1 An interim property settlement was negotiated by the parties and their legal practitioners in proceedings before Smithers J. on 14 September 1999. Consent orders were pronounced. The outstanding issue of the husband’s superannuation entitlement and the alteration of such interest was then adjourned pursuant to s.79(5) of the Family Law Act 1975 (Cth) (“the Act”). That issue and the methodology, quantum, date and consequential form and orders of any splittable payment and the base amount to be allocated to the wife are now before the Court as part of the final determination of s.79 alteration of property.
SUPERANNUATION – BACKGROUND
5 The husband commenced his employment with the Victorian Public Service in April 1974 and on that date commenced contributions to the State Superannuation Fund. On 1 July 1987 all contributors to that Fund were given the option to transfer their superannuation to the recently established Emergency Services Superannuation Scheme (“ESSS”) (‘the Fund”). The husband was, as at the date of separation, a contributing member of that Fund. He ceased making any regular contributions thereto in 1998.
6 ESSS is a defined benefit fund which, subject to certain legislative and retirement options, is required to pay save in specific circumstances, a lump sum to members on their retirement on or prior to attaining age 65 years.
7 This Court is required to determine the amount of the member’s superannuation interest pursuant to the Family Law Act and its ( Superannuation ) Regulations and Schedules. The method therein prescribed for valuing the defined benefit superannuation interest in the growth phase was developed by the Australian Government based upon a typical private sector defined benefit scheme. It has been recognised that this method of valuation may be not wholly appropriate to certain public sector funds and consequently there is a procedure for such funds to apply for a scheme specific method of valuation. ESSS has not made such an application but applied to the Attorney-General on 12 January 2005 pursuant to Regulation 43A of the Family Law ( Superannuation ) Regulations 2001 to vary an aspect of their disability provisions or for an alternate valuation method for interests in the payment phase of that scheme. ESSS has now advised that it has withdrawn such application following discussions between its actuary and the Australian Government Actuary’s Office. That issue remains unresolved.
CHANGE IN HUSBAND’S SUPERANNUATION FUNDS
8 The husband maintained, and I accept his evidence, that in 1987 he did discuss the available superannuation options with the wife. Clearly ESSS represented a vastly superior superannuation plan to that which formerly operated. Exhibit “1” in the proceedings, (also exhibit “JMR-11”to the wife’s trial affidavit) is a letter dated 8 October 1998 from VicSuper. That letter advised:
“The husband became a member of the State Superannuation Fund (revised scheme) on 11 April 1974 and his total contributions to the Fund were $8,626.03. His contributions between that date and 1 December 1985 were $7,155.24. When he resigned on 1 January 1987 to transfer to ESSS the husband received a refund of contributions, net after tax of $8,452.90.”
9 I accept the evidence of the husband that the value of his superannuation entitlements dramatically increased on transfer to the ESSS fund from approximately $8,500.00 to a then calculated sum of $48,000.00. That increase was claimed by the wife to be in the nature of “a financial windfall” in that it was not directly related to the husband’s past service or contributions but to the new and more generous scheme and valuation methodology introduced for all contributors to ESSS from 1 July 1987.
10 I do not accept that claim by the wife as under the State Superannuation Fund the husband had available the option of a pension for retirement other than for disability purposes. Effective 1 July 1987 that pension facility was withdrawn from all members of the Emergency Services and replaced with a predominantly lump sum option. That was the background to the recalculation of the husband’s contributions and there was clearly a compromise between the increase in value of such contributions and the severe restrictions placed upon the pension option.
11 The husband commenced a second superannuation fund, the ESS Plan in 2002 and has since continued to make contributions to that alternate Fund. Its current accumulation value is $34,584.00.
12 The husband’s evidence was that he ceased financial contributions to his ESSS fund for two main reasons, they being:
§ the spousal maintenance order made by Carter J on 9 July 1998 whereby he was required to pay $170.00 per fortnight to the wife, costs fixed in the sum of $3,500.00 together with the lump sum payment of $10,000.00 to discharge the wife’s spousal maintenance claim. He states that he simply did not then have the money to additionally make his regular superannuation contribution; and
§ he sought the advice of a financial planner who advised him that otherwise he would reach his maximum entitlement in the ESSS Fund and that it was prudent and financially proper to contribute to a separate superannuation fund.
13 The wife has, from her employment, her own superannuation entitlements which are valued at $5,408.00 by her in her Financial Statement and which were not the subject of challenge.
