Andreevich & Andreevich (No 4)
[2023] FedCFamC1F 734
•6 October 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Andreevich & Andreevich (No 4) [2023] FedCFamC1F 734
File number(s): MLC 8101 of 2020 Judgment of: MCNAB J Date of judgment: 6 October 2023 Catchwords: FAMILY LAW – PARENTING – high level of conflict between parents – whether orders should be made in respect of 16 year old – other spend time arrangements – whether a 14 year old child should be able to determine how much time he spends with each parent – whether orders for shared care are appropriate.
FAMILY LAW - PROPERTY – divided opinion between experts on the value of a business conducted by the wife – dispute regarding methodology of valuation – whether a valuation assumes hypothetical purchaser could effect significant changes to the way contractors are engaged should be accepted – whether the business valued is the business being conducted by the wife – orders made for the just and equitable division of property.Legislation: Evidence Act (1995) (Cth)
Family Law Act 1975 (Cth)
Superannuation Guarantee (Administration) Act 1992 (Cth)
Family Law (Superannuation) Regulations 2001 (Cth)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)
Cases cited: Andreevich & Andreevich (No 2) [2023] FedCFamC1F 43
Andreevich & Andreevich [2022] FedFamC1F 608
Babett & Falconer (2015) FLC 98-067; [2015] FamCAFC 124
C and C (2005) FLC 93-220; [2005] FamCA 429
Dickons & Dickons [2012] FamCAFC 154
Dovgan & Dovgan [2021] FamCA 306
Hickey and Hickey and the Attorney-General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143; [2003] FamCA 395
Jabour & Jabour [2019] FamCAFC 78
Kildea v Kildea (2007) 38 Fam LR 347; [2007] FamCA 1524
Manolis v Manolis (No 2) [2011] FamCAFC 105
Perrin & Perrin (No 2) [2018] FamCAFC 122
Preston & Preston (2022) FLC 94–108; [2022] FedCFamC1A 157
Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52
Taylor & Taylor & Taylor [2000] FamCA 308
Wilde & Wilde [2007] FamCA 1044
Division: Division 1 First Instance Number of paragraphs: 178 Date of hearing: 27 – 31 March and 9 June 2023 Date of last submission: Final Submissions: 6 June 2023
Final Proposed Minute of Orders:14 September 2023Place: Melbourne Counsel for the Applicant Mr Williams Solicitor for the Applicant: KHQ Lawyers Counsel for the Respondent: Mr Whitchurch Solicitor for the Respondent: Garland Hawthorn Brahe ORDERS
MLC 8101 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS ANDREEVICH
Applicant
AND: MR ANDREEVICH
Respondent
ORDER MADE BY:
MCNAB J
DATE OF ORDER:
6 OCTOBER 2023
THE COURT ORDERS THAT:
Parenting
1.The parties have equal shared parental responsibility for the three children of the marriage, namely:
(a)X, born 2006 ("X");
(b)Y, born 2009 ("Y"); and
(c)Z, born 2012 ("Z").
2.X, Y and Z live with the mother.
3.X spend time with the father in accordance with her wishes.
4.Y and Z spend time with the father as follows:
(a)In Week 1, from after school (or 3:30 pm if a non-school day) on Thursday until the commencement of school (or 9:00 am if a non-school day) on Friday; and
(b)In Week 2, from after school (or 3:30 pm if a non-school day) on Thursday until the commencement of school (or 9:00 am if a non-school day) the following Monday.
And for the purposes of enforcing this order, the mother and the father are to forthwith jointly explain to Y that they agree this increase in time is in his best interests and that from the commencement of the 2025 school year he can spend time with the father in accordance with his wishes.
5.During the school term holidays, the time set out in Orders 4 (a) and 4 (b) herein be suspended and Y and Z spend time with the father as agreed between the parties in writing, and in default of agreement:
(a)In the Term 1 and Term 3 school holidays: from the conclusion of school on the last day of the school term until 5:00 pm on the middle Saturday; and
(b)In the Term 2 school holidays: from 5:00 pm on the middle Saturday until 5:00 pm the following Sunday.
6.Over the long summer holidays, the time set out in Orders 4 (a) and 4 (b) herein be suspended and Y and Z spend time with the parties as agreed between the parties in writing, and in default of agreement as follows:
(a)Commencing in the 2023/2024 long summer holidays, and each alternate year thereafter, with the mother from the conclusion of the school term for a period of four weeks, with changeover to occur at 12:00 pm on the final day, and thereafter with the father until the commencement of Term 1; and
(b)Commencing in the 2024/2025 long summer holidays, and each alternate year thereafter, with the father from the conclusion of the school term for a period of four weeks, with changeover to occur at 12:00 pm on the final day, and thereafter with the mother until the commencement of Term 1.
7.For the purposes of the following special occasions, save that if Y and Z are spending time with either party travelling during the times set out in Orders 5 and 6 above, then that time shall take priority, Y and Z otherwise spend time with each of the father and mother as follows:
(a)On Father's Day weekend, with the father from 5:00 pm on the Saturday preceding Father's Day until 7:00 pm on Father's Day;
(b)On Mother's Day weekend, with the mother from 5:00 pm on the Saturday preceding Mother's Day until 7:00 pm on Mother's Day;
(c)On Y and Z's birthday:
(i)If a school day, with the parent they would not otherwise be spending the night with from the conclusion of school until 7:30 pm; and
(ii)If a non-school day, with the parent they would not otherwise be spending the night with as agreed and failing agreement from 2:00 pm until 8:00 pm.
(d)On the mother's birthday and X's birthday, if not otherwise spending time with the mother:
(i)If a school day, from the conclusion of school until 7:30 pm; and
(ii)If a non-school day, as agreed and failing agreement from 2:00 pm until 8:00 pm.
(e)On the father's birthday, if not otherwise spending time with the father:
(i)If a school day, from the conclusion of school until 7:30 pm; and
(ii)If a non-school day, as agreed and failing agreement from 2:00 pm until 8:00 pm.
(f)For Chanukah, as agreed between the parties in writing and failing agreement:
(i)Commencing in 2023 and each alternate year thereafter, with the mother for the first night of the religious festival and with the father for the second night of the religious festival; and
(ii)Commencing in 2024 and each alternate year thereafter, with the father for the first night of the religious festival and with the mother for the second night of the religious festival.
(g)For Passover, as agreed between the parties in writing and failing agreement:
(i)Commencing 2023 and each alternate year thereafter, with the father for the first night and with the mother for the second night; and
(ii)Commencing 2024 and each alternate year thereafter, with the mother for the first night and with the father for the second night.
(h)For Rosh Hashanah, as agreed between the parties in writing and failing agreement:
(i)Commencing 2023 and each alternate year thereafter, with the father for the first night and the mother the second night; and
(ii)Commencing 2024 and each alternate year thereafter, with the mother for the first night and with the father for the second night.
8.Notwithstanding Orders 4, 5, 6 and 7 herein, from the commencement of the 2025 school year, Y spend time with the father in accordance with his wishes.
9.The parties be permitted to travel overseas or interstate with Y and Z at times agreed between the parties or in accordance with Orders 5 and 6 subject to the travelling parent:
(a)ensuring that appropriate travel insurance is in place in respect of Y and Z; and
(b)providing to the other parent:
(i)not less than three months' prior to departure written notice to the other parent of their intention to travel with Y and Z;
(ii)not less than 30 days prior to departure:
A.a copy of the proposed itinerary/ies showing dates of departure and return, including a copy of the ticket/s purchased, carrier details, flight numbers and like information;
B.accommodation details; and
C.contact details as to where the other parent may contact Y and Z while they are away.
10.X, Y and Z's passports be held by the mother.
11.The mother make the children's passports available to the father for the purpose of overseas travel no later than seven days prior to the date for departure and the father return the children's passports to the mother within seven days of their return to Australia.
12.For the purposes of changeover:
(a)The father collect Y and Z from school at the commencement of his time, if a school day, and otherwise from outside of the mother's residence; and
(b)The father deliver Y and Z to school at the conclusion of time, if a school day, and otherwise the mother collect Y and Z from the father's residence.
13.The parties and their servants and agents be and are hereby restrained by injunction from abusing, insulting, belittling, rebuking or otherwise denigrating the other party to or in the presence or hearing of the children and from permitting any other person from doing so.
14.The parties be permitted to attend all school events relating to the children normally attended by parents and receive at their expense copies of all school reports, school photograph order forms and newsletters.
15.Each party shall advise the other of any serious illness or injury suffered by any of the children as soon as practicable following the onset of the illness or occurrence of the injury and shall provide sufficiently detailed information and any necessary authorities to allow the other parent to obtain information directly from any treating medical practitioners.
16.Each party keep the other informed at all times of their current residential address and contact telephone number.
17.Each party shall facilitate the other having reasonable telephone or videoconferencing contact with Y and Z when in their care and at all times as far as practicable when Y and Z request it.
18.The parties do all acts and things and sign all documents to renew the children's passports as and when they fall due for renewal.
Property
19.Within 90 days of the date of these orders ("the due date"), the wife shall pay to the husband such sum as to affect an overall division of the asset pool of 50% to the wife and 50% to the husband ("the payment") taking into account the proceeds of sale the husband shall receive from the sale of J Street Suburb K (“J Street”) pursuant to Order 2(e) of the orders dated 9 June 2023.
20.For the purposes of the preceding order and calculating the payment the following current liabilities shall be excluded:
(a)L School deferred school fees;
(b)Outstanding L School fees from 2020, 2021 and 2022;
(c)ATO debt of G Pty Ltd for the year ending 30 June 2020 and 30 June 2021;
(d)Credit card debt; and
(e)Balance of outstanding infringement notices owing to Fines Victoria.
M Street, Suburb N
21.Contemporaneously with the payment:
(a)The husband transfer to the wife the whole of his interest and estate in the property situated at and known as M Street, Suburb N, Victoria ("the M Street property") being the whole of the land comprised and described in Certificate of Title Register Book Volume … Folio …; and
(b)The wife refinance the loans secured by mortgage over the M Street property into her sole name.
22.In the event the whole of the payment has not been made by the due date, then the parties do all things required to cause the M Street property to be sold on the following conditions:
(a)The selling agent to be agreed between the parties in writing and in default of agreement the wife shall provide to the husband a list of three different agents within 14 days and the husband shall nominate one from the list within 21 days;
(b)The conveyancer is to be agreed between the parties in writing and in default of agreement the wife shall provide to the husband a list of three different conveyancers within 14 days and the husband shall nominate one from the list within 21 days;
(c)Both parties are to be copied into all correspondence with the selling agent and conveyancer;
(d)Any repairs required to prepare the M Street property for sale shall only be carried out if recommended by the selling agent and provided both parties agree to carry out the repairs and the cost of such repairs shall be met by both parties equally;
(e)The sale price shall be agreed upon by the parties within 14 days and in default of agreement, the parties forthwith do all things required to obtain at their joint expense an up-to-date valuation of the M Street property and the valuation be set as the sale price;
(f)The settlement period shall be no less than 90 days unless otherwise agreed between the parties in writing; and
(g)The wife cooperate with the selling agent including:
(i)Making the keys available to the agent;
(ii)Allowing inspections at all reasonable times, as requested by the agent.
