RESNICK & RESNICK

[2019] FCCA 1816

FEDERAL CIRCUIT COURT OF AUSTRALIA

RESNICK & RESNICK [2019] FCCA 1816

Catchwords:
FAMILY LAW – Property Settlement – small pool of both tangible assets and superannuation – husband’s greater income earning capacity – contributions and s.75(2) factors.

Legislation:

Family Law Act 1975 (Cth), ss.75(2), 79(4)

Cases cited:

Clauson v Clauson (1995) FLC 92-595

Stanford v Stanford (2012) 247 CLR 108

Bevan v Bevan (2013) FLC 93-545

Russell v Russell (1999) FLC 92-877

Applicant: MS RESNICK

Respondent: MR RESNICK

File Number: LNC 383 of 2018

Judgment of: Judge McGuire

Hearing date: 24 June 2019

Date of Last Submission: 24 June 2019

Delivered at: Launceston

Delivered on: 3 July 2019

REPRESENTATION

Counsel for the Applicant: Ms A Trezise

Solicitors for the Applicant: Andrea Trezise

Counsel for the Respondent: Mr G Maguire

Solicitors for the Respondent: Bishops

ORDERS

1. That the wife be solely entitled to and to the exclusion of the husband to the following:

   (a)The net proceeds of the sale of the property at Street A, Town B in Tasmania; and

   (b)Furniture and contents, personalty, balances of bank accounts, motor vehicles and superannuation entitlements currently in the name of or in the possession and/or control of the wife.

2. That the husband be solely entitled to and to the exclusion of the wife the following:

   (a)Furniture and contents, personalty, proceeds of any bank accounts, motor vehicles and superannuation entitlements currently in the name of or in the possession and /or control of the husband.

3. That the wife be solely responsible for and indemnify the husband in respect of the following liabilities;

   (a)Wife’s ANZ credit card;

   (b)Wife's CBA credit card;

   (c)Wife's Store Account;

   (d)Any and all liabilities attaching to any assets retained by the wife pursuant to these Orders; and

   (e)Any and all liabilities incurred by the wife since separation in either joint names or in her name alone.

4. That the husband be solely responsible for and indemnify the wife in respect of the following:

   (a)Any and all liabilities attaching to any assets retained by the husband pursuant to these Orders;

   (b)Any and all liabilities incurred by the husband since separation in either joint names or in his name alone; and

   (c)Any and all liabilities of the company Business [C] (in administration).

5. That pursuant to Section 81 of the Family Law Act 1975 the parties intend that these Orders shall as far as practicable finally determine the financial relationship between them and avoid further proceedings between them.

IT IS NOTED that publication of this judgment under the pseudonym Resnick & Resnick is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT LAUNCESTON

LNC 383 of 2018

MS RESNICK

Applicant

And

MR RESNICK

Respondent

REASONS FOR JUDGMENT

Applications

1. This is an unusual application for property settlement.  The property pool is of negligible value.  The applicant wife in her case outline seeks an order for 100% of the tangible assets of the parties and 100% of their joint superannuation entitlements.  The respondent husband in his case outline, and leaving aside some distribution of chattels, effectively seeks an order that each party be entitled to 50% of the net tangible assets and of their superannuation entitlements.

2. Both parties were represented.  Both provided affidavits and were cross-examined. 

The Background

1. The husband is 34 years of age.  The wife is 32 years old.

2. They commenced cohabitation in 2006, were married on … 2010 and separated on 27 March 2018.  The period of cohabitation was therefore approximately 12 years.

3. Neither party had substantial assets as at the date of commencement of their cohabitation.

4. There are three children of the relationship being [X] (aged six years), [Y] (aged five years) and [Z] (aged three years).  The children live in a fortnightly arrangement as to 8 nights with the mother and 6 nights with the father.

5. In … 2008 land was purchased at Town B in Tasmania for $77,000.  The purchase was made and the title registered then solely in the name of the wife due to some difficulties for the husband obtaining finance.  The wife entered into a contract to build a home for $80,315.  She obtained a mortgage loan of $158,915.  She also obtained the benefit of a first home owners grant of $21,000.