14 I say at the outset that I am satisfied that procedural fairness has been afforded ESSS. They are aware of the proceedings and knew of the current Court injunctions restraining the husband from dealing with his superannuation entitlements. There are no current flagging orders made since the commencement of the superannuation legislation on 28 December 2002. Indeed counsel for the husband has advised the Court that ESSS was not prepared to involve itself in this case and have an officer in its employ give evidence other than upon subpoena. The transcript in this case will, if obtained, reveal that the Court, on a number of occasions as counsel for the wife listed in his written submissions, inquired of counsel if there would be evidence given in the proceedings from ESSS as to particular issues of and related to the husband’s entitlement, retirement and valuation of his superannuation interests. Such evidence was never called by the husband or put before the Court by the Fund, for reasons upon which I do not speculate.
HEARING OF 15 SEPTEMBER 2004
15 The proceedings first came before me in the defended list on the above date. The case commenced and evidence was taken from the husband and the single expert professional witness, Mr W, an accountant and consultant in superannuation and a director of the firm who had some thirty years of commercial experience and whose qualifications were accepted by the parties as appropriately qualifying him to give expert evidence.
16 On the afternoon of that first hearing I determined to adjourn the proceedings part-heard before myself, delivered a substantial extempore judgment and pronounced orders which required an updated expert’s report as to the valuation of the husband’s defined benefit interest in the growth phase of his superannuation entitlements.
17 The reasons for the adjournment and the issues of uncertainty that had then arisen in respect of the valuation methodology and an application by ESSS to the Attorney-General’s Department to vary an aspect of their fund are explained in the reasons for judgment which I refer to and incorporate within my considerations of all aspects of this case. That variation, in fact, turned out to apply only to members receiving a disability pension under section 20F of the Emergency Services Superannuation Act 1986. That fact was subsequently explained to the Court pursuant to the report dated 21 October 2004 of Mr W.
18 The matter returned for hearing before me on 16 December 2004 upon an interim application filed by the husband which was then dismissed. Mr W was ordered to prepare his updated superannuation valuation as at 1 February 2005 and the matter was otherwise adjourned for further hearing before myself on 24 February 2005. On that date the wife’s solicitors, whom she had recently engaged, appeared seeking further disclosure and financial information from the husband and an adjournment of all proceedings. I made orders requiring limited financial disclosure and otherwise adjourned all applications on a part-heard basis to resume on 30 March 2005 which is the date on which these continuing proceedings commenced and then concluded, subject to final submissions, the following day. I provided a further extempore judgment on 24 February 2005 which again I refer upon and incorporate into my reasons for judgment.
DETERMINATION BY COURT OF SECTION 90MT(2) ISSUES
282 Section 90MT(2) requires the Court to “make a determination” under sub-paragraph 1(a) or (b) of either:
(a) the amount in relation to the superannuation interests; or
(b) the value of such interest.
283 In this case the Superannuation Regulations and accompanying Schedule do provide the appropriate methodology to be adopted. The Court must therefore make a determination and not a valuation (my emphasis).
284 I conclude, on the accepted meanings of each of those underlined words that it is not the requirement of the Court to independently take on the arithmetical task of valuation with all of its inherent vagaries and so overlap or usurp the role of the independent valuation expert witness. On the particular facts of this case I must accept the valuation evidence, subject to the other evidence also provided by the expert witness and have evaluated and assessed that evidence in the context of the appropriate four step procedure. When there is such expert evidence before the Court, by a witness accepted by both parties and with no contrary evidence before the Court then I am not able to look behind the valuation. The discretion is as to the alteration of property interests and the quantum and date of the payment splitting order.
285 In G and G (unreported; (2003) FamCA 249 judgment delivered 28 March 2003) the facts before the Court could generally be summarised as a marriage of 24 years, four children one dependent, the husband was the principle wage earner and the wife the primary child carer. The husband was a senior State Public Servant with a preserved superannuation pension and lump sum entitlement. Those parties previously concluded partial property settlements and thus there was an issue before the Court as to the nature of a “partial” and “interim” settlement. I will not further consider that aspect of his Honour’s judgment. The more relevant issue is the approach taken to the Comsuper and the splittable payment made in that regard. His Honour determined a percentage split, by way of lump sum or pension and in so doing considered the then recently introduced superannuation legislation, the obligations to determine a just and equitable order pursuant to s.79(2) of the Act and the specific contribution and s.75(2) factors.
