B and B & Anor

[2008] FCWA 46

[2008] FCWA 46

JURISDICTION	:	FAMILY COURT OF WESTERN AUSTRALIA
ACT	:	FAMILY LAW ACT 1975
LOCATION	:	PERTH
CITATION	:	B and B & ANOR [2008] FCWA 46
CORAM	:	CRISFORD J
HEARD	:	27-29 FEBRUARY & 6 MARCH 2008
DELIVERED	:	1 MAY 2008
FILE NO/S	:	PTW 3466 of 2005

BETWEEN : B

Applicant/Wife

AND

B

First Respondent/Husband

AND

T

Second Respondent

Catchwords:

Property settlement - pool of assets - addbacks - contributions - long marriage - property
acquired with third party

Property settlement - third party interests

Legislation:

Family Law Act 1975, s 75(2), s 79, s 106B

[2008] FCWA 46

Category: Not Reportable

Representation:

Counsel:

Applicant	:	Mr P Dowding SC
First Respondent	:	Ms G Braddock SC

[property number three] Respondent : Mr J Hedges

Solicitors:

Applicant	:	Carr & Co
First Respondent	:	Dwyer Durack

[property number three] Respondent : DCH Legal Group

Case(s) referred to in judgment(s):

Biltoft and Biltoft (1995) FLC 92-614
C & C [1998] FamCA 143
Ferraro and Ferraro (1993) FLC 92-335
Giumelli v Giumelli (1999) 196 CLR 101
Henderson v Miles (No 2) (2005) 12 BPR 23,579
Khademollah and Khademollah (2000) FLC 93-050
Kowaliw and Kowaliw (1981) FLC 91-092
Lenehan and Lenehan (1987) FLC 91-814
Norbis v Norbis (1986) FLC 91-712
O’Hara & O’Hara and Ors [2008] FamCA 189
Omacini and Omacini (2005) FLC 93-218
Prince and Prince (1984) FLC 91-501
Rosati v Rosati (1998) FLC 92-804
Squire v Rogers (1979) 39 FLR 106
Townsend and Townsend (1995) FLC 92-569
Westmore & Westmore [2007] FamCA 1341
White v White [2001] 1 All ER 1
Yukhnevich and Stazzonelli [2006] FCWA 98
Zyk and Zyk (1995) FLC 92-644

[2008] FCWA 46

1 [Mrs B] now almost 67 years of age and [Mr B] who is 74 years of age have asked the Court how their property should be divided.

2 The answer to that question is not always easy. As Lord Nicholls of Birkenhead in the House of Lords has said in White v White [2001] 1 All ER 1:

“Stated in the most general terms, the answer is obvious. Everyone would accept that the outcome on these matters, whether by agreement or court order, should be fair. More realistically, the outcome ought to be as fair as is possible in all the circumstances. But everyone’s life is different. Features which are important when assessing fairness differ in each case. And, sometimes, different minds can reach different conclusions on what fairness requires. Then fairness, like beauty, lies in the eye of the beholder.”

3 [Mr and Mrs B] are unable to agree not only how their property is to be divided

but just what their property comprises. Matters have been complicated by the
husband’s relationship with the second respondent, [Mrs T].

Brief background history

4 The parties married on 6 April 1961. Some 10 years later their first child

[Tanya] was born. She is now financially independent and lives [overseas]. She is
closely aligned with her father.

5 In 1975, their [property number three] child [Ronald] was born. He is now financially independent and lives overseas. He is closely aligned with his mother.

6 During the marriage the husband was engaged in accountancy and associated

consultancy work. The wife has worked, in the main, as a laboratory assistant (now
styled science technician).

7 The husband says the parties separated in January 1978. Significantly in

November 1984 they purchased 100 acres of land in [the hills] with another couple [Mr and Mrs T]. It was planned that each couple would utilise a part of this property to construct a residence. They would then live harmoniously into their retirement on a bucolic property reasonably close to the city.

8 Shortly after the purchase there was a falling out between the wife and [Mrs T].

The husband’s relationship with the [T family] continued to be close. He socialised with them, ate with them and when they constructed their residence on the north side of [the hills] property, a room was made available for his use in their home.

9 On 4 May 1991 [Mr T] passed away. From that time forth the financial

relationship, at the very least, between [Mrs T] and the husband became considerably intermingled. They worked together, purchased properties together, ran a business together and it appears spent a considerable amount of time on a daily basis with each other.

[2008] FCWA 46

10 On 1 November 1997 the wife’s aunt died. The wife inherited a half share in

property her aunt owned in [the suburbs]. With [Ronald], who was in the process of purchasing the other half share from the wife’s mother, she entered into a property development project. Units constructed on the land were sold. The wife gifted her share of the proceeds to [Ronald].