6. In … 2013 the parties purchased the most recent matrimonial home at Street A, Town B for $323,000.  That property was registered in the joint names the parties.  The wife contemporaneously sold the Town B property for $189,000. The mortgage loan then stood at $288,000.

7. Throughout the relationship and save and except for time off for the birth of the children, the wife has been employed as a customer service officer with the Employer.  Her current income is approximately $25,000 per annum.

8. The husband obtained a position as a professional in Launceston.  He enrolled in a course.  He does not appear to have obtained his qualifications.

9. Thereafter, the husband opted for a career change into the … field.  This appears to have been the impetus for what eventually became a disastrous set of the circumstances for the parties’ finances.  In about … 2015 he created his own business effectively being a franchise from an organisation known as Business [D] Pty Ltd.  The husband established a company namely Business [C].  He was the sole director, secretary and shareholder.  As far as I can determine, the work of the company was to provide ….  I assume he obtained some general benefits under the franchise agreement.  His major client became a company/business known as Company [E].  That company went into liquidation/administration at or around the time of the parties’ separation in March 2018.  The husband says that he attempted to keep the business afloat and to obtain other major clients.  His efforts appear to have been admirable but a failure.  His own company is now in liquidation/administration and has been since late 2018.  He is a primary guarantor of the debts of his company and they are substantial and well in excess of $1 million.

10. It seems that the husband re-partnered at or soon after his separation from the wife.  His partner became an employee of Business [C].  That person also had a background in the … business.  Unfortunately for the husband, that relationship has also ended. 

11. It may or may not be of some significance that the wife asserts that the husband and his girlfriend lived a lifestyle outside of their financial competence between March and December 2018.  Perhaps most striking was the admission by the husband that he and his girlfriend flew to Country F for a non-business related holiday at the very time that his business was placed into administration.  There was also evidence of numerous overseas business class flights and other extravagances.

12. In early 2019, the husband obtained employment in New South Wales in the … area with an income and benefits of around $90,000 per annum.  He voluntarily relinquished that employment and returned to Launceston where he candidly admits that his own employment prospects are limited and perhaps because of the small, tightknit business community in this town and the husband's unfortunate history with Business [C] Ltd.  He now holds a position in Business [D] at an income of $50,000 per year.  He says that he gave up the New South Wales employment so that he could maintain a more frequent relationship with his children.

13. The upshot of all this is that the husband, as a guarantor for the business debts, faces personal bankruptcy and candidly admits that this is a possibility.  There appear to be little, if any, assets to interest the administrator of his company.  It appears that bankruptcy seems a real prospect either on a debtors or creditors petition.  Specifically, I was somewhat incredulous of the husband's business-management when there was evidence put to me that the franchise or company provided him with a sum of the around $400,000 in which to meet the taxation liabilities of his company but the husband, for reasons that he was not able to satisfactorily explain, did not pay that money to the tax office but spent it on 'attempting to keep the company afloat'.  As such, he remains indebted to his franchise for at least that quantum and, I assume, also to the Australian Tax Office?

The Husband's Case

1. The husband, like the wife, softened in respect of the orders that he sought during the course of the trial.  He now seeks a sum of $30,000 from the proceeds of sale of the former matrimonial home, which will be only approximately $112,000.  Again, his rationale for this amount was vague, inconsistent and generally unsatisfactory.  On different occasions he said that he needed the money to either set up a home for himself and his children; to meet his legal costs of these proceedings; or to take to his creditors in order to negotiate a release from his liabilities and to ward off a potential bankruptcy.  Suffice to say that, Mr Resnick is perhaps more optimistic than most in respect of this last intention if he is of the view that a sum of $30,000 or less might satisfy his creditors where his debts may exceed $1 million. 