286 His Honour, in G and G, saw the necessity to himself independently value the superannuation entitlement rather than making a determination based on the evidence then before him. With that approach I respectfully disagree. Burr J then proceeded to calculate a different value, albeit not substantially, from the independent single expert on both the accrued benefit multiple and the prescribed discount rate.
287 In the course of his judgment his Honour said:
“86. It is because of these very sorts of complicated calculations and reasons that I believe it inappropriate to exercise my discretion in favour of the husband’s approach. The husband’s approach and calculations contain a number of uncertainties, contingencies, imprecise calculations and guess work (although educated and informed). The husband’s approach requires me to embark again on some of the relatively vague and imprecise exercises that was required of Judges of this Court prior to the passage of the amending superannuation legislation.
87. The orders sought by the wife to split the pension at the time of payment provide the simplicity and precision for which the entire amending superannuation legislative regime was implemented. They do not, for example, require the calculation of an income tax factor to be applied to the calculated lump sum. The parties’ respective taxation commitments will be deducted at source from each of their pension payments. The calculation of the income tax factor is itself fraught with difficulties. It is not possible to undertake a calculation of the appropriate taxation figure with any certainty. It depends upon a number of variables surrounding the period of time into the future that the husband will be employed and the salary at which he will be employed. Application of the regulations and making orders as sought by the wife, overcomes all of those uncertainties. In my view it is entirely appropriate to adopt the wife’s suggested approach and make an order splitting the pension payments and the Comsuper lump sum interest between the parties when they fall due in percentages I determine hereunder, after consideration of all relevant factors.
88. I further accept the evidence of the wife which, in my view, also promotes the approach sought by her. I accept that the anxiety and depression from which the wife suffers and which has entitled her to receipt of a disability pension, ill-equips her to make the sometimes difficult decisions as to what might be the appropriate manner in which to invest a lump sum. I accept that she presently does not have the capacity to make those decisions.
89. There is another very relevant issue which leads me to adopt the approach urged by the wife. The calculation of the husband’s Comsuper interests pursuant to the regulations provides a value of his interests as at the present time (or more strictly speaking as at mid-February 2003 when I concluded the calculation). However, it was the husband’s quite clear evidence that he would not be retiring for some time yet and would therefore not be taking his superannuation interests until some years into the future. Thus the calculation of his Comsuper interests as at the present time, do not represent the value of those interests as at the date he intends to take them. The husband argued for the adoption of a proposal whereby the calculation would take account of the value of his Comsuper interests as at the present when in fact the wife will not be receiving her share of those interests as at the present time but at a date in the future to be determined solely by the husband. Application of the amending superannuation legislation would overcome the possibility of any injustice to the parties”.
288 In this case I find that, likewise, there are many uncertainties and contingencies both with the valuation process and generally with facts in evidence on superannuation . These include (in summary and as I have found):
§ the husband’s actual retirement date;
§ the details of the husband’s salary as provided for valuation purposes;
§ the applicable superannuation tax rates for each of the husband and wife;
§ the introduction, said to be from 1 July 2005, of amending legislation for the ESSS Fund;
§ the husband’s applicable multiple (from time to time);
§ issues as to a just and equitable valuation as put in evidence by Mr W;
§ the failure to have evidence given before the Court from the Trustee of the ESSS Fund.
289 I agree with and adopt the words of Burr J. in that a splittable payment made in the payment phase gives both simplicity and precision to the outcome. I would add that it would be far more likely to produce a just and equitable alteration of property interests as the husband’s income, multiplier, applicable tax rate and retirement date would all be known with certainty. The guess work and likely injustices flowing therefrom would be largely eliminated.
290 In my judgment it is both a proper, equitable and a common sense approach to bind the Trustee of the ESSS Fund to make the required splittable payment upon the husband’s retirement, be it that he then elects to receive a lump sum or otherwise is eligible to receive an ongoing pension payment.
CURRENT ASSETS AND LIABILITIES OF HUSBAND AND WIFE
291 I have previously evaluated the evidence as to the parties respective assets and liabilities and in summary they are as follows:
§ a net equity in her home of
subject to the sum of $44,800.00 “left in” $130,000.00;
§ superannuation , subject to compliance, $5,408.00
§ liability to Australian Taxation Office ($2,212.00)
§ the wife therefore has net property to a value of $133,196.00
§ equity in the F Crescent property $89,000.00
§ equity in the M Street property $Nil
§ long service leave (current but subject to $64,000.00
specific findings in this judgment)
§ superannuation , as valued $403,810.00
(but subject to specific findings in this judgment)
§ second superannuation , ESS Plan (post separation) $34,500.00
§ profit on sale of the W Street property subject to its
expenditure as identified in the judgment $35,000.00
§ $44,800.00 as interim property settlement $44,800.00
I will exclude the W Street equity for reasons given in this Judgment and thus his balance of net property and financial resources is $636,110.00.
