Atkins & Atkins
[2007] FamCA 656
•4 June 2007
FAMILY COURT OF AUSTRALIA
| ATKINS & ATKINS | [2007] FamCA 656 |
| FAMILY LAW – Property – Contributions – Application to adduce adversarial expert evidence - Valuation of businesses- Treatment of capital gains tax and asset realisation FAMILY LAW - Costs - Whether the Court should adopt a modified “asset by asset” or global approach to the assessment of contributions - Assessment of initial contributions - Whether the husband’s contributions fall within the category of special contributions as discussed in Maclay and Maclay |
| Family Law Act 1975(Cth) ss 75, 79 Income Tax Assessment Act 1936 Evidence Act 1995 (Cth) Pharmacy Practice Act (2006) (NSW) Sch 2, s 23(1)(8)(b) Pharmacy Practice Bill 2006 Property (Relationships) Act 1984 (NSW) Family Law Rules r 15.49 |
Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410
Bilous v Muldaliar (2006) NSWCA 38
Brown v Green (1999) 25 Fam LR 483
In the Marriage of Clauson (1995) FLC 92-595
Chorn & Hopkins (2004) FLC 93-204
Coghlan (2005) FLC 93-220
C & C [2000] FamCA 1471
D v D [2003] FamCA 473
Daniels v. Walker (2001) WLR 1382
Farmer v Bramley (2000) FLC 93-060
In the Marriage of Ferraro (1993) FLC 92-335
F & F [2004] FamCA 466
Flotilla Nominees Pty Ltd v Western Australian Land Authority & Anor (2003) 129 LGERA 65
F & S [2006] FamCA 669
G v G [2001] FamCA 1453 (Full Court unreported)
Harrington v Lowe (1997) 190 CLR 311
Harris (1991) FLC 92-698
In the marriage ofHarrison (1996) 20 Fam LR 322
Howlett v Neilson (2005) 33 FamLR 402
JEL v DFF (2001) FLC 93-075
Jones v Dunkell (1959) 101 CLR 298
IABH & HRBH [2006] FamCA 379
In the Marriage of Lee Steere and Lee Steere (1985) FLC 91-626
Jones v Dunkel (1959) 101 CLR 298
Kardos v Sarbutt 34 FamLR 550
Maclay and Maclay (1996) FLC 92-667
McMahon and McMahon (1995) FLC 92-606
Minister of State for Home Affairs v Rostron (1914) 18 CLR 634
Beneke & Beneke (1996) FLC 92-698
Norbis v Norbis (1986) 161 CLR 513
Pearce v Pearce (1999) FLC 92-844
P & P [2002] FamCA 1006
Quinn (1979) FLC 90-677
R & R [2006] FamCA 249
Rosati & Rosati (1998) FLC 92-804
GWR & VAR [2006] FamCA 894
Russell v Russell (1999) FLC 92-877
Saric v Steward (2006) NSWCA 260
Spencer v Commonwealth (1907) 5 CLR 418
The State of Queensland v. J.L. Holdings Pty Ltd (1997) 189 CLR 146
Tomasetti & Tomasetti (2000) FLC 93-023
Townsend & Townsend (1995) FLC 92-569
Tuck and Tuck (1981) FLC 91-021
Zyk v Zyk (1995) FLC 92-644
| APPLICANT: | MRS ATKINS |
| RESPONDENT: | MR ATKINS |
| FILE NUMBER: | (P)SYF | 4134 | of | 2004 |
| DATE DELIVERED: | 4 June 2007 |
| PLACE DELIVERED: | Newcastle |
| JUDGMENT OF: | The Hon. Justice Ryan |
| HEARING DATES: | 7, 8, 9, 10 August and 4 October 2006 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Campton |
| SOLICITOR FOR THE APPLICANT: | Gayle Meredith & Associates |
| COUNSEL FOR THE RESPONDENT: | Mr Lethbridge SC |
| SOLICITOR FOR THE RESPONDENT: | Musgrave Peach |
Proposed orders
That within seven days that the husband and wife do all acts and execute all documents necessary to cause the property situate at and known as P (“the [P] property”) to be listed for sale on or before a date three months from the date of these orders upon the following terms and conditions:
(a) That the real estate agent is L Company (“the Agent”);
(b) That the solicitor acting on the sale is Ian Miller of Hunt & Hunt;
(c) That the husband pays any advertising costs required to be paid for advertising the sale on the basis that he is reimbursed from the sale proceeds for any monies advanced pursuant to this order.
(d)That the husband pays a sum no greater than $20,000 to be utilised towards the costs of preparing the property for sale including undertaking repairs and maintenance recommenced by the Agent upon the basis that the husband is reimbursed from the sale proceeds any sum that he has advanced pursuant to this order.
(e)That in the event the P property does not sell at the auction, the husband and wife negotiate with the highest bidder at the auction and that in the event the property has not been sold within a period of 14 days after the auction, the property shall be listed for sale by private treaty at a listed price agreed by the husband and wife and failing agreement at a listed price advised by the Agent as to the property’s market value.
(f)That on completion of the sale of the P property, the parties shall do all things necessary and execute all documents required to cause the proceeds of sale to be distributed in the following manner and priority:
(i)in payment of the Agent’s commission, selling costs and legal fees on the sale;
(ii)in payment of the amount necessary to discharge the mortgages (including the Viridian loan) secured over the P property to the Commonwealth Bank of Australia;
(iii)in repayment to the husband of any sums paid by him pursuant to orders 1(c) and 1(d) herein;
(iv)in payment of 85 per cent of balance to the wife; and
(v)in payment of the balance remaining to the husband.
That within eight weeks of settlement of the sale of the P property the husband shall pay to the wife an amount which gives the wife 49 per cent of 4,116,694 and P’s net sale proceeds from which $209,762 (that is less $262,385 of in specie assets from which $52,623 half of the Viridian loan) is deducted.
In the event the husband fails to comply with order 2 above, interest on the amount outstanding shall accrue in accordance with the provisions of the Family Law Rules.
Simultaneously upon compliance with order 2 above, the wife shall do all things necessary and execute all documents required to transfer her interest, including her shareholding and any interest she may have in any loan account to the husband and to resign all or any position she may hold in, including her positions as a Director in the following entities:
(a) M Pty Ltd; and
(b) V Pty Ltd.
That within 28 days the husband shall do all acts and execute all documents necessary to transfer to the wife the X motor vehicle registration number … free from encumbrance.
That the husband indemnify the wife in relation to:
(a)any loan account in the wife’s name in M Pty Ltd and/or V Pty Ltd;
(b)all or any actions, claims or demands as may be made against the wife by any person, corporation or entity by reason of her having been an office holder or shareholder of M Pty Ltd or V Pty Ltd or by reason of her having guaranteed the payment of any monies or the performance of any duties by her or on behalf of any such company including any liability of or claim against the wife made by or on behalf of the Australian Taxation Office pursuant to the Income Tax Assessment Act 1936 or otherwise.
That pending the sale of the P property, as and when they fall due, the husband shall pay:
(a)all Council rates, water rates, household and contents insurance referable to the P property;
(b)all instalments on the mortgage to the Commonwealth Bank of Australia secured on the P property; and
(c)instalments with respect to the Commonwealth Bank Viridian loan secured by the husband and the wife pursuant to orders dated 31 October 2005;
That in the event the husband fails to comply with order 2 above within seven days of his failure to comply the husband shall do all acts and execute all documents necessary to cause the T business to be sold and that on completion of the sale of the T business the wife shall be paid all such sums as are outstanding pursuant to orders 2 and 3 and the husband shall receive the balance.
That the wife forthwith make available to the husband the contents of the study in the P property, including but not limited to the husband’s books, trophies, photographs and business records together with contents as set out in annexure “A” to his Response filed 5 April 2006.
That the wife forthwith make available to the husband and transfer to him her interest in the following vehicles:
(a) W registration number …;
(b) K1 registration number …;
(c) B motor cycle (unregistered);
(d) P scooter registration number …;
(e) M registration number …;
(f) K2 registration number …;
(g) N registration number …;
(h) Off-road Camper Trailer; and
(i) Chuck wagon and tent.
Unless provided otherwise in these orders, the husband shall transfer to the wife his interest in the contents and personalty at P or in her possession.
Unless provided otherwise in these orders, the wife shall transfer to the husband his interest in all furniture and personalty in his possession.
That the solicitors who issued subpoenas for the production of documents shall, within seven days, uplift documents produced and return them to their owners.
Unless an appeal is lodged, at the expiration of one month the Registry Manager shall return all exhibits to the party in whose case the documents were tendered.
Other than any cost’s application, all outstanding applications are dismissed.
In the event either party seeks to pursue an application for costs, within 28 days they must file and serve an affidavit which quantifies the amount of costs claimed and attaches any documents relied upon in the costs application.
In the event of non-compliance with order 15 above, any outstanding costs application is dismissed.
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: (P)SYF4134 of 2004
| MRS ATKINS |
Applicant
And
| MR ATKINS |
Respondent
REASONS FOR JUDGMENT
These are proceedings for the adjustment of property pursuant to s 79 of the Family Law Act 1975 (Cth) (the “Act”) and for a departure from the administrative assessment of child support. By way of a preliminary issue the Court considered the husband’s application to review a decision by a Registrar refusing him leave to rely upon an adversarial expert and for leave to adduce additional evidence.
The Applications
Mrs Atkins (“the wife”) initiated the proceedings and at trial moved on her Amended Application filed 18 January 2006. At the commencement of the hearing the wife submitted Short Minutes of Order[1], which sets out the orders she seeks. These orders are set out below:-
[1] Exhibit A
1.That the husband and wife do all acts and execute all documents necessary to cause the property situated and known as [P] (“the [P] property”) to be listed for sale on or before 1 February 2007 on the following basis:
1.1that the real estate agent be [L Company] (“the agent”);
1.2that the solicitor acting on the sale be Ian Miller of Hunt & Hunt;
1.3that the [P] property be listed for public auction to take place on or about the second week of March 2007 or such other date as agreed to by the husband and the wife;
1.4that the husband pay any advertising costs required to be paid for the advertising campaign on the basis that the husband be reimbursed the advertising costs that he paid on completion of the sale;
1.5that the husband pay a sum no greater than $20,000 to be utilised towards the cost of preparing the property for sale including undertaking necessary repairs and maintenance on the basis that the husband be reimbursed any sum that he paid on completion of the sale;
1.6that in the event that the [P] property does not sell at the auction, that the husband and wife negotiate with the highest bidder at the auction and that in the event that the property has not been sold within a period of 14 days of the auction, the property be listed for sale by private treaty at a listed price as agreed by the husband and wife and failing agreement at a listed price advised by the agent as the market value of the property;
1.7that on completion of the sale of the [P] property the husband and wife do all acts and execute all documents necessary to cause the proceeds of sale to be paid as follows:
1.7.1in payment of any agent’s costs, auctioneers costs and legal costs referrable to the sale;
1.7.2in discharge of the mortgage secured over the property;
1.7.3in reimbursement to the husband of any sums paid by him pursuant to orders 1.4 and 1.5 herein;
1.8in payment to the wife of a sum equivalent to 62.5 per cent of the balance after the payment of the sums in 1.7.1 – 1.7.3 herein;
1.9 subject to order 3 herein, the balance to the husband.
