Welch & Abney (No 2)
[2015] FamCA 1116
•14 December 2015
FAMILY COURT OF AUSTRALIA
| WELCH & ABNEY (NO 2) | [2015] FamCA 1116 |
| FAMILY LAW – PRACTICE & PROCEDURE – Where the wife adduced evidence to support a Kennon argument – Where the husband objected to the receipt of such evidence – Where the case did not fall within the exceptional category identified by the Full Court – Where the wife’s evidence, taken at its highest, could not support a Kennon submission and it was therefore futile to receive it into evidence FAMILY LAW – PROPERTY SETTLEMENT – Where the wife submitted for expenditure of over $600,000 to be notionally regarded as property of the husband – Where the parties have both spent large sums of money since separation but their expenditure was not profligate or unreasonable – Where it is just and equitable to adjust the parties’ property interests – Where a global assessment of contributions to assets and superannuation was preferable – Where the husband made a greater capital contribution at the commencement of cohabitation – Where the parties’ financial and non-financial contributions during some 16 years of cohabitation should be regarded as relatively equal – Where after separation, the wife’s contributions were greater, especially with regard to the care of the parties’ two children – Where the wife’s overall contribution-based entitlement is 55 per cent – Where the husband’s prospective common law claim and the wife’s continuing exclusive responsibility for the parties’ youngest child warrant, in aggregation, an adjustment of 5 per cent in her favour – Where the wife is entitled to 60 per cent of the parties’ net assets and superannuation interests – Husband entitled to 40 per cent |
| Evidence Act 1995 (Cth), ss 135 Family Law Act 1975 (Cth), ss 75, 79,106A, 117 |
| Bevan & Bevan (2013) 49 Fam LR 387 Browne & Green (1999) FLC 92-873 Chorn & Hopkins (2004) FLC 93-204 Marriage of Coghlan (2005) 33 Fam LR 414 Marriage of Kennon (1997) 22 Fam LR 1 Marriage of Kowaliw (1981) FLC 91-092 Norbis v Norbis (1986) 161 CLR 513 Omacini & Omacini (2005) 33 Fam LR 134 S & S [2003] FamCA 905 Semperton & Semperton (2012) 47 Fam LR 626 Stanford v Stanford (2012) 247 CLR 108 Vass & Vass [2015] FamCAFC 51 |
| APPLICANT: | Ms Welch |
| RESPONDENT: | Mr Abney |
| FILE NUMBER: | NCC | 629 | of | 2013 |
| DATE DELIVERED: | 14 December 2015 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Newcastle |
| JUDGMENT OF: | Austin J |
| HEARING DATE: | 23, 24, 25 & 27 November 2015 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Tregilgas |
| SOLICITOR FOR THE APPLICANT: | Burke & Mead Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Bates |
| SOLICITOR FOR THE RESPONDENT: | Hunter Family Law Centre Pty Ltd |
Orders
By way of property settlement between the parties:
(a)The wife shall forthwith pay to the husband the sum of $1,992;
(b)The wife is declared the sole legal and beneficial owner of the real property and improvements comprising Lot … in DP …, being the property more commonly known as C Street, D Town, NSW (“the D Town property”), and the husband shall forthwith do all such things and sign all such documents as may be necessary to transfer all his right, title, and interest in the D Town property to the wife;
(c)The wife shall indemnify and keep indemnified the husband against all rates, taxes, statutory charges, mortgage repayments, and other outgoings and liabilities affecting or relating to the D Town property;
(d)The husband is declared the sole legal and beneficial owner of the real property and improvements comprising Lot … in DP …, being the property more commonly known as E Street, F Town, NSW (“the F Town property”), and the wife shall forthwith do all such things and sign all such documents as may be necessary to transfer all her right, title, and interest in the F Town property to the husband;
(e)The husband shall indemnify and keep indemnified the wife against all rates, taxes, statutory charges, mortgage repayments, and other outgoings and liabilities affecting or relating to the F Town property;
(f)The wife is declared the sole legal and beneficial owner of the parties’ farming equipment and tools and the husband shall forthwith do all such things and sign all such documents as may be necessary to transfer to the wife all his right, title, and interest in the farming equipment and tools;
(g)The husband is declared the sole legal and beneficial owner of the parties’ Country H time-share and the wife shall forthwith do all such things and sign all such documents as may be necessary to transfer to the husband all her right, title, and interest in the time-share; and
(h)The parties shall forthwith do all such things and sign all such documents as may be necessary to cause the husband’s removal as a trustee and beneficiary of the Abney Family Trust.
Otherwise:
(a)Each party shall be the sole legal and beneficial owner of all other assets registered in their sole names or in their respective exclusive possession as at the date of these orders, and for that purpose bank accounts are deemed to be in the possession of the account holder and superannuation interests are deemed to be in the possession of the superannuant; and
(b)Each party shall be solely liable for and shall indemnify the other against any and all debts attaching or relating to the property in their respective possession and any debts in their respective sole names.
In the event of either party refusing or neglecting to sign within 7 days of a written request to do so any document necessary to implement the terms of these orders, the Registrar of the Family Court of Australia at Newcastle is empowered to execute such documents on behalf of the parties pursuant to
s 106A of the Family Law Act.
All questions of costs are reserved for 28 days.
Any and all other outstanding applications are dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Welch & Abney (No 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: NCC 629 of 2013
| Ms Welch |
Applicant
And
| Mr Abney |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings concern the determination of property settlement orders, pursuant to Part VIII of the Family Law Act 1975 (Cth) (“the Act”), between two spouses who separated four years ago.
The proceedings were originally commenced by the wife seeking only orders in respect of their children under Part VII of the Act, but the husband later sought property settlement orders when the litigation was underway. The parenting dispute was finalised in July 2014, leaving only the property dispute to be determined.
The parties agreed it would be just and equitable to alter their property interests, but they had different opinions about how that should be done.
History
The parties commenced cohabitation in 1995, married in 1996, and finally separated in 2011. Their relationship subsisted for over 16 years.
Their two children were born in 1997 and 2000. Both live with the wife and neither sees the husband. The eldest is now an adult. The husband pays the wife child support.
