Stoddard & Glover
[2016] FamCA 674
•16 August 2016
FAMILY COURT OF AUSTRALIA
| STODDARD & GLOVER | [2016] FamCA 674 |
| FAMILY LAW – PROPERTY SETTLEMENT – Where the parties were married for approximately seven years and have two children – Where the parties were in agreement that the Court should take a two pool approach – Whether the parties’ legal fees should be included as an “add back” into the balance sheet – Where the Court determines that it is appropriate for the legal fees to be considered in the context of section 75(2)(o) – Where the husband developed a successful business and made a greater initial contribution – Where the wife contributed as homemaker and parent – Where the wife contributed directly and indirectly to the development of the husband’s business –Where the Court finds the parties’ contributions should be assessed at fifty-two and a half per cent to the husband and forty-seven and a half per cent to the wife – Where the Court finds section 75(2) factors favour an adjustment of ten per cent to the wife – Where the Court determines that the parties’ self-managed superannuation fund should be split sixty per cent in favour of the husband and forty per cent in favour of the wife – Orders made. |
| Family Law Act 1975 (Cth) ss 75, 79 Bevan & Bevan (2013) FLC 93-545 |
| APPLICANT: | Mr Stoddard |
| RESPONDENT: | Ms Glover |
| FILE NUMBER: | SYC | 971 | of | 2013 |
| DATE DELIVERED: | 16 August 2016 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | McClelland J |
| HEARING DATE: | 5 - 7 April 2016 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Campton SC |
| SOLICITOR FOR THE APPLICANT: | Pigdon Norgate Family Lawyers |
| COUNSEL FOR THE RESPONDENT: | Ms Christie |
| SOLICITOR FOR THE RESPONDENT: | Rama Myers Family Lawyers |
Orders
Property
All previous property orders are discharged.
Within twenty-eight (28) days of the date of these Orders, the husband is to pay to the wife the sum of $441 098.
Within twenty-eight (28) days of the date of these Orders, the husband is to do all acts and things and sign all documents necessary to transfer to the wife the European motor vehicle registered number ...
Within twenty-eight (28) days of the date of these Orders, the wife is to do all acts and sign all documents necessary to:
(a) Resign as an office holder of Stoddard Pty Ltd;
(b) Transfer to the husband all of her right, title and interest in her shareholding in Stoddard Pty Ltd; and
(c) Give effect to the assignment to the husband of all her right, title and interest in and to any sums due to her from the Stoddard Pty Ltd.
Simultaneously with Order (4) above, the husband is to indemnify the wife and keep her indemnified from and against any actions, claims, suits or demands by reason of the wife having been an officeholder of Stoddard Pty Ltd.
Within twenty-eight (28) days of the date of these Orders, the parties are to do all acts and sign all documents necessary to:
(a) Assign to the husband all of the wife’s right, title and interest in and to any sums due to her by the Stoddard Family Trust;
(b)Forego any right or claim she may have in respect of the Stoddard Family Trust whether as a potential beneficiary or otherwise; and
(c) Remove the wife as a beneficiary of the Stoddard Family Trust.
The husband is to retain the property at E Street, D Town, and is to keep the wife indemnified in respect of the mortgage secured over the property and any actions, claims, suits or demands made in respect of the property.
The wife is to retain the property at C Street, D Town, and is to keep the husband indemnified in respect of the mortgage secured over the property and any actions, claims, suits or demands made in respect of the property.
Subject to any other order to the contrary, the husband is solely, legally and beneficially entitled to the exclusion of the wife, to all other real and personal property of whatsoever nature and kind in his ownership, possession and/or control as at the date of these Orders, including but not limited to, money on deposit, shareholdings, insurance policies, motor vehicles and personal effects.
Subject to any other order to the contrary, the wife is solely, legally and beneficially entitled to the exclusion of the husband, to all other real and personal property of whatsoever nature and kind in her ownership, possession and/or control as at the date of these Orders, including but not limited to, money on deposit, shareholdings, insurance policies, motor vehicles and personal effects.
Superannuation
Within fourteen (14) days of the date of these Orders, the parties are to do all acts and sign all documents as are necessary and as are required by the Superannuation Industry (Supervision) Act 1993 (Cth) to give effect to the distribution of the parties’ entitlements in the MR & MS Stoddard Superannuation Fund (“the Fund”) so that:
(a) Such amount is allocated to the wife, as required by section 90MT(4) of the Family Law Act 1975 (Cth), out of the husband’s entitlement in the Fund so that the value of the husband’s entitlement in the Fund is reduced by $79 265;
(b) The wife’s interest in the Fund, including the allocation pursuant to Order (11)(a) above, is transferred into a complying fund as nominated by the wife;
(c) The parties do all acts and things necessary to remove the wife as a trustee and member of the Fund; and
(d) The husband’s entitlements remain in the Fund for the benefit of the husband.
Subject to Order (11) above, each party is entitled to retain their interest in their superannuation entitlements as at the date of these Orders.
The parties have liberty to re-list the matter on seven (7) days written notice to the other party and to the Court in respect to the implementation of these Orders.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Stoddard & Glover has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 971 of 2013
| Mr Stoddard |
Applicant
And
| Ms Glover |
Respondent
REASONS FOR JUDGMENT
Introduction
Mr Stoddard (“the husband”) and Ms Glover (“the wife”) are health professional who were married and both currently work in D Town.. The parties have two children, N born in 2006 and M born in 2008 (“the children”). In 2010 the wife developed an interest in running. Her talent and application to the sport has been such that she has been invited to compete in national and international events. While participating in one such event in the United States she met Mr H (“Mr H”) who she had previously made contact with on a running website. The husband became aware of the wife's friendship with Mr H in July 2012. Counselling proved unsuccessful and the parties separated in December 2012. The wife subsequently married Mr H in 2015.
The parties have had a difficult relationship in the period after separation and this has resulted in extensive litigation concerning parenting issues, including the extent to which the children should spend time with the wife when she is in the company of Mr H. It is to the parties’ great credit that they have now resolved parenting issues with consent orders being made on the first day of the final hearing, 5 April 2016. However, the litigation was such that both parties have incurred considerable legal costs. The treatment of those legal costs is a complicating factor in what is otherwise a relatively straight forward case concerning an adjustment of the parties’ interests in the matrimonial property.
Applications
In a Minute of Order tendered in the proceedings (Exhibit A), the husband sought the following orders:
1. [RECITALS]
2. The Husband retain the [E Street] property and indemnify and keep indemnified the Wife in respect of the [E Street] Mortgage and any actions, claims, suits or demands made in respect of the [E Street] property.
3. The Wife retain the [C] property and indemnify and keep indemnified the Wife in respect of the [C] Mortgage and any actions, claims, suits or demands made in respect of the [C] property.
4. Within 21 days of the date of these Orders, the Wife do all acts and things and sign all documents necessary to:
4.1 resign as an officeholder of [Stoddard P/L];
4.2 transfer to the Husband all of her right, title and interest in her shareholding in [Stoddard P/L];
4.3 give effect to the assignment to the Husband of all of her right, title and interest in and to any sums due to her from the Companies (if any);
and the Husband indemnify and keep indemnified the Wife from and against any actions, claims, suits or demands by reason of the Wife having been an officeholder.
5. Within 21 days of the date of these Orders, the parties do all acts and things and sign all documents necessary to:
5.1 assign to the Husband all of the Wife’s right, title and interest in and to any sums due to her by the [Stoddard] Family Trust;
5.2 forego any right or claim she may have in respect of the [Stoddard] Family Trust whether as a potential beneficiary or otherwise; and
5.3 remove the Wife as a beneficiary.
6. The Husband do all things and sign all documents as necessary to cause the transfer to the Wife of the [European motor vehicle], which is currently in the Wife’s possession and registered in the name of [Stoddard P/L], and the Wife to be responsible for all costs arising from the transfer including any tax, duties and registration fees.
7. Within 14 days from the date of these Orders, the parties do all things and sign all documents as necessary and as required by the SIS Act to give effect to the distribution of the parties’ entitlements in the Superannuation Fund so that:
7.1 such amount is allocated to the Wife, as required by s 90MT(4) of the Family Law Act 1975, out of the Husband’s entitlement in the Superannuation Fund so that the value of the Husband’s entitlement in the Superannuation Fund is reduced by $65,000;
7.2 the Wife’s interest in the Superannuation Fund including the allocation pursuant to 7.1, be transferred into a complying fund as nominated by the Wife;
7.3 the parties do all acts things necessary to remove the Wife as a trustee and member of the Superannuation Fund; and
7.4 the Husband’s entitlements remain in the Superannuation Fund for the benefit of the Husband.
8. Subject to Order (7), each party be entitled to retain their interest in their superannuation entitlements at the date of these Orders.
9. In relation to the Children’s Accounts, the Wife hold the funds in those accounts on trust for each child until they attain 18 years of age.
10. Subject to any other order to the contrary, the Wife be solely, legally and beneficially entitled to the exclusion of the other party, to all other real and personal property of whatsoever nature and kind in their respective ownership, possession and/or control as at the date of these Orders, including but not limited to, money on deposit, shareholdings, insurance policies, motor vehicles and personal effects.
11. Subject to any other order to the contrary, the Husband be solely, legally and beneficially entitled to the exclusion of the other party, to all other real and personal property of whatsoever nature and kind in their respective ownership, possession and/or control as at the date of these Orders, including but not limited to, money on deposit, shareholdings, insurance policies, motor vehicles, shareholdings in the companies and personal effects.
12. Subject to any other order to the contrary, as and from the date of these Orders, each party mutually releases the other from all debts, claims, actions, suits or demands of whatsoever nature owing from one to the other party, whether past, present or future.
