Simmons and Simmons
[2008] FMCAfam 994
•17 September 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SIMMONS & SIMMONS | [2008] FMCAfam 994 |
| FAMILY LAW – Property – pre marriage contribution – husband’s greater earning capacity. |
| Family Law Act 1975 (Cth), s.75(2)(o) |
| Hickey [2003] FLC 93-143 C v C [2005] FLC 93-220 Clauson and Clauson [1995] FLC 92-595 Best and Best [1993] FLC 92 418 |
| Applicant: | MR SIMMONS |
| Respondent: | MS SIMMONS |
| File Number: | DGC 2092 of 2007 |
| Judgment of: | Phipps FM |
| Hearing dates: | 5, 6 & 7 March 2008 |
| Date of Last Submission: | 7 March 2008 |
| Delivered at: | Dandenong |
| Delivered on: | 17 September 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Williams |
| Solicitors for the Applicant: | Kennedy Wisewoulds |
| Counsel for the Respondent: | Mr Salamanca |
| Solicitors for the Respondent: | Meerkin & Apel |
ORDERS
The husband, at the expense of the wife, transfer all his right in title and interest in the property at Property G to the wife.
The husband to the exclusion of the wife is entitled to ownership and possession of the property at Property C (the Property C property).
The husband is to be solely liable for and indemnify the wife against any liability for the mortgage over the Property C property, the line of credit for managed funds and loan for the Hyundai motor vehicle.
Otherwise each party is declared to have no interest in property, bank accounts and superannuation in the name of the other party.
IT IS NOTED that publication of this judgment under the pseudonym Simmons & Simmons is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT DANDENONG |
DGC 2092 of 2007
| MR SIMMONS |
Applicant
And
| MS SIMMONS |
Respondent
REASONS FOR JUDGMENT
Specific issues in this case are:
What items should be included in the assets?
Do financial contributions by the husband outweigh the wife’s contributions?
What is the effect of the disparity of income?
The issues must be placed in the context of the four step property consideration process.[1] The steps are:
What are the assets and liabilities?
What are the parties’ contributions?
What are the parties future needs?
Is the order just and equitable?
[1] Hickey [2003] FLC 93-143. For superannuation C v C [2005] FLC 93-220
Background
The husband was born in 1965 and is aged 43 years. The wife was born in 1960 and is aged 47 years. The parties married in 1991. They then commenced living together in the former matrimonial home at Property G, where the wife and children still live.
There are two children of the marriage; [X] born in 1995 aged 13 and [Y] born in 1996 aged 11. The parties reached agreement on children's matters prior to the hearing. Consent orders made 7 March 2008 provide for the children to live with the husband from after school Wednesday until Monday morning alternate weekends, half term holidays and two weeks in the Christmas holidays. Otherwise, they live with the wife. The order makes provision for the various celebratory occasions.
The parties purchased their first matrimonial home, and the wife moved in shortly before they were married. The first home was a unit at Property M, purchased for $145,000. They purchased their second home, Property G, in 1998 as a house and land package for $250,000.
They purchased an investment property at Property C for $275,000 in about June 2004. The property was purchased solely in the husband's name. The investment property has a mortgage debt. The matrimonial home has no mortgage debt. They have some investments and both have superannuation, the husband more than the wife. Both propose that the wife keep the matrimonial home and the husband the investment property. The wife proposes that any adjustment be made using the superannuation. The husband proposes a cash payment from the wife to him.
The parties separated under the one roof in April 2006. The husband moved out in September 2006.
What items should be included in the assets?
Assets, agreed unless noted otherwise, are:
Description $ Gross Value $ Net Value Property G
Less mortgage
510,000
Nil
510,000
Property C
Less mortgage
310,000
251,762
58,238
Managed Funds in Husbands name
Less Line of Credit
120,763
82,750
38,013
BHP Shares of Husband 6,624 Savings of Wife at separation 400 Savings of Husband at separation 4,300
Wife’s Ford Laser Motor Vehicle Value Disputed
Husbands Hyundai motor vehicle
Less loan14,500
9,408
5,092
Furniture & Chattels Property G Value Disputed
Furniture & Chattels- Property C Value Disputed
Sporting Memorabilia of Husband To be sold
Funds received by Wife from sale of managed funds after separation 15,700
Funds received by Husband from sale of managed funds after separation 8,275
Husband's legal costs [inclusion disputed] 40,000
Husbands credit card debt at separation [inclusion disputed] -4,713
Superannuation assets are agreed.