23.The sale proceeds of the M Street property be divided as follows:
(a)First, to pay all costs, commissions and expenses of the sale including the agent's commissions and conveyancing costs;
(b)Second, to discharge the mortgage over the M Street property;
(c)Third, so much of the payment as is then outstanding together with interest thereon as provided for under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) from the due date to the husband; and
(d)Fourth, any balance remaining to the wife.
24.Pending the sale of the M Street property:
(a)The wife have sole use and occupancy;
(b)The wife be solely liable to meet the mortgage repayments and all outgoings, including but not limited to all instalments pursuant to the rates and taxes, insurance, bills and like apportionable outgoings of whatsoever nature and kind and ensure that all payments are made as and when they fall due;
(c)Neither party shall further encumber the M Street property without the written consent of the other party save for compliance with these orders; and
(d)The parties hold their respective interests in the M Street property on trust pursuant to these orders.
25.If either party fails to comply, there be liberty to apply to the court in respect of the terms and conditions of sale. The terms and conditions of sale are agreed as machinery provisions pursuant to these orders.
G Pty Ltd ("the Company")
26.The parties shall within seven days execute the financial statement and tax return for the company for the year ending 30 June 2021 as prepared by O Accountants (“the accountants”).
27.Following compliance with Order 26 herein the parties shall do all things required to wind up the company as at 30 June 2023, including but not limited to preparing and/or lodging with the ATO any necessary financial statements and tax returns, with the costs of such work to be paid from the proceeds of the sale of the J Street Property pursuant to orders made on 9 June 2023.
28.The parties shall abide by the accountant's advice as to the most cost effective legal manner to wind up G Pty Ltd, G2 Pty Ltd and the G Trusts.
G Pty Ltd & Associates Trust ("the Trust")
29.The parties shall within seven days execute the financial statement and tax return for the trust for the year ending 30 June 2021 as prepared by the accountants.
30.Within 28 days the parties will do all acts and things and sign all documents such that:
(a)The Motor Vehicle 1 with registration … together with the loan secured over the vehicle are transferred into the name of the wife or at her direction at the expense of the wife;
(b)The Motor Vehicle 2 with registration … is transferred into the name of the husband or at his direction at the expense of the husband; and
(c)The business plant and equipment are transferred into the name of the wife or at her direction or at the expense of the wife.
31.Following compliance with Orders 29 and 30 herein the parties shall do all things required to wind up the trust as at 30 June 2023, including but not limited to preparing and/or lodging with the ATO any necessary financial statements and tax returns; and
32.The parties shall abide by the accountant's advice as to the most cost effective legal manner to wind up the Trust.
Superannuation Fund 1
33.That having been afforded procedural fairness, Orders 34 to 40 (inclusive) are binding on the parties in their capacity as trustees of Superannuation Fund 1 ("SMSF") and service of these orders on the trustees is deemed to have occurred on the date of the orders.
34.The parties shall jointly engage the accountant as soon as possible and the accountant shall certify the respective current entitlements of the parties in the SMSF.
35.The parties do all acts and things to cancel any direct debit relating to the premium payments for any policies with P Insurance, Q Insurance or any other provider from being debited from Westpac account ending …68.
36.The parties agree to each retain one half of the total amount of the sum of their respective entitlements in the SMSF and accordingly, the payment split shall be a base amount (pursuant to Section 90XT(1)(a) of the Act) payable with the effect that after payment of that base amount each of the parties will have an equal entitlement in the SMSF.
37.The parties will comply with all legal requirements (including under Superannuation and Taxation Law) to properly and expeditiously implement the superannuation split and follow the reasonable advice of the accountant to do so.
38.Upon the payment split being affected, the husband shall take all necessary steps to transfer his interest in the SMSF to another fund of his choosing.
39.Simultaneously with the implementation of the super split:
(a)The husband shall sign all documents required to resign from and surrender any right in connection with the SMSF;
(b)The wife shall be solely liable for and shall indemnify the husband from any liability in connection with or arising from the operation of the SMSF; and
(c)The husband shall sign, in his capacity as a director of the trustee, the financial returns of the SMSF as required.
40.Pending the superannuation split and transfer of all the husband’s entitlements in the SMSF to another fund:
(a)Each party is restrained from dealing with, charging, encumbering or disposing of any investment property of the SMSF other than in accordance with the terms of these orders and
(b)Each party shall, as soon as practicable, revoke any binding death nomination already made and each party be, and is hereby and until compliance with this agreement, restrained from:
(i)Making any binding death nomination in favour of a child described in Regulation 13 of the Family Law (Superannuation) Regulations 2001 (Cth);
(ii)Making any other nomination where the effect of such nomination would be to render any splittable payment not splittable; and
(iii)Doing any act or thing which would defeat, extinguish or reduce the entitlement of either party under this agreement.
Payment of Outstanding School Fees to L School
41.Each party be responsible for and indemnify the other with respect to 50% of the deferred L School fees for the years 2016, 2017 and 2018.
42.The husband pay the balance of outstanding school fees due to L School up until fees payable for the school year ending December 2022.
C Company Google Password and Username
43.Within seven days the husband provide to the wife the password and username for the 'Google My Business' page for C Company and do all acts and things to enable the wife to access the page.
Wife to Retain
44.The wife shall retain to the exclusion of the husband and indemnify and hold harmless the husband from any liabilities of or associated with:
(a)Her personal possessions and furnishings;
(b)The contents of any bank account in her sole name; and
(c)Her interest in the business C Company.
45.The wife shall be responsible for and indemnify the husband with respect to the credit card debt in her name.
Husband to Retain
46.The husband shall retain to the exclusion of the wife and indemnify and hold harmless the wife from any liabilities of or associated with:
(a)His personal possessions and furnishings;
(b)The contents of any bank account in his sole name; and
(c)His interest in the business R Pty Ltd.
47.The husband shall be responsible for and indemnify the wife with respect to the credit card debt in his name.
Finalisation
48.Unless otherwise specified in these orders and save for the purposes of enforcing any monies due under these or any subsequent orders:
(a)Each party be solely entitled to the exclusion of the other to all other property (including choses in action) in the possession of such party as at the date of these orders;
(b)Monies standing to the credit of the parties in any joint bank account are to be divided 50% to the wife and 50% to the husband and thereafter those accounts are to be closed;
(c)Each party forego any claims they may have to any superannuation benefits belonging to or earned by the other;
(d)Insurance policies remain the sole property of the beneficiary named therein;
(e)Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and
(f)Any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
49.Within 14 days the applicant file any submissions in relation to the costs, limited to four A4 pages.
50.Within 14 days thereafter the respondent file any submissions in relation to costs, limited to four A4 pages.
51.The question of costs to be determined on the papers.
AND THE COURT NOTES THAT:
A.Pursuant to Section 81 of the Family Law Act 1975 (Cth), the parties intend that these orders shall as far as practicable finally determine the financial relationship between them and avoid further proceedings between them.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Andreevich & Andreevich has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
McNab J
This matter concerns disputes regarding parenting and property proceedings between the applicant wife Ms Andreevich (“the wife” or “the mother”) and the respondent husband Mr Andreevich (“the husband” or “the father”).
BACKGROUND OF RELATIONSHIP
The parties met in 1995 and married in 2000. The wife completed a degree in Adelaide from 1996 - 2000, while the husband completed a degree in Melbourne in 1997.
There are three children of the marriage: X born 2006, aged 16 years, Y born 2009, aged 14 years, and Z born 2012, aged 11 years.
In 2001 the parties established a business, G Pty Ltd, a vehicle to conduct the business of the wife and the consultancy business of the husband.
In 2006 the parties jointly purchased a property in J Street Suburb K (“the Suburb K property”). In 2009 they jointly purchased a property in M Street, Suburb N (“the Suburb N property”) where they built a house which became the matrimonial home.
The parties separated under the same roof on 1 November 2019 and on 20 July 2020 the wife changed the locks on the Suburb N property and the husband moved into the Suburb K property.
DOCUMENTS
The wife relied on:
(1)Applicant’s response affidavit filed 21 March 2023;
(2)Applicant’s Amended Initiating Application filed 10 March 2023;
(3)Applicant’s trial affidavit filed 10 March 2023;
(4)Applicant’s Financial Statement filed 10 March 2023.
The husband relied on:
(1)Respondent’s Amended Response to Application for Final Orders filed 13 March 2023;
(2)Respondent’s affidavit filed 20 March 2023;
(3)Respondent’s affidavit filed 13 March 2023;
(4)Respondent’s Financial Statement filed 13 March 2023;
(5)Affidavit of Ms T filed 22 March 2023;
(6)Affidavit of Mr B filed 22 March 2023.
The trial commenced on 27 March 2023 and ran until 31 March 2023, then it was adjourned part-heard to 9 June 2023. At the conclusion of closing submissions interim orders were made dealing with the sale of the investment property owned by the parties where the husband resides.
The wife commenced these proceedings on 24 July 2020 and is currently seeking orders as noted in her Closing Submission dated 9 June 2023 to be those set out in her Amended Proposed Minute of Parenting Orders dated 27 March 2023 that:
1.The parties have equal shared parental responsibility for the three children of the marriage, namely:
(a) [X], born […] 2006 ;
(b) [Y], born […] 2009 ; and
(c) [Z], born […] 2012 .
2. [X], [Y] and [Z] live with the Mother.
3. [X] spend time with the Father in accordance with her wishes.
4.In the event that the Family Report Writer, [Ms T], is supportive of an increase in time between the Father and [Y] and [Z], [Y] and [Z] spend time with the Father as follows:
(a)in week 1, from after school (or 3:30pm if a non-school day) on Thursday until the commencement of school (or 9:00am if a non-school day) on Friday; and
(b)in week 2, from after school (or 3:30pm if a non-school day) on Thursday until the commencement of school (or 9:00am if a non-school day) the following Monday.
And for the purposes of enforcing this order, the Mother and the Father are to forthwith jointly explain to [Y] that they agree this increase in time is in his best interests and that from the commencement of the 2024 School year he can spend time with the Father in accordance with his wishes.
The husband seeks orders outlined in his Minute of Proposed Final Orders that:
1.The parties have equal shared parental responsibility for the children of the marriage, [X] born […] 2006, [Y] born […] 2009 and [Z] born […] 2012 and collectively known as the [sic] (“the children”).
2. [X] live with the Wife and spend time with the Husband:
(a)Each Thursday, from the conclusion of school for the purpose of the Husband driving [X] home; and
(b)One occasion each fortnight for the purpose of a meal, at times to be agreed between the Husband and [X]; and
(c) At any other time, in accordance with her wishes.
And for the purposes of enforcing this order, the Husband and the Wife are to forthwith jointly explain to [X] that they agree that these orders are in her best interests.
3.[Y] and [Z] live with and spend time with each parent on a week about basis, commencing from the conclusion of school Monday to the commencement of school the following Monday.
4.The time at paragraph 3 be suspended until such time as the Husband has secured residence (either rental or otherwise) with not less than three bedrooms, and in the intervening period [Y] and [Z] spend time with the Husband as follows:
(a)In week 1, from the conclusion of school (or 3pm if a non-school day) Thursday until the commencement of school (or 9am if a non-school day) Friday; and
(b)In week 2, from the conclusion of school Thursday (or 3pm if a non-school day) until the commencement of school (or 9am if a non-school day) the following Monday.
The following orders were made by consent on 18 November 2020:
3.[X] spend time and communicate with the Husband in accordance with her wishes.