2.That within 28 days the husband pay to the wife the sum of $3,225,000.
3.That in the event the husband fails to comply with Order 2 herein that such sum as is owed to the wife pursuant to Order 2 and interest accrued thereon be paid to the wife from the sum due to the husband pursuant to Order 1.7.5 herein.
4.That upon compliance by the husband with Order 2 herein that the wife do all acts and execute all documents necessary to:
4.1retire from any positions of office that she may hold with [M] Pty Ltd and/or [V] Pty Ltd;
4.2cause to be transferred to the husband shares owned by the wife in [M] Pty Ltd and/or [V] Pty Ltd.
5.That pending the sale of the [P] property that the husband pay:
5.1all arrears at the date of these Orders with respect to the mortgage to the Commonwealth Bank secured on the [P] property, and any arrears of council and water rates;
5.2all council rates, water rates, household and contents insurance referable to the [P] property as and when they become due and all instalments on the mortgage to the Commonwealth Bank secured on the [P] property as and when they become due;
5.3any interest that becomes due and payable with respect to the Commonwealth Bank Viridian loan secured by the husband and the wife pursuant to Orders dated 31 October 2005.
6.That within 28 days the husband do all acts and execute all documents necessary to cause to be transferred to the wife the [X] motor vehicle registration number […] free from encumbrance.
7.That in the event the husband fails to comply with order 2 herein that within 7 days of his failure to comply that the husband do all acts and execute all documents necessary to cause the [T] business to be sold and that on completion of the sale of the [business] that the wife be paid all such sums as are owed to the wife pursuant to order 2 herein and the interest accrued thereon in accordance with the Family Law Rules and the husband be paid the balance.
8.That the wife be declared solely entitled to the exclusion of the husband to the [MD] motor vehicle registration number […] to be held by the wife on trust for the children of the marriage.
9.That the husband be entitled to all of the furniture and household effects contained in the attached list marked “A” and contained in the [P] property and the wife be declared solely entitled to the balance of the furniture and household effects in the property.
10.That the husband indemnify the wife in relation to:
10.1any loan account in the name of the wife in [M] Pty Ltd and/or [V] Pty Ltd;
10.2all or any actions, claims or demands as may be made against the wife by any person, corporation or entity by reason of her having been an officeholder or shareholder of [M] Pty Ltd and/or [V] Pty Ltd or by reason of her having guaranteed the payment of any monies or the performance of any duties by her or on behalf of any such company including any liability of or claim against the wife made by or on behalf of the Australian Taxation Office pursuant to the Income Tax Assessment Act 1936 or otherwise.
11.That there be a departure in relation to the husband’s child support liability as assessed by the Child Support Agency on 27 October 2005 so that:
11.1the husband’s annual child support liability be increased to the sum of $943 per month for each of the children of the marriage [E] born [in] April 1988 (“[E]”), [J] born [in] April 1990 (“[J]”) and [P] born [in] February 1992 (“[P]”) (“the children”) for the child support period from the date of the Orders to 22 February 2011;
11.2the periodic child support referred to in 9.1.1 be increased on 1 July on each year by the Child Support Inflation Factor as determined from time to time pursuant to the Child Support (Assessment) Act;
11.3the husband pay all private school fees and related school expenses and school uniforms referable to [E] at [Y School], [J] at [R School] and [P] at [N School] until completion of each of their secondary schooling and for any extracurricular activities of the children;
11.4the husband pay the premiums relating to a private health care policy including the children as members of the policy and all medical, dental and orthodontic expenses relating to the children.
12.That the departure application is made on the following grounds:
12.1that in special circumstances of the case the assessment has resulted in an unjust and inequitable determination of the level of child support because of the husband’s income, earning capacity and financial resources;
12.2that in the special circumstances of the case the costs of maintaining the children are significantly affected because the children are being cared for and educated in the manner that was expected by their parents.
13.That the husband pay the wife’s costs of these proceedings.
“A”
1.the [H] billiard table
2.the glazed china comport in the form of a bust of a lady
3.the brass […] spark screen and set of fire irons (belonging to the husband’s mother)
4.a gilt framed wall mirror (belonging to the husband’s mother)
5.a metal kindling basket and woven cane round basket (belonging to the husband’s mother)
6.[A] mantel clock (given to the husband and the wife by the husband’s sister)
7.[SB] “[WD]”
8.pair of […] candleholders (belonging to the husband’s mother)
9.flat woven wall hanging
10.Australian School “[HD]”
11.three [indigenous] small style paintings
12.Sharp mini audio component system
13.quantity of compact discs
14.three painted bird ornaments
15.pine television cabinet with pair of foldaway doors and a drawer
16.Samsung colour television receiver
17.Panasonic video cassette recorder
18.pine finish sectional wall unit in five sections
19.Sharp colour television receiver
20.NEC video cassette recorder
21.a quantity of books, general literature and reference work (50%)
22.small quantity of ornaments (50%)
23.brass desk lamp in the study
24.Stockberger barometer in the study
25.[HG] “[TB]”
26.white painted split cane armchair (belonging to the husband’s mother)
27.quantity of books in the sitting room (really the library) (50%)
28.pair of similar lamp tables in the library
29.pair of two-seater settees in pastel check wool in the library
30.pine and white painted pedestal bedside chest (belonging to the husband’s mother
31.in the garage, a […] air compressor
32.Black & Decker sander
33.quantity of tools in the garage
34.porter’s trolley
35.wooden folding steps
36.Hallmark Integra hybrid bicycle in the gym room
37.Sharp colour television receiver in the gym room
38.a Laminex table
39.three Manila cane bar chairs in studio storage room (belonging to the husband’s mother)
40.Manila cane settee and other pieces (belonging to the husband’s mother)
41.two light standard lamps in studio storage
42.adjustable television stand
43.a Pfaff sewing machine (belonging to the husband’s mother)
44.a Manila cane open shelf unit (belonging to the husband’s mother)
45.a quantity of plastic storage bins
46.camping equipment
47.Orion colour television
48.an Nashua Tec photocopier
49.pair of blue painted steel folding painter’s ladders
50.aluminium extension ladder
51.double bench grinder
52.teak sunlounge (belonging to the husband’s mother)
53.teak slated outdoor dining suite (gift to the husband’s from his sister)
54.the items in [Mr A’s] valuation, attached to his affidavit sworn
10 October 2005, expressed as belonging to the husband except for the cross-trainer.
Summarised, the key features of the wife’s application are that she seeks:-
(a)After the parties’ eldest child has completed her Higher School Certificate, the sale of [P property] from which she receives 62.5 per cent of the net balance.
(b)That the husband pays her $3,225,000.00.
(c)That she transfers to the husband her interests in [M] Pty Ltd and/or [V] Pty Ltd and that he indemnifies her in relation to any loan account or claims arising by virtue of her involvement with these companies.
(d)An increase in periodic child support from the assessed rate of $341.40 to $943 per month for each of the children in her care and payment of their private school fees, medical insurance and associated school costs.
Mr Atkins (“the husband”) moved on his Response filed 5 April 2006. At the commencement of the hearing his counsel submitted a Minute of Order[2], which sets out the orders he seeks. These orders are set out below:-
[2] Exhibit B
1.Within seven days of the date of this order the husband and wife to do all things necessary and execute all documents necessary to cause the property situate and known as [P property] in the State of New South Wales (“the former matrimonial home”) to be sold in accordance with the terms set out in Annexure “B” and on completion of the sale the parties to do all things necessary and execute all documents necessary to cause the proceeds of sale to be distributed in the following manner and priority:
(i)In payment of the agent’s commission, auction costs and legal fees if any on the sale;
(ii)In payment of the amount necessary to discharge the mortgages secured over the former matrimonial home to the Commonwealth Bank of Australia.
(iii)In payment of 85% of the then balance to the wife subject to her compliance with these orders.
(iv)In payment of the then balance to the husband.
1.1Within seven days of the date of this Order the husband and wife to do all things necessary and sign all documents necessary to give effect to the advice of [G] Chartered Accountants as to the proper manner to discharge the loan to the husband and wife from [M] Pty Limited and to pay in equal shares all monies necessary including all or any tax liability imposed by the Australian Taxation office as a consequence of the loan and to meet the costs rendered by [G] Chartered Accountants in provision of the advice in equal shares.
1.2Immediately upon effect being given to Order 1.1, the wife shall do all things necessary and execute all documents necessary to transfer her interest including her shareholding and any interest she may have in any loan account to the husband and to resign all or any position she may hold in including her positions as a Director in the following entities:
(i) [M] Pty Limited; and
(ii) [V] Pty Limited.
1.3The wife to immediately make available to the husband the contents of the study in the former matrimonial home including but not limited to the husband’s books, trophies, photographs and business records together with contents set out in Annexure A together with the following vehicles:
(i) [W] registered number […];
(ii) [K1] registered number […];
(iii) [V motor cycle], unregistered;
(iv)[P] Scooter registered number […];
(v)M registered number […];
(vi) [K2] registered number […];
(vii) [N] registered number […];
(viii) Off-road Camper Trailer;
(ix) Chuck Wagon and Tent.
1.4Within seven (7) days of the date of these Orders, the husband to do all things necessary and sign all documents necessary to transfer to the wife the [X] motor vehicle registered number […] on the proviso that the wife discharges all lease payments outstanding on the said vehicle.
2.Subject to the wife’s compliance with these Orders and making all payments due pursuant to Order 1.1 the husband shall indemnify the wife and hold the wife indemnified in relation to any claim, suit or damage made against the wife by any person or entity in relation to her interest in or as a consequence of her employment with [M] Pty Limited and/or [V] Pty Limited.
3.That there be no order by way of departure to the husband’s child support liability as assessed by the Child Support Agency on 27 October 2005.
4.The wife pay the husband’s costs of and incidental to this application.
In summary, the husband proposes:-
(a)A sale of the P property from which the wife receives 85 per cent of the net proceeds.