13. Each party be at liberty to re-list the matter on 7 days written notice to the other in respect of the implementation of these Orders.
14. In default of either or both the Husband and Wife doing all such things and executing all such documents as may be needed to comply with these Orders within the time provided:
14.1 a Registrar of the Sydney Registry of the Family Court of Australia or such other person appointed by the Court be authorised to do all such acts and things and execute all such documents on behalf of either or both parties; and
14.2 if either party procures compliance with this order by obtaining execution of documents pursuant to this order, then the party procuring such execution of documents will be indemnified by the party for his or her costs and expenses incurred in obtaining such compliance.
15. That all previous financial orders be discharged and Pigdon Norgate Family Lawyers be authorised to release to the Husband the funds held in the Controlled Monies Account pursuant to Order 3 of the Orders made on 10 September 2015.
16. That the Wife pay the Husband’s costs of, and incidental to, these proceedings.
In an amended Minute of Order tendered in the proceedings (Exhibit B), the wife sought the following orders:
Financial Orders
1. That within 28 days the husband pay to the wife the sum of $1,286,958
2. That the husband as Director of [Mr Stoddard Pty Ltd] transfer to the wife the [European] motor vehicle in her possession.
3. Within 21 days of the date of these Orders, the Wife do all acts and things and sign all documents, at the husband’s expense, necessary to:
(a) resign as an officeholder of [Stoddard P/L];
(b) transfer to the Husband all of her right, title and interest in her shareholding in [Stoddard P/L];
(c) give effect to the assignment to the Husband of all of her right, title and interest in and to any sums due to her from the Companies (if any),
and the Husband indemnify and keep indemnified the Wife from and against any actions, claims, suits or demands by reason of the Wife having been an officeholder.
4. Within 21 days of the date of these Orders, the parties do all acts and things and sign all documents, at the husband’s expense, necessary to:
(a) assign to the Husband all of the Wife’s right, title and interest in and to any sums due to her by the [Stoddard] Family Trust;
(b) forego any right or claim she may have in respect of the [Stoddard] Family Trust whether as a potential beneficiary or otherwise; and
(c) remove the Wife as a beneficiary.
5. Within 14 days from the date of these Orders, the parties do all things and sign all documents as necessary and as required by the SIS Act to give effect to the distribution of the parties’ entitlements in the Superannuation Fund so that:
(a) such amount is allocated to the Wife, as required by s 90MT(4) of the Family Law Act 1975, out of the Husband’s entitlement in the Superannuation Fund so that the value of the Husband’s entitlement in the Superannuation Fund is reduced by $150,000;
(b) the Wife’s interest in the Superannuation Fund including the allocation pursuant to 5(a), be transferred into a complying fund as nominated by the Wife;
(c) the parties do all acts things necessary to remove the Wife as a trustee and member of the Superannuation Fund; and
(d)the Husband’s entitlements remain in the Superannuation Fund for the benefit of the Husband.
6. That other than as provided in these orders each party be entitled to all items of property, real or personal, shares, investments, superannuation entitlements, bank accounts and other assets in his or her own name.
On the first day of the final hearing, counsel for the wife indicated that the wife no longer pressed her application for child support departure orders and that the parties would instead utilise the relevant administrative process via the Child Support Agency.
Evidence
The husband relied upon the following material:
a)Financial Statement filed 21 January 2016; and
b)The husband’s affidavit filed 21 December 2015.
The wife relied upon the following material:
a)Financial Statement filed 18 December 2015;
b)The wife’s affidavit sworn 9 December 2015 and filed 18 December 2015;
c)The wife’s affidavit sworn 17 December 2015 and filed 18 December 2015;
d)The wife’s affidavit filed 29 March 2016;
e)Affidavit of Mr H (the wife’s husband) filed 18 December 2015; and
f)Affidavit of Mr O Glover (the wife’s father) filed 23 December 2015.
There were also two expert reports before the Court prepared for the purpose of these proceedings – the report of Mr P dated 30 March 2016 (Exhibit C) and the report of Ms Q dated 4 April 2016 (Exhibit D).
Mr P is a Remuneration Consultant who prepared a remuneration assessment report. Mr P’s report sought to determine the wife’s potential remuneration if she were to work on a fulltime basis and the husband’s commercial market remuneration for the past five financial years. Ms Q is a Forensic Accountant who prepared a valuation report. Ms Q’s report sought to value the husband’s business, the husband’s two companies, the family trust, the parties’ self-managed superannuation fund as well as any capital gains tax implications from the sale of two properties by the husband.
The husband and the wife were cross-examined. No other witnesses were required for cross-examination.
Background Facts
The husband was born in 1969 and is currently aged 47. The wife was born in 1970 and is currently aged 46.
On 7 February 2003, the husband purchased F Street, G Town (“the G Town property”). He contends that the purchase price was $1.485 million.
In October 2003, the wife purchased R Street, Suburb I (“the Suburb I property”). She contends that the purchase price was $460 000.
In March 2004, the husband purchased T Street, L Town (“the L Town property”). The husband contends that the purchase price was $290 000.
In January 2005 on the wife’s account, or February 2006 on the husband’s account, the parties commenced cohabitation in Sydney.
In 2006, the parties were married.
In 2006, the parties’ first child, N, was born. He is currently aged 10.
Between August or September 2006 and August 2007, the parties resided with N in the UK, where the husband undertook a training position.
In September or October 2007, the parties moved to D Town where the husband commenced work. The wife also assisted at the business as a Manager/Receptionist. She soon after began to assist the husband as a health professional.
On 11 September 2007, the husband registered his company, Mr Stoddard Pty Ltd. The husband is the sole director of Mr Stoddard Pty Ltd. On this date, the husband also established the Stoddard Family Trust by way of Trust Deed with another company of his, Stoddard Pty Ltd, as its Trustee.
Stoddard Pty Ltd is the sole shareholder of Mr Stoddard Pty Ltd. The husband and the wife are both directors of Stoddard Pty Ltd and each holds fifty shares in Mr Stoddard Pty Ltd.
On 6 February 2008, the parties purchased C Street, D Town, (“the C property”) for $230 000. The purchase was made in the wife’s sole name. The parties subsequently built a homestead on the property.
In March 2008, the husband established his own business in D Town. He also commenced consulting and operating in various regional areas once a month. The wife continued to assist the husband whilst also assisting with administrative tasks. This continued until the parties separated.
The business is operated as a sole trader. The company, Mr Stoddard Pty Ltd, is the service company for the business.
In 2008, the husband transferred the L Town property to Mr Stoddard Pty Ltd for $400 000. The company borrowed the required funds from the National Australia Bank.
In 2008, the wife received $30 000 from her late grandmother’s estate.
On 7 July 2008, the parties established a self-managed superannuation fund, Mr & Ms Stoddard Superannuation Fund.
In 2008, the parties’ second child, M, was born. She is currently aged 7.
In 2010, the wife says she began to work for two local health professionals two days per week.
In 2010, the wife also began to compete in running events locally, nationally and internationally.
On 16 September 2010, the wife received $256 153 from the settlement of a personal injury claim. From that settlement, the wife says $210 000 was applied to the mortgage against the C property and $10 000 was applied to discharge a credit card debt.
On 19 August 2011, the parties purchased an investment property at U Street, Suburb K (“the Suburb K property”) for $2.5 million, funded by borrowings from the bank. The property was registered in the sole name of the wife.
In May 2012, the wife says she began to work at the D Town Hospital two days per week.
On 20 July 2012, the husband became aware that the wife was having a relationship with Mr H, an American who she had met over an online running forum.
In November or December 2012, the wife says she became aware of outstanding fees and levies relating to the Suburb I property (approximately $11 000) and unpaid land tax in relation to the Suburb I and Suburb K properties for the period of 2009 to 2013 (approximately $34 000). The wife alleges that she asked the husband repeatedly to assist in the payment of the outstanding fees, levies and land tax but the husband refused.
On 30 December 2012, the parties separated.
In 2013 Mr W, joined the husband’s business and has remained with the business.
In January 2013, the wife says she commenced health professional training in D Town working two and a half days a week.
From 30 December 2012 until 4 April 2013, the parties lived separately under the one roof at the C property.
On 20 February 2013, the wife received a tax refund of approximately $30 000. The wife says that she applied approximately $22 000 of that amount to the outstanding fees and levies owed in respect of the Suburb I property.
On 26 February 2013, the husband commenced proceedings in the Family Court of Australia in relation to parenting.
On 28 February 2013, the husband purchased E Street, D Town, (“the E property”) for $670 000.
On 21 March 2013, the wife’s solicitors wrote to the husband’s solicitors advising of her proposal to sell the Suburb I property.
On 28 March 2013, the Suburb I property was sold for $570 000. The property was sold to a developer who had previously approached the wife expressing an interest in purchasing the property. The husband alleges that the transaction occurred without his knowledge and that the property was sold under market value.
On 2 April 2013, the wife filed a Response to Initiating Application in relation to parenting but also sought final orders in relation to property.
On 3 April 2013, interim parenting and property orders were made by consent. The orders provided, inter alia, for the husband to provide financial disclosure and the wife to place the net proceeds from the sale of the Suburb I property into an interest bearing account.
On 4 April 2013, the husband vacated the C property and moved into the E property.
On 6 May 2013, the net proceeds of sale from the Suburb I property – being an amount of $148 091.19 – were deposited into a joint term deposit.
On 21 May 2013, the wife advised the husband that she could no longer service the mortgage in relation to the Suburb K property from her income and proposed for the Suburb K property to be either sold or transferred to the husband.
On 28 June 2013, the husband filed an Amended Initiating Application including the final orders he sought in relation to property.
In September 2013, the parties agreed to put the Suburb K property on the market.
