Steele & Stanley
[2008] FamCA 83
•8 February 2008
FAMILY COURT OF AUSTRALIA
| STEELE & STANLEY | [2008] FamCA 83 |
| FAMILY LAW - PROPERTY - Contributions, add-backs and defined benefit superannuation - A complex factual scenario where significant contributions where made on behalf of the wife - Whether post-separation expenditure should be added back into the pool of assets – Whether funds used to pay legal fees should be added back into the pool of assets – Whether liabilities incurred in relation to post-separation expenditure added back should also be taken into account – Discussion of principles to be applied when determining whether to add back funds expended post-separation – A large defined benefit superannuation fund which was accumulated over a long period before and after cohabitation. |
| Hickey and Hickey and A-G for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 JEL v DDF (2001) FLC 93-075 Bonnici (1992) FLC 92-272 | |
| APPLICANT: | Ms Steele |
| RESPONDENT: | Mr Stanley |
| FILE NUMBER: | SYF | 4369 | of | 2005 |
| DATE DELIVERED: | 8 February 2008 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Benjamin J |
| HEARING DATE: | 8, 9, 10 and 26 October 2007 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Simpson S.C. |
| SOLICITOR FOR THE APPLICANT: | Adrian Twigg & Co. |
| COUNSEL FOR THE RESPONDENT: | Mr Hallen Q.C. |
| SOLICITOR FOR THE RESPONDENT: | Wyatt Attorneys |
Orders
The wife pay to the husband the sum of $577,237.00 within ninety (90) days from the date of the making of these orders.
(a) pursuant to Section 90MT(4) of the Family Law Act 1975 (as amended), the base amount of $268,291.00 (hereafter the "base amount") shall be allocated to the wife in respect to the husband’s superannuation interest in the D superannuation scheme.
(b)pursuant to Section 90MT(1)(a) of the Family Law Act 1975, whenever a splittable payment (within the meaning of section 90ME of the Family Law Act 1975) becomes payable to or on behalf of the husband from his interest in the D superannuation scheme, the wife is entitled to be paid the base amount of the splittable payment and there is to be a corresponding reduction in the entitlement the husband would have had but for these orders at the time of the splittable payment.
(c)Pending the payment to the wife or otherwise the rolling over of the wife’s entitlement:
(i) The husband is restrained from dealing with, charging, encumbering or disposing of any entitlement he has under the D superannuation scheme other than in accordance with the terms of these orders or with the consent of the wife.
(ii) The husband shall immediately revoke any binding nomination of beneficiary and be restricted from making any binding nomination in favour of any person which nomination would have the effect of rendering that payment a non-splittable payment and/or extinguish or reduce the entitlement of the wife under these orders.
(d)These orders shall be binding upon the husband, his heirs, executors, administrators and personal representatives.
(e)The wife serve these orders upon the trustees of the D superannuation scheme (such service to be by ordinary pre paid post) within seven (7) business days of the making of these orders and that the operative time for these orders be seven (7) business days after the said service of these orders on the Trustees of the D superannuation scheme.
The husband retain to the exclusion of the wife the items of personal property, superannuation, savings, motor vehicle, furnishings, furniture and household effects in his possession or control as at the date of these orders.
The wife retain to the exclusion of the husband the items of personal property, superannuation, savings, motor vehicle, furnishings, furniture and household effects in her possession or control as at the date of these orders.
This case be removed from the list of cases requiring determination.
All subpoenaed documents be returned to the persons or institutions from which they emanated and all exhibits are returned to the person or persons who tendered the same.
IT IS CERTIFIED
Pursuant to Rule 19.50 of the Family Law Rules 2004 it was reasonable to engage Senior Counsel to attend for each of the parties.
IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice Benjamin delivered this day will for all publication and reporting purposes be referred to as Steele & Stanley.
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYF 4369 of 2005
| Ms Steele |
Applicant
And
| Mr Stanley |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings are between the wife and the husband for property orders under s79 of the Family Law Act 1975 (“the Act”).
The wife seeks orders that:-
1.The wife pay to the husband the sum of $100,000.00 within 2 months of the date of the making of orders.
2.The husband transfer to the wife the furniture and contents of the former matrimonial home at [W].
3.The wife be entitled, as against the husband, to the proceeds of sale of the former matrimonial home at [W].
4.Otherwise, each party retain any assets or possessions in their name or control, and retain to the exclusion of the other any superannuation entitlements standing in their name or to their credit.
The husband seeks orders as set out in his case outline, which are said to be as follows;
His [the husband’s] proposal, in broad terms is that the wife pays to him within 28 days of the date of the making of the Orders the sum of $550,000.00 in full and final property settlement. He is content for each of the parties to retain any assets, or possessions, in his, or her, name, to the exclusion of the other, and any superannuation entitlements standing in his, or her name, or to his, or her, credit. In the alternative, his proposal is that the proceeds of sale of the [W] properties, after payment of the liabilities secured thereon have been paid, should be divided in the proportion of 60% to the wife and 40% to him. In addition, the husband seeks the division of household furniture, and effects, excepting those for the mutual use of the children, in the same proportions, between the wife and the husband, with such division to be by agreement of the parties. In relation to other property, that pursuant to section 90MT(4), of the Family Law Act, 1975 the base amount of $205,000.00 be allocated to the wife in respect of the husband’s superannuation in the [D superannuation scheme] and consequential orders in respect thereof. The husband also seeks an order for costs, in terms that the wife pays his costs of the proceedings.
In these reasons any statement of fact is to be treated as a finding of fact, unless in the context of a statement it reads to the contrary. In these reasons I have rounded most sums to the dollar, rather than have regard to cent balances.
BACKGROUND
In the history of the marriage provided by each of the parties there are at times at variance, some of these issues of fact could have been resolved by production of records from various Land Titles Registers. There are also discrepancies as to when some events occurred. Examples of these are:-
-the date the husband was promoted;
-the date the wife underwent surgery to her back;
-the amount of the mortgage on the husband’s unit at G purchased in November 1982;
-the date on which the husband received compensation for injuries arising out of a sporting activity when he was at work;
-the net proceeds of sale of the wife’s home unit at B in 1984;
-the commencement date and time periods of the husband’s study towards his undergraduate and postgraduate university degrees;
-the amount the wife received for the sale of the property in Western Australia. There was also an issue as to how the money was applied although on both versions it was applied for the benefit of the family;
-the precise sale price of the land at K, sold by the wife;
-the net proceeds of sale of the husband’s home unit in G in about May 1990;
-the extent of the non-family mortgage advances in respect of the purchase of the property in Canberra;
In that regard the submissions made by both Senior Counsel was that those differences were such that I should determine that the general contributions towards the non-superannuation property (both financial and non-financial) made by the parties during the course of the marriage were equal. This being subject to otherwise dealing with initial contributions, bequests made during the time the parties cohabited and money advanced to the wife by her family. I have accepted and adopted those submissions.
The husband is aged 55 and the wife is aged 53. They married in May 1984 and separated in August or October 2004, this being a marriage of over 20 years.
There are three daughters of the marriage, N aged 20, A aged 18 and H aged 14 almost 15. In 2007 H was in year 9 and A in year 12 at a private secondary school in Sydney. N has been living with the husband for about the last twelve months but she has recently commenced spending one to two nights per week with the wife. The relationship between the wife and N is somewhat volatile. N had recommenced tertiary studies earlier in 2007 and completed one semester but she has now withdrawn from that study.
The husband earns about $122,000.00 per annum and in 2007 he paid child support of $409.00 per week for A and H and he meets some of N’s living expenses. That child support will reduce in 2008 as A has now completed her secondary education and in December 2007 attained the age of 18 years. In respect of A and H, the husband paid one half of their private school fees and half of the extras in relation to those school fees.
The evidence was that A would complete her secondary education in 2007 and that she proposes to enrol in University in 2008 and undertake study towards an undergraduate degree. From there she has ambitions to study medicine, as a second tertiary degree. For the year 2008 A is considering residing in University accommodation. The parties have both contributed to the private education of the children in the past and they have supported N in her tertiary studies. I infer that they will continue to financially support A in her tertiary studies.
The parties’ marriage was dissolved in November 2005. In December 2005 the wife married Mr Steele. The wife and Mr Steele have resided together since their marriage and they have a stable relationship.
The wife relied upon her affidavits filed the 20 November 2005 (“the wife’s affidavit”) and the 19 July 2006 (“the wife’s second affidavit”), her financial statement filed the 20 November 2005 and an affidavit of Mr Steele filed the 3 October 2007.
In evidence in chief a statement was tendered[1] by the wife providing updated financial details and some alterations to her earlier affidavits.
[1] Exhibit “W2”.
The husband relied upon his affidavits filed 20 November 2006 (“the husband’s affidavit”) and filed in Court on 8 October 2007 (sworn 24 July 2007) (“husband’s second affidavit”) together with his financial statement filed 20 July 2007.
The husband, the wife and Mr Steele were cross-examined on their respective evidence.
The wife says the parties separated under the same roof in August 2004, the husband disputes this assertion. Both parties agreed that in about October 2004 the husband left the former matrimonial home and the parties have not since cohabitated nor lived under the same roof since that time The difference in the date of separation is not of any significance in terms of the substantive issues I need to determine. It is likely that the wife formed a view that the marriage was at an end in August 2004 and that the husband had a different view. In any event, I do not make a specific date finding in this regard, as a finding was no doubt made in the divorce proceedings. I am satisfied that the separation occurred between August and October 2004.
The parties relied upon four affidavits of a single expert, Ms B. These affidavits were filed the 24 November 2006, 6 December 2006, 18 April 2007 and the 3 October 2007. The expert was cross-examined by Senior Counsel for each of the parties. She provided additional information with regard to various issues of valuation and after giving oral evidence on 9 October 2007 leave was given (by consent) for her to provide a further report with regard to the issues and for the parties to ask further questions of her.
Additionally the parties relied upon a further affidavit of the expert filed 26 October 2007. During the hearing the expert provided hand-written notes calculating the value of the wife’s interest in the company, L Pty Limited assuming the life expectancy tables of 7.07 years and capital gains tax payable on realisation of the assets[2]. In terms of the expert her qualifications were not challenged by either party and her methodology was sound, I accept her evidence
[2] Exhibit “W3”.
The husband’s evidence included the following:-
(a)Exhibit “H1” – the husband’s Group Certificate regarding his lump sum superannuation payment made in July 2000. The wife asserted that the lump sum received by the parties from the superannuation when the husband resigned from his position in 2000 was $170,000.00. On balance, I prefer the husband’s evidence in regard to this issue. I am satisfied that the parties received a net amount of about $182,000.00 when the husband retired in about July 2000. This money was applied for family benefit.
(b)Exhibit “H2” – the parties home and contents insurance renewal for 2006/2007.
(c)Exhibit “H3” – the wife’s Westpac Classic Plus account (“Classic Plus Account”) statements from about November 2004 until August 2006 (being statements no. 48 through to 72). This record appears to be incomplete, as in some cases the exhibit contains one of two or one of three pages of the particular statement. Also included in the exhibit was the wife’s Westpac Banking Corporation Equity Access loan account statements from November 2003 to August 2006 (being statements no. 1 through to 11). I will refer to this account as “the Equity Access loan”.
(d)Exhibit “H4” – the husband’s memorandum of costs and source.