2. In facing a real prospect of bankruptcy, Mr Resnick says that he understands that any award from this Court in respect of tangible assets may well find itself in the hands of his trustee in bankruptcy.

3. Generally, Mr Resnick says that he is prepared to take personal responsibility for the parties’ debt situation and that in all other respects the contributions were equal. He says that the s.75(2) factors do not suggest any further adjustment in circumstances of a minimal value of property pool, where the children live in a shared care regime, and where neither party receives a substantial income.

The Wife's Case

1. The wife also moved her position during the course of the trial.  She still asks for 100% of the tangible assets but is more open to an order which does not disturb the parties’ current superannuation interests.

2. The wife argues something of an unusual case but one which might be in line with authorities such as Clauson v Clauson[1] where the Full Court suggested that alteration of property interests, and in particular consideration of the s.75(2) factors, should be undertaken with an eye to the 'reality' of the parties’ circumstances both currently and into the future.

   [1] (1995) FLC 92-595

3. The wife suggests that she has made some superior contributions to those of the husband.  Generally, the tenor of her evidence was that the parties may not to be in such a financial situation should the husband not have enjoyed his extravagances in the later months of his business venture but again noting that the husband does not propose that the wife share in any way in respect of the liabilities of his failed business.

4. The wife says that there are significant s.75(2) factors which favour her and that the Court should look at the quantum of the pool in determining the justice and equity of such an adjustment. The three children are young and currently inhibit her ability to obtain full time employment. She says that, in any event, the husband has a far greater earning capacity than does she and that his skills and experience are more mobile than hers as evidenced by the fact that he has already obtained and relinquished employment in New South Wales.

The Relevant Law

1. Relatively recent decisions of the High Court in Stanford v Stanford[2] and Bevan v Bevan[3] seem to have harmonized again the preferred approach for trial judges in considering the alteration of property interests pursuant to s.79 of the Family Law Act1975 (‘The Act’). Firstly, pursuant to s.79(2) I am to consider whether it is just and equitable to make any orders altering the property interests of the parties. That consideration is not to be conflated simply with the contribution arguments of the parties but rather to be a pointed consideration of the circumstances of the parties’ relationships. In the matter now before me where that relationship is at an end and where the parties are jointly the owners of assets, in particular the proceeds of sale of the former matrimonial home, it is entirely proper for me to consider the alteration of their property interests.

   [2] (2012) 247 CLR 108

   [3] (2013) FLC 93-545

2. It is then advisable for me to follow a multi-step process of consideration although not in any formulaic sense whereby firstly I establish the property pool of the parties where property is to include assets, liabilities and financial resources of the parties or either of them and for these purposes superannuation entitlements are to be treated as if they were property although, of course, are usually not yet crystallised.  I am also to attribute value to each of the items in the pool thereby obtaining a value for the pool itself.

3. I am next to consider the contributions of the parties to the attaining of improvement and maintenance of the items in the property pool.  Contributions can be of many varieties including direct financial contributions, indirect financial contributions, and non-financial contributions including as homemaker and parent.

4. After a consideration of the entitlements pursuant to the contributions, I am then to consider whether it is just and equitable to make any further adjustments to either party by a consideration of the matters set out in s.79(4) (d) – (g) including any of the numerous matters in ss.75 (2) of the Act that might be relevant.

5. Finally, and sometimes controversially, Judges then 'stand back' and consider whether the actual orders anticipated to be made are just and equitable and not just the mathematical percentage distribution[4]. 