On 9 November 2013, the Suburb K property failed to sell at auction at a reserve of $2.7 million. The parties were thereafter unable to reach an agreement as to the sale of the Suburb K property.
In 2014, the wife commenced employment at X Group, D Town, working one day a week.
On 17 July 2014, the parties were divorced.
On 24 November 2014, orders were made by consent facilitating the sale of the Suburb K property.
On 31 January 2015, the husband sold the L Town property for $605 000. The wife alleges that she had no knowledge at the time of this transaction.
The husband deposed in his affidavit to applying the proceeds of sale in the following manner:
259. The proceeds of sale were applied as follows:
259.1 Agent’s commission and advertising - $12, 734.00
259.2 Mr Stoddard Pty Ltd Account - $17, 156.5
259.3 Outstanding council rates - $202
259.4 Outstanding strata levies - $996.72
259.5 Conveyancing fees - $1,686.04
259.6 Discharge Mortgage to CBA - $402,798.88
260. The balance of $169, 374.70 was deposited into the bank account for Mr Stoddard Pty Ltd. The company will need to pay capital gains tax on the sale of the L Town property…
On 21 February 2015, the wife married Mr H. Mr H spends part of the year in Australia and part of the year in the United States.
On 2 March 2015, the parties sold the Suburb K property for $2.51 million.
On 28 March 2015, the husband sold the G Town property for $2.48 million. The wife alleges that she had no knowledge at the time of this transaction.
The husband deposed that a balance of approximately $1.095 million remained from the proceeds of sale of the G Town property after the payment of costs associated with the sale, outgoings and the mortgage against the property was discharged. The husband deposed to applying the balance in the following manner:
255.1. Discharge CBA premium Business Cheque Account…. - $247, 526.13 (paid 11 June 2015)
255.2 Discharge Med-e Credit personal loan - $126, 081.54 (paid 29 and 30 June 2015)
255.3 Payment to home loan secured against [the E property] - $508,000
255.4 Payment of Mr Stoddard Pty Ltd service fees for April 2015 - $100,551.85
255.5 Payment of part of Mr Stoddard Pty Ltd services for May 2015 - $140, 234.3
On 15 April 2015, settlement of the sale of the Suburb K property occurred. The wife deposed in her affidavit sworn 9 December 2015 that the proceeds of sale were applied as follows:
167. …At settlement, the sale proceeds were applied to paying down the Commonwealth Bank mortgage and outstanding Land Tax. This left a shortfall in the mortgage which was partially met from the funds remaining in the [account holding the proceeds of sale of the Suburb I property]… of $36,409. On 1 May 2015, the shortfall in the mortgage was $8,627.47. I subsequently transferred the final rent payment I received of $7,319 into the mortgage account, which left a shortfall of $1,308. I paid this from my own savings on 9 May 2015 to enable to mortgage to be discharged.
Soon after settlement of the Suburb K property, the wife reimbursed $5274.30 of overpaid rent to the real estate agents who had managed the tenanting of the Suburb K property.
On 13 July 2015, the wife borrowed $150 000, which was secured by way of mortgage against the C property.
On 28 July 2015, the wife alleges that the husband disclosed for the first time his disposal of his interest, and the interest of the company Mr Stoddard Pty Ltd, in the L Town and G Town properties.
On 30 July 2015, the husband alleges he was first made aware of the mortgage obtained by the wife against the C property.
The wife deposed in her affidavit sworn 9 December 2015 that the monies borrowed have been applied in the following manner:
171. I applied the monies I borrowed as follows:
(a) $44, 161.45 in payment of outstanding legal fees on 17 July 2015…
(b) $67,644 to pay out a loan [Mr H] had taken against his superannuation to purchase a house in American on 14 July 2015;
(c) $21,252 to pay down debt in [Mr H]’s name on 15 July 2015;
(d) $6,000 towards my credit card debt on 15 July 2015.
On 10 September 2015, orders were made by the Court which required, inter alia:
3. That the respondent husband shall within seven (7) days of these orders being made:
(a) open a controlled monies account (“the controlled monies account”) with the Commonwealth Bank in the name of [Mr Stoddard Pty Ltd];
(b) deposit the amount of $483,576.32 into the controlled monies account; and
(c) provide the applicant wife with documents confirming the opening of the controlled monies account and the deposit of monies required pursuant to this order.
4. That the respondent husband is hereby restrained from withdrawing any monies from the controlled monies account, without the written consent of the wife or further order of the Court.
5. That the applicant wife is restrained from selling, transferring, further charging or encumbering [the C property], or creating or increasing any liability secured against the property, without the husband’s prior written consent or an order of the Court, except for the purposes of borrowing funds to pay the wife’s legal costs.
6. If the applicant wife borrows funds, pursuant to order 4, within fourteen (14) days, the wife is to provide to the respondent husband with the details of the legal costs so paid or payable together with evidence of the borrowings, including a copy of any loan application and bank statements evidencing the loan.
7. That the respondent husband is restrained from selling, transferring, further charging or encumbering [the E property], or creating or increasing any liability secured against the property, without the wife’s prior written consent or an order of the Court, except for the purposes of paying capital gains tax payable on the disposal of [the G Town property] on or about 28 March 2015 and to pay the husband’s legal costs.
8. That if the respondent husband borrows funds, pursuant to order 7, within fourteen (14) days, the husband is to provide the applicant wife with details of the capital gains tax and/or legal expenses so paid or payable together with evidence of the borrowings, including a copy of any loan application and bank statements evidencing the loan.
The amount of $483 576.32 to be deposited into the controlled monies account by the husband accounted for what remained of the proceeds of sale from the L Town and G Town properties.
On 2 October 2015, the wife refinanced the mortgage against the C property and borrowed an additional $50 000.
Issues
The orders, as respectively proposed by the parties, indicates that they are in agreement in respect to the following:
a)The wife should retain the C property (husband’s Order 2, wife’s Order 6);
b)The husband should retain the E property (husband’s Order 1, wife’s Order 6);
c)The husband, through Mr Stoddard Pty Ltd, should transfer the European motor vehicle to the wife (husband’s Order 6, wife’s Order 2);
d)The wife should relinquish her interest in Stoddard Pty Ltd (husband’s Order 4, wife’s Order 3);
e)The wife should relinquish her interest in the Stoddard Family Trust (husband’s Order 5, wife’s Order 4); and
f)The wife should maintain the bank accounts established in respect to the parties’ children (husband’s Order 9).
The parties were also in agreement that it is appropriate to take a two pool approach in respect to parties’ assets and liabilities and the parties’ superannuation. The parties were in agreement that there should be an adjustment of their interests in their joint superannuation fund, Mr & Ms Stoddard Superannuation Fund, but disagree as to how that should occur. The parties otherwise agree that each party should be entitled to retain their interest in their superannuation entitlements as at the date of the Orders. This includes the wife retaining her interest in First State Super.
The issues to be determined by the Court are therefore:
1)Is it just and equitable for orders to be made for an alteration of the parties’ property interests?
2)If the answer to (1) is in the affirmative:
a)What is the matrimonial property having regard to:
i) the parties’ private and business interests;
ii) the parties’ liabilities; and
iii) possible “add backs”?
b)What orders altering the parties’ interests in the matrimonial property should be made considering all of the section 79(4) factors, including those matters referred to in section 75(2)?
c)What orders should be made altering the parties’ superannuation entitlements?
The Law
Subject to section 79(2), section 79(1) of the Family Law Act 1975 (Cth) (“the Act”) empowers the Court in property settlement proceedings to “make such order as it considers appropriate”.
Section 79(2) provides that the Court shall not make an order altering the interests of the parties to the matrimonial property unless the Court is satisfied that, “in all the circumstances, it is just and equitable to make the order”.
In exercising its discretion, the Court is required to take into account the matters set out in section 79(4). Section 79(4) is divided into two limbs. The first limb is in respect to those matters set out in paragraphs (a) to (c), which deal with what are commonly known as the “contribution” factors. Contributions can, in turn, be direct or indirect contributions to the matrimonial property. The second limb is in respect to those matters set out in paragraphs (d) to (g), which primarily relate to the future needs of the parties but can include any fact or circumstance which, in the opinion of the Court, the justice of the case requires to be taken into account.
As noted, section 79(4) applies once the Court has determined that it is just and equitable to make an order adjusting the matrimonial property. The section is a legislative guide to assist the Court in considering how its broad discretion should be exercised to make appropriate orders to adjust the matrimonial property. This is to be contrasted, for instance, with section 75(1) which provides that in exercising jurisdiction in respect to spousal maintenance the Court “shall take into account only the matters referred to in subsection (2)”.[1] In other words, section 79(4) sets out a non-exhaustive list of matters to be considered in order to do justice between the parties.[2] Those matters are:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g) 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.
[1] Emphasis added.
[2] Marinko & Marinko (1985) FLC 91-609 at 79,944.
In considering those matters relevant to the second limb, section 79(4)(e) requires the Court to have regard to those matters set out in section 75(2) insofar as they may be relevant. Those matters are:
(a) the age and state of health of each of the parties; and
(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; and
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and
(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; and
(e) the responsibilities of either party to support any other person; and
(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; and
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant; and
(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; and
(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; and
(l) the need to protect a party who wishes to continue that party’s role as a parent; and
(m) if either party is cohabiting with another person—the financial circumstances relating to the cohabitation; and
(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; and
(naa) the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i) a party to the marriage; or
(ii)a person who is a party to a de facto relationship with a party to the marriage; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv)vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(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
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p) the terms of any financial agreement that is binding on the parties to the marriage; and
(q) the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.
Approach
Since the decision of the High Court in Stanford & Stanford (2012) 247 CLR 108 (“Stanford”), there has been some debate as to the appropriate approach to be followed in the Court’s exercise of discretion under section 79 of the Act.