The wife tendered in evidence the following:-
(a)Exhibit “W1” – copy letter from Wyatt Attorneys dated 5 September 2007 and copy letter Adrian Twigg & Co. dated the 22 August 2007 in which the husband accepts that “the wife suffers from a chronic back condition”. On the basis of that agreement, which was confirmed in submission by Senior Counsel for the husband during the hearing, I accept and find that the wife suffers from a chronic back condition.
(b)Exhibit “W2” – an updated statement from the wife which was read into evidence (referred to earlier).
(c)Exhibit “W3”- the handwritten document from the single expert referred to earlier in these reasons.
(d)Exhibit “W4” – schedules as to the valuation as to approaches to valuation of the husband’s D superannuation scheme based upon the annual rate of pay of the husband at $120,000.00 and $107,000.00 per annum.
(e)Exhibit “W5” – the wife’s memorandum of costs and source.
(f)Exhibit “W6” – the notice of assessment of the husband’s income from the Australian Taxation Officer for the year ended 30 June 2004.
(g)Exhibit “W7” – the husband’s notice of assessment of income from the Australian Taxation Office for the year ending 30 June 2004.
(h)Exhibit “W8” – Westpac Bridging Option home loan (“Bridging loan”) statements no. 1, 2, 3 and 4. These being in the names of the wife and Mr Steele and were for the period from October 2005 to May 2007. I note and accept the agreed interest incurred by the wife and Mr Steele in respect of that bridging loan on the D property was $307,914.41, and that this sum was paid out of the proceeds of the sale of a property at W.
(i)Exhibit “W9” – the special purpose financial report for the year ended 30 June 2004 for H Pty Ltd.
(j)Exhibit “W10” – the special purpose financial report for the year ended 30 June 2006 for S Pty Ltd.
(k)Exhibit “W11” – service and termination group certificate history for the husband for the financial years from 1995 to 2007.
(l)Exhibit “W12” – the husband’s income tax return for the year ended 30 June 1999.
(m)Exhibit “W13” – the husband’s income tax return for the year ended 30 June 1998. The 1999 and 1998 taxation returns disclose that in 1997/1998 the husband sought a tax deduction for work related self-education expenses of $10,284.00 which included:-
Parking
$92.00
University books
$797.00
Depreciation
$1,278.00
Journals
$415.00
Telephone expenses
$39.00
University course fees
$5,742.00
Union fees
$232.00
Computer equipment & peripherals
$807.00
Internet Service
$110.00
Extra phone line
$122.50
Deductible motor vehicle travel
$645
Total
$10,279.50
In the income tax return for the year ended the 30 June 1999 the husband claimed work related, self education expenses of $11,081.00 which included:-
Books & stationery
$774.00
Depreciation on computer
$1,057.00
Course fees
$7,435.00
Computer consumables & software
$871.00
Internet services
$293.00
Photocopying
$5.00
Travel
$646.00
Total
$11,081.00
(n)Exhibit “W14” – a copy letter from D superannuation scheme customer service representative dated 19 October 2007.
(o)Exhibit “W15” – schedule of tax returns of husband from the financial year ended the 30 June 1992 to the financial year ended 30 the June 2000. These showed the net income of the husband has:-
1991/1992
$36,729.00
1992/1993
$35,727.00
1993/1994
$41,033.00
1994/1995
$42,386.00
1995/1996
$42,386.00
1996/1997
$43,436.00
1997/1998
$38,561.00
1998/1999
$39,525.00
1999/2000
$46,802.00
Each party provided a detailed marital, financial and parenting history, much of which is not in issue.
At the commencement of the parties cohabitation the wife had the following assets:-
(i)Shares in J Pty Limited;
(ii)Shares in V Pty Limited;
(iii)Shares in V1 Pty Ltd (now L Pty Ltd);
(iv)A unit at B which had been purchased by her in the early 1980’s for $95,000.00 utilizing a mortgage of $50,000.00. By the time of the commencement of cohabitation with the Husband, the mortgage was between $47,000.00 and $48,000.00;
(v)A block of land in K (referred to earlier in these reasons), which was unencumbered. This property was sold in March 1988 for $62,000.00;
(vi)A 1978, or thereabouts, 2500 S Triumph motor vehicle. The vehicle was sold for $4,500.00 at the end of 1984;
(vii)A small sum in superannuation;
(viii)Furniture in her B unit
The husband had the following assets at the time of commencement of cohabitation:-
(i)A two (2) bedroom unit at G, which was purchased in, or about November, 1982, for the sum of approximately $84,000.00. At the time of the marriage, the amount of mortgage owing in respect of this property was approximately $38,000.00;
(ii)A 1978 Toyota Celica car;
(iii)Household effects;
(iv)A sum of approximately $7,000.00;
(v)The husband’s D superannuation entitlements.
At the time the parties commenced living together the wife was employed as a teacher. The husband was a senior manager. He had joined his employer in 1969.
The wife’s work history is set out in the wife’s affidavit filed the 20 November 2006. The husband’s work history is set out in the husband’s affidavit filed the 20 November 2006. There is little issue with regard to the parties’ employment histories and I accept each parties’ evidence as to their own employment history. In terms of the husband’s employment, he was promoted to management in 1972, he was promoted to senior management in 1975. The husband was promoted again in about 1990 and has had no promotion since 1995.
During the course of his employment the husband served in the United Kingdom in about 1995, the parties moved to Western Australia in about 1996, they moved to Canberra in 1990 and Sydney in 1994. The husband’s employment led to these moves in residence.
The husband undertook tertiary study after marriage. He was awarded a Bachelor of Arts Degree in 1994 and an MBA in 1999. The husband says his employer paid for most of the fees and tuition with regard to these degrees, however, in the final years of the Masters Degrees, the husband paid significant amounts of those fees from matrimonial funds and claimed those expenses as a deduction against his income[3].
[3] Exhibits W12 and W13.
In terms of the husband’s present service, he receives an income which includes an amount paid through S Pty Ltd (the “productivity benefit scheme”). The whole of the scheme income paid through S Pty Ltd must be applied to the husband, as S Pty Ltd is a single service provider. This is an arrangement which is only available to retired employees who have returned to full time service.
At the time the husband left full time employment in mid 2000, he applied for a Disability Pension. The basis of this claim is set out in the husband’s affidavit at paragraphs 126 to 133. As a consequence of that application the husband has the benefit of a disability pension for life, which is consumer price index adjusted each year. He currently receives about $114.00 per week in respect of that pension.
In April 2000 the husband incorporated S Pty Ltd. The husband operated that company as a consultancy business from July 2000 to date. Initially it was a structure through which he could provide consultancy services to his employer, since his return to full time service it is used for the productivity benefit scheme payments.
The income of S Pty Ltd reduced in 2004/2005 as the husband worked part-time with his employer on a day basis rather than as a consultant through S Pty Ltd. This part-time work provided him with about $12,000.00 in direct income and enabled him to obtain financial assistance for his accommodation. This must also be seen in circumstances of the breakdown of the parties’ marriage at about that time and the husband’s need for accommodation after October 2004.
The husband’s present rent is $510.00 per week of which he is subsidised by his employer to the extent of $311.00 per week. In the 2005/2006 financial years the husband had residential accommodation in Canberra. He allocated part of that cost to S Pty Ltd which operated from that address.
S Pty Ltd was a structure through which the husband could provide consulting services to his employer after he resigned as an employee in 2000. Not all of the fees were paid through S Pty Ltd. H Pty Ltd had accumulated income losses during the time it operated its business at T. In the 2003 to 2004 tax year consulting fees in respect of work done by the husband were paid to H Pty Ltd, this totalled about $87,150.00. After payment of expenses the operating profit of $67,720.00 was set off against retained losses. There was an issue as to how those losses were funded. The losses arose from the operation of the business and I am satisfied that the losses were incurred by both the husband and wife in the day to day operations of their family finances at that time.
In the 2003/2004 financial year the gross consulting fees were received through the efforts of the husband. He paid $87,150.00 through H Pty Ltd and about $16,670.00 through S Pty Ltd making a total turn over of about $103,820.00 in that financial year. In 2001/2002 S Pty Ltd had a turnover of about $126,000.00 and in 2002/2003 it had a turnover of about $196,000.00. The husband described that year as being somewhat out of the ordinary, I accept that evidence. In 2004/2005 that turnover from consulting work had reduced to about $77,438.00. This was in circumstances where the husband was earning income by doing part-time work on a regular basis. This work by the husband provided him with income and subsidised his accommodation. Since that time S Pty Ltd has been used by the husband to collect income through the productivity benefits scheme.
The evidence of the husband is that S Pty Ltd generated income in the 2005/2006 financial year sufficient to repay the loan of $25,585.00 incurred the year before. I accept that evidence and accordingly, I am satisfied that that S Pty Ltd has little value. The wife asserts that it has a value of $3,392.00, presumably from the 2006 accounts[4]. The net assets of S Pty Ltd as at the 30 June 2006 were $3,293.00. From the accounts of the previous year the expert treated the value of S Pty Ltd as negative $19,000.00, based upon the 2005 balance sheet showing that company having a net capital deficit of $18,184.22 and her view that the appropriate methodology was an a net asset backing method. I find that S Pty Ltd had a value of $3,293.00 at the date of hearing.
[4]Exhibit W10.
In late 1984 the wife sold her home unit at B and received between $65,000.00 and $67,000.00. That property had been acquired prior to the parties’ marriage.
In April 1986 the wife sold her vacant land at K for $61,000.00 or $62,000.00 this being property acquired by the wife prior to marriage. In 1988 the husband sold his Toyota Celica motor vehicle for $6,200.00. This being the vehicle acquired by him prior to marriage.
In about 1989 or 1990 the husband’s uncle died in England and left the husband about $70,000.00. This bequest was applied for family purposes.
In May 1990 the husband sold his G unit (acquired before the parties married) for between $125,000.00 and $142,000.00.
In July 1990 when the parties purchased their Canberra property, the wife said that she was advanced between about $40,000.00 and $50,000.00 towards that purchase, from her family.
In August 1994 the wife asserts her father gave her $37,000. The husband said the wife’s father lent the parties $47,000.00. There is no issue that money was provided by the wife’s family. In 1997 the wife claims that the loan from her parents, in relation to the purchase of the Canberra property was repaid from money provided from or on behalf of her parent. I accept that evidence.
The wife says that the husband received a lump sum compensation payment in July 1996 for about $17,750.00, I accept that evidence.
In November 1998 the wife received $1,800,066.00 from her family through one of the family companies. The wife also received from her family a consequential interest in L Pty Ltd, which I have determined as having a value at the date of hearing of $476,760.00. The husband made no contribution to the creation of these assets and they are attributed solely to the wife as a contribution from her family on her account.
L Pty Ltd was originally incorporated under the name V1 Pty Ltd in about January 1967 and was a company controlled and/or owned by the wife’s parents.
