Resolving all of the various issues that could have become obstacles in family law
Cathy and Andrew married in 1994. At the time Cathy was working full time as a Nurse at Mona Vale Hospital. She had an interest with her sister in a residential unit at Palm Beach. Andrew had trained as a Mechanical Engineer and worked in his family’s engineering business at Frenchs Forest. He held a 10% minority interest in the Company that owned the trading business and he was also named as a beneficiary in a Discretionary Trust that had been established by his grandfather some years ago. Andrew was not the Appointor nor the Trustee of the Trust but received a small distribution each year from that Trust which was a trading Trust operating, among managing other investments, a nursery at Terrey Hills.
The couple first purchased a semi detached property in Manly and, after the birth of their second child, settled in a comfortable family home at Curl Curl. In 1999 Cathy had, with the assistance of an inheritance she received from her late Aunty, been able to acquire her sister’s interest in the Palm Beach unit. Cathy had continued to work one to two shifts per week as a nurse and, at the time of the couple separating in 2007, was a Nursing Unit Manager at Manly Hospital earning circa $85,000 per annum. The children at the time of separation were 12 and 10 years respectively. The eldest child was due to start High School in 2008. The parties could not agree on a school for their eldest child. Cathy was keen to send him to either Pittwater House or St Augustine’s at Brookvale. Andrew was committed to pursuing Manly Selective High School given that their son had passed the entrance examination.
Sadly, the separation coincided with Andrew suffering a bout of depression. He was currently receiving treatment for that through a referral he obtained from Queenscliff Health Centre. Andrew had taken a leave of absence from his employment in March 2007, just prior to the parties separating, and until that time had earned approximately $180,000 per annum together with receiving other benefits.
At the time of separation the parties joint matrimonial assets comprised:
- Cathy’s interest in her Palm Beach unit – $950,000
- Andrew’s minority interest in his family’s engineering business – NK
- The former matrimonial home situate at Curl Curl – $1,750,000
- Cathy’s motor vehicle – $18,000
- Furniture and effects within the former matrimonial home – $8,500
- A joint savings account with ANZ – $9,250
The parties still had $135,000 owing on their mortgage to the ANZ bank and $3,200 to be paid on the joint ANZ Visa Card. Both parties had superannuation entitlements. Cathy had an interest of $54,000 in HESTA and Andrew had $145,000 in the Smith Family Superannuation Fund (which included his parents as the other members).
In November 2007 Andrew’s father passed away and he inherited a further 15% shareholding in the family engineering business. The parties each discussed with their Lawyers the appropriateness of engaging in mediation. Cathy did not wish to participate as she felt that she had little information and understanding of the discretionary Trust, it’s underlying assets and the way in which Andrew’s minority share holding in his Company would be treated. Andrew was reticent to participate in the mediation process because he felt compromised due to his illness. He was concerned that there was too great a power imbalance. The parties continued negotiations through their Lawyers and, as part of that process, engaged a single joint accounting expert to value Andrew’s minority interest in the engineering business both at the time of marriage and at separation. The parties also agreed to engage a single joint real estate valuer to provide a retrospective value of Cathy’s interest in her Palm Beach unit at the time of the party’s marriage.
The parties agreed that, after receiving legal advice, their overall respective financial and non financial contributions to the marriage, the home, their children and the assets (excluding Andrew’s post separation inherited minority shareholding) were different albeit equal. This formed the basis of the parties agreeing that pursuant to Section 79 (4) of the Family Law Act, 1975 they had equally contributed to such assets.
Cathy conceded that she did not contribute to Andrew’s inheritance of the additional 15% minority shareholding but in consideration of this concession required Andrew to agree that she should receive a larger share of the other assets. Andrew did consent to such an approach and Cathy ultimately received 65% of the net non inherited assets adopting a “two pools” type approach. This significant adjustment to Cathy for her “future needs” was also influenced by the fact that at the time of settlement:
- The two children continued to live with Cathy ten nights of each fortnight and spend four nights of each fortnight with their father.
- Andrew continued to receive a small dividend from the discretionary Trust established by his grandfather.
- Andrew had fully recovered from his illness and was back at work full time earning a package of circa $200,000 per annum.
To effect the settlement Cathy transferred her interest in the Palm Beach unit to Andrew and agreed to a superannuation split in his favour of $50,000. As a result, Cathy was able to retain the former matrimonial home at Curl Curl with the children and Andrew could live comfortably in the Palm Beach unit. The parties each refinanced one half of the joint mortgage so as to manage the payments and Andrew took responsibility for the outstanding credit card liability. Andrew retained his interest in the family business and also continued to receive the small distribution from the long ago established family discretionary Trust. These Orders were embodied in Consent Orders drafted by the Lawyers.
In addition, Cathy and Andrew entered into a Binding Child Support Agreement to provide for Andrew to continue to make periodic payments in excess of the assessed child support amount to Cathy so as to meet the children’s reasonable expenses.
Cathy did not seek spouse maintenance from Andrew given that it would have been difficult for her to establish that she had a shortfall and could not meet her financial needs (given her income). This was a conclusion that Cathy was able to come to readily after carefully reviewing her expenses when completing her Financial Statement as part of the Pre-Action Procedures for Financial Matters.
Andrew was relieved to be clear of any further financial obligations towards Cathy and, given that Cathy was prepared to enter into a Binding Financial Agreement ousting the Courts jurisdiction in respect of spouse maintenance, Andrew agreed to meet two thirds of the cost of the children’s private secondary school education. He did not seek to gain a credit for this in relation to his other Child Support commitments. These additional payments by Andrew were also documented in the Binding Child Support Agreement.
The negotiations spanned seven (7) months. Part of this time was taken in engaging outside experts and awaiting independent valuation reports. Our firm remained proactive in resolving all of the various issues that could have become obstacles to achieving a resolution. We were able to enable Cathy to effect the overall financial settlement for her and her family without recourse to the Court.