In Bevan & Bevan (2013) FLC 93-545 (“Bevan”) at 87,230, the Full Court summarised the position in the following terms:
59. Prior to Stanford, property applications were commonly dealt with by reference to what the trial Judge called “a four stage process”. This process was described at [31] and [32] of his Honour’s reasons. The jurisprudential basis for the process was well established – see the line of cases cited in Hickey & Hickey (2003) FLC 93-143 at [39].
60. The four stage (or step) process involves:
oidentification and valuation of the property of the parties;
oidentification and evaluation of contributions to the property (including property no longer owned by the parties);
oidentification and assessment of the various matters in s 79(4)(d) to (g) including, to the extent they are relevant, the matters in s 75(2);
oconsideration of matters of justice and equity.
61. Although the four step process has been regularly applied, the Full Court has stressed it is no more than a means to an end, since the statutory obligation is to alter existing interests only if it is just and equitable to do so. Thus, in Norman & Norman [2010] FamCAFC 66 at [60], the Full Court (Finn, May and Murphy JJ) said:
It is the mandatory legislative imperative (to reach a conclusion that is just and equitable) that drives the ultimate result. For all its usefulness and merit as a “disciplined approach” or a “structured process of reasoning” (per Fogarty, Lindenmayer, McCall JJ, N and N, unreported, 10 June 1992), the “three-step” or “four-step” approach merely illuminates the path to the ultimate result.
The Full Court in Bevan nonetheless emphasised that a “precondition” to the Court making any order pursuant to section 79 is a finding that in all the circumstances, “it is just and equitable to make the order”.[3]
[3] at [70] at 87,232.
Shortly prior to the decision of the Full Court in Bevan, in Sebastian & Sebastian (No. 5) [2013] FamCA 191, Young J considered the appropriate approach to take, post Stanford, in the Court’s exercise of discretion under section 79 of the Act. His Honour said at [144]:
What can be derived from Stanford is that the following approach is strictly required by the Act:
othe identification of the parties’ existing legal and equitable interests in property;
oan assessment of whether or not it is just and equitable to make an order, as is required by s 79(2); and
oif it is just and equitable to make an order, an assessment of what order should be made by applying s 79(4). Although not expressly authorised by the High Court, it may be useful to further categorise this last point into a separate consideration of contributions and s 75(2) matters as is commonly done by this Court.
In addition, Young J referred to the decision of Gibbs J in Mallet & Mallet (1984) 156 CLR 605 where his Honour at 609 stated that:
It is necessary for the court, in each case, after having had regard to the matters which the Act requires it to consider, to do what is just and equitable in all the circumstances of the particular case.
Applying that reasoning, Young J held that in considering what is just and equitable, it is appropriate for the Court to take into account the financial and non-financial contributions of parties to the marriage, which are set out in section 79(4). In taking that approach, correctly in my view, Young J held that after considering the factors set out in sections 79(4) and 75(2), it was prudent to take a final “holistic overview” to ensure that the outcome of the hearing, and specifically any orders made for the alteration of property interests, are just and equitable.[4]
[4] at [161].
The approach taken by Young J was not inconsistent with what was said by the Full Court in Bevan and is entirely consistent with the caution of the Full Court in Tomasetti & Tomasetti (2000) FLC 93-023 that “the whole is not necessarily the sum of its component parts”.[5]
[5] at 114 at 87,391.
Finally, in Petruski & Balewa (2013) 49 Fam LR 116 the Full Court said at [49]:
The task of assessing contributions under s 79 of the Act is an holistic one; what is required is to evaluate the extent of the contributions of all types made by each of the parties in the context of their particular relationship (Dickons & Dickons [2012] FamCAFC 154). As was also said by the Full Court in Lovine & Connor [2012] FamCAFC 168 at [40] and [41] such an evaluation “inevitably involves value judgments and matters of impression”, and accordingly it cannot be treated as “a mathematical exercise”.
My approach is guided by these authorities and I will follow the four step approach favoured by Young J in Sebastian (supra).
Is it just and equitable to make an order for the alteration of the parties property interests?
The current circumstances of the parties are significantly different from those when they were married. The parties are now divorced. They do, however, have remaining common ownership of property. This includes their directorship of and shareholding in Stoddard Pty Ltd as well as their self-managed superannuation fund, Mr & Ms Stoddard Superannuation Fund. It is not practicable for that situation to continue.
Further, the wife has now remarried to Mr H and is no longer employed by the husband’s business. Both are living in separate households and while they are cooperating in respect to parenting arrangements, they are living substantially separate lives.
Both parties were in agreement that it is appropriate for the Court to make orders to achieve a just and equitable distribution of the parties’ property consistent with the provisions of section 79(4) of the Act.
I am satisfied that, in all the circumstances of this case, it is just and equitable to make orders for the alteration of the parties’ property interests.
The Parties’ Assets, Liabilities and Superannuation
The High Court in Stanford and the Full Court in Bevan confirmed that the starting point for the Court in any property settlement proceedings is the identification of the legal and equitable interests of the parties in assets, liabilities, superannuation and financial resources as at the date of hearing.
The parties helpfully prepared a joint balance sheet which was tendered into evidence (Exhibit E). It was subsequently agreed that the 4WD and its associated financing should be removed from the balance sheet (items 10 and 18). It was further agreed that the correct amount in respect to the loan obtained by the wife for legal fees, which is secured against the E property was $124 398 (item 17).
Whilst the wife conceded that the amount of $3030 which she had originally sought to include as her credit card liability should be removed from the balance sheet (item 16), the wife sought that correspondingly the husband’s credit liability in the balance sheet (item 20) also be removed. This was opposed by the husband. The wife also sought that an amount alleged to be owed by the husband to Mr Stoddard Pty Ltd for service fees in respect of his business (item 21) be excluded from the balance sheet. This was also opposed by the husband.
There is a further dispute between the parties as to the inclusion of the parties’ legal expenses as “add backs” into the balance sheet (items 14 and 15) and consequently, whether the loan obtained by the wife for legal fees should be included as a liability on the balance sheet
Accordingly, reflecting those areas of agreement and disagreement outlined above, the balance sheet was as follows:
| Description | Wife’s value | Husband’s value | ||
| ASSETS | ||||
| 1. | H | E Street, D Town | $670,000 | $670,000 |
| 2. | W | C Street, D Town, D Town (folio identifier …) Valuation of Y Agents | $920,000 | $920,000 |
| 3. | J | Stoddard Pty Ltd (ACN …) Each party owns 50 ordinary shares of the 100 issued shares. | $100 | $100 |
| 4. | H | Stoddard Family Trust | $964,754 | $964,754 |
| 5. | H | Z Health | $41,102 | $41,102 |
| 6. | H | AA Pty Ltd (ACN …) | 0 | 0 |
| 7. | W | CBA Account No. … as at 29 March 2016 | $1,101 | $1,101 |
| 8. | W | CBA Account No. … as at 31 March 2016 | $1,105 | $1,105 |
| 9. | W | ING Account No. … as at 29 March 2016 | $988 | $988 |
| 10. | | | | |
| 11. | H | CBA Account No. … as at 5 April 2016 | $35,384 | $35,384 |
| 12. | W | Furniture and Effects (C property) | $20,000 | $20,000 |
| 13. | H | Furniture and Effects (E Street) | $20,000 | $20,000 |
| Total | $ | $ 2,674,534 | ||
| ADDBACKS | ||||
| 14. | H | Legal fees paid and monies in trust | $421,463 | 0 |
| 15. | W | Legal fees paid and monies in trust | $174,106 | 0 |
| Total | $595,569 | $0 | ||
| LIABILITIES | ||||
| 16. | W | CBA Mastercard Acc. No … as at 22 March 2016 | | $3,030 |
| 17. | W | CBA Loan (…) as at 29 March 2016 (referrable to the wife’s legal expenses) | $124,398 | 0 |
| 18. | | | | |
| 19. | H | CBA loan secured against E Street property (registered mortgage) as at 5 April 2016 | $4,769 | $4,769 |
| 20. | H | CBA Mastercard as at 5 April 2016 | 0 | $20,254 |
| 21. | H | Outstanding Service Fees owed to Mr Stoddard P/L as per Financial Statement filed 21.01.16 | 0 | $220,000 |
| 22. | H | Loan to Mr Stoddard P/L as at 30.06.2015 | 0 | 0 |
| 23. | H | Taxation imposte on distribution of wealth from The Stoddard Family Trust | $244,285.71 | $244,285.71 |
| Total | | | ||
| SUPERANNUATION | |||||
| Member | Name of Fund | Type of Interest | Wife’s value | Husband’s value | |
| 24. | W | Mr & Ms Super Fund as at 30 June 2015 | SMSF | $244,616 | $244,616 |
| 25. | H | Mr & Ms Super Fund as at 30 June 2015 | SMSF | $564,212 | $564,212 |
| 26. | W | First State Super as at 25 March 2016 | Accumulation | $20,363 | $20,363 |
| Total | $829,191 | $ 829,191 | |||
Agreed assets
The parties were in agreement in respect to the value and inclusion of the following assets of the parties in the matrimonial property pool:
a)The E property - $670 000 (item 1);
b)The C property - $920 000 (item 2);
c)Stoddard Pty Ltd - $100 (item 3);
d)Stoddard Family Trust - $964 754 (item 4)
e)Z Health - $41 102 (item 5);
f)CBA Account ending … - $1101 (item 7);
g)CBA Account ending … - $1105 (item 8)
h)ING Account ending … - $988 (item 9);
i)CBA Account ending …- $35 384 (item 11);
j)Furniture and effects of the C property - $20 000 (item 12); and
k)Furniture and effects of the E property - $20 000 (item 13).