(b)The parties discharge the loan to them advanced by M Pty Ltd and pay in equal shares income tax liability which accrues.
(c)Upon compliance with the above, that the wife transfers her interests and resigns any positions she holds in M Pty Ltd and V Pty Ltd.
(d)That the husband indemnifies the wife in relation to any future claim upon her arising out of her involvement in M Pty Ltd and/or V Pty Ltd.
(e)Transfer to him of particular motor vehicles and personalty.
(f)The wife’s child support application is dismissed.
Short History
The husband was born in April 1951 and is now aged 56 years.
The wife was born in September 1959 and is now aged 47 years.
On 30 July 1983 the parties married. Neither party had previously married.
The parties’ eldest child, E was born in April 1988.
In April 1990 the parties’ second child, J was born.
In February 1992 the parties’ son, P was born.
In November 2003 the husband vacated the family home.
In July 2004 the parties finally separated.
On 25 December 2005 the parties’ divorce became final. Neither party has re-partnered.
The Issues
The principal issues raised in these proceedings are:
·Whether the Court should allow the husband to adduce expert real estate evidence from an adversarial expert?
·Whether the Court should accept the single expert’s opinion of T businesses’ value? Central to this issue is an issue concerning possible future development of the T business area and its effect, if any, upon the business.
·Whether the valuation of the T business is so hazardous the Court should order its sale?
·Although the parties had agreed upon the valuation of the NT and ST businesses, should the Court apply a notional rental rate as determined by a different single expert and thereby increase these businesses’ value?
·The valuation of the parties’ shareholding in M Pty Ltd. Central to this issue is the valuation of two pieces of real estate owned by M Pty Ltd from which the NT and ST businesses trade.
·Whether $57,000 loaned by M Pty Ltd to V Pty Ltd should be included as an asset of V Pty Ltd?
·Whether the Court should order the husband to discharge a loan advanced by M Pty Ltd and the parties pay in equal shares the income tax liability which accrues?
·Whether the Court should include as a liability tax payable on the parties M shareholder’s loan if repayment is made by way of a fully franked dividend?
·The extent to which it is appropriate to include Capital Gains Tax, commission and other realisation costs as joint liabilities.
·Other relatively minor issues concerning the asset pool.
·Whether the husband made full and frank disclosure. If he did not, the consequences of his failure to do so.
·The value and significance of the husband’s initial contributions.
·Whether the husband’s contributions fall within the category of “special contributions” as discussed in Maclay and Maclay (1996) FLC 92-667 and JEL v DDF (2001) FLC 93-075.
·Whether the Court should adopt a modified “asset by asset” or global approach to the assessment of contributions.
·The extent of the wife’s work in the businesses.
·What s 75(2) adjustment, if any, should be made in the wife’s favour?
·Whether the husband should be ordered to increase his periodic payment of child support?
Chronology
Both parties were born in Sydney on the dates mentioned.
In 1976 the husband graduated from the University in a profession. Following graduation he worked as an employed businesses manager in Sydney.
In February 1979 the husband purchased the business at NT for $120,000 (the NT business). The husband borrowed the entire purchase price. He borrowed $50,000 from his father, and the remaining $70,000 was advanced in loans from HBA, the Bank of New South Wales, CBC, friends and vendor finance. The purchase price comprised $35,000 plant and fittings, $35,000 stock and $50,000 goodwill. Following settlement the husband worked in the NT business in most weeks seven days a week from 8.30 am to 6.30 pm. Subsequent to his purchase of NT business the husband refitted the premises.
In 1982 the husband entered into a partnership with Mr B which acquired a business at S for $150,000. The husband borrowed $50,000 from the Bank of New South Wales for this venture. The husband continued to work the hours referred to in the preceding paragraph. The only variable is that he divided his time between the two businesses. A retail business must have a manager present when it is open. Because the husband was dividing his time between S and NT, he employed two managers to job share at NT business. They were Ms K and Ms I. The business wage records[3] corroborate the husband’s evidence that the NT business was operating on the basis one manager was present during opening hours. This finding is significant to the businesses’ value at the commencement of cohabitation.
[3] Exhibit P
On 19 May 1982 the Deputy Commissioner of Taxation initiated proceedings against the husband claiming $16,085.38[4]. This comprised $15,893.78 tax due for the year ended 30 June 1981 plus late fees. The wife suggests that this debt remained outstanding as at the commencement of cohabitation. The husband denies any arrears but was also unable to recall the Deputy Commissioner of Taxation commencing proceedings against him. The husband’s accountant, Mr N prepared a personal balance sheet for the husband as at 30 June 1983. Mr N makes no mention of taxation arrears and it seems likely that during the intervening period the husband had paid his taxation sought in the statement of claim. However, on 12 July 1984 the Australian Taxation Office (“ATO”) wrote to the husband concerning his taxation assessment for the year ending 30 June 1983[5]. The purpose of this letter is to explore with the husband deductions claimed for loan expenses and the extent to which these expenses related to income production. It follows that at this stage the husband’s 1982/1983 taxation liability had not been quantified by the ATO. As it was not yet quantified it is unlikely it had been paid. There is no evidence from the husband as to when and how this issue with the ATO resolved. On balance I accept the wife’s contention that as at the commencement of cohabitation it is likely the husband had outstanding taxation, albeit for the 1982/1983 tax year rather than the 1981/1982 taxation year. The husband’s 1982/1983 ATO Notice of Assessment is not before the Court. In the absence of any dramatic changes in his financial circumstances it is reasonable to infer his taxation liability was in the vicinity of the immediately preceding year’s assessment. Thus I am satisfied that as the commencement of cohabitation the husband had outstanding taxation of approximately $16,000. In making this finding I have not overlooked that Mr N makes no mention of this liability in the husband’s personal balance sheet. This omission probably arose because the ATO was still in the process of assessing his tax liability.
[4] Exhibit M
[5] Exhibit N
The parties married on 30 July 1983. Upon their marriage they moved into a rented two bedroom unit. At the time of their marriage the husband worked as a self employed niche retailer and the wife was employed in travel.
On 19 July 2006 the husband asked Mr F of D Company, appointed single expert by the parties to value their various business interests, to express an opinion as to the value of the NT business as at 30 June 1983. It was proposed that the valuation proceed on the basis of the business’ profit and loss account[6]. By letter dated 27 July 2006 Mr F valued the husband’s interest in the NT business as approximately $107,000. The husband responded by advising Mr F that of $34,734 attributed to wages, this included $20,000 paid to the husband. Armed with this information, Mr F revised his opinion and by letter dated 3 August 2006 said the husband’s interest in the NT business as at 30 June 1983 was worth in the vicinity of $213,000. Presented with relevant wage books, it became clear that salary and wages paid to others totalled $34,734. Cross-examined on this issue Mr F explained that the husband’s misrepresentation did not influence his revised opinion. The reason for this lies with his valuation methodology. A critical issue for Mr F is the number of retailers working at any one time. With his first valuation Mr F assumed two retailers when in fact the business operated with one effective manager. In the second valuation Mr F used a total wages bill of $42,000. His point is that provided the wages bill, excluding proprietors funds was in the vicinity of $42,000 his second valuation remained accurate. During closing addresses the wife conceded the husband’s contention that his interest in the NT business is as contained in Mr F’s revised opinion. Although the wife conceded the issue her counsel highlights that in his dealing with this issue the husband misled Mr F and in doing so attempted to mislead the Court. With this submission I agree.
[6] Annexure E, [Mr F’s] affidavit filed 7 August 2006.
Thus at the commencement of cohabitation, the husband had the following assets:
(i) Interest in the NT business - $213,000.00
(ii) Cash on hand - $59.00
(iii) Share in the husband’s and Mr B’s S Partnership - $19,897.27
(iv) Tax savings account - $3,486.20
(v) Shares C Pty Ltd - $1,000.00
(vi) Motor vehicle – value not known.
(vii) Quantity of household contents – value not known.
His liabilities comprised:-
(i) Westpac current account - $24,728.20
(ii) Loan account 1 - $11,158.42
(iii) S business loan account - $42,724.36
(iv) Australian Taxation Office - $16,000
(v) Dr R - $1,250.14.
The wife alleges the husband also owed his father $50,000 being money he advanced when the husband purchased NT business. The husband denies this and says reference to payments to his father (KA) in the parties’ 1990/91 and 1991/92 household budgets[7] are unrelated to the loan his father advanced for the NT business 11 years earlier. The husband says these entries relate to continuing advances, in the nature of periodic but regular gifts, made to his father. In both years the husband paid his father $4,980. Assuming this pattern of repayment from 1979 the loan would have been fully repaid before 1990/91. Reading these household budgets in their entirety all outgoings appear to relate to personal expenditure. If the payments to the father related to capital and interest for a business loan, their inclusion in these documents is inconsistent with the remainder of the entries. I am persuaded these documents corroborate the husband’s evidence that he was contributing towards his father’s support and do not assist in determining whether at the commencement of cohabitation the husband’s debt to his father was outstanding. Two factors reinforce the probability that it is likely the loan was fully repaid. Firstly, the husband’s track record of retiring debt as quickly as possible, a pattern apparent from subsequent mortgage advances. Secondly, no mention is made of the loan in Mr N’s balance sheet prepared 30 June 1983. On this basis I accept the husband’s evidence that he had fully repaid the NT business loans within four years of its purchase and thus by the time the parties commenced cohabitation.
[7] Exhibit G
At the commencement of cohabitation the wife owned a Honda Civic motor vehicle, a quantity of furniture and household effects and a small amount of cash savings. The wife had no liabilities. The wife commenced employment with her employer in 1979 and had a modest superannuation interest. Upon the wife’s resignation from her employer on 23 September 1987 the wife’s superannuation entitlement was $5,732.18[8]. Exhibit ‘H’ suggests that her superannuation comprised employee contributions invested at 2.75 per cent compound interest. Between the commencement of cohabitation and her resignation from her employer, the wife worked with her employer full time. This suggests that at the commencement of cohabitation her superannuation interest was worth approximately $3,000.
[8] Exhibit H
Within a few months of the parties’ marriage, the wife stopped working as a travelling agent and took a position as an agent at her employer’s head office. She did this in order to spend more time with the husband. While working with her employer the wife’s salary was used to pay the parties rental and on their day to day living expenses.