   [4] Russell v Russel (1999) FLC 92-877

The Property Pool

1. As mentioned above, and unfortunately, the property pool for my consideration now is extremely limited and, after discussions between bench and bar during the course of the evidence, appears to be agreed as follows: –

Net proceeds of sale of Street A, Town B	$ 112,000 E
Wife’s furniture & contents	$     5,000
Husband’s furniture & contents	$     2,000
Husband – net proceeds of sale of jewellery	$     2,000
Wife’s jewellery	N/K
Wife – 105 Shares G @ $82.11sp	$     8,621.55
Wife’s Motor Vehicle H	$     3,250
TOTAL	$ 132,871.55
Liabilities:
Wife’s ANZ credit card	$    4,991
Wife's CBA credit card	$  22,099
Wife – Store account	$    4,993
TOTAL	$  32,083
Net Tangible Assets	$100,788.55
Superannuation:
Wife – Employer Super	$ 59,660
Wife – Super Fund L	$     590
Husband’s Super Fund M	$ 62,088
TOTAL	$122,338

1. The above credit card liabilities of the wife are included in the pool as unchallenged in cross-examination by the husband.  I accept, therefore, that they are liabilities either accrued during the relationship or for the general benefit of the family post-separation or, as is most likely, a combination of both.

2. Somewhat strangely, it appears that the husband has effectively retained two motor vehicles being a Motor Vehicle J and Motor Vehicle K and with the good graces and consent of his company's administrator.  One of those vehicles has now been transferred to the husband's now former girlfriend.  I accept, however, that the equity in these vehicles is minimal, if any.

Contributions

1. Superficially, this is a situation where these parties started their relationship with no significant wealth.  Their financial situation set out above is that they have separated with net tangible assets of $100,788.55 and relatively minimal superannuation entitlements.

2. Both contributed by their labours and parenting of the children during the course of the relationship.  The husband does not ask that the wife bear any responsibility for the indebtedness of his company and his jeopardy personally in this respect and is to offer her an indemnity accordingly.

3. The evidence suggests some relatively minor contribution factors which might favour the wife.  Firstly, she used her entitlement to a first home owners grant in order to purchase the first property at Town B.  This benefited the parties by $21,000.  On the face of it, the husband would therefore still retain any rights subject to any government policy at the time.  He says, however, that he signed a waiver with the Commonwealth Bank in respect of ever claiming that entitlement and for the purposes of these reasons I accept his evidence.  Nevertheless, and arguably, this still represents some contribution by the wife in utilising her entitlement at the time.

4. Secondly, the wife had the almost sole responsibility for caring for the children during the period post-separation when the husband was employed in New South Wales.  This circumstance perhaps has more weight when she is not in receipt of substantial child support assistance from the husband relative to the obvious financial needs of three young children. In that sense, the husband was free to pursue his own employment ambitions post-separation and did so.  The wife had the responsibility for three young children and I accept her evidence as to the limitations that this has placed on her employability.

5. Thirdly, I accept the wife's evidence that her parents contributed $5,000 to some improvements to the most recent Town B property so as to put it in a more attractive position for sale.  The authorities are clear that this would be considered as a contribution on behalf of the wife and particularly in circumstances where it has occurred after separation. The sum of $5,000 might not seem significant but does carry some weight within the context of a net pool of tangible assets of $100,788.55.

6. Consequently, on contributions, the Court may be inclined towards a distribution of the property at around 53% to the wife and 47% to the husband.

Section 75(2) Factors

1. Undoubtedly, the husband has had his self-employment business ambitions thwarted by the unfortunate demise of his company.  Nevertheless, he has since, and without any apparent delay, been able to obtain employment in New South Wales which brought him remuneration of some $90,000 per annum.  Of even more significance, however, was the voluntary statement made by the husband to the Court near the end of his evidence whereby he has very recently rejected an employment offer from New South Wales which offered remuneration of $230,000 per annum plus superannuation. 

2. The husband understandably says that he did not take up this employment offer because he wanted to spend more time with his children.  His intentions may be admirable but the task of this Court is to consider the current income and income capacity of these parties.  It is a fact of 21^st century society that many parents are required to pursue employment opportunities in places distant from their children and in order to provide support for their children whether they be married or separated.  Consequently, I am able to find, on his own evidence, that the husband has an employment capacity far superior to that of the wife.  It is clear that he has had the capacity to earn $230,000 per year as against what I find to be the wife's current capacity of approximately $25,000 per annum.