The agreed assets of the parties therefore comes to a total sum of $2 674 534.
Agreed liabilities
While the parties were in disagreement as to a number of liabilities being included in the balance sheet, the parties were in agreement as to the value and inclusion of the following liabilities:
a)CBA Loan secured against the E Street property - $4769 (item 19); and
b)Taxation impost on distribution of wealth from the Stoddard Family Trust - $244 285.71 (item 23).
The agreed liabilities of the parties therefore comes to a total sum of $249 054.71.
Superannuation
The parties were in agreement as to the value and inclusion of the parties’ superannuation entitlements, which were:
a)The wife’s superannuation in Mr & Ms Stoddard Superannuation Fund - $244 616 (item 24);
b)The husband’s superannuation in Mr & Ms Stoddard Superannuation Fund - $564 212 (item 25); and
c)The wife’s superannuation in First State Super - $20 363 (item 26).
The agreed superannuation of the parties therefore comes to a total sum of $829 191.
As previously mentioned, the appropriate adjustment of the parties’ superannuation interests will be considered separately from the Court’s consideration of the adjustment of the parties’ matrimonial property.
Issues in regards to disputed items on the balance sheet
Accordingly, the following issues in respect of the balance sheet remain to be determined by the Court:
a)Should legal fees be included as an “add back” and if so, what portion of the following should that include:
i)legal fees paid by the husband, including monies in trust, in the sum of $421 463; and
ii)legal fees paid by the wife, including monies in trust, in the sum of $174 106?
b)Consequently, should monies borrowed by the wife in respect to legal fees that have been paid in the sum of $124 398 be included as a liability on the balance sheet?
c)Should the parties’ credit card liabilities be included as a liability on the balance sheet?
d)Should the outstanding service fees owed to Mr Stoddard Pty Ltd by the husband in the sum of $220 000 be included as a liability on the balance sheet?
“Add backs” (items 14 and 15) and the wife’s loan for legal fees (item 17)
Counsel for the wife submitted that the legal fees incurred by both parties should be added back as notional property into the matrimonial property pool. As a related issue, it was submitted that the wife’s indebtedness to the CBA in the sum of $124 398, which she alleged she had borrowed for legal fees, should be included as a liability of the wife in the balance sheet.
It was argued by counsel for the wife that, in circumstances where matrimonial property has been sold since the parties separated and where it appears that legal fees have been paid from funds that included those proceeds of sale, it is artificial to attempt to distinguish between legal fees paid from post separation income and those paid from matrimonial property. Counsel for the wife referred to a number of authorities where the legal fees incurred by the parties have been notionally added back to the matrimonial property pool.
Senior counsel for the husband opposed legal fees being included as “add backs” to the matrimonial property pool. He argued that the power of the Court to make an order pursuant to section 79 of the Act is to adjust property and not notional property. Senior counsel cited a number of cases detailing the development of the concept of “add backs”, including several more recent authorities that question the appropriateness of the concept of adding notional property back into the matrimonial property pool. This included a reference to the analysis of Tree J in Rooks & Padley [2014] FamCA 444 where his Honour commented that “the correctness of add backs post Stanford must be seriously doubted”. [6]
[6] at [76].
The rationale for “add backs” was described by the Full Court in Mayne & Mayne (2011) FLC 93-479 at 85,896-97 in the following terms:
72. Parties to proceedings about the division of property before the Family Court (and the Federal Magistrates Court) frequently urge the Court to add-back assets or funds that have been applied by one party or another for allegedly his or her own purposes after separation. The rationale is that one party should not benefit from a premature distribution of the assets. An obvious example is withdrawing and using money from a bank account either joint or owned by one of the parties. It is also the case that the parties may decrease the pool by increasing liabilities. The issue in such cases is whether the liability should be a joint liability or a liability only of the party who created it.
73. The application of the funds removed (or the debt incurred) may have been for a personal purpose (for example, to pay legal fees) or it may have been applied in the sustenance of a party or the children of the parties.
74. If the former is the case this has generally found to be a pre-emptive unilateral division of property. If the latter is the case then the principles enunciated in Marker v Marker [[1998] FamCA 42] and Chorn NH & Hopkins RC [(2004) FLC 93-204] apply. If the money was, or part of the money, was used to meet reasonable living expenses then that money, or that part of the money, is not “added-back” or regarded as a pre-emptive distribution.
In Omacini & Omacini [2005] FamCA 195 at [30] the Full Court identified three categories where it may be appropriate to notionally add back an item of expenditure. Those categories were identified as being:
a)Where the parties have expended money on legal fees (DJM & JLM (1998) FLC 92-816 at 85,262);
b)Where there has been a premature distribution of matrimonial assets (Townsend & Townsend (1995) FLC 92-569 at 81,654); and
c)In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644 – including:
i)“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
ii)“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”.
Specifically in respect to legal fees, in DJM & JLM (1998) FLC 92-816 at 85,262, the Full Court said:
For reasons set out in Farnell, section 117 provides that each party to the proceedings under the Family Law Act shall bear their own costs unless the Court otherwise orders. Failing to add back monies expended by the parties on costs frequently has the effect of defeating the policy of section 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 back costs already paid back into the pool. Whilst there may be cases where that approach is inappropriate, the reason why it is not taken ought normally to be spelt out. We see no reason advanced in this case as to why the costs paid should have been kept out of the pool. This is especially so in light of the costs orders which followed requiring the husband to contribute substantially to the wife’s costs. Unless the $30,000 was treated as part of the parties’ property, the costs order had the effect of having the husband pay for the costs which had already been allowed for by the refusal to bring these monies back into calculation.
In Chorn & Hopkins (2004) FLC 93-204 the Full Court confirmed that the question as to whether legal fees should be included as a category of addbacks is a matter for the trial judge’s discretion. At 79,322-79,323 their Honoursprovided the following guidance in considering whenlegal fees could be added back to the property pool:
57. If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the party, who has had the benefit of them.
58. If funds used to pay legal fees had been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset; nor would any borrowing undertaken by a party post-separation to pay legal frees be taken into account as a liability in the calculation of the net property of the parties. Funds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement may need to be looked at different from other post-separation income or acquisitions.
59. Outstanding legal fees themselves are generally not taken into account as a liability.
60. If in the exercise of discretion, it is determined that legal fees already paid should be taken into account as a notional asset, then normally any liability associated with the acquisition of the monies used to pay the legal fees should also be taken into account.
These principles have been applied in a number of cases where one party has prematurely obtained the benefit of the property of the relationship prior to the question of appropriate adjustment being considered at final hearing.
However, the decision of the High Court in Stanford has created some uncertainty as to whether this approach in respect to “add backs” is correct. In Stanford, the High Court said at [37] that the first step in respect to section 79 proceedings was:
… to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property.
(Emphasis in original)
In Mayne & Mayne (2011) FLC 93-479, Faulks DCJ in his separate Reasons for Judgment, in considering the “existing legal and equitable interests” of the parties to that appeal, said that “by definition it would seem that property which has been spent when the matter is before the Court is no longer there and is not property.”[7]
[7] at 85,897. Emphasis in original.
Further in Bevan, the Full Court considered Stanford and made the following observations at 87,233:
79. We observe that “notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them”, and thus is not amenable to alteration under s 79. It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage - and potentially an important part. As the question does not arise here, we need say nothing more on this topic, save to note that s 79(4) and in particular s 75(2)(o) gives ample scope to ensure a just and equitable outcome when dealing with the unilateral disposal of property.
Further to the suggestion that section 75(2)(o) provided ample scope to deal with the premature distribution or utilisation of matrimonial property, in Vass & Vass (2015) 53 Fam LR 373 the Full Court suggested another possible option was to address the issue of pre-emptive or inappropriate use when considering the overall impact of any orders under section 79 and, in particular, whether those orders were just and equitable. In that respect the Full Court said at 394:
138. There is no error committed per se in adjusting the parties’ actual property interests by a calculation involving notionally adding back into the pool sums which have been dissipated by the parties. We reject any suggestion that the decision of Bevan & Bevan… – or, more particularly, the decision of the High Court in Stanford v Stanford… – is authority for any necessary contrary solution. Some statements made by the High Court may lead to the conclusion that references to “notional property” as have been referred to in decisions of this court and at first instance may need to be reconsidered.
139. The decisions referred to seek to remind the Court that, however the exercise of discretion might seek to deal with property that is said to be the subject of “add back”, proper consideration must be given to existing interests in property, and the question posed by s 79(2) as a separate inquiry from any adjustment to property interests by reference to s 79(4) if a consideration of s 79(2) reveals that it is just and equitable to alter existing interests in property.
(Emphasis in original)
Having regard to these more recent decisions of the Full Court, I determine that the more appropriate course of action in this case is to consider the issue of the legal fees paid by the husband and the wife, including the loan obtained by the wife to pay for her legal fees, in the context of section 75(2)(o).
The parties’ credit card liabilities (items 16 and 20) and alleged liability to Mr Stoddard Pty Ltd for service fees (item 21)
Senior counsel for the husband argued that each of the parties’ credit card liabilities, as well as the amount the husband says that he owes to Mr Stoddard Pty Ltd, should be included as liabilities on the balance sheet. The wife on the other hand argued that all three items should be removed.
No evidence has been presented to the Court to suggest that the expenditure resulting in the parties’ credit card liabilities was a result of extravagance or inappropriate conduct on the part of either party.
There is no question that the respective credit card liabilities are debts of the parties and there is no evidence that the debts have been inappropriately incurred. I therefore propose to include in the balance sheet items 16 and 20. The wife’s primary submission was that the liabilities should be excluded from the balance sheet but that in the event that the Court included the husband’s credit card liability, then it was appropriate for her credit card liability to also be included.