The wife she applied the $1,800.066.00 as follows:-
(a)discharge of the mortgage on property at R. She said the discharge amount was $130,000,00 the husband says it was much less than that sum. The wife’s evidence was that the parties sold the Canberra property for $600,000.00 (this amount is not in issue) and paid $16,750.00 agents commission and repaid a mortgage of $82,176.00 leaving a balance of about $501,000.00. The husband says that his employer met the agents fees as part of the benefits of his service (I accept his evidence in that regard) and says further that the mortgage was $60,000.00. Neither party provided objective evidence in respect of the mortgage discharge amount. As such I find that the net proceeds of sale of Canberra property was between about $520,000.00 and $540,000.00. The parties purchased the R property for $667,000.00. The costs and stamp duty in respect of that purchase were paid for or reimbursed to the parties by the husband’s employer. As such the parties needed to borrow about $147,000.00 or $127,000.00 to complete that purchase. I find that the wife’s family advanced $47,000.00 by either loan or gift, leaving a need to borrow between $80,000.00 and $100,000.00. I accept that the parties borrowed a further $30,000.00 for renovations and that on balance I find the amount paid to discharge the mortgage on the R property was about $130,000.00;
(b)to pay out a lease on a Fairlane motor vehicle used by the wife which debt, at that time, stood at $36,000.00. The wife was not cross-examined in respect of this repayment, as such I treat it as not being in issue.
(c)to invest $1,389,000.00 in the purchase of the property at T and the associated business;
(d)the balance was expended on repairs and improvements to the T property and the business expenses.
I am satisfied that the whole of the $1,800,066.00 was applied to the benefit of the family.
In January 1999 the wife purchased a business and freehold land at T for $1,320,000.00. In the wife’s affidavit she asserts that the investment in that property was $1,389,000.00. I am aware that stamp duty and legal costs would have been incurred on that purchase and from the evidence I infer that about $69,000.00 was expended in such acquisition of costs. The freehold was registered in the wife’s name and the business was acquired by E Pty Ltd a shelf company operated by the parties and the shareholding of which was owned by the parties. This company subsequently changed its name to T Business Pty Ltd and later (the husband’s evidence is July 2001) it changed its name to H Pty Ltd.
The wife operated a business from the T property and spent about $400,000.00 on capital works to the land and improvements. The husband assisted with that business and with some work on the property. In 1999 the wife’s health was problematic and the husband assisted her from time to time with regard to family duties and with the business.
In September 2000 the husband was paid $182,000.00, by way of partial commutation of his D superannuation scheme entitlement. There was an issue about the quantum of this payment and having regard to the evidence of the husband and exhibit “H1” I find that the payment to him was about $182,000.00. This money was applied for family purposes. It was part of the D superannuation scheme benefit accumulated between 1969 and 2000. I have had regard to this finding in making contribution determinations in these proceedings.
In May 2000 the husband received $170,000.00 from his late mother’s estate which was applied for family purposes.
In early 2004 the wife’s father gave the parties $60,000.00 to assist in the payment of the children’s private school fees.
At about the time the wife received the sum of $1,800,066.00 set out earlier an additional sum of about $1,000,000.00 was applied from that source for the purchase of the Bidvest shares (“Bidvest”). These shares were acquired by L Pty Ltd. In October 2004 Bidvest acquired all of its own shares listed on the Australian Stock Exchange. As a result further money was paid to the wife from that source.
The husband claims that, in about April 2004, the wife received about $512,028.00 from the sale of Bidvest in two instalments in 2004 and that part of that sum, vis $20,000, was possibly director’s fees. The wife said she received a single payment $592,000.00 from the sale of Bidvest. There is no issue that the wife receives somewhere between $512,000.00 and $592,028.00 in from the sale of those shares. There is a difference of about $80,000.00 in terms of quantum of this contribution from the wife’s family. The husband submits that $60,000 of that amount may have been given to the wife in cash.
The wife was the person who received this amount and was not cross-examined as to that difference. I find that the wife received the sum of $592,000.00 from Bidvest and it ought to be treaded in the same way as the earlier payment of $1,800,066.00.
The proceeds of the sale of Bidvest shares were said by the wife to have been applied to pay out an overdraft facility with Westpac, towards the refurbishment of the house, the children’s school expenses, horse riding expenses and various motor vehicles. The wife says, and I accept, that ultimately the benefits of the sale of Bidvest represented a return of her loan capital as set out in paragraph 87 of the wife’s affidavit. I am satisfied that those monies were expended to pay out the overdraft facility with Westpac (raised in respect of refurbishments and applied towards expenses of the children, parties and motor vehicles). This is a further contribution from the wife’s family and I have had regard to it in terms of the contributions by or on behalf of the wife.
In relation to the motor vehicles the evidence of the parties seems to be that in about 2001 the parties owned the Fairlane motor vehicle (referred to above) and a four wheel drive. The wife had purchased a four wheel drive for about $56,000.00 in June 2000. The Fairlane motor vehicle was traded-in to enable the purchase of a Jaguar for the husband, the cost of which vehicle was about $108,000.00. The purchase of this vehicle was funded or partly funded by way of a lease.
In about 2002 the wife purchased for the husband a second Jaguar motor vehicle at a cost of about $80,000.00.
In October 2004 the four wheel drive was traded in for a consideration of $31,000.00, which sum was applied towards the purchase of a motor vehicle (for the wife) at a cost of about $110,000.00. The wife also traded in the husband’s first Jaguar for $61,000.00. At that time the lease payout on this vehicle was about $82,000.00. The amount of $21,000.00 needed to payout the lease was paid by the wife from funds in her control.
After the sale of the T property in 2000 the wife purchased the C street property at W (“C Street”)for $1,360,000.00. This property purchase was funded in part from the proceeds of sale of the business at T. Also used to fund this property development were monies raised by way of a bank loan arising from the transfer of the husband’s interest in the R property to the wife.
At paragraph 66 of the wife’s affidavit she asserts that the purchase price of the property was entirely funded by her from the proceeds of sale of the T property. The wife admits that the Husband transferred his half share of the R property to her, for a consideration of $550,000.00. The wife says that she paid stamp duty on the transfer of the husbands half share of about $21,000.00 (the whole value being $1,000.000.00) by using funds which included the $500,000.00 to pay out the husband.
The wife asserts that she undertook refurbishment of the C Street property, including structural changes to the dining room and two upstairs rooms, extensive works downstairs and rebuilding the garden and spent just over $102,000.00. The wife asserts the husband did not assist in the payment of these costs, I do not accept that submission. I find that by the husband transfer of his half share of the R property to the wife was a contribution by him to that property.
In mid 2002 the C Street property was sold for $1,715,000.00 on the evidence of the wife, and $1,900,000.00 on the evidence of the husband. The proceeds of sale were applied to payment of the then mortgage on the W property, reducing the debt on that property to “something over $460,000.00”[5]. This assertion of fact was not challenged by or on behalf of the husband.
[5] Paragraph 72 of wife’s affidavit
In February 2002 the wife had purchased the W Property. The purchase price was $1,900,000.00. The purchase monies for the W Property came from the proceeds of sale of the R Property plus a bridging loan of about $1,200,000.00. The wife says that about $400,000.00 was expended on the renovation of that property.
Shortly prior to the wife’s marriage to Mr Steele, the wife and Mr Steele jointly purchased the D Property. The purchase price for that property was $3,200,000.00. The wife and Mr Steele each paid $80,000 by way of deposit. There was stamp duty paid of about $165,000.00. The amount of $3,440.000.00 needed to fund the purchase of the D property borrowed by way of a bridging loan from Westpac Bank. Mr Steele applied about $700,000.00 from the sale of his property. Included in the capital reductions made by Mr Steele were the proceeds of sale of a home unit he had previously purchased for his daughter’s use in the Australian Capital Territory.
Mr Steele later drew back funds from the Westpac loan facility to pay for work to be done on the D Property.
The D property is now unencumbered. The home on that property is set on about twelve acres of land. That home has several bedrooms and the property includes both a tennis court and a swimming pool.
The wife had been endeavouring to sell the W property since it was first listed for sale in May 2005. In early 2006 a valuation of the W property was obtained by the parties’ solicitors and the value of the property at that time was said to be $2,750,000.00 at that time. The W Property was sold in May 2007 for $2,960,000.00 The proceeds of sale were applied as follows:-
(a) payment of out the bridging loan over D property $2,412,115.00
(b) the wife $250,489.00
In addition to the sum of $250,489.00 the wife also received $237,250.00 being the balance of the deposit on the W Property, making a total of about $487,239.00 paid to her or controlled by her. With that sum the wife paid out the equity access loan, bringing it back to about a nil balance. The wife then drew $200,000.00 against the equity access loan to repay a debt to her sister. I find that the loan from the wife’s sister was used by the wife for family purposes and that it has been repaid as asserted by the wife.
The purchase of the D property, in the absence of the sale of the W property is a premature distribution of capital and I propose to allow the add-back of the bridging loan interest paid out of the proceeds of sale of the W property.
As I have indicated earlier in these reasons, the agreed amount of the bridging loan interest incurred on the purchase of the D property is $307,914.00 and that sum was paid out of the proceeds of sale of the W property. That interest was included in the $2,412,115.00 be paid to Westpac on the W property settlement.
In June 2007, the wife purchased a motor vehicle for $34,000.00 for the parties’ child, A. The parties agree that this vehicle has a present value of $24,000.00 and I determine that in the circumstances of this case it should be regarded as an asset of the wife, this is the approach adopted by both parties in their respective case outlines.
In the wife’s second affidavit she deposed the following expenditure between October 2004 and July 2007:-
Children – living
$51,653.00
Children – horses
$37,198.00
Car
$24,759.00
School
$49,212.00
Medical net out of pockets
$17,096.00
Bank interest - Equity Access Loan
$63,325.00
House outgoings
$24,890.00
Holidays – children
$7,800.00
Holidays – self
$18,900.00
Domestic assistance
$10,460.00
Telephone – wife
$2,000.00
Telephone – children
$4,000.00
Total
$311,293.00.
It was submitted that this was excessive expenditure by the wife. In the context of the way this family operated, before and after separation, I reject that submission and do not make that finding. However, some expenditure was personal expenditure. Insofar as the holiday expenses of the wife are concerned they ought to be added back bearing in mind the reduction of capital that was the effect of the family expenditure. It was a premature distribution of assets by the wife to spend that amount on herself, without an add back consequence, particularly bearing in mind the then financial circumstances of the parties.
The wife’s evidence was, and I accept, that some of the estimates set out above were conservative calculations and that such expenditure may have been greater.
The way the wife operated the family finances, both after separation and for a period of years leading up to separation, was that the wife paid day to day expenses from her Classic Plus account. When that account was short of funds, the wife topped it up with borrowings from the Equity Access Account. There was some issue about whether the husband knew about the particular Equity Access Account. I am satisfied that the parties had such an account during the later years of their relationship, and that such account was closed and the debit balance was transferred into an Equity Access Account in the name of the wife.
There was cross-examination of the husband in relation to his income prior to leaving his employer subsequent to that time. His income schedule from his employer was tendered[6]. I accept that evidence and make findings in terms of the schedule.
[6] Exhibit W11.
The husband is presently employed as a senior manager. The husband was employed with the same employer from 1969 until about June 2000. From June 2000 he provided consulting services to that employer primarily through S Pty Ltd.
The husband commenced part time work with that employer from about October 2004 and in August 2005 the husband re-commenced full time employment. As a consequence of this employment he is entitled to subsidised accommodation. When the husband returned to this employer he was able to re-enter the D superannuation scheme.
The husband’s contract with his employer presently extends to the 11 February 2009. I accept the husband’s evidence when he said that his present intention is to complete that contract (at which time he will be aged 56) but his options after that date are yet to be determined by him. I infer from the husband’s work history to date and from his good health that he will continue to be in paid employment after that date, either part time or undertaking his consultancy work
The incomes of both the husband and wife, earned during the marriage, was used to assist in the acquisition of various real estate and chattels owned by the parties and also to pay for the living expenses of the family throughout the marriage.