The wife was in paid employment throughout the relationship, including periods of paid maternity leave, paid sick leave, and paid medical suspension, until her employment as a university senior lecturer was terminated on medical grounds in February 2011. After separation, the wife became entitled to receipt of a total and permanent disability pension (“TPD pension”) under an insurance policy annexed to her superannuation interest, which pension cannot be commuted and will be paid to her until she is entitled to receive her superannuation interests at 65 years of age, provided her medical condition continues to preclude her fitness for employment. She additionally receives a monthly payment under her income protection policy with CommInsure, which will endure until her retirement age, upon the same condition.
The husband was also in full-time paid employment until he became a full-time PhD student in 2002 for some months. In 2003 he resumed full-time employment, as a university lecturer, which employment he held beyond the parties’ separation. His employment was terminated in December 2013, but he then became entitled to a monthly payment under his income protection policy with CommInsure, which he will continue to receive until retirement age of 65 years, so long as his medical condition warrants it.
Each party introduced real estate to the relationship, which was progressively sold and the proceeds of sale used within the marriage. In 2008 the parties bought a property at D Town in joint names, which was the matrimonial home until their separation in 2011. The wife has since remained in occupation of the D Town property.
At or about the time of their separation, the husband purchased a property at F Town in his sole name, which he moved into and has since occupied. That purchase was enabled by his enlargement of the loan secured by mortgage over the D Town property and the use of other monies paid to the wife upon the termination of her employment.
The parties’ financial circumstances improved significantly after separation. The wife received several lump sum amounts, as compensation for her unfair dismissal from employment, as workers compensation for permanent impairment, and as personal injury damages, and the husband successfully applied for release of his superannuation interests. Both parties still have prospective claims available to them, though their viability remains uncertain.
Evidence
In support of her proposal for property settlement the wife relied upon:
(a)Her financial statement filed on 4 November 2015;
(b)Her affidavit filed on 24 June 2015, which included a separate folder of annexures;
(c)Her affidavit filed on 20 July 2015; and
(d)The affidavit of Mr G, an adversarial expert, filed on 19 November 2015.
With the parties’ consent, leave was granted to the wife to adduce expert evidence from Mr G and to the husband to rely upon his affidavit filed on 19 November 2015, which affidavit addressed the same issue about which Mr G was retained by the wife to offer his opinion.
In support of his proposal for property settlement the husband relied upon:
(a)His financial statement filed on 13 November 2015;
(b)His affidavit filed on 23 July 2015; and
(c)His affidavit filed on 19 November 2015.
The parties also relied upon the evidence of two single experts, comprising the following:
(a)The affidavit of Mr Simon Harben SC filed on 17 April 2015;
(b)The two affidavits of Mr B filed on 22 April 2015 and 14 July 2015; and
(c)A supplementary report of Mr B, prepared after he completed his cross-examination.[1]
[1] Exhibit W1
A substantial amount of time was spent at the commencement of the trial dealing with the parties’ respective objections, many of which were sustained.
One particular objection pressed by the husband related to a tranche of the wife’s first affidavit headed “Husband’s Controlling and Abusive behaviour”.[2] The wife conceded she adduced the evidence for two purposes: first, to demonstrate the nature of the husband’s behaviour and the manner in which it allegedly affected her contributions (see Marriage of Kennon (1997) 22 Fam LR 1), and second, the way in which the husband’s control of the household financial affairs allegedly caused the parties’ financial loss (see Marriage of Kowaliw (1981) FLC 91-092; Browne & Green (1999) FLC 92-873 at [40]-[41]). The husband’s objection was sustained and the evidence was rejected for the reasons which follow.
[2] Wife’s first affidavit, paras 187-249
As to the second purpose, not a single sentence within the pages of evidence that drew objection related to the husband’s alleged financial mismanagement. Relevantly, the evidence directed itself to the husband’s overall control of matrimonial finances (which was not a controversial issue anyway) so the evidence could not prove what the wife wanted.
As to the first purpose, the evidence did not possess the probative value the wife inferentially asserted. At worst the evidence was irrelevant, but even at best, its probative value was substantially outweighed by the danger that its admission would invite cross-examination and induce debate that would unduly waste time (s 135(c) Evidence Act 1995 (Cth)). To determine the admissibility of the evidence-in-chief it was necessary to contemplate the prospective validity of the Kennon argument on the strength of the wife’s own evidence. If, when accepted at its highest, it could not support a Kennon submission then it was futile to receive it (see S & S [2003] FamCA 905 at [37]-[40]).
The relative rarity of a Kennon case should not be overlooked, for otherwise many property settlement cases would descend into unnecessarily bitter contests over the attribution of fault for marital discord and breakdown and divert attention from the statutory formulation of s 79 of the Act. In Kennon the majority stated (at 24):
Put shortly, our view is that where there is a course of violent conduct by one party towards the other during the marriage which is demonstrated to have had a significant adverse impact upon that party’s contributions to the marriage, or, put the other way, to have made his or her contributions significantly more arduous than they ought to have been, that is a fact which a trial judge is entitled to take into account in assessing the parties’ respective contributions within s 79…
In the above formulation, we have referred only to domestic violence, for the reasons which we indicated earlier, but its application is not limited to that…
However, it is important to consider the “floodgates” argument. That is, these principles, which should only apply to exceptional cases, may become common coinage in property cases and be used inappropriately as tactical weapons or for personal attacks and so return this court to fault and misconduct in property matters – a circumstance which proved so debilitating in the past…
However, in our view, s 79 should encompass the exceptional cases which we described above…
It is essential to bear in mind the relatively narrow band of cases to which these considerations apply. To be relevant, it would be necessary to show that the conduct occurred during the course of the marriage and had a discernible impact upon the contributions of the other party. It is not directed to conduct which does not have that effect and of necessity it does not encompass…conduct related to the breakdown of the marriage (basically because it would not have had a sufficient duration for this impact to be relevant to contributions).
This case did not fall within the exceptional category identified by the Full Court. Remembering the parties cohabited from 1995 until 2011, other evidence adduced in these proceedings belied the wife’s intended Kennon submission. For example:
(a)In November 2009, after some 14 years of cohabitation and barely a year before final separation, the wife solemnly and sincerely declared in a statutory declaration prepared for use in other litigation that she was “happily married”.[3] She said in cross-examination that her statement in the statutory declaration was truthful at the time she made it.