I agree with the submissions of counsel for the wife that it would be inappropriate to include the outstanding service fees owed by the husband’s business to the service company, Mr Stoddard Pty Ltd. The husband operates the business as a sole trader. The arrangement that has been established by the husband is that Mr Stoddard Pty Ltd is the service company for the business. The service company employs staff and owns assets utilised by the business. The service company renders a fee to the business in respect to those services. In turn, the business pays the husband who then pays the service company its fees. Any profits made by Mr Stoddard Pty Ltd are then distributed through the Stoddard Family Trust to its beneficiaries. Those beneficiaries are currently the parties and their children. According to the orders proposed by both parties, the husband will be solely able to distribute the trust income as he sees fit and the wife will be removed as a beneficiary.
The agreed value of the Stoddard Family Trust is $964 754, which is based on the report of Ms Q dated 4 April 2016 (Exhibit D). Page 22 of Ms Q’s report notes that the value is as at 30 June 2015. In turn, Appendix 7 to Ms Q’s report sets out the balance sheet of the Stoddard Family Trust which details her adjustments in arriving at the conclusion that the net asset position of the Trust is $964 754. The bulk of that equity is derived from the shares held in Mr Stoddard Pty Ltd in the sum of $965 283. From that amount, the balance sheet records the deduction of liabilities, namely unpaid trust distributions, as listed at Appendix 7.
Pages 17 and 18 of Ms Q’s report deal with the valuation of Mr Stoddard Pty Ltd, which was similarly valued as at 30 June 2015. The adjusted valuation arrived at by Ms Q is set out at page 17 of her report in the sum of $965 283. This sum, as noted, is reflected in the balance sheet relating to the Stoddard Family Trust at Appendix 7. Ms Q notes that 100 per cent of the shares in Mr Stoddard Pty Ltd are held by Stoddard Pty Ltd on the behalf of the Stoddard Family Trust. Further, Ms Q attributed 100 per cent of the value of Mr Stoddard Pty Ltd to the Stoddard Family Trust as at 30 June 2015.
Appendix 6 of Ms Q’s report summarises the balance sheet of Mr Stoddard Pty Ltd which she notes detailed adjustments as at 30 June 2015. In particular, that balance sheet details “Unpaid Billed Services – Public Hospital” in the sum of $23 935 as at 30 June 2015. No such entry is made in respect to unpaid service fees payable by Z Health.
In other words, the valuations of Mr Stoddard Pty Ltd and the Stoddard Family Trust, as at 30 June 2015, did not include the amount identified in item 21 on the balance sheet as the “outstanding service fees owed to Mr Stoddard Pty Ltd” in the sum of $220 000. It would therefore be inappropriate and unfair to the wife to include that item 21 as a liability on the balance sheet in circumstances where there has not been a corresponding adjustment to the value of Mr Stoddard Pty Ltd and consequently, the Stoddard Family Trust. Accordingly, item 21 being the alleged service fees payable by Dr Mr Stoddard trading as Z Health to Mr Stoddard Pty Ltd in the sum of $220 000 will not be included as a liability on the balance sheet
Balance Sheet
The parties’ assets, liabilities and superannuation as found by the Court are therefore:
1. Non-superannuation pool
ASSETS
Ownership Description Value 1 H E Street, D Town $670 000 2 W C Street, D Town $920 000 3 J Stoddard Pty Ltd (ACN …)[8] $100 4 H Stoddard Family Trust $964 754 5 H Z Health $41 102 6 W CBA Account No. ending … $1101 7 W CBA Account No. ending … $1105 8 W ING Account No. ending … $988 9 H CBA Account No. ending … $35 384 10 W Furniture and effects (C property) $20 000 11 H Furniture and effects (E property) $20 000 Total $2 674 534.00 [8] Each party owns fifty ordinary shares of the one hundred issued shares.
LIABILITIES
Ownership Description Value 12 W CBA Mastercard Account No. ending … $3030 13 H CBA loan (E property) $4769 14 H CBA Mastercard Account $20 254 15 H Taxation impost on distribution of wealth from the Stoddard Family Trust $244 285.71 Total $272 338.71
Total Net Assets $2 402 195.29 2. Superannuation pool
Member Description Value 16 W Mr & Ms Stoddard Super Fund $244 616 17 H MR & MS Stoddard Super Fund $564 212 18 W First State Super $20 363 Total $829 191.00
Total Superannuation $829 191.00
Contributions
Approach
In Mallet & Mallet (1984) 156 CLR 605 Gibbs CJ stated that, under the Act, there is no presumption that the “contribution of one party as a homemaker or parent and the financial contribution made by the other party are deemed to be equal” or that “equality of division should be the normal starting point for the exercise of the Court’s discretion”.[9]
[9] at 610.
Gibbs J further stated that “the respective values of the contributions made by the parties must depend entirely on the facts of the case”.[10]
[10] Ibid.
In this case it was not disputed that, at least until the point of separation, the husband made the greater financial contribution to the parties’ property and the wife made a greater indirect contribution, particularly in her capacity as a parent and homemaker. That indirect contribution should not be assessed in a “merely token way”.[11] In Carmel-Fevia & Fevia (No. 3) [2012] FamCA 631, Cronin J summarised the applicable principle derived from Mallet (supra) in the following terms:
113. In Rolfe v Rolfe (1979) FLC 90-629, Evatt CJ said that where one party was earning an income and the other fulfilling responsibility at home, there was no reason to attach greater value to the contribution of one of them to that of the other because that was the way the parties arranged their affairs. Her Honour said that the contribution of each should be given equal value. In Mallet (1984) FLC 91-507 Wilson J referred to Rolfe (supra) and agreed with Evatt CJ’s exposition subject to one reservation. His Honour said that the Act required that the contribution of the wife as a homemaker and parent be seen as an indirect contribution to the acquisition, conservation or improvement of the property of the parties regardless of whether legal ownership resided. His Honour then said:
The contribution must be assessed, not in any merely token way, but in terms of its true worth to the building up of the assets.
[11] Ibid at 636.
Cohabitation
There was an issue between the parties at hearing as to the date they commenced cohabitation. On the wife’s account, the parties commenced cohabitation in January 2005 whereas on the husband’s account, cohabitation commenced in February 2006. In the circumstances of this case, it is unnecessary to resolve those competing contentions. The relevant issue is to identify the contributions that the parties respectively made to the matrimonial property pool. In Harriott & Arena [2016] FamCAFC 69, the Full Court relevantly stated:
48. … Importantly, it had long been established… that regard should be had to all contributions made to the property, including not only those made prior to the marriage, but also those made prior to the commencement of any pre-marriage cohabitation: Beneke v Beneke (1996) FLC 92-698.
49. The Full Court did say in Beneke that it felt there should be some “causal or at least temporal connection” between the contribution and the marriage, although it noted that this was of “no significance” in that case. The Full Court also observed that in Lozanov & Lozanov (unreported, Full Court of the Family Court of Australia, Fogarty, Baker and McCall JJ, 8 June 1994), their Honours had concluded that “contributions made by parties prior to the marriage, whether they were cohabitating or not, can be treated as contributions under s 79 provided the parties subsequently marry and the matters have a sufficiently relevant connexion with the marriage”…
Aside from the real estate owned by the respective parties together with some savings, two motor vehicles as well as their superannuation entitlements, there was no evidence in the proceedings of any material contribution by the parties in the period from January 2005 until February 2006. Insofar as the parties had existing property that became part of the matrimonial property pool, I am satisfied that the contributions of the parties in the period from January 2005 and February 2006 have a sufficiently relevant connection with the marriage to be treated as contributions under section 79 of the Act.
Accordingly, there is no need to characterise the nature of the parties’ relationship in that period in order to determine whether they were cohabiting. For convenience, I will therefore regard the parties’ relationship for the purpose of these proceedings as commencing in January 2005.
Wife’s property at the commencement of cohabitation
The wife’s property at the commencement of the relationship was as follows:
a)The Suburb I property, which was acquired by the wife in October 2003 for $460 000. The wife asserts that the mortgage at the time was $333 122. The parties are in agreement that when sold on 6 May 2013, the sale resulted in net proceeds of $148 091.
b)A motor vehicle.
c)Superannuation valued at $21 262.
d)Savings of $7500.
Husband’s property at the commencement of cohabitation
The husband contended that his contributions as at cohabitation were:
a)The G Town property which was acquired on 7 February 2003 for the sum of $1.485 million. The property was subject to a mortgage of $1.399 million. It is agreed that when sold on 5 June 2015, the sale resulted in net proceeds of $1 095 576.
b)The L Town property, which was purchased in March 2004 for the sum of $290 000. The husband contends that at the time the property had a mortgage of $200 000. It is agreed that when sold on 16 March 2015, the sale resulted in net proceeds in the sum of $186 531.20.
c)A motor vehicle.
d)Superannuation.
e)Savings of $100 000.
Significance of initial contributions
In Pierce & Pierce (1999) FLC 92-844 at 85,881, the Full Court stated that the appropriate focus of the Court in considering initial contributions in the context of the totality of contributions made by parties to a marriage is a question of “what weight is to be attached, in all the circumstances, to the initial contribution”. The Full Court stated that, in doing so:
It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.
In Quaresmini & Quaresmini [1999] FamCA 1314 at [39], the Full Court stated that:
There is no principle that the length of the marriage leads to a likelihood that other contributions will outweigh or weigh equally with ‘a particular contribution’. It is a matter of assessing the contributions of all relevant kinds in each case to arrive at an outcome which is both appropriate and just and equitable. In some cases particular contributions may be outweighed or equalled by other ones. In other cases particular contributions may be so disproportionate to other contributions as to merit special recognition.