4. [Y] and [Z] spend time with the Husband as follows:-
(a) during school terms:-
(i)in week 1, from after school (or 3.30 pm if a child is not at school) on Thursday until the commencement of school (or 9.00 am if a child is not at school) on Friday; and
(ii)in week 2, from after school (or 3.30 pm if a child is not at school) on Friday until the commencement of school (or 9.00am if a child is not at school) the following Monday;
with the time outlined in Order 4 equating to four nights per fortnight and with Order 4(b) outlining arrangements for school term holidays.
PARENTING BACKGROUND
The wife has been the primary caregiver for the children since their birth, but it is agreed the husband was heavily involved in their care. After the separation, the wife continued to care for the children in the former matrimonial home. Since the separation, the children have lived with the mother and spent time with the father, other than the eldest X, who has only spent overnight time with the father on one occasion since 1 July 2020.
The husband is living in their Suburb K property which is a two-bedroom unit.
Orders were made on 9 June 2023 for the Suburb K property to be sold and the proceeds of the sale to be distributed as follows:
2. The sale proceeds of the [J Street] property be divided as follows:
(a)First, to pay all costs, commissions and expenses of the sale including agent’s commissions and conveyancing costs;
(b) Second, to discharge the mortgage over the [J Street] property;
The wife sets her own work hours to fit in with the children and once per week, when she works late, her parents pick the children up from school.
Ms S was engaged for non-reportable family counselling, but no further appointment has been arranged and she was unable to assist.
On 2 October 2020, Ms T was engaged to prepare a Family Report and orders were made by consent on 18 November 2020 which reflected Ms T's recommendations, being:
(a)Equal shared parental responsibility;
(b)The children live with the mother;
(c)X spend time with and communicate with the husband in accordance with her wishes;
(d)Y and Z spend time with the husband every second Thursday night and every alternate week from Friday after school until Monday before school (four nights a fortnight) with this to increase to five nights a fortnight after six months; and
(e)Provision for school holidays, special occasions and religious holidays.
Ms T prepared an updated report on 21 September 2021, which made substantially the same recommendations. The wife seeks for these arrangements to continue, subject to Y being able to dictate his own spend time arrangements from the start of the 2024 school year.
There is a significant level of conflict between the parties to the extent that the parties could not agree on school holiday spend time arrangements and which necessitated a hearing on 11 August 2022 and orders being made. Despite the high level of conflict between the parents, the differences between them in relation to parenting are not substantial in comparison to some of the matters that the court has to deal with. There are no allegations of family violence or abuse. It is apparent that each parent wants the best for their children.
Both parents have the same cultural and religious background, and they agree it is important to raise the children with exposure to their cultural and religious customs.
A central issue in relation to parenting is the arrangements between the father and X. They have minimal direct contact, and X has only spent one overnight period with him since 2020. The father sends X regular text messages, but she rarely replies. The father is plainly upset because the uncontested evidence before the court is that all children enjoyed a close and loving relationship between both parents. The father complains that, since he was locked out of the family home by the mother, his relationship with X has become almost non-existent, a circumstance he blames the mother for. The evidence did not establish that the wife has set about to undermine the relationship between the husband and X.
The evidence shows X is an exemplary student with a strong social network at school and is close to her siblings. She is also independently minded.
The wife submits that the living arrangements at the father's house are inappropriate. She states that Y has told her that he does not want to sleep on a mattress at his father's house surrounded by boxes. The court is aware that since June 2023 the father has vacated the Suburb K property for the purpose of its sale and has moved closer to the Suburb N property and living in more suitable accommodation.
The mother emphasizes the importance of Y's maturity and rational decision-making before he can make choices about where he lives. She gives evidence about Y expressing to her the desire to arrange his own weekends and spend time according to his wishes.
ISSUES IN DISPUTE
There were a large number of issues in dispute in this matter, including:
(a)Whether X should be the subject of orders to spend time with her father, or whether she should be able to spend time in accordance with her wishes;
(b)Whether Ms S should be re-engaged to assist with the relationship between X and the father;
(c)Whether Y should be able to spend time with his father in accordance with his wishes after the beginning of 2024;
(d)The spend time arrangements for Y and Z;
(e)The spend time arrangements during special occasions;
(f)The spend time arrangements during the school holidays, in particular the long summer holidays;
(g)The percentage distribution of the asset pool;
(h)The treatment of the traffic fines in the asset pool;
(i)The value of the business, C Company;
(j)The assessment of the parties' contributions post-separation and whether the wife has made a greater percentage of contributions;
(k)The form of order relating to the former matrimonial home, and whether the mother can afford to retain the home.
EVIDENCE
I do not intend to set out all the evidence of the parties or to seek to make findings to resolve or comment on each dispute that has been set out in the lengthy affidavit material. I have set out the evidence which is relevant to the decisions I am required to make under the Family Law Act 1975 (Cth) (“the Act”).
In his trial affidavit filed 13 March 2023, the husband sets out the history of the parties and of the litigation, including a number of what he says are false allegations made by the wife, demands made by one party to the other and the wife changing the locks on the former matrimonial property. It makes it clear that there is an extensive history of conflict between the parties leading up to separation and post-separation.
The wife sets out a similar history of conflict and allegations, but largely disagrees with the events as told by the husband.
The parties agree that the children are well settled and performing well academically. The evidence was that X is achieving exceptional academic results.
During the relationship, the husband describes that they jointly cared for the children with the help of a babysitter. He describes the wife's work life putting him under significant pressure. The wife acknowledges that they shared care, but says the husband had a much smaller role than he says in his evidence, and that she was the primary carer.
Following separation, the husband gives evidence that the wife sought to only have the children spend daytime visits with the husband. He gives evidence of the wife taking the children to the psychologist without his knowledge or permission, and that he attempted to intervene, but the wife refused. The wife gives evidence that at the time, the husband was being abusive, and she makes allegations of stalking, and she feared for her and her children's safety. She acknowledges that these issues are historic, and she is happy with the children spending overnight time with the husband.
Both parties agree that the wife locked the husband out of the former matrimonial home in July 2020 without any prior notice or explanation to the children. The husband says this led to numerous missed calls and messages from the children and a deterioration in their relationship, in particular with X. When asked about the effect on the children, the wife acknowledges that the children were upset and confused by this. X did not spend any time with the husband following this, save for one overnight visit.
The husband claims the wife made efforts to make the children happy, including allowing Y to install a TV and gaming computer in his room without parental controls and security. Y stays up late gaming on his computer regularly. He says these things are against his best interests. He also believes the wife is influencing Y in relation to these proceedings.
The wife submits that the husband is too strict with the children about technology, and that he takes their iPad and phones from them for long periods of time. She feels this causes the children anxiety since they are unable to contact her.
Both parties allege numerous breaches of the November 2020 Orders, including the husband saying the mother sent a message to change Y's weekend with his father, arranging a sleepover for Y on a weekend he was supposed to spend with his father and not allowing Y to spend New Year's Eve with his father.
Similarly, the husband gave evidence that in September 2021 a dispute arose between the parties regarding the children's time during a religious festival and Z's birthday. The husband proposed that the children spend the first night of the festival with him, which was not accepted by the wife. Ultimately, the wife agreed to extend the children's time with the husband until the afternoon of Z's birthday.
In January 2022 the husband fell sick and was unable to pick up the children for their holiday time with him. The husband and wife had a disagreement over text messages about the plans for pick up, which are set out in his trial affidavit. The husband later regretted the tone and words used in the messages. He sets out a number of similar disputes over spend time arrangements and gives evidence that the wife is being inflexible and negatively impacting his relationship with the children.
The parties agree there is a high degree of conflict between them. The wife gives evidence that she does not understand why the parties cannot be flexible and change their arrangements around the children. She submits that the husband is largely responsible for conflicts due to his inability to be flexible at times.
The husband gives evidence that during the court ordered non-reportable therapeutic counselling with Ms S, Ms S suggested progressing the children's time with the husband to five nights per fortnight, but he alleges the wife became agitated and refused to continue counselling. The wife disputes this.
The husband also alleges that the wife arranged recreational activities for the children during his time, and he is frustrated with the interference. The wife gave evidence that the children are all involved in a number of extracurricular activities, and these often can only occur at specific times, including during the husband's time. She gave the example of all the children being engaged in tutoring separately during the weekend.
In relation to X, the husband believes the wife has manipulated X to not want to spend time with her father. He gives evidence that they previously had a very close relationship prior to his being locked out of the former matrimonial home. He acknowledges that X is allowed to make her own decisions about spend time under the current arrangements but gives evidence that the wife is discouraging X from spending time with him. He also gives evidence that he does not believe she is mature enough to be able to make her own decisions, particularly where he believes she is being influenced by her mother.
The wife disputes this and says the husband bombards X via her phone with communications that are often abusive in nature. The wife says that, according to X, these messages occur daily, often multiple times each day, and X almost never responds. She expressed the desire for the husband to stop harassing X and invite her out for a meal once in a while and allow her to conduct the relationship on her terms.
Family Reports
There are two Family Reports of Ms T in this matter: the first Family Report dated 2 October 2020 and an updated Family Report dated 21 September 2021. Both reports are annexed to Ms T’s affidavit filed on 22 March 2023.
The Report Writer identified that the parties have very poor communication between them and a very high level of conflict. She sets out a history of this conflict, before and after separation, and how often the children would be exposed to the conflict. She notes in her earlier report:
It is my view that at this time, [Ms Andreevich] and [Mr Andreevich] are caring and responsible parents who each have the capacity to meet the intellectual needs, the day to day emotional needs and the practical needs of the three children. While their conflict continues at the level it currently is then the children’s overall emotional needs and wellbeing remains in jeopardy.[1]
[1]Family Report dated 2 October 2020 at [107], Court Book page 732 of 1099.
Notably, Y refused to take part in the earlier Family Report, and X did not attend observation sessions with the father for either report.
When Z was asked about being the only child going to the father's house, she said, "I feel very lonely because I have no one to play with except dad but sometimes he's too busy making dinner."[2] Further, Ms T noted in her earlier report:
[Z] is at an age where she would manage the conflict by showing each parent loyalty when with them but sooner or later she will suffer emotional affects as a result. For [Z] at this time she needs to treat both parents equally. [Z] perceives this as being fair to each parent. There may also be some pressure on [Z] especially from [X] in regard to [Mr Andreevich] as [X] ‘tells her stuff’ about [Mr Andreevich] which clearly [Mr Andreevich] tells her it [sic] is not true. This may be leaving [Z] feeling anxious and confused.[3]
[2]Family Report dated 2 October 2020 at [94], Court Book page 727 of 1099.
[3]Family Report dated 2 October 2020 at [103], Court Book page 730 of 1099.
In the later report, Z says she wants spend time arrangements to be equal.