(b)She also later said in cross-examination “we had the perfect marriage until I stopped doing what I was told”, which she allegedly did in 2011, proximate to their separation.
(c)She also told her doctors throughout 2009, 2010, and 2011 of her admiration for the husband, telling them he was “very understanding” and “supportive” and “there had been no major difficulties in their relationship”.[4] The wife tried to resile from such approbation in cross-examination, saying she would not have criticised the husband to them because she knew he would later read their reports, but that merely implied she deliberately gave false accounts to her own doctors about the husband’s qualities. She may be prepared to falsify her accounts when it suits her, but it is more likely her compliments about the husband to the doctors were accurate.
[3] Wife’s first affidavit, Annex V1W (page 150)
[4] Exhibits H4, H5
Self-evidently, the wife’s expressions of satisfaction with the marriage up until close to final separation are antithetical to any complaint now made about how her matrimonial contributions were rendered more arduous by reason of the husband’s “controlling and abusive behaviour”.
The wife did adduce evidence of one incident of violence between them, but that occurred in May 2011, at a time when she regarded the marriage as finished and the husband was reluctant to acknowledge the breakdown.[5] The charges brought against the husband were dismissed without penalty because of his impaired mental state.[6] As the husband correctly observed,[7] that conflict occurred when their marriage was breaking down, which is conduct the Full Court in Kennon expressly exempted from the principles it espoused.
[5] Wife’s first affidavit, paras 223, 236-241
[6] Husband’s first affidavit, page 31
[7] Husband’s first affidavit, page 31
Although there was an abundance of evidence about the wife’s impaired state of emotional health from 2008 onwards, there was no expert evidence to causally link such ill health to any conduct of the husband. The absence of such a causal link is critical, if not fatal (see Kennon at 18; S & S at [41]-[48]). On the contrary, all of the evidence attributed her ill health to problems she encountered in her workplace, which was why she was retired on medical grounds in February 2011 and why she was able to later successfully sustain workers compensation and common law damages claims against her former employer. Any nexus between the husband’s misconduct and the wife’s matrimonial contributions being rendered qualitatively greater would be purely speculative, not validly inferred.
In retrospect, the wife’s opinion the husband’s behaviour “exacerbated [her] psychological condition” may be honestly held,[8] but that does not make it objectively true. In any event, significantly, she only thinks the husband’s conduct “exacerbated” her condition, not that it was the principal cause. On her own evidence, if her psychological ill-health made it more difficult for her to contribute in the parties’ household, the difficulty was only tangentially related to the husband’s conduct.
[8] Wife’s first affidavit, para 248
Legal principles
Orders under s 79 of the Act altering the property interests of parties may only be made if the Court is first satisfied, pursuant to s 79(2), it is just and equitable to make such orders. The Act then identifies in s 79(4) the matters the Court must take into account in considering what order, if any, should be made (see Stanford v Stanford (2012) 247 CLR 108 at [22], [35]). While those two inquiries are not to be conflated (see Stanford at [35], [40], [51]), it is permissible for the factors within s 79(4) to inform the inquiry under s 79(2) (see Bevan & Bevan (2013) 49 Fam LR 387 at [83]-[89], [163], [169], [171]-[172]).
It is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying the existing legal and equitable property interests of the parties. It must not be assumed that the parties’ rights to or interests in marital property are or should be different from those that then exist or that a party has the right to have the parties’ property divided by reference to considerations set out in s 79(4) of the Act (see Stanford at [37]-[40], [50]). Commonly, however, it will be just and equitable for the parties’ property rights to be altered because the breakdown in their relationship will end their fiscal unity and deprive them of common use of their property (see Stanford at [42]; Bevan at [68]-[70], [82], [164]-[165]).
If and once determined it is just and equitable for the property interests of the parties to be altered, the process of evaluating the proper orders to make is dictated by the factors enumerated within s 79(4) of the Act. The Court must necessarily identify and assess the parties’ contributions within the meaning of ss 79(4)(a)-(c) and then take account of the relevant matters referred to in ss 79(4)(d)-(g) and 75(2).
Existing property interests
The following findings about the parties’ current financial circumstances are drawn largely from the joint balance sheet tendered immediately prior to the parties’ final submissions.[9]
[9] Exhibit W3
The wife’s assets, liabilities and superannuation interests are as follows:
No.
Assets
Value
Total
1
D Town real property (50 per cent)
290,000
3
Car 1
24,500
4
Car 2
13,000
6
Household effects
2,750
8
Farming equipment and tools (50 per cent)
9,293
9
NPBS Acc #...
53
10
NPBS Acc #...
302
11
CBA Acc #...
116
12
CBA Acc #...
7,740
13
IAG shares
2,353
14
NIB shares
3,000
22
Country H time-share (50 per cent)
500
23
US time-share
30,000
Sub-total
383,607
383,607
Liabilities
34
CBA mortgage (D Town – 50 per cent)
156,000
35
CBA mastercard
23,155
36
GO mastercard
4,850
Sub-total
184,005
-184,005
199,602
Superannuation
42
First State Super accumulation interest
33,332
43
Matrix Super accumulation interest
10,455
44
Uni-Super retirement benefit (defined)
276,617
45
Uni-Super accumulation interest
44,900
49
Uni-Super disability pension (defined)
972,959
Sub-total
1,338,263
+1,338,263
Total
1,537,865
The husband’s assets and liabilities are as follows:
No.
Assets
Value
Total
1
D Town real property (50 per cent)
290,000
2
F Town real property
380,000
5
Car 3 car
6,500
7
Household effects
3,725
8
Farming equipment and tools (50 per cent)
9,293
15
IAG shares
2,491
16
CBA Acc #
464,063
17
CBA Acc #
42
18
CBA Acc #
147
19
Bankwest Acc #
253,036
20
Bankwest Acc #
1,138
21
Bangkok Acc #
155
22
Country H time-share (50 per cent)
500
48
Tax credit
5,707
Sub-total
1,416,797
1,416,797
Liabilities
34
CBA mortgage (D Town – 50 per cent)
156,000
38
TMB loan
349
39
CBA visa
536
Sub-total
156,885
-156,885
Total
1,259,912
It is necessary to explain some of those findings, since the parties did not agree upon all of the constituent property interests and their value.