The wife made a contribution to the welfare of the family in the role of homemaker and parent including the performance of domestic work, daily care and upbringing of the three children of the marriage. This was in circumstances where the husband was, from time to time, away with work or undertaking studies. The husband also made a contribution to the welfare of the family in the role of homemaker and parent. He assisted in the care of the wife when she undertook various medical procedures during the marriage.
After marriage and prior to 1998 the properties purchased by the parties were purchased in joint names, including the R property. After 1998 real estate was purchased in the wife’s name alone.
The R property was jointly purchased by the parties in August 1994. In 2001 the husband’s one half share in the property in the R property was transferred to the wife. The property had a value at that time of $1,100,000.00. The wife borrowed $500,000.00 to pay out the husband in respect of his share. That money was paid as follows[7]:-
[7] Annexure “L’ to wife’s affidavit filed 20 July 2007.
Bank fees
$300.00
Commonwealth Bank of Australia (repayment of business loan)
$104,344.00
L Pty Ltd (repayment of loan)
$100,000.00
Repayment of loan to wife’s sister
$50,000.00
The wife
$70,000.00
H Pty Ltd
$100,000.00
Wife
$73,240.00
Registration charges
$174.00
Stamp duty on mortgage
$1,941.00
Total
$499,999.00
The $500,000.00 was not paid to the husband but was applied for the benefit of the family. The repayment out of the Commonwealth Bank loan in respect of T business was a contribution towards that property and/or business and the repayment of a loan to L Pty Ltd was by way of contribution to another property.
I accept that the sum of $50,000.00 paid to the wife’s sister was the repayment of a legitimate loan. The payment to the wife of $73,240.00 was said by her in evidence to be a payment for shares. In her affidavit the wife deposes that the $73,240.00 was paid to H Pty Ltd reflecting a loan due to that company. Whichever, the proceeds of sale of the R property were applied for the benefit of the family.
About twelve months after the transfer of the R property to the wife that property was sold to L Pty Ltd. The sale price was $1,250,000.00, thus making a gross surplus to the wife of $150,000.00. The sale of that property to L Pty Ltd enhanced the profit in that there was no agent’s commission on the sale and the property was sold at a time that suited the needs of the parties at that time.
The wife claims financial contributions which she said were significantly greater than the husband, who had also made additional financial contributions. The wife says that her greater financial contributions should provide to her a significantly greater percentage of the shared asset pool.
Both the husband and wife were challenged in cross-examination as to the accuracy of their evidence. They both gave their evidence clearly and carefully and I find that the evidence of neither party was seriously impeached. The husband and wife both gave evidence from their own subjective perspectives.
The court had the benefit of observing the husband, the wife and Mr Steele under cross-examination. It was submitted, on behalf of the husband, that his evidence ought to be preferred to that of the wife. Senior Counsel for the husband submitted that the wife prevaricated, gave carefully worded answers and at times was evasive.
I find that the wife was not endeavouring to mislead or deceive the court but that she was endeavouring to provide evidence as accurately as she could. As is always the outcome in cases rich in factual issues, of which as is this one, errors will be made. In this case each party made small errors from time to time but I am satisfied that each endeavoured to accurately depose as to their recollection of events as best as they could remember them and from their respective subjective points of view
In terms of one particular submission, I find that the wife has not adduced any evidence as to the limits of her borrowing capacity. Her evidence is that she will borrow funds necessary to satisfy any order of the court and then repaid the borrowing and accrued interest by liquidating her interest in L Pty Ltd at whatever value it is at the first date that she is entitled to do so. I am not satisfied that she will need to sell or otherwise liquidate her interest in L Pty Ltd to meet the property orders made in these proceedings.
Mr Steele gave evidence in accordance with his affidavit filed on the 3 October 2007. I generally accept his evidence. He was challenged in relation to the discrepancy in his income between the information he had provide the wife in July 2007 and different amounts contained in his affidavit. His explanations were clear. The estimate of his income he gave the wife was at a time before he had completed the detail of his tax return. He refined that information in his affidavit, after lodging his last tax return. Similarly, when he checked his superannuation for his own affidavit he found that the information given to his wife was not entirely accurate and he clarified that evidence.
Mr Steele owes his parents about $430,000.00. After his first wife died, in 2000, he borrowed between $90,000.00 and $100,000.00 from his parents. He repaid part of that sum after that date. He borrowed a further $40,000.00 from his parents after the purchase of the D property to fund some renovations and for the removal of some dead trees. The substantial amount of the loan from his parents involved an amount of $300,000.00 which he used to purchase a home unit for the use of his daughter when she was in Canberra. As I indicated earlier in these reasons that the Canberra home unit was sold and the proceeds were paid to reduce the bridging loan which was used to fund the purchase of the D property.
When the mortgage on the D property was paid out after the sale of the W property, the impact of that was to contribute $250,000.00 to Mr Steele’s proportion of the mortgage. However Mr Steele had previously advanced to the wife sums of $85,000.00 which was set off against this sum of $250,000.00. Therefore the wife has an asset of $165,000.00 being the money owed to her by Mr Steele for his interest in the D property.
Mr Steele applies his income to the support of the whole of his family which comprises of himself, his two children (aged 26 and 22 who are both in tertiary study in one form or another), the younger two children of the husband and the wife and to a lesser extent, N who now occasionally visits the wife and her siblings at the D property. Mr Steele’s income is approximately $160,000.00 per year and is applied wholly towards the support of that blended family unit.
The wife’s interest in the D property is $1,920,000.00. There was some debate as to the value of this property although no expert evidence was called and neither party sought the appointment of a single expert. I am satisfied its value is as asserted by the wife. In any event the submission of both parties at the conclusion of evidence was that $1,920,000.00 was the agreed value of this property.
There was an issue as to whether Mr Steele supported the wife or whether she supported herself and the children. On the evidence Mr Steele provides support for the wife and that the wife in part supports herself by access to child support and capital.
The principles to apply
The Full Court in Hickey and Hickey and A-G for the Commonwealth of Australia (Intervener) [(2003) FLC 93-143] at 78,386, reiterated the preferred approach to the exercise of discretion in property matters, pursuant to s 79:
“39. The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79 (4) (a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79 (4) (d), (e), (f) and (g), (“the other factors”) including, because of s.79 (4) (e), the matters referred to in s.75 (2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case: Lee Steere and Lee Steere (1985) FLC 91-626; Ferraro and Ferraro (1993) FLC 92-335; Davut and Raif (1994) FLC 92-503; Prpic and Prpic (1995) FLC 92-574; Clauson and Clauson (1995) FLC 92-595; Townsend and Townsend (1995) FLC92-569; Biltoft and Biltoft (1995) FLC 92-614; McLay and McLay (1996) FLC 92-667; JEL and DDF (2001) FLC 93-075 and Phillips and Phillips (2002) FLC 93-104.
40. Section 79, unlike s.78, requires the Court to consider the whole of the property of the parties, however and whenever acquired, notwithstanding that the parties may only seek an alteration of interest in some of that property. As a consequence of the first step in the preferred approach to the determination of the s.79 proceedings, each party to the proceedings has an obligation to make a full and frank disclosure of his/her financial circumstances and all matters relevant thereto: Oriolo and Oriolo (1985) FLC 91-653; Black and Kellner (1992) FLC 92-287; Weir and Weir (1993) FLC 92-338 and Tate v Tate (2000) FLC 93-047.”
Thus the approach in this case involves a number of steps:-
a.The identification of the property and its value;
b.An evaluation of the parties’ contributions having regards to
ss 79(4)(a)(b) & (c);c.Consideration of any adjustment to that assessment having regard to the relevant matters in ss. 79(d),(e),(f) & (g) (“the other factors”) including the matters referred to in s.75(2); and
d.Consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case.
Identification of property and its value
There was a joint balance sheet provided to me which provided the following:-
Proceeds of sale of W property
$0.00
Wife’s interest in D property
$1,920,000.00
Loan to Mr Steele
$165,000.00
Husband’s Westpac account
$203.00
Husband’s AIG shares
$4,480.00
Wife’s AIG shares
$3,541.00
Wife’s David Jones shares
$12,606.00
Husband’s Jaguar motor vehicle
$26,000.00
Wife’s motor vehicle
$60,000.00
Toyota Corolla motor vehicle
$13,000.00
Motor vehicle purchased for A
$24,000.00
S Pty Ltd
$3,293.00
Husband’s house contents acquired jointly
$10,860.00
Husband’s personal effects
$31,000.00
L Pty Ltd
$476,760.00
H Pty Ltd
$0.00
Wife’s house contents
$46,640.00
Gifts to wife from Mr Steele
$9,490.00
Wife’s items from parents
$3,845.00
Wife’s bank account
$450.00
Add back in terms of bridging loan interest on D property
$307,914.00
Add back of wife’s legal costs
$84,018.00
Add back of part of husband’s legal costs[8].
$5,000.00
Add back – wife’s travel
$18,900.00
Total non-superannuation assets
$3,227,000.00
[8]This is the subject of discussion in these reasons in respect of the loan from NAB and from the wife’s sister.
Liabilities
Equity Access loan of wife
$234,000.00
Toyota finance of husband
$14,000.00
Husband’s American Express credit card
$3,700.00
Husband’s MasterCard
$500.00
Personal loan from wife’s sister
$15,000.00
Personal loan NAB[9]
$22,055.00
Legal fees in sale of W property
$1,346.00
Total liabilities
$290,601.00
[9]This amount has been adjusted to add back $21,370 in legal costs, as set out later in these reasons.
Superannuation
Husband’s interest in D superannuation scheme
$670,729.00
Accumulation scheme superannuation:-
- Clearview Superannuation roll-over (husband)
$81,474.00
- Clearview Superannuation roll-over (wife)
$13,831.00
Proceeds of W property
With the balance of deposit and monies paid to the wife from the sale of the W property, the wife received $487,740.00. The wife says that this money has been wholly expended for the benefit of the family. The husband claims the whole sum of $487,740.00 should be added back.
In AJO & GRO [2005] FamCA 195[10] the Full Court reviewed authorities in respect of wastage and add-backs, the Full Court said;
[10] (2005) FLC 93-218 and (2005) 33 Fam LR 134
30. To date, three clear categories of cases have emerged where the Court has determined that it is appropriate to notionally add back to the pool of assets, that is, assets that no longer exist. They are:
(a) Where the parties have expended money on legal fees. In DJM and JLM (1998) FLC ¶ 92-816 the Full Court said at 85,262:
``11.6 For reasons set out in Farnell, s 117 provides that each party to proceedings under the Family Law Act shall bear their own costs unless the Court otherwise orders. Failing to add back monies expended by parties on costs frequently has the effect of defeating the policy of s 117 by permitting the pool of available assets for distribution between the parties to be diminished by any monies that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought to be to add costs already paid back into the pool. Whilst there may be cases where that approach is inappropriate, the reasons why it is not taken ought to normally be spelt out.''
(b) Where there has been a premature distribution of matrimonial assets. In Townsend and Townsend (1995) FLC ¶ 92-569 Nicholson CJ as he then was with whom Fogarty and Jordan JJ agreed, said at 81,654:
``In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which [79618] would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal with the husband's receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.''
(c) In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC ¶ 91-092 at 76,644:
``As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec 75(2)(o) to applications for settlement of property instituted under the provisions of sec 79.''