In early 1984, the husband sold his interest in the S business to Mr B for $22,000. In addition, Mr B accepted responsibility for all of S Business’ liabilities including two Westpac loans. By letter dated 8 March 1984 Westpac advised the husband he had no further liability to it for the two loans which then had $69,921.00 outstanding. In his affidavit, the husband suggests that
Mr B also assumed liability for the husband’s personal loan raised when he purchased his share of the business. During cross examination, the husband conceded he was in error. Rounded out, the effect of the husband’s involvement in S business is that he lost approximately $23,000. The wife at no stage worked in the S businessOn 7 September 1984 the parties purchased SV property as joint tenants for which they paid $115,500 down from its original $130,000 asking price. As the property had been listed for sale at $130,000 for some time I infer it was purchased at a fair market price. The parties borrowed $60,000 from Westpac Bank, $25,000 from the CBA, $15,000 from the wife’s father and an identical amount from the husband’s father. The wife sold her Honda Civic and use its sale proceeds to pay stamp duty on the purchase. The wife repaid the Westpac loan from her own salary. The remaining loans were paid from income produced through NT business.
In about 1985 the parties established a video rental facility at NT business. This continued for a couple of years before they agreed that although initially successful it was no longer sufficiently profitable to make it worthwhile continuing.
On 13 May 1987 the parties incorporated V Pty Ltd. The parties are its two directors and each owns one of its two issued shares. This has been the situation since incorporation. V is trustee for the husband’s self managed superannuation fund and operates as a service entity to the businesses. V Pty Ltd employs and remunerates all employees who work in the businesses for which the businesses pay V Pty Ltd a management fee. From the time of V’s incorporation the wife has received an income as an employee of the parties’ businesses. This is irrespective of the amount of time she spent working for the businesses and was in effect an income splitting device so as to minimise the taxation payable on the businesses’ profits.
On 23 September 1987 the wife resigned from her employment. At the time she left her work the wife was earning about $33,000 per annum gross. The parties agreed she should stop work so as to enhance her chances of falling pregnant. Until the parties separated, other than in the family businesses, the wife did not engage in paid employment.
Almost immediately the parties discovered the wife had fallen pregnant. Simultaneously they decided to demolish and rebuild their SV home. Both looked for suitable project homes, and ultimately agreed to contract a construction company to build a home the husband located. The parties jointly entered a contract with the construction company for completion of their home at a purchase price of $122,158. They jointly borrowed the entire purchase price from Westpac Bank who secured its advance by a mortgage over the SV property. During construction the wife visited the site daily to ensure that the work proceeded in accordance with the parties’ expectations. The wife had primary responsibility for making decisions concerning paint colours, carpets, appliances and the like. Her decisions were made in consultation with the husband.
E was born in April 1988.
By late 1988 the parties’ new home at SV was complete and they moved in. The husband retained a landscape architect to design the outdoor areas, gardens and pool.
On 30 June 1989 the parties purchased a property in W for $117,500. This property was purchased in the husband’s sole name. The purchase was primarily funded by a loan from Westpac Bank, which loan was secured against the W property. The shortfall was drawn from funds from the business. The parties jointly cleaned and painted the interior of the property. It was thereafter leased continuously until disposed of. Structured this way, it is likely the W property provided an opportunity for negatively gearing and thus reduced the husband’s personal taxation liability. Together, the parties liaised with a builder and explored possibilities for developing the property. Once Council approved their development application for the erection of three villas, the husband undertook a cost benefit analysis of proceeding. The wife agreed with his opinion that the financial burden of proceeding with the development outweighed probable gains. Thus the husband sold W property in July 1997 for $140,000. The property returned a modest capital gain with its $100,000 net sale proceeds were paid into the P mortgage. Although in his affidavit the husband claimed the W property transaction was entirely conducted by him, in cross-examination he conceded the wife’s equal contribution.
On 8 June 1989 the parties incorporated M Pty Ltd. Since incorporation the parties have each held one of its two issued shares. The parties are and always have been its only directors. M Pty Ltd is an investment company which owns and manages the property from which the NT and ST businesses operate. M collects rent and receives a management fee from these and the T business.
In April 1990 J was born.
During 1991 the parties finalised the Westpac loan secured against SV property. Thus a 20 year loan was repaid in seven years
In March 1993 the husband’s accountant, Mr N informed him that a business at ST was for sale. Without involving a broker or agent, the parties agreed to purchase the ST business for $275,000. The purchase was funded by way of a $260,000 loan from SF Company secured by a mortgage over the SV home. The balance of the purchase price and expenses associated with the transaction came from joint savings. Subsequently the SF Company loan was refinanced with a Commonwealth Bank loan secured against the parties homes at SV and P. Since its acquisition the ST business has been twice refitted. As with all of their business acquisitions, so as to comply with company regulations all businesses have been acquired in the husband’s sole name.
In April 1993 the husband approached Mr B and offered to purchase NT business freehold at NT. The husband reached agreement with Mr B and using M the parties purchased the property for $999,950. In order to fund the purchase, including legal fees, stamp duty and refurbishment the parties jointly borrowed $1,100,000 from the National Australia Bank. This transaction was completed without involving an agent or broker. The National Australia Bank advance was subsequently refinanced by a bill facility from the Commonwealth Bank.
In November 1995, in the husband’s name, the parties purchased a business at T (the T business) for a total purchase price of $1,000,000. The parties borrowed the entire purchase price from the Commonwealth Bank on a seven year loan secured over the businesses and SV property. This transaction was completed without involving an agent or broker. Subsequently T business has undergone a complete renovation including a new internal fit-out.
In May 1996, as joint tenants, the parties purchased the ST business from Mr B for $300,000 which I infer was its market value. The parties jointly borrowed the entire purchase price which advance was secured against the property. It is from these premises that the ST business trades.
In 1996 the parties sold the SV home for $600,000. The parties applied the entire sale proceeds to the purchase of land at P was acquired by the parties as joint tenants. Following the SV property sale, the parties moved into rented premises at BP where they remained until their new home was completed in 1998.
The parties engaged a builder and draftsman to design and build a home on the P property. The completed home has six bedrooms, seven bathrooms, numerous living and entertainment areas as well as a six car garage. The parties jointly borrowed $650,000 from Westpac Bank to fund this building work. As part of a general overhaul of the parties’ and companies’ financial dealings, the husband renegotiated the terms and conditions of this advance with the Commonwealth Bank which resulted in lower fees and interest rates.
As I have already found when the W property sold in July 1997, the parties applied its net sale proceeds in partial reduction of the Commonwealth Bank loan.
On 6 May 1998 the husband’s mother passed away.
On 12 June 1998 the parties transferred ST business to M Pty Ltd for $320,000. The transfer was subject to the mortgage previously secured upon the SV property.
In July 1998, as joint tenants, the parties purchased a small parcel of land adjacent to the P property for which they paid $12,000. It appears the funds used came from joint matrimonial savings. The purchase was necessitated to ensure that the P property complied with the local council’s building/land ratio. Although a relatively insignificant transaction it took the husband considerable effort to persuade their neighbours to allow the parties to purchase the land.
On 25 August 1998 a grant of probate issued in relation to the husband’s late mother’s estate. From his mother’s estate, the husband inherited $256,487.62. The wife challenged the husband’s evidence that he paid $200,000 into the National Australia Bank mortgage secured on P. I accept that the National Australia Bank statement[9] discloses that on 13 July 1999 $200,000 was paid into the home loan. The statement corroborates the husband’s evidence on this point. The balance of the inheritance was used in the cost of building and improvements to the P home.
[9] Annexure G Husband’s Affidavit filed 1 August 2006
On 30 June 1999, in the husband’s name, the parties purchased a business at SV for $1,950,000 plus stock. Using M, the parties jointly borrowed $1,950,000 from the Commonwealth Bank and $310,000 from the National Australia Bank. These advances were secured against the T and SV businesses. Using V the parties entered into a deed of guarantee, the effect of which is that the parties were jointly liable for the entire amount advanced. This business was acquired without the involvement of an agent or a broker.
In June 1999 the parties substantially refurbished, extended and renovated the NT business. The fitting and fixtures were leased back to the Commonwealth Bank.
The husband vacated the P home in November 2003. The wife and children remained in residence.
In December 2003 the parties sold the SV business for a total selling price of $2,253,692. On settlement of its sale the proceeds were applied as to $1,533,314.93 to the Commonwealth Bank business loan, $187,856.70 to the National Australia Bank overdraft facility, $198,815 to creditors and $171,793.33 towards other borrowings and legal costs. $160,000 remained which funds the husband placed in a term deposit as security for the businesses’ overdraft facility.
In February 2004 the wife obtained employment as an administrative assistant in the finance department at G College. The wife works school hours four days a week, 42 weeks a year.
From the date of separation until mid January 2006 the husband paid the wife $650 per week. Until late 2005, he paid mortgage repayments, council and water rates, electricity, gas and insurance in respect to P. Since then the husband has paid council and water rates and insurance. Since separation he has paid $396 per week in relation to the lease for a X motor vehicle the wife drives and approximately $50 per week for its registration and third party insurance.
Since separation the husband has continued to pay the children’s private school fees, Y school for E, R school for J and N school for P.
The husband drew upon his M loan account in order to make all post separation payments to and on the wife’s behalf and for the children’s support.
On 12 July 2005 J commenced residing with the husband.
On 11 October 2005 J returned to reside with the wife.
On 27 October 2005, on the wife’s application, the Child Support Agency assessed the husband as liable to pay $1,479.42 per month. The wife applied for an administrative assessment of child support as an essential precondition for an anticipated departure application.
On 31 October 2005 the parties agreed that they would jointly borrow $120,000 which would be secured against the P home. From the advance and up to $105,000 the wife would pay her legal costs. The balance remaining was to be utilised to pay interest on the loan. The entire advance is an agreed pre-payment of interim costs to be taken into account in these proceedings.
In mid January 2006, the husband reduced his periodic payments, from $650 per week to $340.50 per week. Following an exchange of letters initiated by the wife’s solicitors within a few weeks the husband resumed paying periodic child support at the higher rate.
J returned to live with the husband in April 2006 and remains in his full time care.
On 25 April 2006 a further child support assessment issued requiring the husband to pay the wife $1,193.08 per month.
This hearing concluded on 10 August 2006 at which time I reserved my decision. In late September 2006 the wife sought to re-list the matter so as to re-open her case. By arrangement with my Associate the proceedings were listed on 4 October 2006. In anticipation of this hearing, my Associate wrote to the parties and informed them I sought additional submissions. In summary I asked to be advised of the source of evidence for the husband’s assertion M Pty Ltd incurred $165,387 taxation liability for the 2005 tax year. Also how this figure correlated to the provision for taxation made in Mr F’s M valuation. In relation to the last point the husband withdrew his claim for inclusion of $165,387 as a liability.