Husband at separation
ING Master Fund 10,739
Netwealth Investments Ltd. 100,585111,324
Husband current value
ING Master Fund 10,275
Netwealth Investments Ltd 127,897138,172
Wife at separation
HESTA 8,000
Portfolio Care Superannuation Plan 3,58511,585
Wife current value
HESTA 13,818
Portfolio Care Superannuation Plan 3,60117,419
The husband proposes that the wife’s motor vehicle be valued at $1,650. He relies on information from carsales.com.au which gives a likely price for the wife's vehicle in the range of $1,000-$2,300. He adopts the midpoint of $1,650. The wife does not accept that valuation and proposes $250 in her case summary. Her counsel proposed a slightly higher figure.
There is no admissible evidence about the value. I will take into account under s.75(2)(o) of the Family Law Act 1975 (Cth) that the wife has an old but working motor vehicle.
Furniture and chattels at the two properties are in a similar position. Each party makes assertions as to value, but there is no valuation evidence, except that the wife seeks to rely on the husband’s inclusion in his financial statements of the value of the furniture and chattels at Property C at $10,000 as an admission against interest.
The husband’s summary of argument, two financial statements and trial affidavit put a value of $10,000 for furniture and chattels at each property. The financial statements give an estimated value of $5,000 for the husbands half share in each house.
The evidence about the furniture at Property G is that some of it was obtained from a cousin at the time of the marriage. The description given by each party suggests that it is unlikely to have much value.
The furniture and chattels at Property C were obtained new at the time of the purchase of the house. The house is rented out during holiday times, so the furniture and chattels are of a sufficient standard to enable the house to be rented for that purpose.
The submission for the wife that the husbands estimated valuation all $10,000 for furniture and chattels at Property C seeks to separate it from the same estimated valuation he makes for furniture and chattels at Property G. I do not see that as appropriate. The husband’s estimate of the furniture and chattels at Property C cannot be separated from his estimate of the value of furniture and chattels at Property G. If he does make an admission, it is an admission that the two have equal value, that is $10,000 each. Nothing suggests that the husband has a basis for making the estimate.
There is no evidence of value of furniture and chattels which I can use. I will take into account under s.75(2)(o) that the Property G House, has usable but old furniture and chattels. The Property C house has new furniture and chattels suitable for use in a rented holiday house. In addition, the husband has furniture and chattels in his rented premises, some of which came from the Property G premises.
The husband’s credit card debt at separation was $4,713. His practice is to pay accounts using his credit card and then pay the balance each billing period from the bank account into which his salary is paid. Much of the amount of the credit card debt at separation was for the husband’s laser eye surgery. The submission for the wife is that it should be treated as a personal debt of the husband and not a matrimonial debt.
The husband does not suggest that the laser eye surgery was essential for his eyesight, but rather, desirable because it improved his vision and meant he would no longer need glasses. The husband has a reasonably high income, and the parties, certainly at the time of separation, a reasonable standard of living. Payment for the surgery did not detract from that standard of living. In the circumstances, it was a reasonable use of matrimonial resources, or, at the very least, it was not so extravagant or unreasonable, even if a unilateral decision by the husband, that it should be treated as his personal debt rather than a matrimonial debt.
The husband has paid $40,000 for his legal costs using his credit card and then paying the credit card balance from his bank account. The submission for the wife asserts that this account was the line of credit used to finance the managed funds so that the husband had increased that line of credit by $40,000 and should account for it. The line of credit debt is taken into account in the agreed assets. The wife submits that there is a double counting to the unfair advantage of the husband.