With regards to Y, Ms T notes in her later report:
… While [Y] believed he is a very mature child for his age, he may be in some areas, but overall, he does not have the maturity which [X] demonstrates which is not surprising as she is almost three years older. The other concern is that [Y] may feel under a great deal of pressure if he is permitted to make his own decisions, as then he would not only be caught in the middle of the conflict between [Ms Andreevich] and [Mr Andreevich], but he would always have to choose between them. It is my view this is far too much pressure for a twelve-year-old, as [Y] may continually be caught in a bind as to whether he would spend time with [Mr Andreevich] or not, or might that leave him feeling he would let down either [Ms Andreevich] or [Mr Andreevich]. On the other hand, it may be that [Y] also struggles with the conflict between [Mr Andreevich] and [Ms Andreevich] so he formed a view that if he did not feel up to moving between [Mr Andreevich] and [Ms Andreevich] then he could decide not to do this. [Y] is reaching an age where he may decide to align with one parent and reject his other parent which is the direction [X] chose.[4]
…
In my view, it needs to be explained to [Y] in such a way that he is able to gain some insight into how he would be left in such a vulnerable position, if he was permitted to make his own decisions, at this time, rather than when he is older.[5]
[4]Family Report Update dated 21 September 2021 at [88], Court Book page 764 of 1099.
[5]Family Report Update dated 21 September 2021 at [89]. Court Book page 764 of 1099.
When asked about what he wanted, Y responded:
‘I should get to decide where I go between my parents’ houses. It’s just not fair. I’m 12. I’m definitely more mature than the average 12 year old. I have an opinion and I think it’s a very valid opinion… I’m never asking to be doing whatever I want. I’m asking to be able to say when I go to my dad’s. At the end of the day you said in the best interests of the child. What’s going on now is not in my best interest’.[6]
[6]Family Report Update dated 21 September 2021 at [64] – [65], Court Book page 760 of 1099.
The Report Writer is of the opinion that in a few years, Y may be able to make his own decisions if his exposure to the parties’ conflict is minimised.
The Family Report Writer’s recommendations remained the same over both reports, recommending shared parental responsibility for all of the children, but she was of the view that a shared care arrangement would not be in the best interests of the children due to the parties’ inability to communicate and co-operate. She recommended the use of a parenting app, which the parties give evidence they are currently using.
The Report Writer notes that if shared care spend time orders were made in relation to X, she would likely refuse to co-operate, and it is not clear how Y would respond. Ms T recommends X be permitted to make her own decisions as to spend time arrangements and states:
… If an Order was made at this time for [X] to spend time with [Mr Andreevich], in my view, this would leave [X] feeling angry toward [Mr Andreevich] which may further damage their relationship. It is my view that when [X] feels ready it may be helpful for her to attend some counselling to assist her to resolve her feelings about her parents.[7]
[7]Family Report dated 2 October 2020 at [110], Court Book page 733 of 1099.
X says about the current arrangement:
… ‘It’s convenient. It works well for me based on my plans. If I need to do homework and focus on my study which I can’t do if I go to dad’s’.[8]
[8]Family Report Update dated 21 September 2021 at [50], Court Book page 758 of 1099.
Ms T is of the view that shared care would separate the siblings, which is not in their best interests. She recommends Y and Z spend alternate weekends, and the alternate Thursday overnight with the father, being four nights per fortnight. She states:
[The mother] does not oppose the children having an extra night [per fortnight with the father] but does not think [Y] would cope nor would [Mr Andreevich] cope with extra time with the children.[9]
[9]Family Report Update dated 21 September 2021 at [6], Court Book page 750 of 1099.
LEGAL PRINCIPLES
Orders in respect of children are made under Part VII of the Act, where the meaning of a “parenting order” is defined (s 64B).
The court may make such parenting orders as it thinks proper (s 65D(1)), within the context of the objects of the legislation and the principles which underpin those objects (s 60B).
When making parenting orders, the court is mandated to regard the child’s best interests as the paramount consideration (ss 60CA and 65AA). The Act specifies the criteria which must be considered in arriving at a conclusion as to what is in the child’s best interests (s 60CC).
The Act imports a rebuttable presumption that a child’s best interests are served by an order allocating equal shared parental responsibility for the child to the parents (s 61DA). Parental responsibility is defined to encompass all duties, powers, responsibilities and authority conferred by law upon parents (s 61B).
The presumption of equal shared parental responsibility does not apply in certain circumstances (s 61DA(2)) and may be rebutted if the court is satisfied it would not be in the child’s best interests for the parents to have equal shared parental responsibility (s 61DA(4)).
CONSIDERATION REGARDING PARENTING
I do not need to make findings about each of the matters of dispute that have arisen between the parties and which are set out in their trial affidavits. The main disputes in relation to parenting are:
(a)whether the younger children spend time with the parents on a week about basis or five nights a fortnight;
(b)whether any orders are made for X to spend time with the father; and
(c)whether, from the commencement of the 2024 school year, Y can spend time in accordance with his wishes.
Given that each party is seeking orders for shared parental responsibility, s 65DAA of the Act requires consideration about whether the children spending equal time with each of the parents is in the best interests of the children.
Section 60CA of the Act provides that, in deciding whether to make a particular parenting order in relation to the children, the court must regard the best interests of the children as the paramount consideration.
Ms T expressed the opinion that equal shared time was not in the best interests of the younger children in the following terms in her First Family Report:
109. It is my view that at this time a shared care living arrangement would not work in the best interest of the three children. [The mother and the father] have not developed a co-operative parenting relationship with appropriate communication. This means that the children would not be assisted to adjust to such an arrangement. At this time, [X] would refuse to co-operate in such an arrangement, and it is unknown how [Y] would feel about such an arrangement. While [Z] said that she would like shared care, for [Z] this was about being fair to each parent (as a result of being caught in the middle of the conflict). At this time a shared care arrangement would leave the siblings separated each alternate week for a week at a time, which may mean [Z] is on her own without her siblings in alternate weeks for the week. This is not about whether [the mother or the father] is the better parent, it is about circumstances where [the mother and the father] are in conflict, unable to effectively communicate, they are unable to work together co-operatively as parents, as well as the separation of siblings. It is also not about equal time with children automatically meaning the children receive the same quality of parenting, as some parents who parent full-time do not provide the quality or caring responsible parenting as provided by some parents who spend little time with their children. Equal time does not equate with the child necessarily receiving quality time with each parent.[10]
[10]Family Report dated 2 October 2020 at [109], Court Book pages 732 - 733 of 1099.
In her oral evidence before the court Ms T expressed similar views and did not support week about time. She emphasised the need for cooperation between parents if such orders are made and that for the children it is about the quality of the time spent with each parent.
I do not think that the conflict and difficulties that are likely to arise from these parents managing what will be two households in a shared care arrangement is going to be in the best interests of the children. The father points to the fact that he will be arranging to obtain suitable accommodation which he says will make shared care possible, however I do not think that this will improve the quality of communications between the parents and make such an arrangement work in the interest of the children.
In relation to orders requiring X to spend time with the father, Ms T was of the view that her impression of X, having spoken to her twice, was that she was pushing in her own directions and that if such an order was made it would put her under pressure. She noted that because X was in Year 11 and heading into Year 12, to have extra pressure on her may cause her to feel quite angry and she did not support making an order in these terms.
I can understand why the father has proposed the orders in relation to X. From his perspective he has lost what was a close and loving relationship with X, as a result of him being effectively removed from the family home, and he is making the proposal in an attempt to maintain a relationship with his eldest daughter. I agree with Ms T that his proposal is likely to cause more problems and is likely to be counterproductive. I agree with Ms T that X’s present approach is an expression of independence. Ms T also gave evidence that it is common for children to be very loyal to the parent that they are living with and that this is a means for them to manage the conflict between the parents. Not having orders in relation to X may be a means of relieving her of some pressure and may improve her relationship with her father.
In [51] and [53] – [54] of the First Family Report, X speaks of the father bombarding her with calls and texts.[11] If he refrained from doing that, that is also likely to take pressure off the relationship.
[11]Family Report dated 2 October 2020, Court Book pages 718 – 719.
I am also concerned that if the court made orders in relation to X and X did not comply, this may lead to contravention applications which are unlikely to assist this family. I understand that the father sought a notation to orders that he would not make an Application for Contravention in the event that X is unable to spend time with him because of her schedule or commitments, however that still provides scope for an application on the basis that he alleges that the mother has not actively encouraged 17-year-old X to spend time with her father.
The mother sought orders regarding Y being permitted to determine his own spend time arrangements from the commencement of the 2024 school year at the father’s, at which point he will be entering Year 10 at the age of 14 years.
The father proposed orders that contained a notation that the father would not institute contravention proceedings against the mother if Y did not spend time in accordance with orders after the age of 17 years. Ms T expressed the view in her oral evidence that if Y was told that the orders in relation to him were to continue until he turned 17 years of age, he would likely get very upset with his father. Y expressed strong views to Ms T regarding his desire to make his own decisions about which parent he spent time with.[12] The evidence of the mother is that Y has been showing resistance to spending time with the father.[13] Ms T was of the view that it was best not to put Y, who was then 12 years of age, under too much pressure and that in “a couple of years, [Y] will be able to make his own decisions, particularly if the conflict is minimised between [the parents].”[14]
[12]Family Report Update dated 21 September 2021 at [64] – [67], Court Book page 760 of 1099.
[13]Father’s affidavit dated 12 March 2023 at [114] - [135], Court Book page 312 - 317 of 1099.
[14]Family Report Update dated 21 Septembe2r 2021 at [90], Court Book page 765 of 1099.
Again, I can understand the position of the father: he fears losing the affection of another child if orders of the kind sought by the mother are made. However, I do not regard it as sensible or in the best interests of the child to adopt the proposal of the father. I will make orders that Y can make a determination as to what time he spends with each parent at the start of 2025, when he will be 15 years of age. I think an order of this kind is more likely to lead to less disputation and reduce the risk of further litigation between the parties. It conforms to the view expressed by Ms T regarding Y. If the court was to simply make no reference to when Y can make some decisions about how much time he spends with each parent, then there is a risk that there will be further proceedings in the event that Y makes the decision to spend less time with one or other parent.
BEST INTERESTS – PRIMARY CONSIDERATION
Sections 60CC (2) and (3)
Turning to the primary and secondary considerations under s 60CC (2) and (3) of the Act, the orders providing for the younger children to spend five nights per fortnight and holiday time with the father are such as to support a meaningful relationship between the children and each of the parents. X has the opportunity to spend time with her father should she choose to do so.
Neither parent contends that the other presents a risk to the children whilst in their care.
BEST INTERESTS – ADDITIONAL CONSIDERATIONS
Sections 60CC (3)(a), (b) and (g): Issues relating to the children – their views, level of maturity, culture and relationships
The views of the children have been canvassed above, as have the issues of the nature of the relationship with each parent. There is some strain in the relationship between the father and the elder children. However, this has arisen in the course of what has been somewhat protracted and hard fought litigation between the parents and has arisen as the children got older where, as a matter of common experience, such tension is not uncommon.
The orders take into account the religious days observed by this family. The husband accepts the wife's proposal that special occasions and religious festival time be suspended if the children are travelling interstate or overseas. He seeks provision for make-up time if that occurs. I will not make orders for make-up time on the basis that each parent will have opportunities to travel with the children during religious festivals and the time that each parent spends over those periods is likely to even up. Trying to calculate make-up time in these circumstances adds a layer of complexity which is unnecessary.
Sections 60CC (3)(c), (ca), (f) and (i): Obligations, attitude, capacity and exercise of responsibility
The mother gives evidence that the father has not paid child support since separation, although the father has paid outgoings with respect to the former matrimonial home since separation in lieu of paying child support. The mother has paid for the majority of extracurricular activities which are numerous and at a significant cost.[15] The mother has paid half of the very substantial private school fees. The father currently owes about $58,000 in school fees. Otherwise, it is apparent that each parent has fulfilled their obligations to provide for the emotional and intellectual needs of the children and each has taken their responsibilities seriously.