31. As the Full Court said in Browne v Green (1999) FLC ¶92-873 at 86,360:
``44. We agree with her Honour that the principles stated by Baker J in Kowaliw certainly do not constitute any form of fixed code. They are no more than guidelines for use in the exercise of the discretionary jurisdiction conferred by s 79 of the Family Law Act 1975. Nevertheless, they have over the considerable period of time since they were enunciated, become a well accepted guideline in this jurisdiction — a guideline the use of which assists in the achievement of the important goal of consistency within the jurisdiction.''
In Chorn and Hopkins (2004) FLC 93-204 the husband bought his new partner an engagement ring eight months after separation. It was not purchased with funds the husband had at separation, it was purchased on credit and there was vague evidence that his partner may have contributed to the purchase. The Full Court quoted favourably from para 2.11 of M & M [1998] FamCA 42, 1 May 1998, per Baker, Kay and Chisholm JJ:
"There seems to be no appropriate basis for notionally adding back monies that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support."
It also quoted favourably from para 346 of C & C [1998] FamCA 143, 8 October 1998 per Nicholson CJ, Chris and Kay JJ:
"Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with property getting on with their lives."
In Omacini and Omacini (2005) FLC ¶93-218 the Full Court found that the trial judge had incorporated a number of add-backs without making any specific finding that the expenditure of the husband was wanton or reckless. To justify an add-back, it was necessary to make some assessment of the reasonableness of the husband's expenditures. This had not occurred.
In Townsend and Townsend (1995) FLC ¶92-569 the husband after separation sold a taxi licence. He spent much of the proceeds for his own benefit. Nicholson CJ said at p 81,654:
"In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal with the husband's receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly."
The relevant history in relation to the money in this case is that as at the date of separation the Equity Access Loan was about $213,000.00. As at the time of settlement of the W property the Equity Access Loan had increased to $459,360.00[11]. In addition, the wife owed her sister $200,000.00 which the wife had earlier borrowed to reduce the amount outstanding on the Equity Access Loan account. Thus, the liability on that account had increased to about $659,360.00.
[11] See annexure “B” to wife’s second affidavit
The rhetorical question is how this money was applied.
The husband says not only should the sum of $487,739.00 be added back and the wife should not be allowed the current debit on the Equity Access account of $234,000.00.
The wife has spent about $422,000.00 and her evidence is that is was spent as detailed below, I accept that evidence;
Equity access liability at separation $213,000.00
Interest on equity access account $ 45,000.00
Loan from wife’s sister $200,000.00
Payment on settlement of
W property $459,360.00
Increase in Equity access loan from
$213,000 to $234,000 $ 21,000.00
Amount spent by wife $422,360.00
Balance $680,360.00
Interest accrued on the original equity access loan of $213,000.00 totalling about $45,000.00. I accept the submissions of the wife’s Senior Counsel that the original equity access account plus the interest that would have accrued on that sum ought to be deducted from the figure of $659,360.00 leaving a balance of $401,360.00.
The wife drew from the equity access account the sum of $79,018.00 to pay legal costs. In addition she was advanced $5,000.00 by way of loan from Mr Steele. This makes a total of $84,018.00 in costs paid by the wife[12]. I have dealt with these costs later in these reasons and I have added them back.
[12] Exhibit W5
Mr Steele lent $5,000.00 to the wife for legal costs in November 2005. That debt was set of against the sum of $250,000.00 which the wife paid towards his share of the mortgage. Accordingly in terms of legal costs I will be adding back the whole of the $84,018.00. Taking legal costs into account the amount is reduced to about $338,360.00. It would be ‘double dipping’ to add back the legal costs and then including the same sum paid out of the proceeds of sale.
In annexure “J” of the wife’s second affidavit filed the 19 July 2007 she sets out her “conservative” expenditure between October 2004 and July 2007. This is:-
Children living
$51,653.00
Children horses
$37,198.00
Car
$24,759.00
School
$49,212.00
Wife’s medical expenses
$17,096.00
Bank interest – Equity access loan
$63,325.00
House outgoings
$24,890.00
Holidays – children
$7,800.00
Holidays – self
$18,900.00
Domestic assistance
$10,460.00
Wife’s telephone
$2,000.00
Children’s telephone
$4,000.00
Total
$311,293.00
Included in the above are the wife’s expenses of:-
Car
$24,759.00
Medical expenses
$17,096.00
House outgoings (presumably mostly on D property)
$24,908.00
Holidays self
$18,900.00
Domestic assistance
$10,460.00
Wife’s telephone
$2,000.00
Total
$98,123.00
The children were involved in the equestrian activities, private schools and a relative expensive lifestyle prior to separation. Bearing in mind the principles regarding add-backs I do not accept that these ought to be added back. The children’s telephone and holidays over that period should likewise be treated. In regard to the wife’s car, medical expenses, house outgoings and domestic assistance and telephone these likewise fall into expenses that the wife incurred prior to separation. I have added back the holiday expenditure later in these reasons, and as such the deduction against expenditure should be allowed otherwise the effect would be a double add back.
I accept the submission of the wife’s Senior Counsel that:-
“15.This is not an unreasonable level of expenditure and it is more so when regard is had to the standard of living enjoyed by the parties during the marriage as evidenced by their accommodation and motor vehicles driven by them”
The parties used equity access loan prior to separation. It was part of the way the family operated their finances, from at least 1999. The interest claimed by the wife of $63,325.00 includes the $45,000.00 referred to above and an additional sum of about $18,000.00 incurred with the additional use of funds. To be fair the net expenditure to be deducted should be the $311,293.00 less the $45,000.00 already dealt with above, viz $266,293.00. If this sum is deducted from the $338,360.00 it leaves a balance of about $72,067.00. The wife, in oral evidence, said that her estimates were conservative. The $72,067.00 was applied by the wife for her own living expenses and that of the children.
I will not add that sum back but I have had regard to the whole sum of about $422,000.00 as a significant contribution by the husband post separation. The capital was used by way of the support of the wife and children and is a factor in determining the contributions set out later in these reasons.
Valuation of S Pty Ltd
In terms of the valuation of S Pty Ltd, the single expert undertook the valuation on that company based upon its financial returns of 30 June 2005. At that time the single expert expressed the view that the company had a net deficit value of $19,000.00. This was presumably based upon its balance sheet retained losses of some $18,184.00.
In respect of the accounts for the year ended 30 June 2006 S Pty Ltd made an operating profit of $21,477.00 and was able to set off against that profit the accumulated losses of the previous year of some $18,284.00 giving a retained profit of $3,193.00. This in turn led to the change in the asset position of S Pty Ltd of some $3,292.00 in credit. It was thus submitted on behalf of the wife that this amount ought to be treated as an asset of the parties. The balance sheet discloses that provision was made for income tax on that operating profit and accordingly it was open for the husband to distribute these profits to himself, having regard to his evidence about his requirement to do so, there seems no reason why the asset position of that company ought not to be regarded as an asset in his hands. Accordingly, I will be allowing the value of S Pty Ltd at $3,293.00.
L Pty Ltd
L Pty Ltd was incorporated in January 1967. There are various classes of shares. The wife and her two siblings each owned 13,000 shares. The wife’s father and mother have “A” and “B” shares. These shares give effective control of that company to the wife’s parents. The wife’s father has complete control of the company by virtue of his ownership of the “A” class shares and that control will pass to his wife on his death. The wife’s father is aged 87 and the wife’s mother is aged 86 as at 1 October 2007. Her life expectancy is greater than that of her husband. The principal activity of the company is its diversified portfolio of shares, trust property at Y and a significant amount of cash. The company does not have any employees and has a policy of not paying dividends and the evidence of the expert is that this policy is likely to continue into the future. I have had regard to this fact in terms of my consideration of the capital gains tax issues.
The expert said that prior to 2002 transactions arose within L Pty Ltd which gave rise to significant loan accounts by the company to the wife and her two siblings. The expert says that these transactions related to the liquidation of another family company, the proceeds which were deposited by the wife and her siblings into L Pty Ltd. The loan accounts were gradually repaid and at 30 June 2006 there is no remaining balance.
There is no issue as to the methodology adopted by the expert in respect of valuing the wife’s shares in L Pty Ltd, it is the life expectancy approach and capital gains tax that are in issue.
The first issue is in terms of the discount factor to be applied to the wife’s interest in L Pty Ltd. The issue is whether to adopt a life expectancy of 7.07 years as used in exhibit “W3” or the 6.83% contained in the expert’s report[13] of October 2007.
[13] Valuation of L Pty Ltd as at 1 October 2007, affidavit of expert filed 3 October 2007.
In her affidavit filed the 3 October 2007 the single expert valued the wife’s interest in L Pty Ltd as follows:-
“The present value of the pro rata share held by the Wife in [L] Pty Ltd has been determined by reference to the life expectancy of [the wife’s mother], who is currently 86.13 years old. For the purpose of this report, I have adopted the life expectancy of 6.83 years for a female aged 86 years per the current Australian life expectancy tables. [the wife’s mother] has a longer life expectancy than [the wife’s father] who, at 87 years of age, has a life expectancy of 5.47 years per the Australian life expectancy tables”.
The single expert went on to value the wife’s interest at $490,000.00 applying a discount factor being 6.83 years at 12.5% per annum.
It was argued by the wife that the calculation should be based upon a life expectancy of 7.07 years both because reference to the prospective life tables making allowance for future improvements in life expectancy is logically more appropriate than historical life tables and because it had been endorsed by the High Court in Golden Eagle International Trading Pty Ltd v Zhang [2007] HCA 15;(2007)234 ALR 131.
In that case the paragraphs 68 to 70 set out;
Life expectancy tables
68 The primary judge assessed the plaintiff's life expectancy by reference to historical tables published by the Australian Bureau of Statistics. Those tables were based upon annual information with respect to deaths and made no allowance for any future improvement in life expectancy.
69 The plaintiff submitted at trial that life expectancy should be calculated by reference to certain prospective tables also published by the Australian Bureau of Statistics. Those tables take account of the predicted improvement in life expectancy. The tables look forward rather than confining attention to what history has already revealed about life expectancy.
70 The Court of Appeal held that "it is appropriate for the courts to make their estimations on the basis of the best information available: the projected tables would appear to be a more accurate assessment of future trends than the historical tables." There is no reason to doubt that the Court of Appeal was correct in its conclusion that the projected tables published by the Australian Bureau of Statistics were more likely to give an accurate estimate of future life expectancy than the historical tables published by the Bureau. That being so, it follows that the Court of Appeal was right to conclude that, despite the then prevailing practice in the courts of New South Wales, the primary judge should have used the prospective rather than the historical tables.
Having regard to the submissions made by each party in relation to life expectancy, I adopt the approach submitted on behalf of the wife. I find that the prospective life expectancy tables are to be preferred and as such the gross value of the wife’s interest in L Pty Ltd is $476,760.00.
The second issue is whether capital gains tax ought to be deducted from the determined value of the wife’s interest in L Pty Ltd. The principles in relation to the question of capital gains tax are said, on behalf of the wife, to be identified by the Full Court in Rosati v Rosati (1998) FLC 92-804 where the Court stated;-
“It appears to us that although there is a degree of confusion, and possibly conflict, in the reported cases as to the proper approach to be adopted by a court in proceedings under s.79 of the Act in relation to the effect of potential Capital Gains Tax, which would be payable upon the sale of an asset, the following general principles may be said to emerge from those cases:-
(1)Whether the incidence of Capital Gains Tax should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.