The husband unsuccessfully submitted that the Court should not allow the wife to re-open her case for the purpose of informing the Court that the Pharmacy Practice Bill 2006 had commenced operation. The husband submitted that in the event the wife was granted leave to re-open he sought leave to adduce further evidence concerning the end of third quarter 2006 financial reports. It was submitted these figures crystallised the impact of changes which occurred prior to the closure of evidence. The extent of the alleged variance was not made clear. As the available evidence was only a few weeks old, there seemed no proper basis to re-open this aspect of the evidence. It does not seem to me that one quarter's figures could materially influence either the business valuation issues or s 75(2)(b) future income issues. The husband advised that if the wife’s application for leave to re-open failed he abandoned his request to re-open. This suggests that even if permitted to re-open his case the evidence the husband proposed to adduce was unlikely to materially influence the outcome of the proceedings.
To the extent required I granted the wife leave to re-open her case so as to advise the Court that the […] Act 2006 (NSW) passed Parliament on 6 September 2006 and received assent on 7 September 2006. The relevant aspect of this legislation is that Sch 2, s 23(1)(8)(b) prohibits the establishment of businesses “within or partly within, or adjacent or connected to, a supermarket and that the public can access from within the premises of the supermarket.” The significance of this is its impact on the husband’s contention that a supermarket chain may establish a business in its T store which would arguably adversely affect turnover at the parties T store. Also his submission that his future earnings may reduce because of the risk of increased competition from businesses located in supermarkets such as Z. I accept the wife’s submission that the effect of this provision is that there is now no likelihood that in the foreseeable future Z at T will establish a business outlet and that there is little likelihood that in the foreseeable future the husband’s income will be adversely affected by competition from supermarket run businesses.
Governing Law
The approach to the determination of an application under s 79 is well established by authority. In the Marriage of Lee Steere and Lee Steere (1985) FLC 91-626; In the Marriage of Ferraro (1993) FLC 92-335; In the Marriage of Clauson (1995) FLC 92-595. The process ordinarily involves a four part procedure. Firstly, identifying the property, liabilities and financial resources of the parties at the time of the hearing. Secondly, evaluating the contributions made by the parties as defined in s 79(4)(a) to (c) and the effect of any proposed order upon the earning capacity of either party. I must then evaluate the matters contained in s 75(2) insofar as they are relevant, any other order made under the Act affecting a party or child and any child support under the Child Support (Assessment) Act 1989 that a party to the marriage is to provide, or might be liable to provide in the future, for a child to the marriage.
In determining what order the court should make under s 79, the Court must be satisfied in all the circumstances that it is just and equitable to do so [s 79(2)]. It is the justice and equity of the actual orders that the Court must consider. Russell v Russell (1999) FLC 92-877.
In Coghlan (2005) FLC 93-220 the Full Court discusses the relevant provisions of Pt VIIB including the manner in which a court should formulate the asset pool. Specifically, whether the Court should effectively adopt a two pools approach, one for s 4(1) property and a separate pool for superannuation. The majority held:
“We consider that the preferred approach to the determination of property settlement cases must be to prepare in addition to the list of items of property (which would clearly fall within the definition of that term in s 4(1)), a separate list containing any superannuation interest or interests (valued according to the Regulations if a splitting order is sought in any application before the Court, or if no such order is sought, valued either according to the Regulations or otherwise).”
The husband’s application to adduce adversarial expert evidence
At the commencement of the hearing, the husband pressed an application to review a decision by a Registrar refusing him leave to adduce evidence from an adversarial expert, Mr D. The wife opposed his application. She made no mention that she intended to challenge the evidence of a different single expert.
Previously, the parties jointly retained Mr E as the single expert valuer to value the P property; NT business and ST business. On 12 January 2006 Mr E swore an affidavit attaching his valuation reports. The parties accept his opinion concerning P. As already indicated, the husband believes Mr E’s opinions concerning NT and ST businesses are inflated. The husband made enquiries from the Commonwealth Bank and was referred to Mr D a valuer who, inter alia, conducts real estate valuations for the Commonwealth Bank. Armed with Mr E’s report, Mr D conducted valuations as requested and on 16 February 2006 swore two affidavits, annexing to each a valuation of one of the two properties.
Pursuant to Rule 15.49 of the Family Law Rules, on 16 February 2006 the husband filed an application seeking: “The Court grant leave to the husband to tender a report and/or adduce evidence from [Mr D] of [U Company] in respect of the valuation of the real estate known as [NT] and [ST]”. The husband’s application came before a Registrar on 28 February 2006 where his application to adduce evidence from Mr D failed. After the husband advised his intention to review the Registrar’s decision, leave was granted to both parties to obtain the earliest possible hearing date for his Review application. The husband filed his Review application on 1 March 2006 and the matter was listed for hearing on 19 May 2006 when it was not reached. That day the Court directed: “That the Review Application be adjourned and allocated two hours before the trial judge when the identity of the trial judge is known.” Having regard to this order, it is somewhat surprising, therefore, that the Review was not listed in advance of the hearing. On 4 July 2006 the matter was listed for hearing for five days commencing 7 August 2006 with the Review application to be determined as a preliminary issue. The risk inherent in this approach is that the late introduction of expert evidence may have denied the wife procedural fairness and thus jeopardised the hearing.
The husband challenged the Registrar’s decision upon the following three bases.
1.That the provisions of the Rules prohibiting a party from calling evidence from an expert that is otherwise admissible at law are ultra vires the rule making power.
2.If any part of the relevant Rules are to survive, they must be read down so as to operate conformably with the Evidence Act 1995 (Cth) and not operate to exclude evidence which is otherwise admissible at law.
3.In any event, this is an appropriate case for granting leave.
The wife opposed the husband being given leave to adduce evidence from Mr D. The wife contended that consistent with Harrington v Lowe (1997) 190 CLR 311 the single expert rule is no more than a “procedural precondition” to the admission of further expert evidence and as such is within power. Concerning the husband’s leave application she highlighted that Rule 15.42 requires that the husband satisfy the Court:
a)There exists a substantial body of opinion contrary to the opinion of [Mr E] and that such opinion is or may be necessary to determine the issue of valuation;
b)That another expert knows of matters, not known to [Mr E] that may be necessary to determine the issue of valuation;
c)That there is a special reason for adducing expert evidence from another expert witness.
The wife highlighted that the husband had failed to comply with Rule 16.65 and Rule 15.66 in that he had not put to Mr E those matters on which he wished Mr D to give evidence. For example, other comparable sales, the appropriate capitalisation rate and methodology. The wife made the telling point that Mr E’s answers may well have addressed the husband’s concerns. The wife referred the Court to Daniels v Walker (2001) WLR 1382 in support of the proposition that before calling additional expert evidence, the party seeking to adduce adversarial expert evidence should first seek a response from the single expert on the issue which concerns them. As a general approach, I agree. The difficulty in this case is that the Review application was listed at the same time as the parties were ready to proceed with a five day hearing and prima facie the husband had a genuine issue which he had for months sought permission to explore. In these circumstances adopting a Daniels v Walker approach would have been unreasonable. Was it not for the proximity of the hearing, however, I may well have directed the husband to comply with Rule 16.65 and Rule 15.66 and only when he had done so, allowed him to pursue his Review application.
The parties agreed the Court should first determine the husband’s Review application and only if that application failed was it necessary to determine whether the single expert rule is ultra vires. On the face of it, the difference in the two valuers’ opinions was $650,000. Having regard to the value of assets asserted by Mr E this is a significant sum. It was submitted that the comparative magnitude of the differential brought this case within the special category of case referred to in the Rules. On its face, Mr E’s report appeared credible and there was nothing suggestive of bias or a lack of professional objectivity being brought to bear upon the task at hand. The husband’s Counsel submitted that in this instance, the Court had a genuine disagreement between two appropriately qualified experts on a matter of real consequence. Counsel emphasised that the husband had moved quickly to bring the issue before the Court and that the wife had been served with Mr D’s affidavits in February 2006. Thus there is no issue of delay.
The wife submitted that allowing Mr D’s evidence made the valuation process hazardous. Counsel submitted disputes concerning capitalisation rates and comparable sales are commonplace and could not amount to a special reason sufficient to allow departure from the primary Rule.
In The State of Queensland v J.L. Holdings Pty Ltd (1997) 189 CLR 146 the High Court held (per Dawson, Gaudron and McHugh JJ) at p 155: “Justice is the paramount consideration in determining an application such as the present one .. case management involving as is does the efficacy of the procedures of the Court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicant out from raising an arguable defence, thus precluding determination of an issue between the parties.” I agree with the husband’s submission that the Court is obliged to ensure that its ruling ensures justice to each of the parties. Although the single expert rule has many advantages for trial management, the Rules themselves recognise that justice on occasion requires a different approach. In this case the process of justice can only be served by allowing the husband to call apparently credible expert evidence on a contentious and relevant issue of considerable magnitude. In my view the Registrar’s decision was erroneous and the Review application is allowed.
Before, taking evidence from the real estate experts I directed that they confer, in furtherance of which I made the following directions: -
1.That the Review by way of Application in a Case filed by the husband on 16 February 2006 is allowed.
2.That the husband has leave to file, serve and rely upon the affidavits of [Mr D] to which are attached valuations of the premises at [ST] and [NT].
3.The Court directs that the husband’s solicitor serve copies of the above valuations on [Mr E] of [Q Company] today.
4.The Court directs that a conference of experts take place between [Mr E] of [Q Company] and [Mr D] as soon as practicable and, if possible, tomorrow.
5.That at the conference of experts the experts must:-
a. identify the issues that are agreed and not agreed;
b. if practicable, reach agreement on any outstanding issue;
c. identify the reason for disagreement on any issue;
d. identify what action (if any) may be taken to resolve any outstanding issues; and
e.prepare a joint statement specifying the matters mentioned in paragraphs (a) to (d) and deliver a copy of the statement to each party.
6.That the Court suspends the operation of Parts 15.65 and 15.66 of the Family Law Rules 2004 to the extent necessary to enable the wife and her advisors to confer with Mr Connor on matters relating to the above properties.
7.That the costs of the joint conference in the first instance are to be paid by the husband.
8.That all parties’ costs of the Review Application are reserved.
Assets, Liabilities and Financial Resources as at the date of hearing
The parties agree on the value of most of their assets and some liabilities.
Their respective contentions as to the asset pool are identified in a schedule of property, superannuation and liabilities tendered[10] at the end of the hearing.
[10]Exhibit T
I find that the assets, liabilities and financial resources as at the date of hearing are as set out in the table below.