Examination of the bank statements for the line of credit and the husband's other account showed that he did not use the line of credit account to pay legal fees. The husband has paid his legal fees out of post-separation income. There is no double counting.
The matrimonial property is:
Description $ Gross value $ Net Value Property G
Less mortgage
510,000
Nil
510,000
Property C
Less mortgage
310,000
251,762
58,238
Managed Funds in Husbands name
Less Line of Credit
120,763
82,750
38,013
BHP Shares of Husband 6,624 Savings of Wife at separation 400
Savings of Husband at separation 4,300
Husbands Hyundai motor vehicle
Less loan14,500
9,408
5,092
Funds received by Wife from sale of managed funds after separation 15,700
Funds received by Husband from sale of managed funds after separation 8275
Husbands credit card debt at separation -4713
Total $641,929
Superannuation assets are.
Husband at separation
ING Master Fund 10,739
Netwealth Investments Ltd. 100,585111,324
Husband current value
ING Master Fund 10,275
Netwealth Investments Ltd 127,897138,172
Wife at separation
HESTA 8,000
Portfolio Care Superannuation Plan 3,58511,585
Wife current value
HESTA 13,818
Portfolio Care Superannuation Plan 3,60117,419
Total at separation was $122.909. At the time of the hearing total value was $155,591.
What are the parties’ contributions?
The controversy concerning contributions at the time of the commencement of the relationship had resolved itself by the end of the hearing. The husband contributed $30,000 in savings and the wife $5,000. The balance of the amount needed over and above the bank loan for the purchase of the matrimonial time was saved by the joint financial effort of the parties prior to the marriage.
Their financial relationship commenced prior to the marriage. For six to 12 months they saved all of the husband’s salary and paid expenses from the wife's salary. The wife was living in a rented apartment and the husband with his parents. The husband spent some time at the wife’s apartment. The wife gave the husband $50 a week as spending money. They commenced living together in the house immediately after the marriage.
The husband has accounting and financial management qualifications. He graduated in 1986 with a Bachelor of Business majoring in accounting from [omitted]. He completed a postgraduate diploma in finance finishing in 1991, and then, after the marriage, studied for 18 months part time, and obtained a master's degree in business. He is a fellow of the CPA. At the time of the marriage he was employed by [O]. Both parties worked from the marriage in February 1991 to the birth of [X] in 1995. Both worked at [O], the husband as an accountant and the wife as a data entry operator.
The husbands taxable income each year ending 30 June 1992 to 1995 was:
1992 $37,673
1993 $39,437
1994 $71,119
1995 $70,121
The wife's taxable income during the same period was:
1992 $25,639
1993 $26,828
1994 $27,957
1995 $20,111
The husband left [O] at the end of 1996 and received a lump sum payment after tax of $32,000. About half was accrued long service leave and annual leave and about half a redemption of superannuation entitlements. $15,000 was spent on the purchase of a motor vehicle. The husband said the balance went towards paying off the mortgage, something the wife could not recall. There is no dispute that all of the money was spent for the benefit of the family.
The husband’s permanent employment with [O] commenced in 1987 so that some of the superannuation and some of the long service leave lump sum payment accrued prior to the commencement of the parties’ relationship. The party’s joint financial endeavour commenced six to twelve months prior to the marriage, so in 1990 about three to three and a half years after the husband commenced at [O]. He left [O] about five and a half to six years after they pooled their finances, so the majority of the lump sum accrued during the relationship.
For a time during 1995 and 1996 the husband worked in Geelong for [T] and the parties lived in rented accommodation in Property V. Some of that time he worked on a project in Melbourne so that he was travelling to and from Melbourne leaving relatively early and returning relatively late. They returned to Melbourne in 1997 and lived in rented accommodation until moving to Property G.
The husband, after leaving [O], has remained in continuous employment. Until late 2002 he worked as a consultant with [K], [P], and [D]. He commenced his current employment as a financial controller with [B] in January 2003. His current salary is just under $123,853.31, superannuation $11,146.79 and a petrol card worth about $5,000. He has a performance bonus depending upon whether the company achieves budget or not which is about $23,000. He has been receiving the bonus. His total package is a little over $160,000.