11 On 13 November 1999 the wife’s mother passed away. She inherited her

parent’s property in [another suburb]. She transferred her interest in the property to [Ronald]’s company [OH] Pty Ltd on 9 September 2000. She received no money for this.

12 In February 2002 the husband sold his [business] for $316,800 plus work in

progress.

13 On 9 August 2002 the husband suffered a stroke and was admitted to

[the local] Hospital. The wife was not named as his next of kin and she was denied
access to detail about his condition. It is at this time she says the parties separated.

14 On 29 June 2005 the wife made an application for property settlement. The

catalyst for such application was that the modest amount of financial support
previously extended to her by the husband was withdrawn.

Orders sought at trial

15 In her Papers for the Judge the wife is seeking an equal share of what she says

the parties’ assets are. Importantly she is seeking that the husband pays out her interest in the [hills] property. She wants to be in a position to relocate to another rural property and continue working [with her animals] for the foreseeable future. She seeks the husband pay her $1,049,215.

16 The husband seeks to retain the [hills] property and pay the wife $205,259. He

did not allocate a precise percentage division to the orders he sought but says they are fair and just. In closing his counsel said the wife should get around 20% of the [hills] property.

17 [Mrs T] is seeking declaratory relief entitling her to register a charge over the

[hills] property to secure payment to her of $462,000 which she says is the value of the
improvements she and her late husband effected on the land.

18 Importantly she accepts that half of the value of the [hills] land is owned by the

husband and wife, despite her majority shareholding in [AS] Pty Ltd, the registered proprietor of the [hills] land. She is seeking that each couple receive the value of improvements they have done to the land but the value of the land itself be divided equally.

19 She will join with the husband to satisfy any order of the Court in favour of the

wife even if it means her interest in property jointly owned with the husband is
required to be sold.

[2008] FCWA 46

Observations of the parties

20 In the witness box neither the husband nor the wife was particularly likeable.

Not unusually they did not appear to like or respect each other. This appeared to be an attitude each of them had held over a considerable period of time.

21 The husband said his wife complained all the time. The wife said her husband

had grizzled for many years about many things. This appears to be the only ground they had in common. If there is one thing in this case that is certain, it is that these parties had an unconventional relationship.

22 This is not a case where credibility is determinative of matters I need to resolve.

It revolves more on the interpretation of facts based on what each has said and done. However, overall I found the wife to be more believable. In particular, her memory was much better than that of her former spouse. On his own admission the husband’s memory is poor. Although he indicated his memory was “selective” I took this to mean that he could remember some things but not others due to his suffering a number of strokes rather than a desire to avoid the truth. However, there were times when I thought he used his poor memory to avoid having to really consider some of his actions.

23 Despite his ill health and some degree of hearing impairment it appeared to the

Court that, at times, the husband took a perverse pleasure in applying an overly literal interpretation to words used by cross-examining counsel. He adopted a black and white view of matters and rigidly adhered to his own literal interpretation even after effective challenge.

24 The husband regards the date of separation as January 1978. He deposes that at

this time his wife informed him that she was “going her own way”. He said she refused to help him anymore on the semi-rural property in [the suburbs] and on which they lived prior to moving to the [hills] property. She then commenced working at [a nearby school] as a laboratory assistant. The wife denies she went her own way. She says she told him she would get a job, which she did.

25 Despite his insistence this was when the parties separated, it is clear they

continued to live together, purchase property together and work jointly to provide
a home life for their children.

26 The wife has deposed with precision as to why she says the marriage continued.

She was never successfully challenged on any of this evidence. I have no hesitation in accepting that their marriage continued, albeit in an unusual form, until August 2002 when, in a fashion, the husband communicated his intention to sever the relationship.

27 [Mrs T] was far more reliable than the husband in her recounting of historical

facts. She was able to detail her relationship with the husband and wife and the history of her relationship with the husband. Again the Court formed the view that the relationship between [Mrs T] and the husband was unusual. However, it is not difficult to discern a strong and longstanding commitment emotionally and financially between the two. In all the circumstances of this case it is unnecessary to take the matter further.

[2008] FCWA 46

Principles

28 The task the Court undertakes is to arrive at a just and equitable distribution of

the property the parties accumulated during the course of their marriage in accordance with s 79 of the Family Law Act 1975. This involves a number of steps which are set out in s 79(4) of that Act:

• The identification of their property and its value;

• An evaluation of their contribution to that property having regard to a number of factors set out in s 79(4)(a) - (c);

• Consideration of any adjustment to that assessment taking into account the primarily prospective factors in s 75(2); and

• A review of the outcome against the just and equitable requirement (see for example Ferraro and Ferraro (1993) FLC 92-335).