Assets $ P property (Agreed) (Joint) 3,200,000 Shareholding M Pty Ltd (Joint) 3,091,058 T business (Husband) 1,140,000 ST business (Husband) 704,000 NT business (Husband) 1,495,000 Businesses – trade and other debtors (Agreed) (Husband) 242,094 Savings (Agreed) (Wife) 1,805 Savings Commonwealth Bank (Husband) 179,472 K1 motorcycle(Agreed) (Husband) 6,800 M motorcycle (Agreed) (Husband) 3,800 K2 motorcycle (Agreed) (Husband) 3,900 B motor cycle (Agreed) (Husband) 2,800 N vehicle (Agreed) (Husband) 24,500 W motor cycle (Agreed) (Husband) 17,600 P motor cycle (Agreed) (Husband) 7,300 X vehicle (Agreed) (Husband) 59,650 Holden Maloo (Agreed) (Husband) 37,200 RT camper (Agreed) (Husband) 3,500 GL camper trailer (Agreed) (Husband) 12,500 MD vehicle (Wife) 13,550 H motorcycle (Husband) 2,100 Jewellery (Agreed) (Wife) 10,690 Furniture – P property (Agreed) (Wife) 27,085 Furniture – P property and DH property (Husband) 24,907 I shares (Agreed) (Husband) 1,658 Legal fees (Agreed) (Husband) 118,285 Legal fees (Agreed) (Wife) 114,004 TOTAL Non-Superannuation Assets 10,545,258 Superannuation Assets $ V Pty Ltd (Agreed) (Husband) 65,585 G Superannuation (Agreed) (Wife) 33,037 N Superannuation (Agreed) (Wife) 2,564 TOTAL Superannuation Assets 101,186 TOTAL ASSETS 10,646,444 Liabilities $ CBA mortgage – P property (Agreed) (Joint) 179,680 Disposal costs on sale of P property (Agreed) (Joint) 92,500 Wife’s secured debt for paid legal fees (Agreed) (Wife) 105,246 Loan from M Pty Ltd (Agreed) (Husband) 1,225,590 Retail trade and other creditors/bank overdrafts (Agreed) (Husband) 1,136,311 Long service leave (Agreed) (Husband) 55,614 Leases on fixtures and fittings (Agreed) (Husband) 52,134 Lease on X Vehicle (Agreed) (Husband) 59,358 Lease on Holden Maloo (Agreed) (Husband) 40,891 C.G.T. T business (Husband) 12,000 Legal costs on sale of T business (Husband) 3,000 TOTAL LIABILITIES 2,962,324 TOTAL NET ASSETS 7,694,120
There are a number of findings which require explanation.
Valuation of real estate and M Pty Ltd
The parties disagree on the valuations of M Pty Ltd and the businesses. There are two real estate valuers and Mr F is the single expert appointed to value M and the businesses.
Resolution of the M Pty Ltd valuation substantially centres upon the values attributed to its two primary assets, namely NT and ST. These issues will be addressed first.
At the end of the hearing, the wife submitted the Court will find NT is valued at $1,665,000 and ST is valued at $770,000. The wife relies upon the expert opinion expressed by Mr E. The husband says that Mr E’s valuations are too high. The husband relies upon expert evidence given by Mr D and contends that ST business is worth $450,000 and NT business $1,350,000. The real estate valuers prepared a joint statement[11]. As is apparent from the above discussion, they were unable to reach agreement concerning either property.
[11] Exhibit O
Mr E was admitted as an Associate to the Australian Institute of Valuers (now Australian Property Institute) in 1979. He holds a certificate of registration (without limitations) granted by the Office of Real Estate Valuers Registration Board of New South Wales. Mr E has been in full time practice as a valuer since 1974. He has given expert evidence in the Supreme, District and Family Courts concerning valuations of a wide range of residential, rural and commercial properties. He is well qualified for the task for which the parties retained him. Mr D was admitted as an Associate to the Australian Property Institute in 1988. He has been in full time practice as a valuer since that time. Like Mr E, he has undertaken valuations across a wide range of property types, including project feasibility. Mr D is well qualified to express the opinions sought from him in these proceedings.
Both valuers adopted the same general approach in order to determine the various properties current market value. As their primary methodology, the valuers used the capitalisation method. Capitalisation involves the application of a rate of return required by investors to the net annual return (rental) on the property. By way of cross check both used the direct comparison method. This involves examining the property and comparable sales.
Dealing firstly with NT business. The description of the property was uncontentious. It has a land area of 697.6 square metres and is zoned Business 3(a)-(A3) (Retail Services) in the local council’s Environmental Plan No. … (Business zone). The property has a gross building area of 282 square metres. Erected on the site is a 1950-1960’s single storey building comprising two retail shops in the NT shopping strip. The property has a frontage to H Road of 15.24 metres, realigned to a right of way and council car park of 15.24 meters, side boundaries of 45.72 metres and 45.83 metres. The building is brick with a rendered brick façade, reinforced concrete flooring, reinforced first floor slab with a metal deck covering and metal street awning. The NT business has a building area of 150.4 square metres and the adjacent “[OB]” food outlet is 132.2 square metres. The business is owner occupied and the food outlet leased to HT Pty Ltd at $42,253.74 per annum. The bakery lease expired on 12 November 2003 and the tenants are in occupation pursuant to a three year option. The food outlet comprises front retail area, preparation/storage area, toilet, rear storage area and concrete porch. The NT business comprises product display area, customer service counter, dispensary, office, toilet and rear concrete porch. A rear open unsealed area which adjoins the council car park provides on-site parking.
The NT shopping strip comprises a strip neighbourhood shopping centre of twelve one and two storey retail/commercial buildings with a rear council car park. The subject property is on the western side of H Road. Additional retail/commercial development is located on the southern side of J Street and the eastern side of H Road. The shopping village is a well patronised neighbourhood centre catering primarily to the resident population of NT.
Concerning the capitalisation method, the valuers agree upon the NT business’ estimated gross annual rental. For the NT business, 150.4 metres squared at $325 per metre squared per annum gross produces $940 per week gross or $48,880 per annum. The food outlet produces $812.58 per week or $42,254 annually. The valuers agree that the property’s estimated gross annual rental is $91,134.
The valuers disagree upon the rate per square metre of land method adopted by Mr D and NT’s redevelopment potential. Mr D considers that due to varying building sizes, the rate per square metre of land area can give distorted results and calculates sales price analysis by reference to actual site coverage. His approach does not accord with standard valuation methodology. As Mr E explained the method he applied has been used since the valuers handbook was established and accords with industry practice. In his view Mr D’s approach is unorthodox and may produce artificially low results. Another flaw in Mr D’s approach is that it assumes unimproved land carries the same value as the improved portion of property. Before I would accept Mr D’s personal valuation methodology in preference to well accepted industry methodology, he needed to demonstrate that his opinions are underpinned by sound theory and practice. Although time consuming, in this case he needed to provide a retrospective analysis of a sizeable number of actual sales which showed that his formula produced accurate results. With respect to him he did not do so. On balance I am persuaded that the covered site methodology adopted by Mr E is the appropriate methodology.
Mr E considers the property has further redevelopment potential and, said that as valuations are conducted in perpetuity, this potential affects the capitalisation rate. With this assertion I agree. The issue which arises is whether the property has further redevelopment potential. When the parties purchased the NT business they contemplated its future development. Its concrete slab roof is structurally suited to the addition of a one storey office. The shopping strip comprises a mixture of one and two storey retail property buildings and a first storey office would accord with the nature of the village. These are the features which particularly influence Mr E’s opinion concerning the properties redevelopment potential.
Primarily due to on-site car parking requirements, Mr D considers the property cannot be further developed. The local Council Development Control Plan No. … requires that the NT property has one car space per 17 square metres of gross building area for retail shops and 12 car spaces for retail food outlets. Mr D explains: “Based on the gross building area of 282 square metres, the current requirement is for 17 car spaces. From our calculations, the subject property cannot be extended in its current form. For any further single storey and/or first floor construction, part of the rear of both shops would have to be demolished and a basement car park constructed. The actual amount of building required to be demolished will depend on the size of any proposed redevelopment.” It is Mr D’s opinion that the property does not represent a viable development. He explained that there is only limited ground level area that can be developed and in his opinion, limited demand for first floor commercial office space in the area. For the foreseeable future, “the cost involved with redevelopment of the site outweighs any return in the current market”. Mr D’s reference to the current market suggests that he did not fully consider the future or in perpetuity considerations to which Mr E referred.
The valuers agree the permissible floor space ratio for the subject property is 0.75:1. Under Development Control Plan No. … the potential exists for approval of a two storey commercial building of 523.2 square metres with at least fifty per cent (261.6 square metres) utilised for shops or refreshment rooms. Mr E does not dispute Mr E’s opinion: “Based on the gross building area of 282 metres squared, the current requirement is for 17 car spaces, plus there would be requirements for driveway and areas designed for service vehicles. The vacant yard space is not large enough to accommodate all of these current requirements”. However, Mr E points out that the local Municipal Council Car Parking Development Control Plan No. … states that Council will have regard to :-
·the size and nature of the development and the parking demand generated;
·availability and accessibility of other parking; and
·accessibility to public transport and the probable mode of transport of users.
According to Mr E there is thus an opportunity to persuade Council to waive compliance with its car parking development control plan so that the property may be redeveloped. Provision is also made in the car parking development control plan for provision of monetary contributions in lieu of on-site car parking. Neither valuer sought information from Council about whether it has approved, or refused, any development application which involved waiving compliance with the car parking development control plan.
In GWR v VAR [2006] FamCA 894 the husband appealed on the basis that the trial judge failed to include a properties sub-division potential. The Full Court cited with approval Pullin J in Flotilla Nominees Pty Ltd v Western Australian Land Authority & Anor (2003) 129 LGERA 65 at [par 18 and 19]:
“The test of market value is well known. It is what the hypothetical purchaser desiring to purchase the land would have had to pay for it on the date of resumption to a hypothetical vendor willing to sell it for a fair price but not desirous to sell: Spencer v Commonwealth (1907) 5 CLR 418. Regard must be had to every element of value which the lands possess. Every such element must be taken into consideration insofar as they increase the value to the owner of the land: Minister of State for Home Affairs v Rostron (1914) 18 CLR 634 at 637. In short, regard should be had to the highest and best use of the subject land, meaning the most advantageous use of the subject land having regard to planning and all other relevant factors affecting its present and future potential: Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410 at 415.”