The wife worked full time at [O] until she was about eight months pregnant in 1995. After the second child was born they were in Property V, the husband was away long periods of time, so it was not possible for her to work. There was a period in 1999 when the husband worked in New Zealand for four months coming home each weekend except for three weeks when the wife and children stayed with him in New Zealand.
In September 2002 she commenced working for [A] entering raffle ticket details. She worked between 10.00am and 2.00pm. This stopped in 2006. The position was no longer available. Between 2003 and 2006 she did short periods off work twice a year for the husband's employer during stock taking.
She then commenced employment with [L] processing invoices with some customer liaison. This employment ceased immediately prior to the hearing. The evidence shows that the work was no longer available for her. She worked 25 to 30 hours a week at $16 an hour earning $350-$400 per week. She was able to regulate her working hours so that she was at home for the children before and after school.
The husband has had money in various managed funds. The balance at the time of the hearing is set out above. The history since about separation is set out in the husband’s affidavit. Other than how he has funded his legal costs that history is no longer relevant. The proceeds were used principally for the reduction of the Viridian line of credit, $10,000 reduction of the Property C mortgage and some was used for holidays for both the parties and the children.
In 2004 the wife received an inheritance of $20,000 from the estate of a deceased uncle. The husband says some was used for cooling at Property G and the balance paid off the Property C mortgage. The wife says it was all paid towards the mortgage and the cooling was installed the following year. How the money was used is irrelevant because it was all used for the benefit of the family. The significance is that the wife made a financial contribution of $20,000 in 2004, about two years before the marriage ended.
The husband is paying child support. At the time of the hearing it was $382 per week in child support.
The husband’s submission is that because he made a greater initial contribution than the wife, made a contribution when he left [O], paid the mortgage on the matrimonial home plus rent for his own premises since separation, and continued to pay the mortgage on the Property C property, his contribution should be assessed as higher. Part of his argument is that the values of the two properties have increased since separation while the Property G mortgage has been paid off and the Property C mortgage reduced.
The parties, although not cohabiting, commenced a common financial endeavour in anticipation of their marriage some months prior to it taking place in February 1991. The financial arrangements remained the same after April 2006 when they separated under the one roof. The change came in September 2000 when the husband moved out. For contribution purposes I consider that the relevant period is from about the middle of 1990 until September 2006, about sixteen years.
The husband made an initial contribution of $30,000. Something, less than half, of the lump sum he received on leaving [O] is attributable to the period prior to the marriage. The wife made a contribution of $20,000 in 2004. The husband has continued the mortgage payments since September 2006.
The husband's financial contribution was greater throughout the marriage, but this was possible because the wife was caring for the children. The husband was able to study and improve his qualifications, something he acknowledges.
The relationship is about sixteen years. The husband’s greater financial contribution is balanced by the wife’s non financial, home maker and child care contribution.
The same applies to the post separation period. The basic nature of the financial arrangements have remained the same. The husband has continued making the major financial contribution. The wife has the major care of the children and has earned to the extent that she can. The contributions were equal contributions.
The same assessment applies to superannuation, up to the time of the final separation. Some of both parties’ superannuation is attributable to the pre-marriage period, but not a great deal.
What is the effect of the disparity of income? Needs
I have already described the parties’ income. At the time of the hearing the wife was unemployed. The husband’s submission is that she is capable of full time employment earning about $32,000 a year or more.
The wife’s position is that she will not take up full-time employment, but will do part-time employment that enables her to care for the children in the way she is now. She can perform the type of work she was doing, that is part-time clerical or administrative work paying about $15 per hour.
The wife’s position that she will work part time so as to care for the children is reasonable. It is a logical extension of the arrangements during the marriage. That means her capacity to earn income is in casual employment at the rate of about $16 per week for about 25 hours each week. At times she has worked longer hours than, for instance when the children were with the husband. Whether she can will depend on the type of employment she can obtain. If she obtains 45 weeks work per year at an average of $25 a week and $16 an hour she earns $18,000. This contrasts with the husband's $160,000 per year, $146,000 of which is salary plus bonus.