[15]Applicant’s trial affidavit at [178], Court Book pages 89 - 90 of 1099.
There are no issues of family violence. These parenting orders will affect minor changes to the status quo. There is no practical difficulty in the implementation of these orders.
Section 60CC 3(l) Avoiding Further Proceedings
As discussed, an order in relation to Y making decisions about how much time he spends with each parent once the school year commences in 2025 is likely to reduce the possible occurrences of further proceedings regarding parenting arrangements. If orders were made effectively requiring him to spend time with one parent or the other after that time, there is a risk of contravention proceedings being issued if he chooses not to follow the routine set by the orders. As mentioned above, that would not be in the interests of the children or the parents.
PROPERTY
LEGAL PRINCIPLES – PROPERTY ASPECT OF DISPUTE
In respect to the parties dispute regarding the division of their property these proceedings, s 79 of the Act sets out the following:
(1)In property settlement proceedings, the court may make such order as it considers appropriate:
(a)in the case of proceedings with respect to the property of the parties to the marriage or either of them--altering the interests of the parties to the marriage in the property; or
…
including:
(c)an order for a settlement of property in substitution for any interest in the property; and
(d)an order requiring:
(i) either or both of the parties to the marriage; or
…
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.
…
(2) The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
In exercising that discretion, the court is required to take into account the matters set out in s 79(4) of the Act, as follows:
(4)In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e)the matters referred to in subsection 75(2) so far as they are relevant; and
(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
The High Court in Stanford v Stanford (2012) 247 CLR 108 (“Stanford”), at [35] confirmed that before an order is made adjusting the parties’ property the court is required to make a determination that it is just and equitable to do so. That determination is to be made, however, not as a discrete or preliminary issue but requires the Court to consider the matters set out in section 79(4) of the Act.
In the leading case of Hickey and Hickey and the Attorney-General for the Commonwealth of Australia (Intervenor) (2003) FLC 93-143, the Full Court held at [39] that, in considering the matters set out in section 79 (4) of the Act the preferred approach was to adhere to the following four steps:
(a)Identify and determine the value of the asset pool of the parties as at the date of the hearing (this necessarily involves identifying both the assets and liabilities);
(b)Identify and assess each of the parties’ financial and other contributions up until the date of the hearing (this can include the financial contributions made before, during and after the marriage);
(c)Assess how future and other events may have a financial impact on either of the parties, such as their age and state of health and their income and property or financial resources (known as the s 75(2) factors); and
(d)Step back and examine this formula-based reasoning against the history of the marriage, intangible considerations and other contingencies so as to consider whether the outcome represents a just and equitable result.
That approach had been endorsed many times: see, for example, Manolis v Manolis (No 2) [2011] FamCAFC 105 at [63] (per Coleman, May and Ainslie-Wallace JJ); Kildea v Kildea (2007) 38 Fam LR 347 at [104] (per Finn, May and Boland JJ); C and C (2005) FLC 93-220 at [22] (per Bryant CJ, Finn and Coleman JJ) and [142] (per O’Ryan J). However, as the High Court noted at [35] in Stanford, s 79(2) of the Act provides that the Court shall not make an order altering the interests of the parties to the matrimonial property, “unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”. Accordingly, since Stanford, it has generally been the practice of the court to determine, as an initial issue, whether it is just and equitable to make an adjustment of marital property.
The Full Court in Perrin & Perrin (No 2) [2018] FamCAFC 122 cited at [57]–[58] with approval, the decision in Babett & Falconer (2015) FLC 98-067 at [44]:
Within the family law context, those comments [in respect to the adequacy of reasons] should be seen as reinforced by the fact that the nature of the s 79 inquiry is, in essence, a broad discretionary assessment, which is neither an accounting nor mathematical exercise and which, effectively as a corollary, requires a ‘broad-brush approach’.
(Citations omitted)
Both parties in this proceeding agree that an order adjusting the marital property of the parties should be made.
Prior to the Relationship
The parties had no significant assets or liabilities when they started their relationship.
During the Relationship
In 1999 the parties purchased a property which they sold in 2000. The parties set up the company G Pty Ltd in 2001, which served as a vehicle for the wife's business and the husband's consultancy services. Throughout the relationship, the wife worked full-time as a medical professional while the husband worked as a contractor for various companies. The wife earned significantly more than the husband during this period, although the figures are in dispute.
Properties
In 2003, the parties purchased a home at EE Street, Suburb N for $575,000, which was paid for by joint funds and a mortgage, and they invested a further $380,000 in renovations, which the husband gives evidence he was substantially responsible for. They moved into the property in late 2004.
In 2006 a property was purchased at J Street, Suburb K for $280,000 and it was bought in the name of the G Trust, a discretionary family trust that the couple had set up earlier that year. The trust also owns plant and equipment for the couple's business, including furniture and motor vehicles. The property was purchased as an investment.
In 2009 the family home in M Street, Suburb N was purchased for over $1.8 million, which was partly funded by the sale proceeds of a property in EE Street, Suburb N. The construction at the Suburb N property was estimated to cost around $2.5 million, with some of the funding coming from the sale of EE Street and the rest from borrowed money and the wife's income. At the time the occupancy permit was granted, the estimated value of the family home was $4.5 million, and there were two mortgages on the property with Westpac.
Businesses
In August 2006 the wife established G Pty Ltd and registered the business name C Company. She designed the business from the ground up and engaged building consultants to complete the work. She was the only professional at C Company, often working six to seven days a week, and she engaged other professionals to cover emergencies during the short maternity leave that she took with each child. In 2016 Dr U and Dr V joined the C Company team, providing general services, respectively. The husband agrees he "never interfered with the […] business".[16]
[16]Family Report dated 2 October 2020 at [50], Court Book page 718 of 1099.
In 2010, the husband and wife split their business into two entities, where the wife continued to run C Company, while the husband set up R Pty Ltd to run his consultancy. After orders were made on 18 November 2020 the wife began operating C Company under C2 Company, of which she is the sole director and shareholder.
The husband was ordered to separate his businesses and relinquish any GST credits for services. However, he retained a windfall of $21,800 in GST credits, which C Company paid to the ATO on his behalf.
Mr D of E Accountants was engaged to value the two business streams operated under G Pty Ltd. The first report dated 23 September 2021 concluded that the equity interest in the business was $19,004, with the consultancy business having no value.
The wife also raises issues in relation to the completion of tax returns for G Pty Ltd and the ongoing dispute between the wife and husband. The taxation liability for the financial year ending 30 June 2020 was partially paid but still has outstanding penalties and interest. The 2021 tax return was prepared but the wife submits the husband has not signed it yet. At the time of trial, the taxation liabilities for the 2021 and 2022 financial year are unclear.
There is an issue relating to the father's outstanding school fees. The children have been attending L School since Grade 1 and 3-year-old kinder and are part of the school community. The couple agreed to split the tuition fees, camp fees and security levies of the school equally since their separation in 2020. The mother has paid her 50% share for 2020, 2021 and 2022, while the father owed the school $43,873.32 from Term 3 of 2020 to the end of 2021, and the mother received a statement in February 2023 indicating that the father owed $58,217.88. The total tuition fees, camp fees and security levies for the 2023 school year are $105,715.24. Both parents have jointly deferred fees from 2016 and 2017 totalling $53,309.86.
Since separation, the wife states she has made contributions towards the family home, including repayments on two mortgages, council rates, renovations, home insurance and maintenance costs for the swimming pool. She deposes she has also contributed to the welfare of the family by paying for private school fees, extracurricular activities, school uniforms, school textbooks, school computers, private health insurance and their child's business start-up.
The husband has failed to maintain repayments on the two loans secured over the Suburb K property since the separation.
There is an issue in this matter relating to fines for a car. The car is driven by both parties and neither believes they are responsible for the fines. The car is registered under a trust, resulting in higher penalties for infringement notices. There were three outstanding infringement notices in the name of the trust. The matter escalated when the Sheriff threatened to seize the vehicle. The wife entered into a payment plan with Fines Victoria to prevent repossession. Interim Orders made on 9 June 2023 in relation to the fines noted which provided for the fines to be paid out of the proceeds of sale of the Suburb K property.
In relation to contributions to matrimonial property, during the opening submissions, counsel for both parties agreed that contributions should be assessed to be 50%/50%, save that the counsel for the wife argued the wife has made greater contributions since separation due to her repayment of the mortgage.
The husband gives evidence that his work as a contractor is unstable, and his current main contracts are set to expire in July 2023. He notes that he is paid $138 per hour currently. He notes the wife has stable income and significantly higher income, which is not disputed.
In regard to contributions to the parties' property, the husband gives evidence that he undertook most of the renovations on the properties that they sold which he submits improved the value of the property, resulting in significant profits from the sales of those properties. There is no independent evidence of the value of his renovation work. The wife argues she had significant involvement in the renovations, but acknowledges, as she was working, the husband was more involved in that side of things.
In relation to his contribution to C Company, the husband argues that he and the wife incorporated G Pty Ltd together, and he was responsible for finding the appropriate business venue, negotiating the lease, managing commercial construction and other associated start-up tasks. When C Company began specialising in digital smile design, the husband gives evidence that he assisted in preparing models for the smiles in the evenings. He also submits he worked as a general practice manager and assisted in the everyday running of the business. He submits they shared jointly in the profits generated by C Company.
The wife disputes the husband's involvement in C Company, saying it was minimal.
Both parties allege issues relating to the G Pty Ltd tax returns. The husband alleges that although an accountant prepared these returns, he does not believe they are accurate as the wife has not provided him with access to financial records, and consequently he has not signed them. The wife disputes that the husband has not been provided with financial records, and argued his refusal is causing difficulties as there are unknown outstanding tax debts. The taxation liabilities arose from the joint enterprise and should be paid in accordance with the Consent Orders made on 9 June 2023.
The husband deposed that since C Company has been operated out of a new entity since November 2020, he has had no share or entitlement to profits, and the wife has retained all profits and benefits arising out of C Company. The husband believes he should receive an adjustment to reflect his share of the profits that he has not received since separation. No authority was cited for the proposition that the husband should receive any profits from the new entity. The parties have effectively separated their finances since November 2020. The mother has paid the mortgage on the M Street property and made substantial contributions to the care of the children since that time from the money received from the business.