3. Still further, and in respect of the husband’s earning capacity, I expect that he would receive superannuation on top of his salary of at least 9.5% of that salary.  Simple mathematics suggests, therefore, that he would be in a far greater position to accrue superannuation than would his wife. The income discrepancy is, therefore, substantial and significant.  It has even greater significance when seen against the quantum of the property pool.  Put simply, any distribution of the property pool pales into insignificance in respect of either party re-establishing themselves financially where one of them might have the benefit of an income or income potential of $230,000 per annum.  I make similar comment in respect of their ability to provide for their own superannuation.

1. The oft cited decision of the Full Court in Clauson v Clauson (supra) is of considerable assistance to me in my consideration of the particular circumstances of these parties.

2. Firstly, their Honours in Clauson state at (81,981):

   It has long been recognised that in most cases the most valuable 'asset' which a party can take out of a marriage is a substantial, reliable, income-earning capacity: see Best and Best (1993) FLC 92 – 418.

3. Secondly, in respect of the consideration of an adjustment pursuant to s.75(2) factors, their Honours continue on the same page:

   There is, we think, at times, a tendency to assess is s75(2) factors in percentage terms without considering its real impact, and we think there is legitimacy in the views expressed in more recent times that the Court has tended to operate in this area within artificially delineated boundaries.  That is, it appears almost to be inevitable that the s.75(2) factors will be assessed in a range between 10% and 20%. A number of cases will justify an assessment outside those parameters and in any event, it is the real impact in money terms which is ultimately the critical issue.

Conclusions

1. The property pool here is extremely limited and with net assets sitting at value of $100,788.55. The parties have superannuation entitlements which are not of high-value. The contributions of the parties favour the wife only to a small extent and I might consider a distribution of the property at around 53% to the wife and 47% to the husband. It is, however, the nature of the s.75(2) factors which must be given full, proper and realistic consideration. Whilst having some sympathy to the husband in wishing to maximise his time with his children, the fact is that he chose to move to New South Wales for work after the demise of his business leaving the children in the primary carer of the wife, and, more relevantly, he concedes that he has very recently rejected a job offer with remuneration of $230,000 per annum plus superannuation. Noting the comments of their Honours in Clauson (supra), considering the very limited nature of the property pool in this matter before me, and so as to give real effect to the s.75(2) factors which are notable in their discrepancy of income earning capacity and ability to superannuate each of the parties accordingly, an adjustment to the wife of the around 30% of that pool would, in my view, not be unreasonable.

2. As mentioned above, the tangible asset pool is of limited value and the superannuation entitlements also of minimal value.  In these circumstances, and in exercising my discretion, it would be proper to consider this matter on a one-pool basis.  In doing so I note that the husband may be at jeopardy to any potential Trustee in bankruptcy in respect of any hard assets or cash achieved by him in this settlement although not in respect of his superannuation.  Nevertheless, that possibility remains only speculation and noting the husband’s optimism that he will avoid bankruptcy it has not influenced my determination in this respect.

3. On a one-pool approach and with emphasis on the income capacity difference between the parties, I intend to make orders whereby the husband retain his superannuation entitlement ($62,088) and the wife retain her entitlements ($60,250). The husband will retain the assets in his possession ($4,000). The wife will retain the balance of the assets including the balance proceeds of sale of the former matrimonial home and will be responsible for and indemnify the husband in respect of the liabilities mentioned above in these reasons. I calculate that on a one-pool basis the husband will be retaining property at value of $66,088. I calculate that the wife will be retaining net property at value of $157,038. That is, the property inclusive of superannuation will be divided as to 70.38% to the wife and 29.62% to the husband. Whilst such a distribution arguably might not give the wife a full recognition of her superior s.75(2) factors, I do note that she will be retaining the balance proceeds of sale of the home and the husband will be left essentially with only his superannuation. In all of those circumstances I am satisfied that orders in such terms are just and equitable.

I certify that the preceding forty five (45) paragraphs are a true copy of the reasons for judgment of Judge McGuire

Date:  3 July 2019