The parties held different opinions about the value of the Country H time-share (item 22), in which they have a joint interest. The husband originally purchased the time-share, but it was later transferred into joint names. The wife thinks it is worth $5,000, but the husband thinks it is worth only $1,000. Their inexpert opinions about value carry no weight. The husband does not want to retain the time-share, but inferentially, neither does the wife.[10] The husband bought it and has maintained it, so he can keep it, but for that reason I adopt the lesser estimate of $1,000 as its value. It is his admission as to its value.
[10] Wife’s first affidavit, paras 115-116, 499; Husband’s first affidavit, pages 27-28
The wife submitted for expenditure of over $600,000 to be notionally regarded as property of the husband (items 24-33). The submission is rejected. The add-back of expenditure as notional property was always discouraged as the exception rather than the rule (see Chorn & Hopkins (2004) FLC 93-204 at [24]), but there is even less room for it following the High Court’s observations in Stanford.
The first step in determining any claim under s 79 of the Act is to establish the parties’ individual existing legal and equitable property interests (see Stanford at [37]-[40], [50]). By definition, an existing legal or equitable property interest cannot include an extinguished interest.
Any argument about the premature distribution of assets or the deliberate, reckless, negligent or wanton dissipation of assets can only ordinarily be relevant to the inquiry about the proper nature of the property adjustment orders to be made, once it is first determined that an adjustment of property interests is just and equitable. Consideration of such evidence is permissible when comparing the parties’ contributions under ss 79(4)(a)-(c) of the Act or otherwise pursuant to ss 79(4)(e) and 75(2)(o) of the Act. Such an approach is not novel (see Bevan at [78]-[79], [160]; Vass & Vass [2015] FamCAFC 51 at [138]-[139]).
Even in the past when dissipated assets were given notional recognition as existing property, the mere fact a party dissipated assets, without more, did not justify such an approach being taken. The dissipation must have been unreasonable (see Omacini & Omacini (2005) 33 Fam LR 134 at 146).
In this case, both parties spent large sums of money after separation, but their expenditure was not profligate or unreasonable. In the main, their expenditure was to meet ordinary living expenses, retire debt, and pay legal costs. There was also some discretionary expenditure, but it was reasonable and only to leaven the depression that misfortune settled upon them and their children.
The wife spent considerably more than the husband. She spent the entirety of the workers compensation payment she received in April 2012 ($60,000) and the entirety of the common law damages she received in May 2013 ($500,000). The husband spent the proceeds realised by the sale of two vintage cars in 2012 ($23,000), the entirety of his severance pay received in December 2013 ($54,000), and a chunk of the superannuation interests he crystallised in 2015 ($300,000+).
The wife also complained about how the husband unnecessarily incurred a tax liability ($91,501) by the manner in which he withdrew his superannuation interests in 2015, but that complaint was without merit. While it is true the husband’s superannuation interests with SASS and MLC had tax-free components and it was theoretically possible for him to draw down some of his superannuation without incurring any tax,[11] the situation was otherwise when he made claims upon the ancillary disability insurance policies.
[11] Affidavit of Mr G, pages 11-14
The husband only had until April 2015 to make his claim on the SASS disability insurance policy,[12] and he said in cross-examination, without contradiction, that successful claims upon the disability policies crystallised his superannuation interests, requiring them to be either paid out in full or rolled-over to another fund. The husband’s belief seems to be corroborated by information fact sheets published by the trustee of SASS.[13] He took advice from a financial advisor, but decided to cash-in his superannuation interests for a number of valid reasons he explained.[14]
[12] Husband’s first affidavit, Annexure Z3
[13] Exhibits H2, H3
[14] Husband’s second affidavit paras 3-7; Exhibit H1
The manner of treatment of paid and unpaid legal costs incurred by the parties in litigation has long been a vexed question, not least because the Act ordinarily requires the parties to meet their own legal costs (s 117(1)), and the parties’ existing property interests are distorted by, for example, the diminution of jointly-owned assets by the payment of the parties’ unequal legal costs or the parties creation of unequal individual liabilities to meet legal costs.
In this case, allowing for some dispute about the precise amounts, the wife incurred legal fees of about $160,000 and the husband incurred legal fees of about $190,000. The wife argued for the husband’s legal costs to be added-back as his notional asset, but no satisfactory argument was offered for why, let alone for why her own legal costs should not then also be added-back for consistency between them. Her proposal was opposed by the husband. His legal costs were paid from monies he borrowed or received after separation, in which case there should be no add-back (see Chorn v Hopkins at [55]-[60]). He did not submit for any add-back of the wife’s paid legal fees. The loan raised by the wife, principally to pay legal costs, is ignored as a liability (item 37) and the parties’ respective unpaid legal costs are also ignored as liabilities (items 40-41).
The husband’s prospective common law claim against his former employer was regarded by the parties as a financial resource (item 46). Accordingly, it is not included as an existing property interest of the husband.
An account held with the Australian Scholarship Group was also noted by the parties as a financial resource (item 47). The parties hold an account with ASG into which they contributed money to cover the eventual cost of the children’s secondary and tertiary education. Their contributions have ceased and, apparently, some $18,000 remains to be disbursed by ASG to the children. Neither party regards the money as their own. It is neither their property, nor a financial resource to either of them.
The husband conceded in cross-examination his accountant arranged for an amended assessment of his tax in the 2014/2015 financial year, which resulted in a tax credit of $5,707 (item 48). The husband will use the credit in the 2015/2016 financial year to defray his tax liability and so the tax credit is counted as his property.
The wife’s TPD pension is a defined benefit superannuation interest in the payment phase. It’s capitalised value of $972,959 was calculated by the single expert according to the Family Law (Superannuation) (Methods and Factors for Valuing Particular Superannuation Interests) Approval 2003 (Cth) (item 49). That figure represents the current value of the TPD pension, assuming payment until she attains 65 years of age.[15] The pension is paid monthly and cannot be commuted. Her continuing entitlement to payment of the pension depends upon her medical qualification for it, which is periodically reviewed. No aspect of the evidence implied any likelihood of its cessation and no such suggestion was made by the husband.