(2)If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any Capital Gains Tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.
(3)If none of the circumstances referred to in (2) applies to a particular asset, but the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid term, then the Court, whilst not making allowance for the Capital Gains Tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s.75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
(4)There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incidence of Capital Gains Tax into account in valuing that asset. In such a case, it may be appropriate to take the Capital Gains Tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.”
This authority continues to be applied by the Full Court in varying degrees, as shown in C & C [1998] FamCA 143; T & T [2003] FamCA 1066; JEL v DDF (2001) FLC 93-075.
In G and G [2001] FamCA 1453 the Full Court appeared to apply a wide interpretation of Rosati and allowed for tax to be taken into account even where there was no sale. The Full Court observed as follows:-
“104.In the course of his oral submissions, senior counsel for the Wife properly conceded that although the court in Rosati (supra) was speaking specifically in relation to Capital Gains Tax, the principles therein stated would extend to ordinary (“mainstream”) income tax. We would perhaps go even further, and say that in our view, where property which is held by a party or the parties to proceedings under s.79 of the Act was acquired as part of a business of acquiring, developing and reselling real property for profit (i.e. essentially, as trading stock of that business) then, in valuing that property for the purpose of the proceeding, the Court should ordinarily take into account both the estimated realization costs and the tax (in that case, “mainstream” income tax) which will ultimately be paid on its sale, even if the Court’s orders leave the property in the hands of one party and the sale of it is not seen as an inevitable or even a likely consequence of those orders. We think that statement falls within the purview of the principle stated in paragraph (2) of the above-quoted extract from Rosati.”
The first step is to determine whether a particular item of property is a Capital Gains Tax asset. If it is, then the court should thereafter proceed on the basis that if the Capital Gains Tax asset is sold then the capital gain, if any, will be included in the assessable income of the party who retains or receives the Capital Gains Tax asset. There is no issue that the assets of L Pty Ltd are capital gains tax assets. This capital gains tax was the capital gains tax calculated in the hands of L Pty Ltd not in the hands of the wife. Capital gains tax in the hands of the wife was not able to be determined.
The wife asserted, in Exhibit ‘W2’, that she would borrow the monies to pay out the husband in respect of any capital payment she is obliged to make pursuant to these proceedings. She goes on to say she will liquidate her interest in L Pty Ltd at whatever value it may be at the first date she is entitled to do so. This does not address the evidence of Mr Steele, that he supports the wife nor does it address the capacity of the parties to borrow elsewhere or to sell the D property and purchase a home of less value.
When considering the other factors with regard to property I shall have regard to the following facts in respect of L Pty Ltd:-
(a)there is a possibility there could be capital gains tax paid on distribution to the wife if she chooses to take capital out of L Pty Ltd if and when it becomes available to her.
(b)L Pty Ltd is an asset which is not readily available to the wife at the present time.
Senior Counsel for the wife submitted that the wife will have to access her interests in L Pty Ltd to satisfy any order, I do not accept that that is the case. The wife is married to Mr Steele and it is a stable relationship. Mr Steele earns income. It is possible that if the wife and Mr Steele reflect on their financial circumstances it may be that the D property needs to be sold.
As I have indicated earlier, the wife adduced no evidence as to her borrowing capacity or that of Mr Steele. The wife and Mr Steele purchased a home of significant value, which may, in all of the circumstances, be beyond their joint means. It does not inevitably mean, in these proceedings, that the wife will have or has access to the funds from L Pty Ltd.
I determine that this is not a matter to which it is likely that the wife will have access to these funds in the immediate future or medium future. Accordingly, I will not be making the adjustment as sought by the wife with regard to the capital gains on her interest in L Pty Ltd.
The other matter raised by the wife was the risk that she may incur liability for capital gains tax in respect of her distribution of her entitlement in L Pty Ltd. This must be seen in the context that the wife’s one third interest in the assets of L Pty Ltd (without a discount factor as at 30 June 2007) was some $1,000,096.00. Whilst there may be some capital gains tax liability, and the single expert was unable to even offer a guess in relation to whether there was such a liability or the extent of such liability, the wife’s equity in L Pty Ltd increases each year as the life expectancy of her parents diminishes.
GIFTS TO THE WIFE FROM MR STEELE
The wife submits these should be dealt with in the same category as post-separation inheritance whilst remaining the property of the parties and should be excluded from consideration the matter outlined in Bonnici (1992) FLC 92-272.
Having regard to the wife’s use of the capital of the parties for her support, the support of her household including housekeeping, overseas travel etc, I do not consider it appropriate in this case to adopt that approach. These post separation assets will fall into the pool of assets to be determined on a global basis. In terms of contribution I will have regard to the fact that the husband has made no contribution to this particular category of asset.
GIFTS FROM PARENTS
I adopt the same approach to these gifts as I did with the approach from the gifts of Mr Steele.
ADD-BACK IN RELATION TO BRIDGING INTEREST ON D PROPERTY
Mr Steele and the wife purchased the D property in circumstances where there were limited funds available to each of them and in circumstances where it was clear that they would need to borrow significant sums of money to secure the loan to buy that property. As a consequence of that action an interest liability of $307,914.00 was incurred. This does not fall into the living expenses referred to with regard to the question of the other add-backs from the sale of the W property. This was specifically identified as interest on a bridging loan to enable the acquisition of a property by the wife and Mr Steele.
The wife argued that it should not be added back as the parties had agreed to a lesser valuation than the eventual sale price of W property. The underlying feature of this liability was that it was incurred by the wife and Mr Steele without reference to the husband and in circumstances where the husband will be left to meet a proportion of that expense. It was not an expense to which the husband could reasonably have assumed was a normal expenses of his family (including the wife and the party’s children) but was an expense primarily for the provision of the home for Mr Steele and the wife. Accordingly I will allow that sum as an add-back.
ADD-BACK IN RELATION TO WIFE’S LEGAL COSTS
The wife has incurred legal costs of $84,018.00 which was paid almost entirely from the Equity Access Account[14]. The sum of $5,000.00 was paid by Mr Steele but was deducted from the wife’s loan to him. Accordingly, this does not alter the add-back referred to in respect of the costs. The costs having been paid directly or indirectly out of the equity access account, and having regard to the principles set out in Chorn and Hopkins, supra, that sum ought to be added back into the pool and I will do so.
[14]Exhibit “W5”.
ADD-BACK IN RELATION TO HUSBAND’S LEGAL COSTS
Tendered in evidence was the memorandum of costs paid and sourced by the husband[15]. From that document it is clear that the husband paid $21,370.00 against his National Australia Bank (NAB) line of credit (personal loan of $43,425.00). The balance of costs of $37,497.00 was paid by the husband to his solicitor in various amounts between November 2005 and April 2007.
[15] Exhibit “H4”
The NAB line of credit was taken out by the husband in about April 2007 and was in part used to pay tax, repairs to his car and an American Express account. The husband gave evidence that about half that sum was paid in legal costs. The husband claims a liability in relation to the personal loan. He is entitled to do so (with the exception of legal costs) as I find that the monies were spent in accordance with the parties’ general approach to funding their lifestyle. The question I have to consider is whether I allow the whole sum of $43,425.00 and add-back about $21,370.00 in legal costs or simply reduce the personal loan account by that sum. I propose to adopt the later course and the personal loan will be treated as $22,055.00.
There then remains the balance of the legal costs paid by the husband totalling about $37,500.00. The husband borrowed $15,000.00 from the wife’s sister. He applied $5,000.00 of those borrowings towards legal costs. I propose to add those legal costs back having regard to the principles set out earlier.
As to the other legal costs the husband was working and was in paid employment and, having regard to the state of the evidence, I do not propose to add-back further sums in that regard.
With respect of the balance of the amount outstanding to the wife’s sister of $10,000.00 by the husband, this falls into the scope of the parties continuing lifestyle which I have discussed earlier. As a consequence I will be allowing the whole of the loan to the wife’s sister of $15,000.00, having regard to the add-back of $5,000.00 towards legal costs, which gives a net allowance of $10,000.00.
LEGAL COSTS ON SALE OF W PROPERTY
The wife claims legal costs of $1,346.00 being liabilities with regard to the sale of the W property. The wife sets out in her second affidavit that she has just received an account from her solicitors I respect of the sale of that property. Annexure ‘A’ to the wife’s second affidavit shows that the whole of the proceeds of sale were either paid to her, Westpac Bank or in payment of outstanding counsel and water rates. I find that the wife owes $1,346.00 in respect of legal costs on the sale of the W property and it will be allowed as a liability of the wife.
VALUATION OF D SUPERANNUATION SCHEME AS AT OCTOBER 2007
The value of this defined benefit superannuation fund was set out by the single expert in her report filed with her affidavit on 25 October 2007. The value of the fund at the time the parties ceased to live together under the same roof was $670,729.00. The value of the fund as at the date of hearing was $815,222.00.
Having regard to the submissions of both parties I intend to put the D superannuation scheme as a separate list of property for the purpose of the adjustment of property. As a consequence of the size of the superannuation fund in relation to the whole pool, it is appropriate, in my view, to make a splitting order. There has been a marked change in the value of the superannuation fund as a consequence of the husband’s re-engagement with his employer and I will have regard to those factors when I come to deal with the aspect of contributions.
The D superannuation scheme is a benefit payable as a pension for life. There is some opportunity for commuting part of that benefit. The husband has already commuted part of the pension some years ago the detail of which is discussed earlier and which has been considered in respect of contributions.
If there is a splitting order the amount payable to the wife would be by way of a lump sum which she could take after she attains the age of 55 years. It would be an accumulation fund but the accumulation would be on the basis of an interest rate on long term treasury bonds.
Senior Counsel for the wife submitted in terms of the value of the scheme that;
28The Husband’s superannuation has increased from $670,729 at 15 October 2004 to $815,222. The increase of $144,493 was acquired post separation but remains property of the parties, its post separation character being relevant to the parties’ respective contributions. The Wife has made a welfare of the family contribution to that increase. For the purpose of these submissions I have had regard to the sum of $670,729 for the purpose of assessing contributions. [He added as a footnote that] “ This submission is not intended to limit the manner in which the additional $168,306 can be approached”
From the joint balance sheet there appeared to be an issue as to the value of the fund. In her affidavit of 26 October 2007 the expert valued the entitlement at $815,222.00 as at 10 0ctober 2007. She valued the same entitlement as $670,729.00 as at 14 October 2004. These values have not been challenged. Yet the wife invites me to accept that value for the purpose of assessing contributions at the lower amount. I determine the value of the entitlement as $815,222.00 as at the date of trial but will accede to the submission made on the wife’s behalf that the lower sum be used in determining contribution. I have had regard to the difference as a factor under s75(2)(o) of the Act.
In terms of the valuation of the fund, for convenience I have included the productivity benefit.
LIABLITIES
There were some issues with regard to liabilities. The parties agreed that the Toyota finance loan of the husband of $14,000.00 was not in issue.
There was an issue regarding the husband’s American Express credit card and MasterCard liabilities.
Counsel for the wife submitted:-
“These items are to be disregarded as referrable to the payment of legal fees ($58,867.97 paid) or post-separation living expenses including taking holidays. The husband’s position post-separation differs from the wife’s because he was all times in employment”.
Having regard to the comments I have made about the parties lifestyle, set out earlier in these reasons, I propose to allow the two credit card liabilities.