29 In this case there is also the legitimate interests of a third party to consider.

Pool of assets

30 There are a number of issues in dispute revolving mainly around the

composition of the pool of assets and the value to be attributed to the [hills] property.
A number of assets and liabilities are agreed.

31 Counsel for the husband has urged the Court to adopt what is commonly referred

to as an asset by asset approach. She points to the fact that the wife received an inheritance to which the husband made no contribution, the relationship of the parties during their marriage was such that each treated some property as exclusively their own and to which property the other party made no direct financial contribution. [Mrs T] is involved in the acquisition of some of the property. I will return to the appropriate approach later and will now deal with the various items in contention.

The assets

•	The [hills] property
(i) Ownership

32 By contract of sale stamped 30 November 1984 between [YP] Pty Ltd and [AS]

Pty Ltd the [T family] and the [B family] acquired 100 acres of land [in the hills]. The purchase price of the property was $200,000. Each couple contributed $100,000.

33 The property, a rectangular block, is divided naturally into approximately equal areas by a creek running through it.

34 On 24 June 1985 [AS] Pty Ltd as Trustee for [TWS] Trust became the registered owner of the [hills] property.

[2008] FCWA 46

35 [AS] Pty Ltd was registered on the 26 July 1971. On 27 July 1971 the husband

and wife were appointed directors. At the date of purchase of the [hills] property it
was anticipated that each couple would hold four shares.

36 The wife assumed that each adult would have two shares respectively. As it

transpired, [Mrs T] and the husband each held three shares and [Mr T] and the wife
each held one share.

37 On 7 December 1991 [Mrs T] was appointed a director of [AS] Pty Ltd. In a

Deed of Appointment of [TWS] Trust dated 22 February 1993 the husband and
[Mrs T] were appointed as joint appointors of the Trust.

38 On 18 May 2004 the husband transferred two of his ordinary fully paid shares in

[AS] Pty Ltd to [Mrs T]. By deed dated 25 June 2004 the husband retired as joint
appointor and guardian of [TWS] Trust.

39 I accept that the transfer by the husband of his two shares to [Mrs T] and his

retirement as joint appointor and guardian of [TWS] Trust amounted to his making a determination as to the entitlements of the parties and [Mrs T]. His actions were designed to ensure that the wife would receive what he determined her entitlement to be.

40 The wife has sought to have the instrument and the disposition set aside pursuant to s 106B of the Family Law Act 1975.

41 Given the manner in which [Mrs T] has run her case and the acceptance by the

husband of the parties’ entitlements to the [hills] property, despite a dispute over value, I do not find it necessary to determine this matter on the basis of the instrument and disposition being set aside.

42 It is clear to the Court and it would seem to all parties that the husband and wife are entitled to, at the very least, one half share of the land value of the [hills] property. land are to be dealt with.

43 What remains to be determined is how the value of the improvements on the

(ii) Value

44 In accordance with a sworn valuation of [a valuation company] of 16 October 2007 the parties have agreed that the property is worth $1,945,000. However, they cannot agree how this should be divided between the respective owners. The wife’s argument is the most simple – the property should be divided equally and should be included in the asset pool at $972,500.

45 The husband’s position is that the owners’ individual contributions to the

improvements of the property need to be taken into account separately from the value of the land and what are called the existing structures. On his calculation there is to be an equal division of a combined amount consisting of the current land value of $1,295,000, the structures that existed at the time of the purchase now valued at $41,000 and the structure which was jointly built by the owners now valued at $18,000.

[2008] FCWA 46

46 Accordingly, the parties would be entitled to an equal division of an amount of

$1,354,000, being $677,000. In addition to this amount the husband says the parties would be entitled to the value of their individual improvements - $129,000 for the [B family] and $462,000 for the [T family]. Consequently, on the husband’s position the property should be included in the asset pool at $806,000.