[15] First Affidavit of Mr B, pages 6, 9, 19
Because the statutory scheme expects the TPD pension to be capable of lump sum valuation, the wife’s superannuation interests incorporate that value. Contrary to the husband’s submission, the wife has no existing proprietary interest in it. Contrary to the wife’s submission, it is not merely a financial resource. It is a valuable superannuation interest susceptible to a splitting order. However, the “nature, form and characteristics” of the TPD pension affect any decision about whether it should be split.[16]
[16] First affidavit of Mr B, page 7
Given the nature and value of the parties’ property and superannuation interests, it is just and equitable to adjust their interests, just as they both contended. The imperative to untangle their financial affairs can only be achieved by severance of their joint proprietary interests in the D Town property, the Country H time-share, and their farming equipment, and the allocation of respective liability for the joint loan secured by mortgage over the D Town property.
Contributions
Initial contributions
There was some slight discrepancy in the evidence about the wife’s initial capital contributions to the marriage, but it was not explored in cross-examination. The wife took into the relationship an encumbered real property (“Suburb I property”), a car, some savings, and minimal superannuation, then collectively worth about $40,000 net.[17]
[17] Wife’s first affidavit, paras 12-22, 28; Husband’s first affidavit, page 5
The discrepancies in the evidence about the husband’s initial capital contributions were, however, explored. The husband took into the relationship two encumbered real properties (“J Town property” and “K Town property”), a car, and minimal superannuation. He also had some debts.[18] The quantification of those capital contributions was influenced by cross-examination.
[18] Wife’s first affidavit, paras 23-25; Husband’s first affidavit, pages 4-5
The husband was forced to concede his debt secured by mortgage over both properties was then $111,000, not $95,000 as he deposed, and he had a personal bank loan of $15,000, which was omitted from his evidence-in-chief.
The wife initially asserted the husband had an additional liability to his father in respect of the J Town property,[19] but in cross-examination she admitted she did not know whether or not any of the debt was ever repaid by the husband to his father. The husband staunchly maintained his father died without any money being paid to him and he did not buy-out his former wife’s interest in the property.[20] I accept his insistent evidence that he did not pay any money to acquire sole proprietorship to that property, aside from the money used to discharge the mortgage which encumbered it.
[19] Wife’s first affidavit, paras 23, 33, 34
[20] Husband’s first affidavit, page 4
The upshot of those conclusions is the husband contributed assets with a net value of about $115,000.
Financial contributions during marriage
At the time of commencement of cohabitation, both parties were in full-time employment. The wife was earning about $60,000 gross per annum[21] and the husband was earning $83,000 gross per annum.[22] Later in the relationship, though, the wife’s income exceeded the husband’s by a modest margin.[23]
[21] Wife’s first affidavit, paras 7, 43; Husband’s first affidavit, page 8
[22] Wife’s first affidavit, para 11; Husband’s first affidavit, page 5
[23] Wife’s first affidavit, para 131
The wife later commenced additional part-time work.[24] In 1998 she resigned her employment and then started full-time employment at a university,[25] though she did not relinquish her other part-time role until 2002.[26] She only took paid annual leave and maternity leave after the birth of both children in 1997 and 2000 before resuming work.[27] The wife was in a senior position when she was suspended from work on medical grounds with full pay in 2009, at which time her income was about $89,000 gross per annum.[28] When she was eventually retired from employment on medical grounds in February 2011 her income was about $108,000 gross per annum.[29] There is no doubt all of her income was applied to the household.[30]
[24] Wife’s first affidavit, paras 9, 43-47
[25] Wife’s first affidavit, para 49; Husband’s first affidavit, page 8
[26] Wife’s first affidavit, para 55
[27] Wife’s first affidavit, paras 48, 51-53
[28] Wife’s first affidavit, paras 67-68
[29] Wife’s first affidavit, para 69
[30] Wife’s first affidavit, paras 129-130
Following the termination of the wife’s employment she was paid six months wages in lieu of notice and her accrued leave was also paid out. She received about $57,000 net, which was deposited in the household accounts.[31]
[31] Wife’s first affidavit, paras 262-263
The husband remained in the position until 2000, after which he became an administrator of the same institution.[32] In 2002, despite the wife’s doubts,[33] he took paid leave and a stipend to complete his PhD. In 2003, he resumed full-time employment, which employment he held until well after final separation.[34] His income generated income of around $87,000 gross per annum, which he supplemented with income from some consultancy work.[35] At the time of the husband’s medical retirement in December 2013 his income was about $100,000 gross per annum.[36] All of the husband’s income was used for the benefit of the household, save for amounts he paid in child support to his former wife in the initial years of the parties’ relationship.
[32] Wife’s first affidavit, paras 76, 80; Husband’s first affidavit, page 6
[33] Wife’s first affidavit, para 81
[34] Wife’s first affidavit, paras 82, 85-87; Husband’s first affidavit, page 6
[35] Wife’s first affidavit, paras 84, 86, 93-94
[36] Wife’s first affidavit, para 95; Husband’s first affidavit, pages 6, 20
Following termination of the husband’s employment he was paid a net amount of about $54,000 for his accrued entitlements, which sum he retained.[37]
[37] Wife’s first affidavit, para 332; Husband’s first affidavit, page 21
Non-financial contributions during marriage
When the parties commenced cohabitation they lived in the K Town property and leased the Suburb I property.[38] They then bought and moved into a second K Town property, allowing them to lease the K Town property until it was sold in 2000.[39] The Suburb I property was sold in 2001.[40] The proceeds of sale from both properties defrayed the parties’ debt.[41]
[38] Wife’s first affidavit, para 97
[39] Wife’s first affidavit, paras 102-104
[40] Wife’s first affidavit, para 108
[41] Wife’s affidavit, para 109
While the parties lived in the second K Town property they carried out quite significant renovations and improvements to it.[42]
[42] Wife’s first affidavit, paras 110-113; Husband’s first affidavit, page 9
In 2008 the parties bought the former matrimonial home at D Town and they moved into it. They lived there together until the marriage ended and the husband vacated the property in October 2011.
The J Town property and the second K Town property were both sold in 2008 or 2009, after which the former matrimonial home was their only real estate.[43]
[43] Wife’s first affidavit, paras 121-122; Husband’s first affidavit, pages 11, 13
The parties substantially renovated and improved the former matrimonial home during the marriage.[44] In reference to the parties’ performance of such work, the wife said in cross-examination “I think we were pretty even”. Given the husband’s superior trade and manual skills, it is likely he did more of the building work but, given his commitment to such heavy work, it is also likely the wife performed a greater load of the household duties.