I have dealt with the question of legal costs earlier in these reasons. The husband continued to pay school fees and child support subsequent to separation. It was necessary for him to set up a new home and he no doubt incurred expenses in that regard. The liability to J Holding Pty Ltd was not challenged in so far as it existed; it was challenged in so far as whether it ought to be taken into account. In my view the credit card debts and the loan from
J Holding Pty Ltd ought to be taken into account and I have done so.There was an argument, referred to above, in respect of the equity access loan of the wife. In submissions of Senior Counsel on behalf of the wife it was submitted that the equity access loan was $234,000.00. This was a sum which was consistent with the evidence of the wife set out in paragraph 32 of her second affidavit. The sum of $234,000.00 was included as a liability in the husband’s amended case outline document but the husband asserted that such sum was raised to meet living costs, children’s expenses (including school fees and horse agistment) and interest accruing on the balance from time to time the equity loan now repaid.
Curiously in the joint balance sheet this sum was shown to be $169,981.00. I am satisfied that this liability was, at the date of trial, $234,000.00. I have dealt with the treatment of this sum earlier in these reasons.
Contributions
There are three list of property. The non-superannuation assets, the D superannuation asset and the Clearview Accumulation type assets. I intend to treat the contributions with regard to the Clearview Superannuation as property on the same basis as I will the other, non D scheme, assets. Accordingly in coming to division of property I will include with the non-superannuation assets of the husband the $81,474.00 in the Clearview Rollover Fund and I will add to the wife’s non-superannuation assets the Clearview Superannuation Rollover of $13,831.00.
In considering the other factors and the question of consideration as against just and equitable I have had regard to the nature of these rollovers, in particular with the husband, in that he will not be entitled to access that sum of $81,474.00 until such time as he retires from full time employment.
Therefore, in respect of the Clearview superannuation I do not intend to make splitting orders in respect of same however I have had regard to the husband retaining a fund of $81,474.00 and the wife retaining a fund of $13,831.00. This in circumstances where the husband is still in paid employment as discussed earlier in these reasons. I have had regard to that fact in terms of both the other factors and in terms of a just and equitable outcome.
D SUPERANNUATION SCHEME
The husband joined his employer in 1969. He was subsequently made a member of the D superannuation scheme and it was back-dated to the date he commenced. He was in the fund for about fourteen years before parties’ commenced cohabitation and about twenty years after that time.
In July 2000 the husband retired from his employer and commuted the sum of $182,000.00 which sum was applied to the benefit of the family. The wife’s submissions with regard to contribution to superannuation are as outlined above and are set out in paragraphs 39 to 45. These provide:
39.The evidence regarding the Husband’s entitlement is at Husband filed 20 November 2006, paras.60,66 and 67.
40.From the material available it appears the scheme is partly contributing and the entitlements are a product of a number of factors including:
(i)satisfaction of a minimum number of years of service (20 years) so as to qualify;
(ii)number of years service as at the date the pension was taken (July 2000);
(iii)annual rate of pay at the date the pension is taken.
41.As at the date the pension was taken the Husband had 31 years membership of the scheme of which 16 were during the marriage.
42.The Husband’s annual rate of pay at the date he joined the scheme and what it was at the date of marriage is not disclosed.
43.The Husband’s pay rose 24.8% between 1995 and 2000 and it should be inferred the rate of increase from 1984 to 1995 was not less and was probably greater. ([D superannuation] contributions increased commensurately.) Refer EX. W1.
44.Having regard to the above and authorities such as M v M, the contribution based assessment to the [D superannuation scheme] received ($172,000) and existing entitlements is 60% Husband and 40% Wife.
45.The contributions to the balance of the Husband’s [D Superannuation scheme] entitlements prior to his current re-engagement ($670,729) are accordingly:
Wife $268,291
Husband$402,438
The wife concedes that the contribution towards the increase in the value of the fund by some $144,493.00 was limited to the contribution the wife has made to the welfare of the family over that period of time since separation.
Senior counsel for the husband submits in relation to the D superannuation scheme –
In the assessment of contributions to the [D] Scheme, the husband contends that the Court should take in account what he says are not only his undoubtedly superior financial contributions to that fund, but also his completed years of service, which are central to the calculation of his current benefit and to the rationale of the Scheme. In this latter sense, a significant proportion of the current contribution to the [D] Scheme must be regarded as his alone — he alone contributing the years of service which have brought his membership of the [D] over the threshold to the point where the substantial benefits of service “kick in”, about 15 years of service having been given when he was not involved with the wife.
The difference in submissions with regard to the D superannuation are that the husband’s wages from 1995 to 2000 rose significantly and I am able to infer, from that evidence, that the increase from 1984 to 1985 was probably greater. Consequently the contributions to the D scheme increased commensurately. It was argued that the contributions by the husband to the fund from the date of marriage to the date of separation were far greater than before that date.
If the Court were to calculate these matters by way of money contribution that would inevitably be the case. However, the period of involvement in the fund must also be a significant feature.
The essence of the wife’s submissions are that I should assess the contributions as to sixty per cent by the husband and forty per cent by the wife in relation to the 2004 figure, vis $670,729.00. If I was to adopt that submission the wife would end up with an entitlement of $268,291.00 which is of course sixty per cent of the smaller sum but which amounts to about thirty three per cent of the current value of the fund.
I intend to adopt that approach as it, in effect, acknowledges the husband’s superior contributions to the fund to those of the wife. It takes account that the wife made no contribution to the first fifteen years of the fund. In coming to that conclusion I am aware that such a split does not mean that the wife becomes a member of the scheme. I accept the submissions of senior counsel for the husband that the wife would not be entitled to any index pension or retirement pay, rather her interest accrues at the long term bond rate between the operative time (the effective date of splitting order) and the date on which the benefit becomes payable.
NON D SCHEME CONTRIBUTIONS
I do not intend to again recite the facts and material set out earlier in these reasons. This has been a long marriage between the parties and each have made differing but essentially equal contributions in terms of parenting, home maker, financial and non-financial contributions. The wife says that the contributions at separation were at best for the husband equal bearing in mind the husband’s full time employment with the wife having a responsibility for the children, together with periods of employment. Whilst the parties do not agree on the facts they both agree that the contributions at the time of separation were equal subject to the matters which I will deal with further in these reasons. Earlier in these reasons I have expressly referred to contributions in respect of various matters, and I have taken those into account.
In his outline to submissions Senior Counsel for the wife set out –
36.Adopting those figures and amending the Schedule appearing in I of the Wife’s Case Outline accordingly and the date of the [V Family] Pty Ltd family company receipts, their respective sums brought to the marriage by the parties (involving the commutated [D benefit] as such) is as follows:
Husband Wife Late 1984 Wife sold Triumph motor vehicle for $4,500. (Wife para.11(vi); para. 52) $4,500
May 1984 Husband applied savings of $7,000 towards parties’ honeymoon. (Husband, para 16) $7,000 Late 1984 Wife sold unit at [B] and received net $67,000 which monies were paid into a term deposit. (Wife para.50)
Husband says sold February 1985 for approx. $115,000 with Wife receiving net $65,000. (Husband para.22)$62,000
April 1986 Wife sold block of land she owned in [K] for $61,000 or $62,000.
(Wife paras. 53 and 54; Husband para.28) Husband says about $62,000.$61,500
May 1990 Husband sold his [G] unit and received net $125,000. (Wife para.56)
Husband says received net $142,000. (Husband paras.21 and 32)$142,000
June/July 1990 Parties purchased [property in K].
(Wife para. 58: Husband para.33)
Wife’s father gave her $40,000 and her mother lent the parties $10,000. (Wife para.58)
Husband says $50,000 lent to parties by Wife’s parents through a family company.
(Husband para.34(c))
Wife accepts both sums loans repaid from funds received from 1998 sale of [V family]companies (Wife para. 53 Filed 20.07.2007)September 1990 Husband’s uncle died in England Husband inherited $66,000 or $70,000.
(Husband paras.31(d) and 30)$65,000
September 1993 Husband says she received $18,500 compensation (Husband para 133) August 1994 Completion of purchase of [R Property] (Wife para.61)
Wife says father gave her $37,000. (Wife para.62)
Husband says Wife’s father lent Wife $47,000. (Husband para.44)
Wife accepts $47,000 loan and says loan repaid from funds received from 1998 sale of [V family] companies. (Wife para. 53, Filed 20.07.2007)1996 Husband received compensation payment of $17,750. $17,750
November 1997 [V] Pty. Ltd. (family company in which Wife had shares) sold. Wife received $750,000. (Wife para.81)
Wife says she was entitled to $2,050,066 in relation to [J Pty Ltd] but her father instructed her to deposit $1M from funds received with [L] Pty. Limited and she received $1,050,066 – Total $1,800,066). Wife acknowledges earlier advances from parents referred to above repaid from these monies. (Wife, para 53, filed 20.7.07)$1,800,066
July 2000 Husband’s commutation of part [D scheme] entitlements (Husband, para.66).
Wife says this was partly accrued during the marriage and the whole sum is not a contribution to which she made no contribution. The full sum is used for this table.$103,200 $68,800 May 2002 Husband received $170,000 from his late mother’s estate.
(Husband para.83)$170,000
Early 2004 Wife’s father gave parties $60,000 for children’s school fees. (Husband para.88)
Wife says monies formed part of $592,028 received by her.April 2004 Husband says Wife received approx. $200,000 from sale of Bidvest shares. (Husband para.90) August 2004 Husband says Wife received a further sum of approx. $312,000 from sale of Bidvest shares. (Husband para.90)
Wife says total received from sale of Bidvest shares by two installments was $592,028. (Wife para.88)$592,028 Wife’s interest in [L Pty Ltd]. $424,125
TOTAL CONTRIBUTIONS BY OR ON BEHALF OF PARTIES FROM PRE MARRIAGE ASSETS, INHERITANCES AND THE COMPANIES IN WHICH THE WIFE HAD AN INTEREST $504,950.00
(16.35%)
$3,013,019.00
(83.65%)
$3,517,969
The wife’s submissions go on to say;
37.The weight to be given to the overwhelming imbalance in the contributions identified above must reflect both by the magnitude of that imbalance including its relationship to the value of the pool of property the subject of the proceedings and also the fact:
a.The sums were received at relatively regular intervals.
b.The largest of the sums was received only seven years prior to the end of the marriage;
c.Those monies were the primary source of the funds utilised to purchase the property at [C Street], which in turn provided the bulk of the funds to purchase the property at [W]. This is significant for the reasons referred to In the Marriage of Pierce (1999) FLC 92.844 at 85, 881 para 28 (and in this case was not an initial contribution).
d.The Wife’s interest in [L] Pty Ltd is not yet in possession and should be given the weight ascribed to any receipt contemporaneous with or post-separation. The observations in Bonnici (supra) are apposite.
e.The relativity of the amounts received by the Wife as a consequence of her interest in the family company compared to the incomes of the parties’ during the course of their marriage. As to that …
(i) This can be demonstrated by reference to the last full financial year before the Husband left [his employer]. That was the year in which the Husband’s income reached its highest level.
(ii) In that year and by reference to EX. W11, the Husband’s after-tax income excluding [D scheme] (which is an entitlement separately dealt with) and without deduction for educational expenses and the like, was $45,161. Even if the Husband had earnt that sum in every year of the marriage, the totality of his net wages over the course of the marriage would have been $45,161 x 20 = $903,220. The Husband’s earnings were of course significantly less than $45,161 when averaged over the course of the marriage.