The wife met Mr M in November 2007 when both were helping the wife’s employer move premises. He and his son commenced living in the Property G house in December, the wife and Mr M sharing a bedroom. The wife said he had come down from Queensland, he had nowhere to live and he had a child with him so she offered him accommodation.
Mr M had worked in the building industry, but he said that he had had surgery to his wrists for carpel tunnel syndrome which restricted his ability to work. He gave evidence of his financial position and said that he was at risk of becoming bankrupt. He did not intend to stay living at the house in Property G and was looking for somewhere else to live. He was challenged on how he would find money for the rent and he said he would find some work.
Mr M and the wife said that he had been contributing to expenses by buying about $50.00 worth of food each week.
The husband’s submission is that the presence of Mr M in the house should be treated as a financial resource for the wife and that the court should find that he has the ability to contribute to the finances of the wife’s household.
There is no reason to disbelieve either the wife or Mr. M. Their relationship may continue, but Mr M’s presence in the house was only intended to be temporary. Mr M’s financial position is poor so even if he was living in the house, his ability to contribute is limited. I consider that the wife's relationship with Mr M, whatever it is, is not a relevant factor in considering the adjustments under s.75(2).
I have to take into account that, as I have already described, each will retain furniture and the wife has a usable motor vehicle.
The younger child is nearly 12. It is reasonable for the wife to maintain her position about part-time employment and care for the children for about another four years. By then she will be over 50. While she has been able to obtain employment her skills and experience are limited. She is not had the opportunity to improve her qualifications in the way the husband has because she has been caring for the home and children.
The husband is younger than the wife, well qualified and experienced, and should be able to maintain his current level of remuneration for
20 years or more.
The husband has a good standard of living, including overseas holidays. He is playing a substantial amount of child support, but that does not affect his standard of living.
The marriage lasted 16 years. The husband leaves the marriage with a substantial and a secure income. The wife does not, to a large extent because she was the principle home maker and child carer throughout the marriage. She maintains the principle child caring role.
This is not a case where one party’s income is limited to a substantial extent solely because of the need to care for children. The wife's income earning potential is limited even without the child care consideration.
The husband’s salary plus bonus is $146,000 a year. Tax is about $44,000 a year and he is paying about $21,000 a year in child support. But that leaves him with about $85,000 a year. That contrasts with the wife’s $18,000. She receives the child support and government benefits, but she has the children for the major part of the time.
This calculation, using present-day figures, shows the husband’s substantially superior position. He has $85,000 a year after paying tax and child support. If that is reduced by another $26,000 ($500 a week for rent or mortgage payment), to balance against the wife having the home mortgage free, he is left with $59,000. That is $41,000 a year more than the wife's $18,000. In the six years until the younger child turns eighteen he will have nearly $250,000 more of his income available after he has paid tax, rent and child support. Another illustration is that the husband has been able to pay his legal expenses, while the wife has had to borrow to pay hers.
The wife’s income can increase when she no longer has the children, but there will still be a substantial difference.
Counsel for the wife referred to the approach in Clauson and Clauson [1995] FLC 92-595. He referred to the passage at 81, 911 where the court said that a number of cases justified assessment outside the range between 10% and 20% and that it is a real impact in money terms which is ultimately the critical issue.
He referred to Best and Best [1993] FLC 92 418. At 80, 295 the Court said that the most striking feature in the case was the husband’s substantial income. He had the capacity to steadily earn his way out of the financial position he was in. The wife had no such capacity. The court said this was even more significant because the husband had acquired and developed his professional skills during the marriage and the wife had lost the professional skill she had at the time of the marriage.
This case is not directly analogous to either of these Full Court decisions, but much of the reasoning is applicable. This is a case where the husband has left the marriage with a substantial ability to earn income, and the wife has not.