In this matter the husband made a greater initial contribution to the matrimonial property of the parties. It is not possible, however, to make an accurate assessment of the net value of the property owned by either party at the time of cohabitation. The focus of my consideration will be on the benefit ultimately obtained by the parties from the respective contributions of property that they each brought into the relationship.
The G Town property produced a significant capital gain for the parties. As noted, when sold on 5 June 2015, the net proceed of sale were approximately $1 095 000. Counsel for the husband referred to the decision of the NSW Supreme Court of Appeal in Kardos v Sarbutt (2006) 34 Fam LR 550 at [61] as authority for the proposition that appropriate recognition should be given to the capital gain made from the husband’s initial contribution in the form of the G Town property. It was submitted that a failure to do so undervalues the initial contributions and treats the increase in the capital value of the asset as if ownership of such property was part of the “fruits of the relationship, when it is not”.
Counsel for the wife, on the other hand, submitted that “the dicta in Kardos v Sarbutt [(supra) has] limited application to a case where the wife made both a direct and indirect contribution to the assets introduced by the husband (and vice versa) during the period of the parties’ relationship”.[12]
[12] Wife’s further submissions dated 8 April 2016.
The G Town property was tenanted throughout the period of cohabitation and the rental income substantially supported the mortgage repayments for that property. Insofar as there was a shortfall in respect to the outgoings for the property as against rental income, it was common ground that the shortfall was funded by way of the husband’s income. The agreed net proceeds of the sale were $1 095 576. Those proceeds were applied as follows:
a)To the extent of $247 526 to discharge a CBA overdraft;
b)To the extent of $126 081 to discharge a Med-e Credit personal loan;
c)To the extent of $508 000 to reduce the loan secured against the E property; and
d)To the extent of approximately $241 000 to Mr Stoddard Pty Ltd for service fees.
Pursuant to orders made 10 September 2015, the remaining sum arising from the sale of the G Town property remains in specie in Mr Stoddard Pty Ltd as part of the funds held in the controlled monies account.
The L Town property was also tenanted throughout the marriage and the rental income substantially supported the mortgage secured over that property. Again, it is common ground that in so far as there was a shortfall in meeting expenses over and above the rental income, that shortfall was met by the husband’s income. The sale of the L Town property in 2008 to Mr Stoddard Pty Ltd for $400 000 raised funds that were, in turn, applied towards the purchase and construction of the former matrimonial home and towards improvements which were to be made to that property. When the L Town property was finally sold by Mr Stoddard Pty Ltd on 31 January 2015, the proceeds of sale were in the sum of $169 374.70, following the discharge of the mortgage and associated selling costs.
On the other hand, senior counsel for the husband argued that the wife’s equity in the Suburb I property diminished during the course of the relationship. This appears to be the case.
In terms of section 75(2)(k), the assistance the wife provided to the husband to develop his business came at some expense to her in respect to her own professional career. At the time the parties met the wife and the husband were both working as trainee health professionals. The wife put her traineeship on hold prior to the birth of the parties’ first child. The wife travelled with the husband to the UK in order to enable him to complete his training and obtain his qualifications. The wife formally resigned from her position when she was pregnant with the parties’ second child.
The wife took up training after separation in January 2013. She finally qualified as a senior health care professional in October 2015. I accept that subsequent to the birth of the children, the wife did not pursue her career and she delayed commencing training until after separation. While I accept the submission of senior counsel for the husband that there is no evidence that the wife would necessarily have finished her initial training, it would be unreasonable not to recognise that she has made sacrifices, as a wife and as a mother, that have impacted upon her career development and consequently, her earning capacity.
In terms of section 75(2)(l), I accept that it is reasonable for the wife to arrange her current employment, so far as it is possible, to be available for the children when they spend time with her before school and after-school. She manages to do that three days a week. In that context I note that the children are aged ten and seven. This results in the wife working six hours less than full-time per week and has an impact on her weekly income.
In terms of section 75(2)(na), I note that while the wife has made some criticisms regarding the amount of child support that the husband has paid, there has been no question that he has met and will continue to meet his statutory obligations in respect to the children. I accept the submission of senior counsel for the husband that, despite the fact that the children will now spend equal time with each of their parents, in light of the husband’s superior income, it is likely that he will be required to pay ongoing child support.
In terms of section 75(2)(o), I note that as result of the parties separation, the wife’s employment in the husband’s business was terminated. This meant that the wife no longer earned the income that she had previously enjoyed through the husband’s business. During cross-examination the husband accepted that the wife’s income from his business was in the sum of $200 003 for the financial year ended 30 June 2011, $444 046 for the financial year ended 30 June 2012 and $210 153 for the half financial year ended 30 December 2012.
As result of the significant reduction of her income, the wife experienced a period of hardship including the need to find funds to pay expenses in respect to the Suburb K property. On the other hand, senior counsel for the husband noted that despite her reduction in income, the wife still managed to access sufficient funds to enable her to undertake overseas travel including visiting Mr H.
The other significant issue in respect to section 75(2)(o) is the treatment of legal expenses. In that respect senior counsel for the husband submitted that those cases in which the Court has added back to the property pool notional property were “the exception rather than the rule.” He submitted that this case did not fall within that category of those exceptions. It was argued that the legal fees were not unreasonably incurred, but rather were the result of protracted litigation concerning parenting issues which were ultimately resolved by consent orders. It was argued, in that respect, that the husband had no alternative but to engage in the litigation because, at least in one instance, an application was made for orders that the husband’s time with the children be supervised.
Further, senior counsel for the husband noted that in the husband’s solicitor’s costs notice (Exhibit H) advised that approximately 75 per cent of the legal fees incurred by the husband related to the parenting proceedings. That apportionment was not challenged by the wife.
As noted, counsel for the wife submitted that, in circumstances where the husband has sold matrimonial property and placed the proceeds of that sale in a company account controlled by the husband, it was artificial to attempt to characterise the source of funds used to pay the husband’s legal fees as being attributable to the husband’s post separation income (as opposed to the proceeds of the property).
Further insofar as the husband has paid his legal fees from funds generated from his business, the wife has a valid argument that she has made a contribution to the development of that business.
In that context, counsel for the wife submitted that where legal fees are paid from income, it is necessary to consider the connection of that income to the marriage. In that respect reference was made to decisions of the Full Court in Jong & Yeng,[13] Kasiopoulos & Garapiperis[14] and Calder & Calder.[15] Further support for that submission is also found in paragraph [58] of Chorn & Hopkins (2004) FLC 93-204.[16]
[13] [2014] FamCAFC 156 at [62] – [64].
[14] [2012] Fam CAFC 85 at [107].
[15] (2016) FLC 93-691.
[16] See [111] above.
The legal fees incurred by the husband in this matter are substantial. However, the circumstances in which they were incurred are not such that I determine that they are excessive or unjustified.
The evidence placed before the Court did not establish that the husband has paid legal fees directly from the proceeds of the sale of the G Town or L Town properties. However, as previously indicated, in circumstances where the proceeds of the sale of those properties became part of the matrimonial property and specifically, in large part through Mr Stoddard Pty Ltd (the service company of the husband’s business), it is somewhat artificial to attempt to differentiate between the utilisation of income that was available as result of the receipt of the capital from the proceeds of sale of the G Town and L Town properties.
It is clear that at least some of the proceeds of sale from the G Town property were applied towards payment of service fees to Mr Stoddard Pty Ltd rather than payment being made from its usual source, the husband’s business. Paragraph 255 of the husband’s affidavit indicates that payments were made to Mr Stoddard Pty Ltd in respect to service fees in the sum of $100 551.85 for April 2015 and in the sum of $140 243.30 for part of May 2015. It is reasonable to conclude, as was the submitted by counsel for the wife, that this must have resulted in additional funds remaining in Z Health which would have then been available to husband to be utilised for the purposes of paying the husband’s legal fees.
In those circumstances, I respectfully agree with counsel for the wife that it is somewhat artificial to attempt to identify the source of funds used to pay legal fees in circumstances where the proceeds of the sale of the property became part of the matrimonial property pool and freed up funds to be applied as income for the husband, including to be applied towards legal fees.
Further, as noted, insofar as the husband has paid legal fees from income derived from his business, the wife has a legitimate argument that she has made a contribution to the development of that business.
I also note that there is a substantial disparity in the legal fees paid by the husband which total the sum of $421 463 and those paid by the wife in the sum of $174 106. That represents a difference of $247 357, or approximately 10 per cent of the net non-superannuation property pool. Failure to make at least some adjustment in respect to that disparity would result in the situation where, in effect, the wife would be “subsidising” the husband’s legal fees insofar as it would diminish any adjustment of property in her favour.
Each party is entitled to be represented in the manner in which he or she chooses, including engaging senior counsel. The costs notice from the husband’s solicitors (Exhibit H) indicates that the husband has, in the main, chosen to be represented by senior counsel. There can be no criticism of him for that. It would, however, be unfair to expect the wife to effectively subsidise that decision.
In summary, it is appropriate to make some adjustment pursuant to section 75(2)(o) to reflect the fact that the husband incurred significantly greater legal fees than the wife and was able to utilise his income and financial resources to pay those legal fees as they arose whereas it was necessary for the wife to borrow the substantial portion of her legal fees. That adjustment will not, however, be to the full extent of the difference between the parties’ legal fees.
Evaluation of section 75(2) factors
I have given consideration to all of the matters set out in section 75(2) and, in particular, those matters to which I have referred. The most relevant considerations are:
a)That the husband has a significantly greater earning capacity than the wife; and
b)That the husband has incurred significantly greater legal fees than the wife in the circumstances to which I have referred where it is more likely than not the husband’s legal fees have, at least in part, been paid for from the capital of the parties as opposed to his post separation income.
