not need to accumulate superannuation.
Of the superannuation assets, which total $1,551,301 the wife will take $129,000, or 8 per cent the husband $1,418,301.76, or 92 per cent.
I recognise that if the total pool is considered at $1,272,600 (non-superannuation) plus $1,551,301 (superannuation), that is $2,823,901, then in total the wife will take $978,080, being 35 per cent, and the husband $1,845,821, being 65 per cent.
In arriving at this result it has been critical to acknowledge that the statutory valuation is only for the purposes for effecting a split of a superannuation interest and to continue to acknowledge the difference in nature of the superannuation interest as opposed to the non-superannuation interests, and the particular impacts that flow from adjustment of the superannuation interests. Failure to give such recognition would result in orders that are neither just nor equitable because they would not deal with the property of the parties in accordance the true nature of the property.
Accordingly, despite the disparity in relation to the non-superannuation property for the parties, and despite the disparity in superannuation, the adjustment reflects a just and equitable outcome of an assessment of both the contributions of the parties and the s 79(4)(d)-(g) factors.
To achieve this outcome, the wife will retain the family home and her superannuation interest, together with responsibility for the mortgage and for her debt of $10,000. Given that I have found that the husband has (including the adding back of the Minibus) the benefit of $34,000 in his hands, the wife will be required to pay the husband the sum of $260,965. He will retain his superannuation interests.
The orders will provide to retain the same percentage division of the non-superannuation assets in the event that the wife is unable to buy out the husband’s interest and the home must be sold.
I certify that the preceding one hundred and thirty-six (136) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Gill delivered on 9 June 2017.
Associate:
Date: 9 June 2017
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