Asset Pool according to the Parties
Description Ownership Applicant’s value Respondent’s value ASSETS 1 M Street, Suburb N Joint $6,100,000 $6,100,000 2 C Company Joint $57,000 $758,362 3 Business Plant and Equipment Trust $16,207 Included in C Company valuation 4 R Pty Ltd Husband NIL NIL 5 J Street, Suburb K Trust $750,000 $750,000 6 Motor Vehicle 2 (Husband) Trust $26,600 $26,600 7 Motor Vehicle 1 (Wife) Trust $67,250 $67,250 8 Westpac Account ending …08 Joint $521 $521 9 W Bank Account …96 Husband $5,314 $886.92 10 Z Bank Account …52 Husband $23,675 $12,034.77 11 Westpac Life ending …66 Wife NIL NK 12 Westpac Choice ending …84 Wife $339 NK 13 BB Insurance Payment received 4 March 2022 Joint $238,513 $238,513 Assets subtotal $6,904,377 $7,954,167.69 LIABILITIES 14 Fines Victoria G Pty Ltd Holdings $10,149 $10,149 15 Deferred L School fees Joint $53,310 $53,310 16 L School fees Husband NIL $58,217.88 17 Westpac loan ending …42 secured over M Street Joint $1,013,322 $1,013,322 18 Westpac Investment loan number …50 secured over M Street Joint $1,199,323 $1,199,323 19 ATO Debt 2020 balance including interest and penalties to date G Pty Ltd & Assoc P/L $37,046 $37,046 20 ATO tax debt 2021 G Pty Ltd & Assoc P/L $1,788 $1,788 21 ATO tax debt 2022 Wife & C Company $69,079 NIL 22 Westpac Card ending …62 Husband NK $31,112.14 23 W Bank Mastercard ending …80 Husband NK $20,709.88 24 Westpac Loan ending …26 on J Street Trust $209,238 $209,238 25 Westpac Loan ending …02 on J Street Trust $154,005 $154,005 26 Loan over Motor Vehicle 1 Trust $17,799 $17,799 Liabilities subtotal $2,384,017 $2,806,019.90 SUPERANNUATION Name of Fund Type of interest Member Applicant’s value Respondent’s value 27 Superannuation Fund 1 – Westpac account …68 $23,626 $23,625.91 28 Superannuation Fund 2 Husband $12,798 $12,798 Superannuation subtotal $36,424 $36,423.91 TOTAL (assets – liabilities) $4,520,360 $5,148,147.79 TOTAL (assets – liabilities + superannuation) $4,556,784[17] $5,184,571.70[18] [17]Wife’s Written Submissions filed 6 June 2023, pages 7 – 8.
[18]Husband’s Written Submissions filed 27 May 2023, pages 13 - 14.
Business Valuations
The most substantial and contentious issue regarding the property of the parties is the valuation of the business.
By way of background, which background is accepted by both valuers:
(a)The wife is self-employed as a professional in the business C Company which has been conducted from premises at DD Street, Suburb CC since 2006;
(b)The business is owned by G Pty Ltd of which the parties are both directors and equal shareholders;
(c)The husband is self-employed as contractor and provides services to a number of businesses including C Company (although the wife disputes that the husband provides any service to C Company);
(d)The parties are directors of G Pty Ltd and G2 Pty Ltd which is trustee of the G Trust of which the parties are beneficiaries. The Trust owns the J Street property, plant and equipment of C Company and the motor cars driven by each party.
(e)The business engages two professionals, Dr V and Dr U.
Order 14 made by Judge Carter on 18 November 2020 by consent enabled the appointment of a single expert to:
… undertake valuations of the two business streams operated under [G Pty Ltd] with such valuations to include an analysis of the income streams and outgoings and to clearly indicate the current separate value of each of the [Consultancy Services] and [Business] streams with the costs to be borne equally by the parties.
Mr D provided a report dated 23 September 2021 valuing the parties' net equity interest in G Pty Ltd and the G Trust as at 30 June 2020 at $19,004 under a "value to owner" (“VTO”) standard. Mr D adopted capitalisation of future maintainable earnings ("CFME") methodology. At 4.48 – 4.53 of his first report he determined that:
(a)G Pty Ltd had negative future maintainable earnings and had no enterprise value on an earnings basis;
(b)The operations of the business reflects the personal exertion of the wife only; and
(c)The family equity interest in G Pty Ltd is $19,004.[19]
[19]Single Expert Report, E Accountants, dated 23 September 2021, Court Book page 797 of 1099.
Mr D found that he could not value the IT business as the income earned was generated from the personal exertion of the husband.[20]
[20]Single Expert Report, E Accountants, dated 23 September 2021 at [5.3], Court Book page 799.
In her Financial Statement filed on 24 July 2020, the wife had attributed a value of $500,000 to that business. It is noted that estimate does not fix or affect the value as determined by an expert, but I treat that as the value that the wife herself ascribed to the business in a sworn financial statement.
In his response to questions put to Mr D pursuant to Rule 7.26 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) as to why he had adopted a standard of VTO, Mr D responded to the effect that the barriers to open a business are low and that any qualified professional can open a practice. He stated that as the wife is the only professional with an equity interest in the business, she is effectively a sole trader employing other professionals and assistants; and that without the wife's skills and knowledge the business has limited value.[21]
[21]Court Book 822.
On 8 July 2022 an application was filed by the husband to have leave to adduce adversarial expert evidence regarding the value of C Company. That application was heard and orders were made on 24 August 2022 granting leave to the husband to file the adversarial expert evidence of Mr B for the reasons set out in reasons published that day: Andreevich & Andreevich [2022] FedFamC1F 608. Mr B used a fair market value approach and concluded the fair market value was $610,102.[22]
[22]In oral evidence Mr B gave evidence that he had undertaken the valuation of roughly 450 businesses and involved in “tens but not hundreds of transactions” Transcript dated 31 March 2023 page 20, line 45.
Mr B has provided two reports in this matter dated 31 May 2022 (valuing the business as at 31 December 2021), and an updated report dated 21 March 2023. He also provided a letter dated 10 June 2022 reviewing Mr D’s first report of 23 September 2021. Mr D has provided multiple reports dated 23 September 2021 (valuing the business as at 30 June 2020), 16 March 2023 and 21 March 2023 along with a letter dated 24 March 2023 in response to a letter from E Accountants dated 22 March 2023.
Pursuant to the orders of 24 August 2022, the experts attended a conference on 17 March 2023 in order to, as noted at Order 3 (d):
(i)Identify the issues that are agreed and not agreed in relation to their respective valuations of [C Company];
(ii)If practical, reach agreement on outstanding issues;
…
(iv)Identify what action may be taken to resolve outstanding issues; and
(v)Prepare a joint statement specifying matters mentioned above.
The experts provided a joint statement on 28 March 2023 which narrows the issues in dispute and provides an explanation for their points of difference.
In the joint statement, the two experts agreed on using the Capitalised Future Maintainable methodology to value the enterprise value and the value of C2 Company. They also agreed on using the going concern premise of value and a capitalisation rate of 30%. However, they disagreed on the standard of value, with Mr D using the Value to the Owners (“VTO”) standard and Mr B using the Fair Market Value (“FMV”) standard. They also disagreed on the asset being valued, with Mr D valuing the wife's equity in the corporate structure that operates the business, including all assets and liabilities held by C2 Company, and Mr B valuing the proprietorship interest of the wife in the practice operated by C2 Company, excluding certain assets of the practice.
Mr D disagrees with Mr B' basis for valuing the wife's interest in the proprietorship only and believes that all assets and liabilities should be factored into the wife's equity value in the corporate structure. Mr B believes that the selection of proprietorship as his valuation measure is based on instructions, and his valuation approach is on the basis that the business was "for sale," in order to determine fair market value. Mr D has made a series of adjustments and add‑backs to Earnings before Tax, Interest, Depreciation and Amortisation (“EBITDA”) for the Enterprise/Proprietorship valuation of the business, which includes adjustments for the remuneration of the wife and superannuation for unincorporated contractors. There are differences in some of the add-backs of non-remuneration expenses by the experts, but Mr D states that this may be due to a difference of opinion and that they are relatively minor compared to the adjustments for remuneration for the wife and superannuation. Mr D has adjusted Dr V's remuneration to account for superannuation and made enquiries regarding the manner in which Dr V has been engaged to provide services. Mr D has agreed with Mr B that any remuneration paid to the wife is a related party transaction, and her remuneration for the provision of services has been set at 35.7% of gross fees, which includes an allowance for management services. Mr B has calculated aggregate salaries for the professionals and health worker at $421,802, while the equivalent figure in Mr D's valuation for 2022 is $543,534.
Mr B has made adjustments to the financial statements, which Mr D disagrees with, as they cannot be traced to a profit and loss schedule. Mr B has applied what he says is a benchmark formula for employee or contracted professionals of 40% in determining the value of the business. Mr D disagrees with this calculation as it ignores actual payments to arms-length contracts that have been in place for five years. Mr D believes the valuation should reflect the value to the wife in the manner in which she operates it and will continue to operate it in the future. The remaining profit and loss items where they differ are of low materiality.
Mr D has also adjusted the enterprise value of the business to $167,983, while Mr B values the proprietorship at $541,841.
Further, Mr B has acknowledged a "likely SG liability" of $39,146, indicating that Dr V should have been paid superannuation as his engagement was captured by the extended definition of employee under the Superannuation Guarantee (Administration) Act 1992 (Cth). Under cross‑-examination, both experts agreed that there was no evidence that superannuation had ever been paid to Dr V.
During the course of the trial both experts gave evidence in a "hot tub " setting (by which it is meant that they gave concurrent evidence) following a morning of discussions that took place in an attempt to narrow the issues in dispute. They agreed that a calculation on the basis that the wife would receive 59% remuneration (calculated as 40% for services and an additional 19% for her administrative work) would result in a total equity value of $57,000, of which the enterprise value is $30,000. Both experts agree this results in a negative assessment of future maintainable earnings. The experts acknowledge that this 59% is a hypothetical figure, based on the notion that a hypothetical purchaser would want to receive at least the rate contractors receive (being 40%, plus the uplift for her admin work).
Mr B concluded, as a result of further adjustments, that the equity value of the business is $570,000 based on a market value approach.
Mr D concluded based on adjustments to his report that the enterprise value is $167,983, with an equity value of $180,008 based on a value to owner standard. That value is based on the wife receiving remuneration of 40% of the net receipts.
Submissions were made by the wife that the court effectively had three options, being the figure of $57,000 put by Mr D or the updated figures of Mr D being $180,008, and that of Mr B being $570,000. The submission was also made, by counsel for the wife, that it was open to the court to find that the approach of each valuer was flawed and that the court could appoint a third valuer to assess the value of the business.
In summary, Mr B gave evidence that a purchaser, when looking at whether to purchase the business, would adopt industry standards when determining how much it would cost to engage professionals to run the business and that a purchaser would not be bound to continue to engage Dr V or Dr U, whether on the rates that they are currently paid or at a lesser rate.
Mr B was challenged in relation to his hypothetical remuneration rate of 40%. He gave evidence that 40% was the industry standard for remuneration of professionals, and in his 17 years of experience, he had only seen a few instances that varied from the industry standard, and they were cases of professionals who offered special services over and above general services. While he accepted that two of the professionals engaged by C Company have specialised skills, he gave evidence that the vast majority of the revenue of C Company related to general service, and thus it would be possible for the incoming purchaser to replace the current consulting professionals with staff paid at a lesser rate.
Mr B' evidence was also challenged on the basis that:
(a)There was no published benchmark or industry standard that supported his evidence regarding the 40% rate; and
(b)A purchaser, when looking at the business, would be aware that the consultants were integral as they brought in more than 50% of the revenue; and that if they were not remunerated in accordance with the existing rates, they would walk and much of the value of the business would be lost.
CONSIDERATION
The Valuation of the Business
No party took objection to the reception of the expert evidence of either Mr D or Mr B on the grounds that they lacked qualification or experience to express their opinions. Nor was any objection raised that the opinion expressed was not based "wholly or substantially" on the "specialised knowledge" of the expert witness as required as a precondition to the admissibility of that evidence under s 79 of the Evidence Act (1995) (Cth).