38. These matters warrant a contribution based assessment in relation to the property and superannuation of the parties excluding [D scheme] of 75% to the Wife and 25% to the Husband.
The significant features with regard to these contributions are the payments to the wife from her family or on behalf of her family. These include:-
November 1997 $1,800,066.00
2004 – money paid from Bidvest $592,000.00
L Pty Ltd $476,760.00
Total $2,868,826.00
Of the pool of assets (excluding the valuation of the D superannuation) $2,868,826.00 came from the wife’s family. Of that sum $592,000.00 was paid immediately before separation and $1,800,066.00 in late 1997. These are very significant contributions by the wife.
The husband submits that;
At its highest, and when one remembers the duration of the marriage and the fact that throughout it the husband worked full-time, with his income being used only for family purposes, it is submitted that the imbalance results in a 10% - 15% increase to the wife, thereby making her entitlement 60% - 65% and the husband’s 35% to 40%.
The wife submits there ought to be a contribution based assessment in relation to the property and superannuation, excluding D scheme, of seventy five per cent to the wife and twenty five per cent to the husband. Counsel for the husband submits that that adjustment should be at a rate of sixty per cent to sixty five per cent in favour to the wife and thirty five to forty per cent in favour to the husband.
The basis of the wife’s submissions are that the contributions for the parties from the commencement of cohabitation to separation were at best for the husband equal bearing in mind the husband’s full time employment with the wife having a responsibility for the children, together with periods of employment, with the exception of:
i)property brought to the marriage by the parties and inheritances and receipts from third parties received by them during the marriage; and
ii)the Husband’s pre marriage contribution to his D superannuation entitlements and the commutated sum of $172,000 taken in July 2000.
The husband says that the contributions at the time of separation were equal. The husband agrees that each party’s contribution from sources other than earnings were different, with the wife’s contribution being greater. However, the husband does not agree that the effect of the wife’s greater contribution should lead to the percentage imbalance sought by the wife[16]. The husband accepts there was an imbalance, but says that the wife’s calculations are inaccurate and to not take into account the post separation contributions, particularly the transfer of the R property, which was later on sold to her family company[17].
[16] Page 27 of the husband’s amended case outline.
[17] Page 30 of the husband’s amended case outline.
Senior Counsel for the husband set out in his case summary the following;
Contribution to Separation
A.The wife asserts that the contributions of the parties to separation were at best for the Husband equal (Husband in full time employment with Wife having preponderant responsibility for the children and also periods of employment all of which were more onerous because of her health) excepting for:
i)property brought to the marriage by the parties and inheritances and receipts from third parties during the marriage; and
ii)the Husband’s pre marriage contribution to the [D scheme] superannuation ultimately received by him.
The husband asserts that the contributions at the time of separation were equal. The husband agrees that each party’s contribution from sources other than earnings were different, with the wife’s contribution being greater. However, the effect of her greater contribution does not lead to the percentage imbalance asserted by her.
Having regard to the facts and the findings and agreed facts in these proceedings I determine that the adjustment of property should be on the base of contribution (including the Clearview superannuation but excluding D scheme) should be on the basis of seventy five per cent to the wife and twenty five per cent to the husband.
Other factors
S75(2) factors
(a) the age and state of health of each of the parties;
At the time of the hearing the wife is aged almost 53. The husband is aged almost 55. Both parties suffer some physical restrictions. It was conceded on behalf of the husband that the wife had a chronic back condition[18]. The wife had back surgery in 1975; the wife underwent a partial hysterectomy in about 1999. The wife has undergone a number of surgical procedures regarding her back, the details of which are set in her affidavit and were not challenged. The wife’s restrictions exceed those of the husband and impacts upon her capacity to obtain some, but not all employment[19].
[18] Exhibit W1.
[19] Paragraph 6 of the wife’s first affidavit, at annexure “B”.
The husband receives a disability pension in respect of his employment related conditions. However, the husband retains a capacity to undertake work as a consultant of the kind performed before his current employment. I infer from the husband’s work history to date and from his good health that he will continue to be in paid employment after the expiration of his current contract, either part-time or undertaking his consultancy work.
(b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
The husband receives an income of $122,000,00 per annum. He has an entitlement to an indexed pension when he retires. A significant proportion of that pension will be split to the wife and whilst he will receive the benefit of an indexed pension. The evidence of the expert was that there is limited scope for him to capitalise that pension. The capital available to the husband will be less than that available to the wife. As set out earlier the husband is able to continue in full time employment for the medium term future.
The wife has remarried and her present husband, Mr Steele, earns a good income. It is a sound relationship. The wife has limited ability to undertake paid employment. The wife will have significant capital as a result of the contribution factors.
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
At the time of the hearing there were two children of marriage A and H who were under the age of 18 years of age who have lived continuously with the wife. The child A turned 18 in January 2008. At the time of the hearing the children attend private school, although A is likely to commence university studies in 2008. The husband meets half the private secondary school fees and has done so since separation.
The husband pays child support for A and H in accordance with the child support formula.
The eldest child, N who is over the age of 18 years has lived with the husband for the last twelve months, but has recently commenced spending two nights per week with the wife. The husband meets some of N’s living expenses.
At the time of publication of these reasons the wife’s care of a child under the age of 18 years will be limited to H, and in that regard the husband makes significant financial and other contributions.
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii)a child or another person that the party has a duty to maintain
The husband has a commitment to support himself and H. The wife has a commitment to support herself and H and I repeat the comments made by me earlier in respect of the support provided by both parties for H. I likewise repeat the comments I have made in regard to the capital sum each party will achieve by virtue of the contribution factors.
(e) the responsibilities of either party to support any other person
The parties’ have the reasonability to support their children over 18 years who may attend university.
(f)subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i)any law of the Commonwealth, of a State or Territory or of another country; or
(ii)any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party;
The husband will receive a pension as part of his superannuation entitlements. He has an entitlement to an indexed pension when he retires. That pension is indexed. However a significant proportion of that pension has been split to the wife and whilst he will receive the benefit of an indexed.
(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
This is not a relevant consideration. Neither party has addressed this issue in their submissions.
(j)the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
The Husband undertook and acquired additional qualifications during the marriage; a Bachelor of Arts and a Masters Degree which has maximised his capacity to earn income.
The wife has also acquired additional qualifications during the marriage. However at present the wife does not earn any income, I find that due to her health problems and her physical restrictions the wife is unable to return to work similar to that which she has undertaken in the past.
(k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration
These factors have been addressed elsewhere in these reasons.
(l)the need to protect a party who wishes to continue that party's role as a parent;
This is not a relevant consideration; the issue was not addressed by either party’s solicitor in their submissions.
(m)if either party is cohabiting with another person - the financial circumstances relating to the cohabitation;
In December 2005 the wife remarried. Her present Husband is Mr Steele. The wife submits that[20] “the mutual legal obligations arising between the wife and her new husband counter balance each other” and should be given no or negligible weight. The husband submits that there is some dispute between the evidence of the wife and Mr Steele, relating to his income, his superannuation and whether or not he supports the wife. Mr Steele is not as asset rich as is the wife, but he does have a good income which is used to support the wife, the children living with the wife and him. I find he makes a contribution to the wife’s household.
[20] Page 39 of the wife’s revised case document.
The husband’s evidence is that he has not re-partnered and as a consequence does not have or receive the financial support of another person.
(n)the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party;
I have had regard to the orders proposed to be made in discussion earlier in these reasons.
(na)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
At the time of the hearing the husband pays $409.00 per week by way of child support for H and A. The husband also meets some of N’s living expenses. A will attain 18 in January 2008 and the husband’s obligation to pay child support for her will cease.
The exercise of discretion in respect of the other factors in the facts of these proceeding is difficult. The wife has poor health without again reflecting again on all of the circumstances in particular but having regard to them, it is of value to note that the wife is in poor health and has limited earning capacity; she has the care of the parties’ youngest child who will be in Year 10 high school in 2008. The resources she will have available after these proceedings will include a significant portion of the assets accumulated by the parties during the course of the marriage, albeit one of those assets is one to which the wife is not entitled until the death of both of her parents. The wife has re-married.
On the wife’s retirement she will receive a lump sum in terms of the adjustment on the husband’s D scheme superannuation.
Throughout these reason I have referred to the other factors and I have had regard to all of the evidence and findings in that respect. I have given weight to the capital imbalance between the parties by virtue of my findings on contribution.
Having regard to all of these factors I find that that there should be an adjustment in favour of the wife of 2%.
Determination of just and equitable
In terms of the non-superannuation property the property would be adjusted as to seventy seven percent to the wife and twenty three percent to the husband.
The total of the non-superannuation property is $3,227,000.00. Added to this is the Clearview Superannuation amounting to $95,305.00 making a total of $3,322,305.00. After deducting the liabilities of $290,601.00 the net balance of the non D scheme property is $3,031,704.
The wife retains the following;
Proceeds of sale of W property
$0.00
Wife’s share in D property
$1,920,000.00
Loan to Mr Steele
$165,000.00
Wife’s AIG shares
$3,541.00
Wife’s David Jones shares
$12,606.00
Wife’s motor vehicle
$60,000.00
Motor vehicle purchased for A by Wife
$24,000.00
L Pty Ltd
$476,760.00
H Pty Ltd
$0.00
Wife’s house contents
$46,640.00
Gifts to wife from Mr Steele
$9,490.00
Wife’s items from parents
$3,845.00
Wife’s bank account
$450.00
Add back in terms of bridging loan interest on D property
$307,914.00
Add back of wife’s legal costs
$84,018.00
Add back – wife’s travel
$18,900.00
Wife’s Clearview Superannuation
$13,831.00
Total non-superannuation assets
$3,146,995.00
Liabilities
Equity Access loan of wife
$234,000.00
Legal fees on sale of W property
$1,346.00
Total liabilities
$235,346.00
The wife would have liabilities of $235,346.00 making a net amount in the wife’s hands of $2,911,649.00. Seventy seven percent of the non D scheme pool of property is $2,334,412.00. Therefore the wife would need to pay the husband the sum of $577,237.00. In that respect I will provide that such payment is to be made within 90 days, to enable the wife to make arrangements in that respect. The husband would then have twenty three percent of the non D scheme asset pool.
The husband would retain the following;
Husband’s Westpac account
$203.00
Husband’s AIG shares
$4,480.00
Husband’s Jaguar motor vehicle
$26,000.00
Toyota Corolla motor vehicle
$13,000.00
S Pty Ltd
$3,293.00
Husband’s house contents acquired jointly
$10,860.00
Husband’s personal effects
$31,000.00
Add back of part of husband’s legal costs.
$5,000.00
Husband’s Clearview Superannuation
$81,474.00
Total non-superannuation assets
$175,310.00
Liabilities
Toyota finance of husband
$14,000.00
Husband’s American Express credit card
$3,700.00
Husband’s MasterCard
$500.00
Personal loan from wife’s sister
$15,000.00
Personal loan NAB
$22,055.00
Total liabilities
$55,255.00
The net non D scheme property retained by the husband is $120,055. Adding $577,237.00 to this sum gives a net amount of $697,292.00 to the husband. This amounts to 23% of the said pool.
Having regard to the superannuation split to the wife and the adjustment as set out above it is in my view just and equitable.
I certify that the preceding 219 paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin
Legal Associate:
Date: 8 February 2008
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Remedies
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Injunction
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Fiduciary Duty
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Costs
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Statutory Construction
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