For the purposes of my identification of the asset pool, and having regard to the most recent Financial Statements of each of the parties I have excluded personal chattels, motor vehicles, personal credit card debts and legal fees (with each of them said to owe $20,000.00, albeit with the husband’s counsel appearing pro bono in the proceedings).
ASSESSMENT OF CONTRIBUTION
292 I have considered and assessed and made findings as to the various contributions, financial and non-financial, direct and indirect of the parties to the acquisition, conservation and improvement of their property and particularly, in the context of this judgment as to superannuation . I have balanced the 60% interim property order and the $44,800.00 sum which the husband “left in” the wife’s then property. I have fully evaluated the contributions of the husband to superannuation prior to and after cohabitation and specifically the significant contributions made throughout that 12.9 years of cohabitation. I have properly balanced the evidence of and related to homemaker and parent and, within the context of the contributions issue, the applicable s.75(2) factors as are there relevant.
293 The husband has, I find, made the principal contribution to his superannuation entitlements having regard to his long and continuous employment, his financial contributions, his level within the public service and the particular and generous entitlements of the ESSS fund which are available only because of his employment. The wife’s contributions are significantly lesser and are made in the role of homemaker and parent and as the then wife of a person in the husband’s job with the inherent stresses that that placed upon her and the family.
ASSESSMENT OF SECTION 75(2) FACTORS
294 Those relevant factors have been identified and considered throughout this judgment. I have made specific findings on the employment and income of each of the parties and how the parties have and will continue financially to provide for themselves and their households.
295 There must be an appropriate adjustment of these factors in favour of the wife having regard to all of my findings and, in summary:
§ her current and future income when contrasted to the husband’s;
§ the likelihood of her obtaining more extensive and full paid employment;
§ her obligations for JSR;
§ the husband’s superannuation entitlements and generally other work related entitlements and benefits including accrued long service leave and other leave and payments for service;
§ her reduced standard of living post separation;
§ the 12.9 years of cohabitation and the limitation that that imposed upon the wife’s work qualifications, employment and earning capacity;
§ the need of the wife to continue in her role as a parent to JSR and with the financial, emotional and time restraints thereby incurred;
§ the financial circumstances of the husband’s marriage with Ms W, her substantial income and superannuation and the ability of each of the husband and his new wife to invest, negatively gear property and otherwise earn a substantial combined income and provide for their lifestyle and future retirement;
§ the existing interim order and the equity that the wife has therefrom in her home with a significant mortgage encumbering its title;
§ the current child support and additional payments made by the husband for JSR which substantially contribute to but do not remove from the wife the burden of at least an equal contribution to JSR’s schooling and general financial wellbeing;
§ the financial responsibilities of the wife to support and maintain LJR;
§ the particular sub-paragraph (f) and (o) factors as I have discussed.
BASIS OF INTERIM SETTLEMENT ORDERS
296 It is common agreement that the interim orders altered the parties interests in property, other than superannuation as to 60% to the wife and 40% to the husband. It is a matter of significance in the written submissions filed on behalf of the husband (page 17) that he and his counsel determined an apportionment of that 60% sum as follows:
§ s.79(4) contributions in the range of 35% – 40%; and
§ s.75(2) “needs factor” in the region of 20% – 25%.
297 That acknowledgement of the importance and financial worth of the s.75(2) factors in that interim order is significant and it does properly form a basis for the further consideration of the alteration of superannuation entitlements of the husband in the full and proper context of the relevant facts as determined in this judgment.
ASSESSMENT IN PERCENTAGE TERMS
298 As to contribution I assess that the wife is entitled to 10% of the husband’s ESSS Superannuation Fund. By my valuation of the s.75(2) factors the wife is entitled to an additional 25% of such superannuation entitlements. I therefore assess that a proper order altering the parties interests in superannuation is an alteration by way of a splittable order in the payment phase for the husband to retain 65% and for there to be a percentage split of 35% to the wife.