In Taylor & Taylor & Taylor [2000] FamCA 308 the Full Court (Finn, Kay and Barlow JJ) at [24] extracted the following principles which provide guidance as to how the trial judge approached the issue of valuation of property:
24.1The determination of valuation issues “...is essentially a matter for the trial Judge” (Hull and Hull (1983) FLC 91-360 at 78,410).
24.2The determination of valuation issues may be assisted by evidence of expert witnesses. The purpose of such evidence is to enable the trial Judge to form his or her “...own independent judgment on the matter by the application of the appropriate principles” (Lenehan and Lenehan (1987) FLC 91-814 at 76,142).
24.3A trial Judge must satisfy himself or herself, by means of the application of proper principles, that he or she has arrived at an appropriate value. If that value “...happens to be different to the values ascribed to the relevant property by the valuers called in evidence, this in itself does not affect the validity of the Judge’s finding...” provided that proper principles have been applied (Borriello and Borriello (1989) FLC 92-049 at 77,558).
24.4The determination of the value of property involves a determination of the most appropriate method of valuation, which determination in turn depends on a number of factors. In the case of shares, those factors include “...the purpose for which the valuation is made, the nature of the shareholding, the character of the company’s business, its capacity to earn profits and the net value of its assets” (Mallet and Mallet (1984) FLC 91-507 per Gibbs CJ at 79,121).
24.5It is the shareholding of the party, as opposed to the assets of the company, which must be valued (Gamer and Gamer (1988) FLC 91-932 at 76,743).
24.6Whilst the primary test is that of a hypothetical prudent purchaser (Gamer and Gamer (1988) FLC 91-932 at 76,743), it is the case that for the purposes of Family Law, “...the present commercial or capital value of shares in a proprietary company may not reflect their value to the spouse, who either has control after divorce, or who stands ultimately to benefit from them, or control them after the death of generous parents” (Reynolds and Reynolds (1985) FLC 91-632 at 80,111).
24.7In proceedings under the Family Law Act, “...the value to be ascribed to shares in a family Company must be a realistic one, based upon the worth of the shares to the party himself or herself” (Harrison and Harrison (1996) FLC 92-682 at 83,087; see also Turnbull and Turnbull and Others (1991) FLC 92-258 at 78,738).
I do not accept the initial approach to the valuation of the business taken by Mr D to be appropriate. His opinion that the business cannot be valued on a fair market value approach because the value of the business is based on the personal exertion of the wife ignores the established facts that much of the income of the business is derived from the exertions of professionals who are engaged by the business. It also ignores the evidence of Mr B which establishes that there is a market for the sale and purchase of businesses of the kind conducted by the wife. I accept the expertise of Mr B in that regard. Further, even if the business is valued on a value to owner basis (rather than fair market value), the valuation fixed by Mr D fails to have regard to the value of the wife’s interests in the business to her. If the business is only worth $57,000 to the wife, it begs the question why she would continue to work in that business rather than work as an employee or consultant.
There is force in the criticisms of Mr B’ reports made by the wife, that in making hypothetical adjustments to the level of remuneration to professionals engaged by the practice, the valuer is valuing a business other than that carried on by the wife, and it is therefore of no assistance. In Wilde & Wilde [2007] FamCA 1044 (“Wilde & Wilde”) at 167 the Full Court (per Bryant CJ, Finn and Boland JJ) stated:
167.Lonergan in his text The Valuation of Businesses, Shares and Other Equity (supra) discusses inherent dangers in valuing on “potential” versus an “as is” basis. Whilst he notes that in the case of valuing a controlling interest “it is generally appropriate to value on the basis that the glaring inefficiency (such as excessive remuneration drawn by the proprietor) is removed” he observes at 24 to 25:
However, it is generally inappropriate to value on the basis that the new owner is able to achieve full synergistic and other improvements. Such an approach is often misguided, as steps taken to improve profitability often also have other (sometimes unexpected) consequences. Furthermore, steps taken to improve profitability often require up front capital expenditure. They also almost always take some time to implement and there is a risk that the expected improvements will either not occur or will be offset or more than offset by some other unexpected adverse development.
More importantly, however, many willing but not anxious buyers acquire businesses, or equity in the structures that the businesses are conducted in, with a view to improving their performance. Therefore, there would be no gain to be made in the acquisition if the purchaser paid away to the vendor as part of the purchase price the capital value of the expected profit improvements. Indeed, there would be an opportunity cost to the purchaser, who could otherwise have been rewarded by applying their profit improvement skills in some other activity.
As a general guide, even in valuations of controlling interest the valuation should reflect the removal of glaring inefficiencies but not reflect other extra profit improvements that the purchaser alone can make as a result of their special skills or synergy benefits.
The question arises as to whether the improvements suggested by and assumed by Mr B are the removal of “glaring inefficiencies” or the adoption of some wider improvements that a particular purchaser alone could achieve. Mr B has given evidence of a widespread industry standard whereby an employee or contracted professional is remunerated at a rate of 40% of their receipts net of certain expenses. He has produced two job advertisements which reflect that practice and has also given evidence of his experience in valuing and selling businesses and says that rate is an industry standard. He was not shaken in relation to that evidence, although the court notes that there is no evidence that there is any published industry standard regarding the remuneration of professionals which is applied in businesses. I accept the evidence of Mr B that there is an unwritten industry standard to that effect, however that is not the standard that has been adopted in the business that is being valued.
Mr B gave evidence that the fee income attributable to Dr V and Dr U is not extraordinary in relation to figures for businesses or business production as he referred to it. He noted that Dr V’s fee income was about $200,000 and Dr U’s fee income was about $400,000 and that it would not be hard to find a dentist to achieve the same level of revenue.
Mr B also gave evidence that the scenario of a person buying a business, and the main professional of the business being sold leaving that business following the sale, is not unusual. Mr D gave evidence[23] that the low level of fees ( as expressed by Mr B ) amounted to in excess of 50 % of the total fees of the business and if they were to leave the risk of entering into the contract for the purchaser must be greater than what Mr B has identified.[24] The level of risk was not identified by either expert, nor was there any question asked as to the level of risk and to what extent that would affect the price offered or the value of the business to a hypothetical purchaser.
[23]Transcript dated 31 March 2023 at p 50, line 10.
[24]Transcript dated 31 March 2023 at p 50 line 40.
The valuation of Mr B and the evidence that he gave is based on his professional experience and I accept that the services that were supplied by the consultants in this case were not so specialised or that fees rendered by them were not so extraordinary that they could not be replaced with alternative professionals bringing in similar levels of income. Mr B gave evidence that the business offered “overwhelmingly general [services]” and not specialist service and the capitalisation rate adopted by him reflected this.
As to the adoption of a 40% rate of remuneration, I note that Mr D also adopted that for fixing the wife’s salary for the purpose of valuation after the meeting of experts. He accepted that it was the starting point for the remuneration of the professional and then subject to negotiation.[25] Mr B gave evidence that, from his experience, in a general business (which he characterised this business as) even highly skilled professionals receive 40% inclusive of superannuation).[26]
[25] Transcript dated 31 March 2023 at p33, line 40 and following.
[26] Transcript dated 31 March 2023 at p 35, lines 10-30.
I accept the evidence of the wife that she is very proud of the service that she and the consulting professionals offer, that she has been able to maintain them in the business over a long period, that they provide a high level of service and that they would not work for a lesser rate. I accept the evidence of Mr B that this business does not have a high level of receipts and that a person taking on the business could engage alternative professionals at a lower rate of remuneration. However, that opinion does not take into account the possible disruption to the business and the income stream brought about by changes to the business. Mr B assumes a seamless transition to professionals working at a lower rate of remuneration without interruption.
The court is left in the somewhat unsatisfactory position of having to consider two approaches to valuation which lead to quite significant differences in value. In the course of submissions, counsel for the wife made a somewhat feint submission that I might reject all the expert evidence and refer the matter to a referee to determine the true value of the business. That would be an expensive and time consuming exercise and possibly of limited benefit to the parties whom I presume wish to have the matter resolved without recourse to further opinion.
The difficulty with the valuation put forward by Mr B is that he is essentially valuing a business that is quite different to that which is conducted by the wife. She has an established business with two longstanding consulting professionals who form part of that business and presumably part of that business’s appeal to clients. His valuation fails to take into account the risks to the revenue if these consultants were to leave because their rate of remuneration changed significantly. Whilst the court could engage in a process of discounting the value ascribed by Mr B by taking into account the risks to the revenue if remuneration of the consultants was assumed at the level of 40%, that would be an entirely speculative exercise and done without recourse to evidence, because there is a lack of evidence before the court on that point. Mr B asserts that essentially there is little risk because the consulting professionals would be easily replaced, however I do not accept that to be the case, having regard to the particular business carried on by the wife and the nature of the longstanding arrangements that have been in place.
The compromise position put by Mr D has been the subject of criticism, however on balance his valuation of the practice at $180,008 appears to be a figure more in line with what is a reasonable estimate of value and takes into account the assumption of the wife receiving an income of 40% of net takings plus superannuation. The figure proposed by Mr B is flawed for the reasons identified in the extract from the textbook quoted in Wilde & Wilde at [130] above. In the joint statement of experts, Mr D made the same point when it was noted:
… [Mr D] disagrees with the add-back of the payments of the [service] payments to arm’s length contracts that have been freely negotiated by the respective parties. It ignores the fact that these arrangements have been in place for five years [2018 – 2022]. There has been no indication that these arrangements are subject to change in the foreseeable future. In my view, [Mr B’s] adjustments create a fiction. The result is a financial profit performance that does not reflect the [business] that is operated by the wife. Rather, it reflects [Mr B’s] view of what [business] must look like and perform in order for him to sell it. [Mr D] is of the view that the valuation should reflect the value to the wife in the manner in which she operates it and will continue to operate in the future.[27].
[27]Joint Statement of Experts dated 28 March 2023 at page 5 of 8.
The other and perhaps most important point is that made by Lonegran in the quoted passage from the textbook (at [130]). In paying $570,000 for the business, the purchaser would be paying away to the vendor the capital value of the expected profit improvements, rather than paying the vendor what the business was worth at the time of the purchase, without the improvements having being made.
I agree with that criticism of Mr B’s report, that he has valued a practice other than that conducted by the wife. I also agree with the compromise position adopted by Mr D in respect of the wife’s remuneration and his reasons for fixing a valuation of the practice at $180,008.