The non-superannuation property is $641,929 and the superannuation, at current value, $155,591. The husband has sufficient income to re establish himself financially, including borrowing to purchase a home. He can do this while still maintaining a reasonable standard of living. The wife does not have the ability to do any more than maintain herself and the children. She has limited, if any, ability to borrow money.
The case is one which requires an adjustment of more than 10% to 20% for the non-superannuation assets. An adjustment of 25% means the wife receives $481,446 and the husband $160,482. This adjustment reflects the husband’s superior earning capacity, length of time he can expect to remain employed and limitation on the wife’s earning ability because she still has the care of the children under the age 18.
So far as superannuation is concerned, the wife will no longer have the care of a child under the age of 18 when she reaches an age when she can access superannuation. The difference between her position and the husband is again the disparity in income earning ability. An adjustment of 10% gives the wife 60% of the value at time of separation $73,745 and the husband $49,163. The increase in the husband's superannuation since then illustrates his greater earning ability.
Just and equitable
If the wife retains the Property G house and the husband Property C the assets will be:
Wife
Property G $510,000
Savings at separation $400
Share of managed funds $15,700
Total $526,100
Husband
Property C $58,238
Managed funds $38,013
BHP shares $6,624
Savings at separation $4,300
Motor vehicle $5,092
Share of managed funds $8,275
Credit card debt -$4713
Total $115,874
A 75/25 division is $481,446 to the wife and $160,482 to the husband. If the assets are divided in this way the wife must pay $44,653 to the husband. To pay this the wife would have to borrow.
The husband's position is that he wishes to purchase a home for himself and argues that the justice and equity of the case requires that he be paid a cash amount. The wife argues in reply that he will have capital in the form of equity in the Property C property and the investment funds and shares.
The wife gave evidence that she had trouble obtaining a loan of $10,000 from a bank for legal costs. If the wife is ordered to pay $44,653 to the husband, and she cannot borrow, the house will have to be sold. The cost of sale, purchase and relocation will reduce the standard of housing available for her and the children by more than the amount to be paid to the husband.
In a trial affidavit filed in February the wife said that if she could receive the house unencumbered she would make no claim on the husband's superannuation. That is not the case she put at the hearing. Her claim is for an 80/20 split of all assets including superannuation. However, what she says in her affidavit is specific evidence from her that keeping the house is more important to her than having superannuation.
The just and equitable solution is to increase the amount the husband receives in superannuation. The disadvantage to him is that it is not an immediate benefit. He will be able to purchase a residence without it, probably at the same standard by increasing his borrowings.
The total value of superannuation at separation was $122.909. A 60/40 split gives the wife $73,745. She had $11,595 of superannuation herself at separation and so a 60/40 split means a transfer to her of $62,150 from the husband's superannuation. If the $44,653 adjustment for non-superannuation assets is taken directly off this amount it reduces it to $17,497.
This simple reduction would not be fair to the husband. His preservation age for superannuation is 60, more than 16 years away. A disadvantage to the husband is that if the adjustment is solely through superannuation he does not have a choice. It must remain in a superannuation fund. If he was paid a cash amount he could chose to use it to help purchase his own residence, put it into superannuation, or spend it in other ways.
The wife has limited ability to increase her superannuation. The husband does. The husband should be able to remain in well-paid employment until he is 65 if he so chooses. He can make substantial contributions to superannuation and so have a reasonable retirement income. The wife cannot do this.
Any additional superannuation the husband has now contributes to his retirement income. He has the ability to purchase a residence for himself. The wife in her trial affidavit filed in February 2007 said she would forgo any superannuation if she received the house.
These considerations lead to the conclusion that the just and equitable way of putting into effect the findings I have made on contributions and needs is for the wife to have the house as Property G unencumbered with its contents and her motor vehicle, and for the husband to retain Property C and its contents, the managed funds, and BHP shares, motor vehicle and each retain their superannuation.
I certify that the preceding eighty (80) paragraphs are a true copy of the reasons for judgment of Phipps FM
Associate: Jan Smith
Date: 17 September 2008
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