ASSESSMENT OF ORDERS SOUGHT BY HUSBAND
299 I now pause to reflect upon the financial outcome of the orders sought by the husband. With an allocated base amount as sought of $37,782.00, in addition to her other net assets the wife would have received a total sum of $170,978.00. In contrast the husband would retain the balance of this superannuation fund at its valuation date, ($366,028.00) his second superannuation fund, his equity in his home and his long service leave entitlements. Specifically I find that such an order would not do justice and equity as between the husband and wife. Deducting long service leave of $64,000.00 as I found proper pursuant to the interim orders, still leaves what I conclude to be a wholly unjust result.
300 I do not propose to interfere with the actual division of property made in the consent interim orders of the Court. The husband and wife will each retain their current real property, assets, financial resources and liabilities.
MONETARY EFFECT OF ORDER
301 On the basis of a 35% alteration in favour of the wife of the husband’s interest in the ESSS Fund the net monetary position of the parties, based on the superannuation valuation of $403,810.00 would be:
§ current assets $133,196.00
§ superannuation order $141,333.00
§ wife’s superannuation $5,408.00
§ home equity $89,000.00
§ long service leave $64,000.00
§ ESS Plan $34,500.00
§ Superannuation $262,476.00
Inclusive of the earlier interim orders the difference therefore in dollar terms in favour of the husband is $170,039.00 which must be assessed in the context of his ongoing employment, income, additional superannuation and other issues as evaluated in this judgment.
302 In accordance with the requirements of case law I have now stood back from the orders and reflected upon the overall determination and judgment, both in percentage terms and in monetary terms and confirm, having considered and re-evaluated all of the evidence, that the proposed orders are just and equitable pursuant to the provisions of s.79(2) of the Act.
303 The effect of the splitting order in the payment phase is that each of the husband and wife will have to wait for their interests to become payable. One party does not have the immediate access to a ready sum of money with the other party being delayed in payment. The superannuation interests will incrementally increase in value pending payment and this cannot be viewed in isolation from the marital history. Both parties, to the extent of their respective entitlements, will therefore continue to benefit by the earnings and investment income of the Fund.
304 I made available to counsel prior to submissions the decision of Thackeray AJ in Woollams and Woollams (2004) FCWA 32 (unreported). I am alive to the discussion therein as to the importance of the fourth step, what is called the “section 79(2) factor”. It may well be that greater attention is now given by the superannuation legislation to this step and this is acknowledged in the article by Stephen Bourke, “The Fourth Step in Superannuation Orders”, Current Family Law (February 2004 edition). What I have determined in this fourth step is that my evaluation of the evidence and the determination of the contribution and s.75(2) factors is proper and that it would be just and equitable to divide the superannuation interests as I have concluded and on the basis of a splittable payment in the payment phase.
305 I order as follows:
IT IS DECLARED:
1. THAT the Court is satisfied that procedural fairness has been afforded the Trustees of the Emergency Services Superannuation Scheme in relation to these orders.
IT IS ORDERED:
2. THAT pursuant to s.90MT(1)(b) of the Family Law Act 1975 that, whenever a splittable payment becomes payable in respect of the interest held by the husband in the Emergency Services Superannuation Scheme the wife, or her heirs, executors or assigns, be then paid 35% of such splittable payment, whether it be then as a lump sum or pension and that there be a corresponding reduction in the entitlement the husband would have received in the ESSS Fund but for this order.
3. THAT these orders are to bind the Trustee of the ESSS Fund to observe their obligations as Trustee under the Family Law Act 1975 and the Family Law (Superannuation) Regulations 2001 .
4. THAT within seven (7) days the husband serve a sealed copy of these Orders upon the Trustee of the ESSS Fund.
5. THAT within seven (7) days the wife provide to the Trustee of the ESSS Fund full particulars as to her full name, current postal address and date of birth and such other particulars as may be required of her by that Fund.
6. THAT in respect of any superannuation interest of the husband in the ESSS Fund the Trustee of that Fund:
(i) must not make any splittable payment without the leave of the Court; and
(ii) must notify the wife and her solicitors on the record in writing twenty one (21) days prior to the next occasion a splittable payment becomes payable.
7. THAT each party otherwise retain all items of real and personal property in their respective name or possession as at the date of these orders.
8. THAT all extant applications before the Court be otherwise dismissed and the proceedings be removed from the list of cases awaiting trial.
IT IS CERTIFIED
9. THAT pursuant to Rule 19.50 of the Family Law Rules this matter reasonably required the attendance of Counsel for each of the husband and wife.