In those circumstances I consider that an appropriate adjustment pursuant to section 75(2) in favour of the wife is 10 per cent.
Superannuation
As previously noted, the parties agreed that the matrimonial property and the parties’ superannuation entitlements should be considered in two separate pools.
The parties’ self-managed superannuation fund was established in 2008 after the parties relocated to D Town and the husband had established his business. The parties are the sole members of the fund and their benefits are preserved until they are 58 years of age.
The fund was valued in the report of Ms Q. Appendix 8 to that report indicates that the value of each parties’ entitlement in the fund as at 2015 is approximately $564 212 to the husband and $244 616 to the wife.
Paragraph 154 of Ms Q’s report indicates that the husband’s membership entitlement in the fund is 69.8 per cent and the wife’s membership entitlement is 30.2 per cent.
Exhibit F shows that, in 2008, the husband rolled his entitlement with First State Super in the sum of approximately $110 000 into the self-managed superannuation fund.
Exhibit Q shows that, in 2008, the wife rolled her entitlement with MLC in the sum of approximately $41 000 into the self-managed superannuation fund.
Accordingly, the husband’s initial contribution to the fund was approximately 70 per cent and the wife’s was 30 per cent. In other words, there is a consistency with the current entitlements of the parties’ referred to in paragraph 154 of Ms Q’s report.
Senior counsel for the husband submitted that the Court could comfortably make a contribution finding of 60 per cent to the husband and 40 per cent to the wife.
Counsel for the wife, on the other hand, argued that insofar as Coghlan & Coghlan (2005) FLC 93-220(“Coghlan”) is authority for the proposition that superannuation can be treated differently from the non-superannuation property pool, the points of difference relate to the particular characteristics of superannuation. Most relevantly, with superannuation, there is usually lack of access to the funds until the identified retirement or withdrawal date. In this case that is when the parties reach fifty-eight years of age. That lack of access, it was submitted, applies equally to both parties.
Counsel for the wife submitted that the Court should give the same consideration to issues of contribution as the Court would give in respect to the non-superannuation property pool.
In Drewett & Drewett [2012] FamCA 320, Cronin J at [184] referred to Coghlan as providing a preferred approach to the treatment of superannuation wherein the majority of the Full Court said:
We consider the preferred approach to the determination of property settlement cases must be to prepare, in addition to the list of items of property which would clearly fall within the definition of that term in s 4(1), a separate list containing any superannuation, interest or interests valued according to the regulations if a splitting order is sought in any application before the court or if no such order is sought that either according to the regulations or otherwise.
In further discussing Coghlan, Cronin J said at [185] – [188]:
185. Their Honours said that whether or not a splitting order was sought on either party's application, their contributions to both the property as defined in s 4(1) and also the superannuation interests should be assessed. The other factors in s 79(4)(d), (e), (f) and (g) would then need to be considered. The s 75(2) factors would then be considered.
186. Similarly, the parties' future superannuation prospects, be they in capital or income form, would also need to be considered. The overall justice and equity of the ultimate award, including any proposed splitting order or the need for such an order, would then be considered. The Full Court then went on to set out how that pathway was to be followed. Their Honours then said:
In the context of the consideration of the matters referred to in subparagraphs (b) and (c) of a preceding paragraph in which they referred to the pathway the following matters may be relevant: the relationship between years of fund membership and cohabitation; actual contributions made by the fund member at the commencement of the cohabitation (if applicable) at separation and at the date of hearing; preserved and non-preserved resignation entitlements at those times; and any factors peculiar to the fund or to the spouse's present and/or future entitlements under the fund.
187. Their Honours then said:
If this approach is adopted whereby superannuation interests are dealt with separately from properties defined in s 4, but are subject to the considerations in s 79(4) then not only will any contributions both direct and indirect by either party to such superannuation interests be more likely to be given proper recognition, but the real nature of the superannuation interests in question can also be taken into account both in consideration of the s 75(2) matters and in the final assessment of whether the ultimate order is just and equitable.
188. The Full Court referred to the real nature of the relevant superannuation interest and by that they were referring to not just the value of the superannuation interests according to the regulations but also the relevant value to the party in the future. In this case, the parties have obtained and agreed upon the valuations of their respective interests and it was not suggested that I should examine what those interests will mean for them in the future. Initially therefore, I propose to simply assess their respective contributions and then make adjustments separately.
Senior counsel for the husband submitted that the Court should have regard to the fact that both parties are seeking a superannuation splitting order and that the parties are only in their mid-forties. As a consequence, it was argued that the superannuation entitlement of the parties cannot be regarded as equivalent to “a dollar in the bank” because it will be a number of years before the parties are able to access their entitlements.
Despite the fact that it will be a number of years before either party is likely to access their superannuation entitlements, there was no suggestion that the Court should apply anything other than the agreed valuations of their respective interests.
In this matter I have had regard to the fact that the husband’s initial contribution to the self-managed super fund was approximately 70 per cent of the fund and the wife’s initial contribution was approximately 30 per cent. I have also had regard to the fact that the husband transferred the entirety of his then superannuation entitlement into the self-managed fund whereas the wife retained her interest with First State Super. I also note that the orders proposed by each of the parties provide for the wife to retain her interest in her First State Super.
Further, I have had regard to the contributions of each of the parties overall in respect to the non-superannuation property and specifically, during the marriage, the significant role the wife played in the development of the husband’s business which generated the income to enable the parties to contribute to their superannuation. This included the husband’s ability to contribute a significantly greater sum than the wife was able to contribute.
Having regard to the above matters, I determine that it is therefore appropriate to reduce the husband’s current entitlement in the self-managed superannuation fund from 69.8 per cent to 60 per cent. Accordingly, the wife’s entitlement of the self-managed superannuation fund will be increased from 30.2 per cent to 40 per cent. This will result in a split of the self-managed superannuation fund of 60 per cent to the husband and 40 per cent to the wife. As noted, in addition, the wife will retain her existing entitlement in First State Super.
Orders
Property settlement
I have therefore found that the net pool of non-superannuation assets should be divided 42.5 per cent to the husband and 57.5 per cent to the wife. The net pool of assets as found by the Court amounts to $2 402 195.29, of which 42.5 per cent and 57.5 per cent equates to $1 020 933 and $1 381 262.29 respectively.
The husband currently holds assets to the sum of $1 731 290 and liabilities to the sum of $269 308.71. Accordingly, the husband holds net assets to the sum of $1 461 981.29, which exceeds his entitlement by $441 048.29.
The wife currently holds assets to the sum of $943 244 and has liabilities to the sum of $3030. Accordingly, the wife holds net assets to the sum of $940 214, which leaves her with a shortfall of $441 048.29 for which she will require payment from the husband.
As outlined at [71] above, the parties were in agreement that the parties should each retain the respective properties in which they live, that Mr Stoddard Pty Ltd should transfer the European motor vehicle to the wife and that the wife should otherwise relinquish her interests in Stoddard Pty Ltd and the Stoddard Family Trust. I intend to make orders to that effect.
With the wife to relinquish her fifty shares in Stoddard Pty Ltd to the husband ($50), this means that the wife will therefore require a total payment of $441 098.29. For convenience, I will round that figure to $441 098. I will therefore order that the husband pay to the wife within twenty-eight days the sum of $441 098. I will discharge all previous property orders in these proceedings, which in turn will release the amount of $483 576.32 currently held in a controlled monies account in the name of Mr Stoddard Pty Ltd. The husband will be at liberty to utilise those funds, if he deems appropriate, to meet such a payment to the wife.
I decline to make an order pursuant to section 106A of the Act as sought by the husband (husband’s Order 14), but I will give the parties liberty to re-list on seven days written notice to one another and the Court (husband’s Order 13), only if an issue arises as to the implementation of the Orders.
Superannuation
As noted, the husband is currently entitled to $564 212, being 69.8 per cent, of the Mr & Ms Stoddard Superannuation Fund whilst the wife is currently entitled to $244 616, being 30.2 per cent.
I have found that the Mr & Ms Stoddard Superannuation Fund should be split 60 per cent to the husband and 40 per cent to the wife. Accordingly, the husband’s entitlement in the Fund will be reduced by 9.8 per cent, or approximately $79 265.
Under the Orders, as proposed by both parties, the wife will continue to retain her superannuation with First State Super, being an amount of $20 363.
Children’s accounts
During the proceedings it was acknowledged that the wife holds bank accounts on behalf of the parties’ children with funds of approximately $60 000. It was agreed that those funds should not be included in the balance sheet.[17] However, the order proposed by the husband to confirm that these funds will continue to be held by the wife on behalf of the children is appropriate.
[17] See transcript of 6 April 2016 at page 107.
Overview of orders
In taking a holistic overview to the consideration of these orders I am satisfied that the orders are appropriate, just and equitable.
The orders will provide sufficient funds to the wife to enable her to pay her debts including paying off her mortgage if she so chooses. Her ongoing income as a health professional and working at X Group will enable her to maintain a comfortable standard of living for herself and the children.
Without the obligation of a mortgage, the wife should be able to supplement her superannuation to help sustain her after retirement.
The transfer of funds to the wife can be met through monies held in the controlled monies account without unduly impacting upon the husband’s business or requiring the husband to incur any additional debt. He too will be able to enjoy a comfortable standard of living supported by income from his business. That income will also be sufficient to enable him to contribute to his superannuation with a view to supporting his retirement when that occurs.
I certify that the preceding two hundred and forty-one (241) paragraphs are a true copy of the reasons for judgment of the Honourable Justice McClelland delivered on 15 August 2016.
Associate:
Date: 15 August 2016
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