[44] Wife’s first affidavit, paras 119, 124; Husband’s first affidavit, pages 10, 13
The wife maintained she did the vast majority of the household work and was principally responsible for the care and supervision of the children,[45] but the differential was probably not as pronounced. The husband probably played a much greater supporting role than the wife conceded.
[45] Wife’s first affidavit, paras 135-171
The wife conceded she worked long hours in her employment, at least up until 2005.[46] The husband must have taken on more of the household load while the wife was at work. She admitted in cross-examination he cared for the children when she worked at night and she also admitted “he did do a lot of work around the farm”. Both parties worked hard to fulfil their employment commitments around their obligations to supervise the children and run their household.[47]
[46] Wife’s first affidavit, para 151
[47] Wife’s first affidavit, para 160; Husband’s first affidavit, page 8
In 2007, the husband travelled overseas for work extensively. In that particular year he was away for about 9 weeks,[48] during which the wife was solely responsible for the care of the children, as she was whenever he travelled internationally on his own.
[48] Exhibit W2
After the wife fell seriously ill in 2008, the husband needed to contribute much more effort in the household because she could not function at full capacity. She acknowledged he spent much more time at home than at work from that time on[49] and she conceded in cross-examination her illness affected the children from that time.
[49] Wife’s first affidavit, paras 89, 91; Husband’s first affidavit, page 22
Later, the husband’s household help waned when he fell into depression in 2010 over the murder of his older daughter from a former relationship. Nevertheless, he again needed to take on greater household responsibility when the wife attempted suicide and was admitted to hospital for treatment as a psychiatric patient in February 2011. When that happened to the wife a second time in October 2011 the marriage was over and the husband was in the process of vacating the former matrimonial home.
Both parties probably consumed more alcohol than they should have, which adversely affected their parenting performance. The wife regularly drank more heavily than usual over a period of months while her mental condition was at its lowest in 2009, which she admitted to the doctors she consulted,[50] and the husband’s level of consumption was dangerously high in 2010 following his daughter’s murder, which he admitted in cross-examination. However, the evidence does not sensibly permit a finding that either was an undue burden to the other on account of their drinking habits. They each took up the slack for the other when needed.
[50] Exhibits H4, H5, H6
In or about 2008, the husband tried to start a wedding-car hire business, but the wife was disinterested. The three vintage vehicles purchased for that purpose were later sold. The first was sold before separation and the sale proceeds used to improve the former matrimonial home. The other two cars were sold after separation for a total of $23,000 and the sale proceeds were retained by the husband.[51]
[51] Wife’s first affidavit, paras 123, 126, 128, 297, 454
Post-separation contributions
Following upon the termination of her employment in February 2011, the wife commenced action against her employer for unfair dismissal. In April 2011 she successfully obtained a net lump sum compensation payment of $36,032.[52] Her evidence-in-chief was confused about the nature of the payment, but in cross-examination she confirmed it was an industrial claim rather than a workers compensation claim. The money was channelled through the parties’ accounts and ultimately used by the husband to help fund his purchase of the property at F Town (the “F Town property”).
[52] Wife’s first affidavit, paras 254, 266
The husband vacated the former matrimonial home in October 2011 once he purchased the F Town property. His purchase of the F Town property was enabled by his use of money paid to the wife and by enlarging the loan secured by mortgage over the former matrimonial home. The parties disputed whether the husband’s use of those funds was surreptitious or consensual, but that factual dispute need not be determined because it makes no difference to the analysis of their contributions.
The loan secured over the former matrimonial home had a debit balance of only $100. To purchase the F Town property, the husband drew down on the loan, increasing the debit balance to over $313,000. The remainder of the purchase price and ancillary costs comprised part of the wife’s severance pay received in February 2011 ($57,000) and the unfair dismissal payment she received in April 2011 ($36,032).[53]
[53] Wife’s first affidavit, paras 284-291, 465; Husband’s first affidavit, pages 14-15, 17-18
In February 2014, with the parties’ consent, they were ordered to convert the home loan to an interest-only loan and meet the repayments in equal shares.[54] The home loan is secured over only the former matrimonial home, even though virtually all of the debt pertains to purchase of the F Town property.
[54] Order 1 made 28 February 2014
Once in possession of the F Town property, the husband unilaterally raised his own loan, secured by mortgage over the F Town property. The debit balance of that loan grew to nearly $150,000, before he was restrained from increasing the debt beyond that amount,[55] but he reduced the debt to almost nil using money he successfully applied to release from his superannuation interest, following which he was restrained from increasing the debit balance of the loan beyond $500 and also from reducing the credit balance in another banking account.[56]
[55] Order 2 made 16 October 2014; Wife’s first affidavit, paras 465-480
[56] Orders 1-2 made 19 June 2015; Order 1 made 30 July 2015
In April 2012, the wife successfully obtained a lump sum payment of about $60,000 for her permanent impairment in workers compensation proceedings, which money she spent.[57]
[57] Wife’s first affidavit, paras 255, 315-316; Husband’s first affidavit, page 15
In October 2012 the wife commenced tortious action against her former employer for personal injury damages, which suit she successfully settled for a net amount of $500,000 in May 2013, and she spent the money.[58]
[58] Wife’s first affidavit, paras 317-321
Using the money she received after separation, the wife carried out more renovation and improvement work to the former matrimonial home, without the husband’s knowledge or consent.[59] The wife deposed to her expenditure of some $146,000 on the post-separation renovations and improvements,[60] but such expenditure did not result in commensurate capital appreciation. Close to the time of the husband’s departure from the property it was valued at $525,000,[61] but even after all of the improvements its current value is still only $580,000.
[59] Wife’s first affidavit, paras 355-390; Husband’s first affidavit, page 14
[60] Wife’s first affidavit, para 388
[61] Wife’s first affidavit, para 258
Sometime in early 2015, the husband applied for release of his superannuation interests held with SASS and MLC. His applications were successful and, between May and July 2015, he was paid net amounts of $640,397 by SASS[62] and $388,682 by MLC.[63] The husband’s accumulated superannuation interests with SASS and MLC then approximated only $416,878[64] and $19,410[65] respectively, so the amounts he received incorporated lump sum payments under allied insurance policies for his total and permanent disablement.