Their Honours also refer favourably to Rost R.O. & Collins H.G., authors of Land Valuation and Compensation in Australia, 3rd ed, Australian Institute of Valuers, 1984 at 90 where it is said:
“Recognition of the willing-selling-willing-buyer concept necessarily involves valuation for the highest and best use for which the land is adapted. The prudent and well-informed vendor (whose existence must be assumed) would not willingly part with his land for a price less than that appropriate to its highest and best use; and the well-informed buyer would not expect to be able to purchase it for less. Each party would take into account “not only the present purpose to which the land is applied, but also any more beneficial purpose to which, in the course of events at no remote period it may be applied, just as an owner might do if he were bargaining with a purchaser in the market.”
Neither valuer provided an estimate of the likely redevelopment costs. Mr E adverted to his inability “to effect a preliminary feasibility study” of the costs of redevelopment. Basically he was unconcerned about costs of development and opined that because the property has development potential this enhanced the capitalisation rate and hence its value. His opinion is based on his view concerning how the market will react to the potential of redevelopment balanced with the risks involved in securing Council’s approval as well as the development costs. For a commercial property worth somewhere between $1,350,000 and $1,665,000 I infer a well informed buyer would appraise him or herself of the possible redevelopment costs involved in adding a second storey and the likelihood any future development proposal could secure Council approval. On the basis of the information provided to the Court “a well informed buyer” is likely to be concerned that the cost of complying with the relevant planning regulations makes a development project presently commercially unviable. By this I mean that capital costs and expenses may outweigh immediate returns. However, as GWR & VAR says one must have regard to factors affecting a properties “present and future potential”. Looking to the future there is a possibility that redevelopment may achieve positive returns, whether by capital appreciation, rental returns or both. The Car Parking Development Control Plan makes provision for non compliant developments being approved if the exceptions are established. Although approval is far from certain it is this possibility that tips the scales in favour of Mr E’s approach to this issue. Simply put, a combination of a structure which makes addition of a second storey feasible, the properties location in a village which comprises one and two storey buildings and approval upon exceptions being met, future redevelopment is not so unlikely that it should be completely discounted. On balance, I am persuaded that although the property’s redevelopment potential is subject to a number of caveats, Mr E was correct to include its redevelopment potential when setting his capitalisation rate.
In assessing both the capitalisation rate and comparable sales method, both valuers considered NT the most comparable. This property sold on 17 April 2004 for $1,350,000. The property comprises two attached, single storey, brick retail shops with a rear amenities areas and an unsealed rear yard used for open car parking. The property was sold to an owner operator looking to combine the two shops. Although in the same shopping strip, the property is located in a less patronised area and the improvements are inferior to the subject property. The transaction was completed in a more sedate retail real estate market, which since 2002 has seen investors pursuing commercial property investment rather than in the residential rental market where gross yields have been falling. The site area is 696 metres squared, of which the shops cover approximately 229 square metres. Mr E explains this gives a sales price analysis of $5,895 per square metre of gross building area. Using the improved site, this gives a sales price analysis of $1,940 per square metre.
Section 75(2) factors
The wife claims s 75(2) entitles her to a 12.5 per cent adjustment in her favour. In the event the outcome of the s 79(4) process is broadly consistent with the husband’s application, he submits that there should be a slight adjustment pursuant to s 75(2) in the wife’s favour, somewhere in the vicinity of 5 per cent. In the event the Court adopts the wife’s submissions concerning the asset pool and her arguments concerning contribution are accepted, the husband submits that there should be little, if any, s 75(2) adjustment in her favour.
Subsection (a). The husband is fifty six years old and in good health. The wife is forty seven years old and also in good health. Neither party submits these factors warrant any adjustment. I make no adjustment pursuant to the subsection.
Subsection (b). I have already made findings about the parties’ assets and liabilities. As a consequence of my s 79(4) and other contributions findings, rounded out the wife will have assets worth about $3,539,000 and the husband will have assets worth about $4,154,000. P property will be sold and its net sale proceeds divided 85 per cent to the wife and the balance to the husband. It is likely the husband will dispose of T business so as to pay the wife the balance to which she is entitled. Assuming the wife requires about $1,500,000 to rehouse herself this means she will have something in the vicinity of $1,750,000 which she can invest and turn into an income producing asset. The difference between these two amounts is the assets will receive in specie and provision for relocation and other expenses. Invested at 6.355 per cent, the current 90 day bank bills rate, this will provide her with an additional $111,000 per annum or $2,138 per week (gross). In her work as an Administrative Assistant, the wife earns $1098.97 per fortnight, or $896.30 per fortnight net[12]. The wife has been receiving $341.50 per week child support for E and P which, now that E has finished school will reduce to the amount to the current assessment or about $100 per week until P finishes school. On this basis the wife will have about $2,787 gross each week. Because the wife will be using the income on her investment fund to meet her day to day living expenses her capital investment will remain static. Within two or three years, it is likely the wife will work full time and her income will increase by a small amount. Although the wife previously worked in the travel industry, long ago she severed her ties with it, and the prospects she will return to that industry seem remote. It is most likely that the wife’s future employment will continue to be as an administrative or clerical assistant until she reaches retirement age. Although the wife is younger than the husband and may have more working years available, as an employee she does not have the same control over her working future as the husband does and at no stage will she earn an income anywhere as much as he does.
[12] Exhibit F
At the wife’s behest, Mr F conducted a five year analysis of the parties’ business entities’ net operating profits. Mr F calculates the actual income the husband receives equates to the Atkins Group’s net operating profit before tax. For the last six years this amounted to $346,567 in 2000, $359,706 in 2001, $461,707 in 2002, $488,411 in 2003, $548,613 in 2004 and $346,785 in 2005. Concerning the husband’s future income, Mr F says the 2005 figure is the best indicator, which equates to $6,668 gross each week. I accept Mr F’s evidence subject only to the qualification that the husband is likely to shortly dispose of T business which will see his income fall. The precise amount of the reduction is difficult to quantify. For the purpose of this exercise I have assumed a reduced income of roughly $1,600 per week. This means that for the reasonably foreseeable future the husband will earn about $5,060 per week gross. Roughly $263,000 per annum compared to the wife’s $145,000, which amount will fall slightly once child support ceases. The husband has 30 years continuous experience as a retailer and running businesses. I am satisfied he is likely to continue doing so until he chooses to retire. Even in retirement the husband will have business assets which will continue to provide him with a good income. Having regard to these findings the husbands income earning capacity considerably exceeds the wife’s. His business assets are also likely to continue to increase in value in a manner which the wife’s capital investment is not. I make an adjustment in the wife’s favour pursuant to the subsection.
Subsection (c). E and P live with the wife and J lives with the husband. E has finished school and turned 18 which mean each party has one relevant child in their care. The wife hopes and believes J will return to her care. Living with the husband, J has changed schools and there is no evidence she is contemplating leaving. It appears more likely J will remain with the husband until she turns 18 and the probability is P will remain with the wife. Presently, P sees his father four afternoons after school. The husband collects P from school and usually delivers him to the wife at about meal time. The return time is flexible. P spends time with his father each alternate weekend and for half of each school holiday. J’s time with the wife is ad hoc and I would observe that both parties should do more to ensure that she reverts to the arrangement of regularly seeing the wife on alternate weekends and for half of school holidays. With modest effort by both parties this should be achievable.
In Clauson the Full Court held: “In addition, it should not be forgotten that the payment of child support in no way compensates the custodial parent for the loss of career opportunity, lack of employment mobility and the restriction on an independent lifestyle which the obligation to care for children usually entails.” Caring for J has not adversely impacted upon the husband’s capacity to continue earning a good income. The manner in which he has structured his various business interests means he is presently able to delegate tasks to others without compromising his income. The wife is not in the same position, and in my view, the observations made by the Full Court in Clauson apply to her circumstances. P’s age is relevant and the adjustment in her favour is not as significant as it would be if she was the primary carer of a younger child. I make an adjustment in the wife’s favour pursuant to the subsection.
Subsection (d). This focuses on the financial needs of the parties, including their financial commitment supporting any children. The wife’s expenses are set out in her Financial Statement filed 16 February 2006. The wife’s total weekly personal expenses are $1,578. These include average weekly living expenses are $1,356 of which $963 relates to the children. These figures are calculated on the basis that all three children live with the wife. Taking a broad brush approach to the children’s expenses, it is appropriate that these are divided equally. Until E finished her final exams this means the wife’s expenses for the children reduce from $963 to $642 each week. From about December 2006 they fell to $321 each week. Thus her total weekly expenses fall firstly to $1,257 and then to $936. These figures do not include housing costs and give an artificially low indication of the reasonable living expenses the wife will carry after the s 79 orders are implemented.
From the husband’s Financial Statement it is difficult to discern his necessary commitments. The husband’s Financial Statement asserts a total average weekly income of $160 and total personal expenditure of $4,011. The husband refers to his loan account with M Pty Ltd and says: “This loan has substantially increased since separation, primarily as a consequence of my continuing to maintain the former matrimonial home and meeting all of the children’s expenses.” As the husband’s loan account is treated as joint matrimonial liability, indirectly, the wife contributes to a significant portion of the personal expenditure identified in Part G of the husband’s Financial Statement Should he wish to do so, the husband will receive sufficient assets to rehouse himself thus avoiding rental. There appears no basis for assuming the costs he incurs for J are greater than the costs the wife met whilst J lived with her. Because P is younger than J, the wife will have higher necessary commitments than the husband for approximately two years. I make an adjustment pursuant to the subsection in the wife’s favour.
Subsection (e). Other than the children, neither party has any responsibility to support another person. In making this finding I have not overlooked that E lives with the wife. Having finished school and turned 18, unless ordered, neither party has any legal obligation to contribute to her support. I make no adjustment pursuant to this subsection.
Subsection (f). Neither party receives social security benefits or a pension, allowance or benefit from any superannuation scheme. I make no adjustment pursuant to the subsection.
Subsection (g). Since separation the wife has had exclusive use of the former matrimonial home. As her disposable income has reduced in the sense of no longer having unrestricted access to the parties’ total wealth, her standard of living has fallen. For example, she has relinquished domestic help. She contends that her standard of living has reduced in a manner which the husband’s has not. However the wife ignores that the husband has lost the amenity of his own home and the assets to which he has enjoyed access are virtually entirely business assets. He has continued to travel overseas and interstate in a way the wife has been unable to afford. In my view, the standard of living each has maintained and is likely to maintain is reasonable. I have already made an adjustment in the wife’s favour pursuant to subsection (b), which adjustment is primarily predicated on the husband’s greater assets and their potential for future growth combined with his greater income earning capacity. In the circumstances of this case, I consider it would be effectively double compensation to make a further adjustment pursuant to subsection (g) in the wife’s favour. I make no adjustment pursuant to subsection (g).