Having regard to these findings the asset pool is as follows:
Asset Pool as Determined by the Court
Asset
Owner
Value
J StreetJ Street, Suburb K
G2 Pty Ltd
$750,000
Motor Vehicle 2 (respondent)
G2 Pty Ltd
$26,600
Motor Vehicle 1 (applicant)
G2 Pty Ltd
$67,250
C Company
G Pty Ltd/C Company
$180,008
M Street Suburb N
Joint
$6,100,000
R Pty Ltd
Husband
Nil
Westpac Account ending …08
Joint
$521
Westpac Account ending …66
Wife
$0
Westpac account ending …84
Wife
$339
W Bank Account ending …96
Husband
$5,314
Z Bank Account ending …52
Husband
$23,675
Consultancy Services
R Pty Ltd
Nil
BB Insurance Payment received 4 March 2022
Joint
$238,513
Total Assets
7,392,220
Liabilities
Owner
Value
Westpac Loan ending …26 on J Street
G Pty Ltd & Associate Holdings Pty Ltd
$209,238
Westpac Loan ending …02 on J Street
G Pty Ltd & Associate Holdings Pty Ltd
$154,005
Motor Vehicle 1 Loan
G Pty Ltd & Associate Holdings Pty Ltd
$17,799
ATO Tax debt for 2022
Applicant/C Company
$69,079
Westpac Loan ending …42 secured over M Street
Joint
$1,013,322
Westpac Investment Loan ending …50
Joint
$1,199,323
Total Liabilities
$2,662,766
Assets minus liabilities
$4,729,454
Superannuation
Owner
Value
Super Fund 1 SMSF – Westpac account …68
Joint
$23,626
Super Fund 2
Husband
$12,798
Superannuation total
$36,424
TOTAL assets – liabilities + superannuation
$4,765,878
CONTRIBUTIONS
The Court is required to make an assessment of the nature and quality of the totality of the parties' contributions throughout the entirety of their relationship, together with their contributions in the period subsequent to their separation. In Dickons & Dickons [2012] FamCAFC 154 at [14] (Bryant CJ, Faulks DCJ, Murphy J); Jabour & Jabour [2019] FamCAFC 78 at [61] (Alstergren CJ, Ryan and Aldridge JJ). See also Dovgan & Dovgan [2021] FamCA 306 at [347] (Harper J), which restates the need to holistically assess contributions following the case of Dickons, and that “all contributions must be weighed collectively and so it is an error to segment or compartmentalise the various contributions and weigh one against the remainder”.
Initial Contributions
The parties entered the relationship with minimal or no assets. The wife was studying dentistry and the husband had already commenced working. There were no special contributions in the form of gifts, inheritances, insurance payouts or windfalls.
Contributions during the course of the Parties’ Relationship
The parties concede that their contributions to the pool of assets for division are equal up to separation.
Post-Separation Contributions
The wife asserts, with evidence produced by way of tendered bank statements, that she has made significant post-separation contributions (from 20 July 2020 to date):
(1)The wife has reduced the mortgages outstanding against the former matrimonial home, being M Street, Suburb N, in the sum of $135,000 and continuing at $6,955 per month after 31 March 2023.
(2)The wife has been the primary carer of the three children and almost the exclusive carer of X, born 2006.
(3)The husband has not honoured his financial obligations in respect of the mortgage payment and school fees.[28]
[28]Wife’s Written Property Submissions filed 6 June 2023 at page 4 of 80.
The husband contends that the post-separation contributions should be assessed at 50%/50%. The husband submits that the funds by which the wife paid down the mortgage to the extent of $135,000 was paid from joint family monies. He submits that the income stream earned by the wife through the business was joint funds to be used for family expenditure and should not be characterised as "the wife's funds” or the "wife's contributions."[29]
[29]Husband’s Written Submissions at [141] – [143].
He also submits the wife has paid the M Street mortgage and that he has paid the J Street mortgage and that the overall picture is one where the parties have made financial contributions from the pooled financial resources.
I do find that the wife has made more significant contributions post-separation in circumstances where she had access to greater financial resources. I also note that she has made those contributions over a reasonably short period post-separation.
I find the parties’ financial and non-financial contributions to be equal.
Section 75(2) Factors
75(2)(a) The Age and Health of each of the Parties
The applicant wife is 48 years of age and the husband 50 years of age. Both parties are in good health and have ongoing earning capacity.[30]
[30]Wife’s Written Property Submissions filed 6 June 2023 at page 4 of 80.
The wife’s superior earning capacity since separation is made plain by the amount of expenditure that she has been able to pay (mortgage, private school fees and holidays and ongoing expenses).
75(2)(b) Income and Earning Capacity
The wife will enjoy higher ongoing benefits whether paid as income or as benefits from the business or alternatively in her role as a professional. I acknowledge that the court cannot double count the income received from the practice and the value of the business as an asset (see Preston & Preston (2022) FLC 94–108 at [8] – [22]). Given the approach the court has adopted in relation to the valuation, the acknowledgement of the superior earning capacity of the wife does not offend that principle. The wife has submitted that she intends to retain the business and hopes that one or a number of the children will join her in that. The husband currently earns about $270,000. He has been engaged on rolling contracts as a consultant for many years and there is no evidence that this will not continue.
Section 75(2)(c) Care and Control of the Children
The father currently has a 5/9 arrangement with Z and I assume that this will continue for some time. Y may spend less time with his father but I do not take that as a given. I assume that the extracurricular costs, including the costs of tutoring, will continue and will be met by both parties. I am confident this will occur when proceedings conclude. Both parties have supported the children when the marriage was intact and I assume that both will continue to do so as they both want the best outcomes for their children particularly from an educational perspective.
The father will have to pay child support which will be an ongoing expense for him.
Section 75(d) Commitments of each of the Parties that are Necessary to enable a Party to Support Himself or Herself and a Child or another Person that the Party has a Duty to Maintain
The father will have to purchase a home suitable to accommodate himself and the children. The wife wishes to retain the family home, however the retention of that home is not necessary to enable the wife to support herself or the children – although I do accept her position that there would be benefits for the children to remain in what has been the family home, particularly as the eldest child X enters the final year of school next year. Whether the home can be retained is a decision to be taken by the wife, however I do not make any apportionment so as to enable the wife to retain that home.
Section 75(2)(g) Standard of Living
Both parties have the means to provide a suitable standard of living and accommodation for them and their children.
Section 75 (2)(ae) Child Support
The father is being assessed for child support. The father will have an obligation to pay child support and it is likely that the level of that child support will equate to the current level of expenditure on utilities on the M Street property which will cease when the child support assessment comes into force.
CONCLUSION
The mother's post-separation contributions have been greater than the father's, however the father will have ongoing obligations and expenses and his future needs are at a somewhat greater level than the wife's because of his more limited earning capacity. The wife has sought an adjustment in her favour of 60%/40% based on her primary care of the three children and her responsibility to feed, house and pay for 50% of the children’s private school fees. She asks the court to assume that the father will be delinquent in his contributions to school and extracurricular expenses. I do not accept that will be the case.
The father points to the mother’s same and superior earning capacity and that the children, Y and Z, will be spending substantial time with him. He seeks an adjustment of 54%/46% in his favour.
In the circumstances, the contributions and s 75(2) factors are evenly balanced. I find that a just and equitable distribution of the assets is 50%/50%.
At the conclusion of the hearing on 9 June 2023, Interim Orders were made dealing with the sale of J Street property and the proceeds of the sale as follows, with Order 1 dealing with the mechanics of selling the property:
THE COURT ORDERS THAT:
2. The sale proceeds of the [J Street] property be divided as follows:
(a)First, to pay all costs, commissions and expenses of the sale including agent’s commissions and conveyancing costs;
(b) Second, to discharge the mortgage over the [J Street] property;
THE COURT ORDERS BY CONSENT THAT:
(c)Third, such sum as agreed by parties to pay out the outstanding fines due to Fines Victoria […] (“Driving Fines”) and failing agreement then as determined by [O Accountants] (“the Accountants”) with such sum to be held in trust by the solicitors for the Wife pending further order of the Court; and
(d)Fourth, such sum as agreed by the parties or failing agreement as advised by the Accountants to cover the anticipated CGT of the sale, any outstanding tax liabilities owing by [G Pty Ltd] and [G2 Pty Ltd] as trustee for the [G Trust], the Accountants costs of preparing outstanding financial and tax returns for the said entities and costs to wind up the entities, such sum to be held in trust by the solicitors for the Wife pending further order of the Court.
THE COURT ORDERS THAT:
(e)Fifth, the balance to be paid to the Husband to be adjusted as part of the overall final settlement.
3. Pending the sale of the [J Street] property:
(a) The Husband have sole use and occupancy;
(b)The Husband be solely liable to meet the mortgage repayments and all outgoings, including but not limited to all instalments pursuant to the rates and taxes, insurance, bills and like apportionable outgoings of whatsoever nature and kind and ensure that all payments are made as and when they fall due;
(c)The Wife be responsible for the payment of instalments with respect to the Driving Fines;
(d)Neither party shall further encumber the [J Street] property without the written consent of the other party; and
(e)The parties hold their respective interests in the [J Street] property on trust pursuant to these orders.
4.If either party fails to comply, there be liberty to apply to the Court in respect to the terms and conditions of sale. The terms and conditions of sale are agreed as machinery provisions pursuant to these orders.
The final orders that I make take into account the interim orders made.
Other Matters
One further area of controversy is the steps to be taken to wind up the company G Pty Ltd. The mother seeks orders that the company's current accountant be appointed to prepare a financial statement and the return for the year ending 30 June 2021. The husband seeks that a new accountant be appointed (as selected by the parties from three options).
The father has objected to the current accountant O Accountants doing this work on the basis that he believes that the principal of the firm is a personal friend of the wife’s and that he has difficulties dealing with her and has had issues with the accounts that have been prepared by that firm (as set out at [192] – [198] of his affidavit filed 13 March 2023). The mother responded to the concerns raised by the husband comprehensively at [56] – [70] of her trial affidavit. The husband has produced no admissible evidence on the quality of the accounts prepared by O Accountants and relies on his opinion. If the husband continues to have issues with the accounts prepared by O Accountants, he can raise those matters with the accountant. The evidence, such as it is, does not justify the parties going to the expense of engaging new accountants. The appointment of a new accountant is likely to add expense.
Pursuant to the June orders, the costs of and associated with winding up the company trust are to be met from the proceeds of the J Street Property. The husband sought an order that the wife personally pay infringement notices with Fines Victoria. These infringement notices were the subject of the orders of 9 June 2023, and it was ordered that the infringement notices (driving fines) be paid from the proceeds of the J Street property in accordance with Order 2(c).
The wife seeks that the payment to the husband pursuant to these orders be deferred for 180 days. Given the time since trial, payment should be deferred for 90 days. This will allow the wife to consider these reasons, and determine whether she might be able to retain the property and pay the husband.
Costs
The husband has sought orders in relation to costs incurred in relation to the application filed on 8 July 2022 seeking orders in relation to international travel during school holidays and to adduce evidence for Mr B.
The applications were contested and the subject of considerable debate during the course of the hearing. I see no reason why the usual position in relation to costs should not apply with each party to bear their own costs. The father has suggested that the mother misled the court in relation to alleged conversations with a school teacher. That allegation was not put to the mother. I did not regard the wife’s opposition to the orders as frivolous. I will make no order as to costs in relation to that application.
The husband also sought costs in relation to a recusal application filed by the wife on 7 November 2022. The wife was wholly unsuccessful in that application however I do not regard that application as being frivolous or baseless as outlined in judgment Andreevich & Andreevich (No 2) [2023] FedCFamC1F 43.
Counsel for the wife submitted that I should not make any order for costs prior to making final orders in the substantive proceeding. I have not heard submissions from the wife in relation to the costs of the second application.
If any costs order was to be made, subject to argument it would be on scale for the costs at a hearing of less than three hours (Item 203 of the Schedule 3, Part 2 of the Rules which provides a scale fee of $266 - $1,247.74). I note that the father appeared by a solicitor and made brief oral submissions. The parties should bear this level of costs when considering whether to pursue or oppose an order for costs in relation to the recusal application.
Otherwise, I will make orders for the parties to make submissions about any orders that they seek in relation to costs.
I certify that the preceding one hundred and seventy-eight (178) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McNab. Associate:
Dated: 6 October 2023
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