[62] Husband’s financial statement, para 59; Husband’s first affidavit, pages 29-30
[63] Husband’s Case Outline filed 20/11/15
[64] Wife’s first affidavit, para 483
[65] Wife’s second affidavit, para 8
The husband banked the monies he received, but they have been depleted by his expenditure, some of which was explained by the husband in his affidavit,[66] but elaborated by him in cross-examination. Save for one small amount of child support allegedly paid by the husband, the nature and quantum of his expenditure from those funds was not controversial. The residue of some $717,000 remains deposited in his banking accounts.
[66] Husband’s first affidavit, page 30
Following the husband’s movement out of the former matrimonial home in October 2011, the wife assumed greater responsibility for care of the children. She assumed sole responsibility for their care after the husband’s suicide attempt in March 2013, as they have not seen him since then.[67] No doubt the children were disturbed by the wife’s suicide attempt in February 2011 while the marriage was intact, but they were distressed beyond words by the husband’s suicide attempt in March 2013. They witnessed his attempt at self-immolation in a public street and one of them was accidentally splashed with accelerant in his attempt. The wife’s past emotional support of two distraught teenage daughters is a contribution of some magnitude.
[67] Wife’s first affidavit, paras 400-402
There has been considerable angst over the husband’s financial support of the children. He paid the household mortgage after separation until November 2013, when the wife applied for a child support assessment.[68] He then began paying child support in lieu of the mortgage, until ordered otherwise. He effectively created the mortgage liability to purchase the F Town property and so he was ordered to pay one-half of the loan repayments even though he did not live in the former matrimonial home.[69] The parties tussled over the child support assessments, which changed several times.[70] The child support assessment is now fixed until 30 November 2016.[71] The assessment decreases after 16 December 2015, from which date no child support is payable in respect of the eldest child.
[68] Wife’s first affidavit, paras 456, 457, 500; Husband’s first affidavit, page 20
[69] Order 1 made on 28 February 2014
[70] Wife’s first affidavit, paras 502, 504, 505, 506, 509
[71] Exhibit H7
Conclusion about contributions
Despite the lively debate over the facts, the nature of their contributions, and the manner in which their contributions should be assessed, the parties had remarkably similar opinions about the value of their contributions. The wife submitted for assessment of her contribution-based entitlement at 55 per cent, whereas the husband thought her entitlement was even greater, in the range between 55.5 and 60 per cent.
The wife submitted for global assessment of their contributions across all assets and superannuation interests, whereas the husband submitted for separate assessment of their contributions to assets and superannuation interests in five separate categories. Given the trifling differential between their respective assessments, the dispute over the methodology needs only superficial attention.
Global assessment of contributions is the norm (see Norbis v Norbis (1986) 161 CLR 513 at 523, 532-533, 541), though superannuation interests are usually treated separately (see Marriage of Coghlan (2005) 33 Fam LR 414 at 428-429). In this case, the husband no longer has any superannuation. He voluntarily converted it to cash. The wife retains her superannuation, but the bulk of it comprises defined benefits with undisputed capitalised value. Global assessment of contributions to assets and superannuation is preferable.
Overall, the wife’s contributions were modestly greater than the husband’s. The husband made a greater capital contribution at the beginning of their relationship, but their financial and non-financial contributions during some 16 years of cohabitation should be regarded as relatively equivalent. After separation, the wife’s contributions were greater and outflanked the greater initial contribution of the husband. He continued to make financial contributions to increase his superannuation interests, but the wife improved the D Town property and she contributed to maintenance of the debt over that property the husband created to buy the F Town property for himself. The wife’s contributions to the care of the children over the past four years have been substantially greater. The parties were correct to assess the wife’s overall contribution-based entitlement at 55 per cent.
Adjustment
The parties disagreed over the assessment of any adjustment warranted by the considerations under ss 79(4)(d)-(g) and 75(2) of the Act. The wife sought an adjustment in her favour in the range of 5 to 10 per cent, but the husband contended no adjustment either way was justified.
The two factors which do warrant an adjustment in the wife’s favour are her continuing responsibility for the care of the youngest child and the prospective common law damages claim available to the husband.
The eldest child attained her majority in April 2015. Although she still lives with the wife, her care is no longer relevant. The youngest child, however, does not attain her majority until March 2018. She will likely remain in the sole care and be the exclusive responsibility of the wife until then. She has not seen the husband and has barely spoken to him since March 2013. Nothing is likely to change in the foreseeable future. The wife will exclusively bear the burden of her emotional support in the last years of her minority as she finishes secondary education.
The husband will undoubtedly contribute to her financial support through his continued payment of child support, but that is liable to reduce rather than increase. The existing child support assessment for the younger child will endure until November 2016, unless it is successfully challenged or amended. However, that assessment was calculated using the figure of $465,348 as the husband’s 2015 taxable income.[72] The husband was aggrieved by the Child Support Registrar deeming his cashed-in superannuation as income to calculate his child support liability. His application for calculation of the assessment on the basis of his actual income was rejected. His actual income under the income protection policy is $1,189 per week[73] (or $61,828 per annum), so by the expiration of the current assessment in November 2016 his child support liability will probably be reduced to calibrate with his actual income for the remainder of the youngest child’s minority. The wife will continue to bear a financial burden maintaining the youngest child, which will only be exacerbated by any future reduction of the husband’s child support.
[72] Exhibit H7
[73] Husband’s financial statement, para 15
The husband has a prospective common law damages claim against his former employer. The single expert considered the claim in negligence would not likely succeed on an evidentiary basis, but the potential of the claim could not be ignored and it was “not unrealistic” to expect he could settle the claim for damages in the range of $400,000 to $500,000.[74]
[74] Affidavit of Simon Harben SC, first report paras 49, 52, 55, 56(v)
In relation to that prospective claim, the husband said in cross-examination he did not want to see another court room in his life and he did not think he was “up to the fight” of more litigation. Such evidence implied he would never contemplate pursuing the claim, but he actively contemplated making the claim less than a year ago.[75] In the uncontested opinion of the single expert, the claim is realistically capable of settlement for a large sum of money. With such an incentive, it would be difficult for the husband to resist institution of proceedings and an early attempt to settle the claim for a depreciated figure to avoid his engagement in the litigation as a witness. I do not infer that such a strategy will probably succeed, but it is a potentiality that cannot be safely ignored.