47 In arguing their positions the parties referred to various decisions with

circumstances, somewhat akin to these, in which the Court permitted equitable relief. Both parties referred to the decision in Squire v Rogers (1979) 39 FLR 106, in which Deane J stated at pp125 - 127:

“As a general rule, capital expenditure upon permanent improvements to land by one joint owner without the authority of his co-owner creates a passive equity which attaches to the land. The joint owner making the improvements is not entitled to bring proceedings for contribution against his co-owner. In circumstances where his co-owner (or a successor in title of his co-owner other than a purchaser for value without notice) would otherwise unfairly benefit under an order in equity (including partition or sale of the property), he is entitled to an allowance for his expenditure on such improvements to the extent to which they result in the present enhancement of the value (or the price on sale) of the land: (see, generally, Leigh v. Dickeson (1884) 15 Q.B.D 60; Williams v. Williams (1899) 81 L.T. 163; Re Jones; Farrington v. Forrester [1893] 2 Ch. 461; Brickwood v. Young (1905) 2 C.L.R. 387; Re Byrne (1906) 6 S.R. (N.S.W.) 532; McMahon v. Public Curator of Queensland [1952] Q.S.R 197; Noack v. Noack [1959] V.R. 137 and D Mendes da Costa, Co-Ownership under Victorian Land Law, 3 Melbourne University Law Review, 137 at 138ff.). The operation of these principles, on a sale under the Partition Act, was succinctly stated by A. H. Simpson C.J. in Eq., in Boulter v. Boulter (1898) 19 L.R. (N.S.W.) (Eq.) 135 in the following passage: “Where an owner of an undivided interest in land spends money in improving the property so that on a sale under the Partition Act it fetches an enhanced price, a Court of Equity in dividing the proceeds of sale will not allow the other co-owners to take their shares of the increased price without making an allowance for what has been expended to obtain that increased value: Leigh v. Dickinson [sic]. This course of action cannot inflict any injustice on the other co-owners, for it takes nothing out of their pockets, it only prevents them putting into their pockets moneys obtained by the expenditure of another person, unless they recoup him such expenditure. In no case can the co-owner who has improved the property obtain more than his outlay, though such outlay may have trebled the value of the property. And, on the other hand, the increase in the price obtained is the limit of what he can receive, though his actual outlay may be far larger” (1898) 19 L.R. (N.S.W.) (Eq.) at p. 137.

…

In Leigh v. Dickeson (1884) 15 Q.B.D 60 Cotton L.J. explained the right of the co-owner to receive a limited allowance for capital expenditure upon sale or partition as follows: “in a suit for a partition it is usual to have an

[2008] FCWA 46

inquiry as to those expenses of which nothing could be recovered so long as the parties enjoyed their property in common; when it is desired to put an end to that state of things, it is then necessary to consider what has been expended in improvements or repairs: the property held in common has been increased in value by the improvements and repairs; and whether the property is divided or sold by the decree of the Court, one party cannot take the increase in value, without making an allowance for what has been expended in order to obtain that increased value; in fact, the execution of the repairs and improvements is adopted and sanctioned by accepting the increased value” (1884) 15 Q.B.D 60 at p. 67. Again, in Swan v. Swan (1820) 8 Price 518; 146 E.R. 1281, the Court of Exchequer Chamber similarly explained the right of one joint owner (“the defendant”) to such an allowance for capital expenditure against another joint owner (“the plaintiff”): “Although, in point of law, the Defendant may not, strictly speaking, have any lien on the premises, yet if he has been at expense in improving them, as stated, beneficially for the Plaintiff, the Plaintiff has clearly no right to take advantage of that expenditure, without making any allowance” (1820) 8 Price, at p. 519; 146 E.R., at p. 1282. (See, also, Attorney-General v. Magdalen College, Oxford (1854) 18 Beav. 223, at p. 255; 52 E.R. 88, at pp. 100-101; Vyse v. Foster (1872) L.R. 13 Eq. 602.)”

48 The wife referred to the High Court decision in Giumelli v Giumelli (1999) 196 CLR 101 in which the Court provided equitable relief to the respondent who improved and constructed a home on a property purchased by his parents based on his reliance on promises made by them:

“In these cases, the equity which founded the relief obtained was found in an assumption as to the future acquisition of ownership of property which had been induced by representations upon which there had been detrimental reliance by the plaintiff. This is a well recognised variety of estoppel as understood in equity and may found relief which requires the taking of active steps by the defendant.”

49 The High Court went on to say that the Court should first decide, having

considered the issues relating to the particular litigation, whether there is an
appropriate equitable remedy which falls short of the imposition of a Trust.

50 [Mrs T]’s counsel argued that the law had “moved on” and the decision in

Giumelli (supra) was not applicable to this case. He referred to a decision of Henderson v Miles (No 2) (2005) 12 BPR 23,579 in the Equity Division of the Supreme Court of New South Wales in which Young CJ stated:

“13. Where a family joint venture breaks down without attributable blame, it is unconscionable for one of the parties to retain a windfall which the parties never contemplated that that party would receive.