Subsections (h) – (k). These subsections do not arise.
Subsection (l). This subsection recognises that a parent may legitimately consider the children’s needs when structuring his or her life post separation. Presently the wife works part time and wishes to do so until P finishes school. She has tried to strike a balance between the benefits to the children of a parent’s care and her need for paid work. To date, the parties appear to have agreed that the children benefit from a parent’s supervision during school holidays and after school. Notwithstanding that the husband takes primary responsibility for after school care and as I have earlier found, the parties share responsibilities on weekends and during school holidays, it is reasonable that she maintains part time employment until P completes his Higher School Certificate. There is an obvious connection between this subsection and s 75(2)(b) and (c). The Court must be careful not to double count the impact on the wife’s circumstances of P’s primary care. In the circumstances, I make no adjustment pursuant to the subsection.
Subsection (m). Other than the children, neither party cohabits with another person. I make no adjustment pursuant to the subsection.
Subsection (n). Section 75(2)(n) achieves a cross referencing between s 75(2) and s 79(4). The outcome of the assessment of contributions and other factors has resulted in the husband receiving 54 per cent of the available assets compared to the wife’s 46 per cent. These findings have already been considered pursuant to subsection (b). By virtue of the overall s 75(2) findings there will be a further 3 per cent adjustment in the wife’s favour. This means the husband will receive 51 per cent and the wife 49 per cent of the net assets. These circumstances do not warrant further adjustment pursuant to the subsection.
Subsection (na). The wife contends that having regard to the husband’s conduct to date as to the payments of periodic child support, he may attempt to avoid making an equitable contribution to the children’s support in the future. The husband says he can be trusted to pay assessed child support and the children’s private school fees, uniforms, books and school related expenses. These amounts are not specifically quantified and are included in the husband’s estimated $2,000 per week he says he spends on the children’s education, medical, entertainment and day to day clothing. This figure included E’s school and associated fees. Applying a broad brush approach this will have fallen to about $1,320 for both P and J. As J’s expenses have already been considered this means the husband says he will be paying something like $660 per week for P’s expenses plus the assessed periodic child support to the wife. Because there have been tensions about this in the past, his future child support liability will be the subject of a departure order and thus the wife’s insecurity is addressed. The husband has not sought a contribution from the wife towards J’s support and is unlikely to do so. I make an adjustment pursuant to the subsection in favour of the husband.
Subsection (o). The husband is retaining assets which are subject to $681,651 capital gains tax liabilities. When he eventually pays out his loan account he will incur $323,750 income tax liabilities. At the point when these liabilities are paid there will be a commensurate and compared to the asset pool, significant reduction in his net wealth. The wife carries no similar liabilities. I make an adjustment in the husband’s favour pursuant to the subsection.
Subsection (p). This issue does not arise.
Having regard to all of the s 75(2) factors, I find that it is appropriate that there should be an adjustment in the wife’s favour of 3 per cent. This outcome reflects the cumulative outcomes I have made pursuant to s 75(2). See Tomasetti (2000) FLC 93-023.
Section 79(2) – Is this outcome just and equitable?
Because the Court must consider the actual orders, not just the percentage distribution, under s 79(2) justice and equity in cases like this requires that the Court stands back and looks carefully at the outcome of the s 79(4) and s 75(2) process. It is at this stage that the Court considers the actual structure of the orders.
I will not repeat the findings made thus far. There are key findings that lead to my comfortable satisfaction that an outcome distributing the available assets 51 per cent to the husband and 49 per cent to the wife is just and equitable. These include that the parties’ contributions span 24 years and reflect great efforts by each of them. The husband made a greater initial contribution which included an asset that, for a number of years provided the financial mainstay for the family. Later he introduced a sizeable inheritance the entire amount of which was put into P property. The husband worked hard as a retail operator and manager and his work ethic was an important component of the parties’ financial success. He would not have been able to devote his time so significantly to the businesses and real estate ventures had the wife not taken primary responsibility for running their homes and caring for their children. In addition, she joined in their various property and business acquisitions, as a shareholder and director of their companies and through personally guaranteeing large amounts of money borrowed to acquire business and personal assets. Alongside the husband, who is simultaneously making a similar contribution, these contributions were vitally important to the parties ability to acquire and improve their homes, real estate and operate their businesses. With the finalisation of these proceedings both parties will have significant assets and secure financial futures. The husband remained in the paid workforce and has the capacity to earn considerably greater income than the wife. He has assets business assets which are likely to continue to increase in value and which, even after he retires are capable of providing him with considerable income. At some stage the husband will have to pay income tax when he pays out his loan account and capital gains taxation when he disposes of his business assets. These are significant liabilities none of which the wife will carry. The wife’s employment prospects are far more limited and she does not have the same degree of control of her working future as the husband. Although P will finish school within a reasonably short time span the wife is never likely to be in a position to replenish her wealth through employment or investment in the same manner the husband is likely to achieve.
When all of the relevant factors are considered the proposed orders are just and equitable.
Structure of the property orders
The net assets to be distributed are $7,694,120 from which the husband will receive $3,924,001 and the wife will receive $3,770,118.
The wife’s assets comprise her savings, the X vehicle which she will receive free of encumbrance, the MD vehicle, her jewellery, furnishings at P property worth $27,085, her superannuation and her paid legal fees. These have a total value of $262,385. This means the wife must receive an additional $3,507,733. The husband proposes that the wife receives 85 per cent of P property’s net sale proceeds, he preferring to retain the business assets to the greatest extent possible. There is no good reason why the husband should be required to take a greater share of P property and I will distribute the P property sale proceeds in the proportions he seeks. Assuming P property sells at its agreed value, after payment of selling expenses, the Commonwealth Bank loan and the Viridian loan the parties will receive $2,822,574. This means the wife will receive $2,399,187 from which she must repay the husband half the amount paid out on the Viridian loan. On this calculation the husband must pay her an additional $1,108,546 less $52,623 which is $1,055,923. This figure is predicated upon P property selling at its agreed value. Although it has an agreed value, its actual selling price cannot be known.
Excluding P property, its selling costs, the Commonwealth Bank mortgage and the Viridian loan from the asset pool the remaining net assets are worth $4,116,694 of which the wife is entitled to $2,017,180. If she receives $2,017,180 plus 85 per cent of P property’s net sale proceeds she will receive more than the amount to which I have determined she is entitled. In order to give effect to these findings, after the wife receives her 85 per cent of P property’s sale proceeds there must be an adjustment from the remaining assets so that overall the wife receives 49 per cent of the net assets and no more. The formula for this is to add together $4,116,694 and P property’s net sale proceeds. From this the wife receives 49 per cent overall. This is made up of 85 per cent of P property’s net sale proceeds, plus $262,385 of in specie assets from which $52,623 (half of the Viridian loan being is deducted) and an amount which when added to these other two sums equates to 49 per cent of $4,116,694 and P property’s net sale proceeds. It is this later amount that the husband must pay the wife by way of final adjustment.
Because the amount which the husband must pay the wife cannot be determined until P property is sold, he will have slightly longer than usual within which to arrange his affairs and pay her the adjusting amount. This is the inevitable consequence of the parties’ agreement that P property should be sold. He will have eight weeks from settlement of P property’s sale within which to pay the wife the balance to which she is entitled. This gives the husband about 20 weeks within which to make whatever refinancing or restructuring arrangements necessary to comply. Although it means the wife is waiting longer than she would prefer in order to receive her full entitlement, this time frame strikes an appropriate balance between her interests and the nature of arrangements the husband needs to make pay her with as little disruption to his business assets as possible. If the husband does not pay the wife the balance within the time frame, interest will run on the amount outstanding and he will be required to sell T business from which the balance due to the wife will be paid. If there remains any further amount outstanding the wife may then take such further enforcement action as she considers appropriate.
Pending P property’s sale, the husband must pay P property’s Council and water rates, periodic Commonwealth loan and mortgage instalments, taxes and insurances as and when they fall due. If there are outstanding amounts these must be paid out of his share of the proceeds.
Concerning P property’s sale, the wife’s minutes of order are appropriate. It appears she has chosen a reputable agent and Mr J has previously conducted a number of the parties real estate transactions. I infer the wife at least is satisfied with his services. Now that E has finished school the agreed auction can proceed without delay. Unless the agent recommends a different time frame the auction will take place within three months. This gives amble time for any property preparation and a well timed advertising campaign. It is feasible that the property may need minor repairs so as to present it in the best possible manner. Because the husband’s disposable income and assets greatly exceed the wife’s, he will be responsible in the first instance for any such expenses capped at $20,000. I infer that this accords with the wife’s understanding of the maximum amount which may be required. For the same reason the husband will in the first instance pay the advertising costs associated with the sale. Before the sale proceeds are distributed the husband shall be reimbursed any monies advanced as a consequence of my orders.
In the event P property fails to sell at auction the parties must abide their real estate agents advice concerning its sale by private treaty. The husband proposes a gradual formulaic reduction in the selling price until P property sells. The difficulty inherent in this approach is that it may result in the property selling for less than its fair market value. The wife’s approach provides for an informed strategy which is responsive to prevailing market conditions. Because it is more likely to result in P property achieving its best price I prefer her suggested sale conditions to the husband’s.
The parties agree that the wife will receive the X vehicle. I agree she should receive it unencumbered. The husband has sufficient funds to pay out the X vehicle lease. Giving him 28 days within which to pay out the lease and affect a transfer is ample.
The parties agree that the husband will receive specified personalty and his various cars and motor vehicles stored at P property. They also agree the wife shall transfer her interests in V Pty Ltd and M Pty Ltd and that hereinafter the husband indemnifies her in relation to any liability arising by virtue of the wife’s interest and her office with these companies. This is consistent with the clean break principle.
In closing addresses both counsel indicated the formulation of orders was likely to be difficult, with the wife’s counsel in particular seeking an opportunity to make submissions once my findings and reasons were available. I will give them this opportunity. Having published my reasons for the proposed s 79 orders, the matter is adjourned until Thursday next so that the parties can make submissions concerning the final formulation of orders which they submit gives effect to this judgment.
I will give judgment in the child support departure application on the adjourned date.
For these reasons I propose making the orders identified at the start of this judgment.
I certify that the preceding two hundred and forty-five (245) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan
Associate:
Date: 4 June 2007.
IT IS NOTED that this judgment for all publication and reporting purposes be referred to as ATKINS & ATKINS
Key Legal Topics
Areas of Law
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Civil Procedure
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Administrative Law
Legal Concepts
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Judicial Review
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Jurisdiction
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Standing
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Procedural Fairness
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Natural Justice
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Abuse of Process
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