[75] Wife’s first affidavit, paras 335-337
The husband also has a prospective workers compensation claim, but the single expert was much more pessimistic about its prospects, since the insurer has already rejected his claim.[76] It would be necessary to commence and prosecute legal proceedings on tenuous grounds, which the husband is unlikely to do.
[76] Affidavit of Simon Harben SC, first report paras 39-46, 56(iv)
The wife also has a prospective claim for a lump sum total and permanent disability benefit in the sum of $560,000, but her claim has already been rejected by the insurer and the single expert opined she had no prospects of success in pursuing the claim at law.[77]
[77] Affidavit of Simon Harben SC, second report paras 1-24
The husband’s prospective common law claim and the wife’s continuing exclusive responsibility for the youngest child warrant, in aggregation, an adjustment of 5 per cent in the wife’s favour. In monetary terms, that will amount to approximately $140,000.
Other features of the evidence about which the parties made submissions do not influence the foregoing conclusions because there was little, if anything, to distinguish them.
The parties are of similar age and their health status is similar. They are both highly intelligent and educated, but their psychological ill-health prevents them from holding down employment commensurate with their skills. So much must be obvious from their continuing receipt of income protection insurance payments.
The wife has suffered from depression, anxiety and PTSD since about 2008. She still consults a psychiatrist and is still medicated. She does not anticipate returning to paid employment.[78] She was not challenged about that evidence. The most the husband could say was that he did not know whether she had the physical and mental capacity for employment.[79] She does not.
[78] Wife’s first affidavit, paras 120, 251, 294, 510-513; Husband’s first affidavit, page 24
[79] Husband’s first affidavit, page 25
The husband began consulting a psychologist in 2011 and a psychiatrist in March 2012. He publicly attempted suicide in March 2013 when he admitted he was “having a breakdown”.[80] In January 2015, a doctor retained by a workers compensation insurer opined the husband “is fit to return to work, but not to [his former employer]”,[81] but that opinion was notable for its exceptional optimism. No other doctor regards the husband as fit for employment. The wife’s contention the husband has capacity for employment, in reliance upon that isolated medical opinion, is rejected.
[80] Husband’s first affidavit, pages 8, 22
[81] Wife’s first affidavit, Annexure V2Y (page 283)
The parties’ incomes are similar. The wife’s income protection insurance payments are either $5,355 or $5,447 per month[82] and the husband’s income protection insurance payments are $4,927 per month.[83]
[82] Wife’s first affidavit, paras 310(a), 514(i)
[83] Wife’s first affidavit, para 334; Husband’s first affidavit, pages 21, 22
For the purpose of ss 79(4)(d)-(g) and 75(2) of the Act, the wife’s income in the form of the TPD pension is ignored. The TPD pension has already been taken into account as part of her superannuation interests with a capitalised value, so to additionally regard it as an income stream would infringe the Full Court’s exhortation to avoid double-dipping (see Semperton & Semperton (2012) 47 Fam LR 626 at [143]-[157], [167]-[186], [195]-[197]).
Conclusions and orders
As a consequence of those conclusions, the wife is entitled to 60 per cent of the parties’ net assets and superannuation interests.
The total net value of the parties’ assets and superannuation interests is $2,797,777 (= 1,537,865 + 1,259,912), of which 60 per cent is $1,678,666. In final submissions the husband countenanced the wife’s retention of 60 per cent of the assets and superannuation interests if no superannuation splitting orders were made and much of the wife’s wealth remained locked in superannuation, which is the determination now reached.
If the wife retains all of her own assets and superannuation interests, takes sole proprietorship of the D Town property (subject to its mortgage), takes sole proprietorship of the farming equipment and tools, and divests to the husband her proprietary interest in the Country H time-share, she would retain assets and superannuation interests with a total net value of $1,680,658, which is only $1,992 more than her entitlement. That can be rectified by an order requiring her to pay $1,992 to the husband. The wife can conveniently pay that amount from her meagre savings or by selling one of her small parcels of shares.
Such an outcome will require the wife to meet the entirety of the repayments on the loan secured by mortgage over the D Town property, but with the combined income of the TPD pension and her income protection insurance payments she should be able to manage.
The wife can retain all of the farming equipment and tools. She is the one who will retain the D Town property, which the parties regard as a farm. The husband will retain a suburban property,[84] so farming equipment will be of no use to him. The wife wanted only some of the farming equipment,[85] but she can have it all and dispose of the items she does not want as she sees fit.
[84] Husband’s first affidavit, pages 30-31
[85] Amended Application 26/8/15, Orders 12-13
The husband can retain the Country H time-share, even though he does not want it,[86] for the reasons already given.
[86] Amended Response 26/8/15, Order 5
Although no evidence was adduced about it and no submission made about it, the parties both proposed orders pertaining to a trust.[87] They each described the trust by a different name and they each proposed different orders to deal with it, but the common thread was the removal of at least the husband’s association from the trust in any capacity. An order is therefore made more consonantly with the wife’s proposal. The husband must be removed as a trustee and beneficiary of the trust, which presumably has no current value to either party.
[87] Amended Application 26/8/15, Order 15; Amended Response 26/8/15, Order 6
The husband would then retain assets with a net value of $1,117,119, which when added to his receipt of $1,992 from the wife, totals $1,119,111. That is 40 per cent of the parties’ net assets and superannuation interests (= 40 per cent x 2,797,777). Consequently, his proposal for superannuation-splitting orders becomes superfluous. In any event, there were two obstacles to his proposal to give the wife cash in return for a proportion of her superannuation: the wife wanted to keep her superannuation interests intact and he voluntarily decided to cash-in all of his own superannuation barely months ago.
The orders set out at the commencement of these reasons achieve a just and equitable outcome.
I certify that the preceding one hundred and ten (110) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on 14 December 2015.
Associate:
Date: 14 December 2015
Key Legal Topics
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Family Law
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Civil Procedure
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