14. This equity was first identified in modern times by Deane J (with whom Mason J agreed) in Muschinski v Dodds (1985) 160 CLR 583 at 620, who thus expressed the principle:

[2008] FCWA 46

“the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in the circumstances in which it was not specifically intended or specifically provided that the other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do.”

51 Later in his judgment Young CJ explains the nature of the “windfall equity”:

“23. …The windfall equity is quite different: the promise has been fulfilled, but the resultant arrangement has come to an end in circumstances not contemplated by the parties, leaving the legal interests in one party who, if equity were not to intervene, would obtain an unconscionable benefit.”

52 I am not convinced these cases are particularly relevant to the current arguments before me. However, what is relevant are the principles of equity they espouse.

53 In O’Hara & O’Hara and Ors [2008] FamCA 189 Watts J dealt with a situation where the husband and wife purchased a property with the husband’s parents, who later made improvements to the property. After referring to numerous decisions, including Giumelli (supra), his Honour noted:

“157. The parties had entered into a four way family arrangement in 1996 to acquire the E property so that it could accommodate two families comprising the husband and wife and their children on the one hand and the 2nd and 3rd respondents on the other. I am comfortably satisfied that

what was being contemplated was a long-term relationship that went beyond co-ownership of the property and that it would be unconscionable brought about by monies invested in it by the 2nd and 3rd respondents for the husband and wife to share in the increased value of the E property

improving the property by the construction of the dwelling in which they
live.”

54 The overriding consideration is to arrive at a fair and equitable value based on the circumstances particular to this fact situation.

55 I do not agree with the wife’s position that the value of the property should be

simply equally divided amongst the owners. An equal division of the property allows the [B family] to capitalise on the significantly greater improvements made by the [T family], and I do not consider this appropriate in the circumstances in which this property was treated.

56 Although both parties contributed equally to the acquisition of the property, the

parties were very separate and distinct in the manner in which they constructed their dwellings on the property. The [T family] proceeded with constructing improvements

[2008] FCWA 46

at a significantly greater cost than the [B family]. In my opinion the intention of purchasing the property was for the [B family] and the [T family] to be equally entitled to the use of the land, but from the point of purchase to separately enjoy their own designated portion and the improvements they made to it.

57 In such circumstances it is not appropriate that the [B family] reap the rewards

of the [T family]’s expense and effort, and therefore the value of the property should
not be divided equally for the purpose of these proceedings.

58 Despite this, I do not entirely agree with the husband’s position either. He seeks

that the value of the structures which existed at the time of purchasing the property be included in the value of the land, and that the value of jointly built structures also be included in the value of the land. The issue I have with such a position is the same that I take against the wife’s position, that after the parties equally purchased the property they ceased equal involvement in the construction, use or improvements on their designated sites.

59 The [B family] lived on the [hills] property from January 1985. The [T family]

did not move to live there until around mid 1987. [Mrs T] deposes that after the [B family] were able to take possession of the property she asked the wife which side of the property the [B family] wished to live on. The wife indicated the south side where the existing improvements were. They had children and needed the use of the facilities immediately although the wife describes these existing improvements as derelict. There is nothing to suggest at that stage there was to be any adjustment or recompense for existing improvements or their use. There was no adjustment made to reflect this situation. There were no discussions about how matters would be dealt with in the future. There is nothing to suggest any supplementary agreements about this aspect of the property despite their being discussions about the property not being used as security for the raising of finance.

60 I accept the [T family] did assist the [B family] in building a machinery shed on

the south side of the property. It appears they each provided half the cost of the materials although the amount was never canvassed in evidence. There was never an agreement these improvements would reduce the [B family]’ entitlement. It is clear that, in particular, the husband assisted the [T family] on their part of the property from time to time for example with fencing and water troughs and that [Mrs T] has benefited from activities she has conducted with the husband on the north side of the property.

61 The Court accepts that the property venture of the [B family] and the [T family]

has broken down. It would be unfair for either family to make a financial gain which
was never contemplated the other party would receive.

62 There is no evidence to suggest that the [T family] ever expected any adjustment

for the fact the [B family] wanted to build on the south side of the property. It appears that [Mrs T] gave the [B family] the choice of which part of the property they wanted and there were no conditions attached to that. Both couples pitched in, in their own way, to make the property suitable for their particular needs. There is no evidence to suggest that assistance was other than freely given by the [T family] and the husband

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to each other over a considerable period of time. The husband has also assisted
[Mrs T] since her husband passed away in May 1991.

63 Further, there is no evidence to suggest that the current value placed on the

existing improvements has any bearing on a 1985 value. The value the husband urges the Court to adopt does not take into account any increase in value of the existing improvements as a result of subsequent buildings and improvements. There was no attempt to clarify this in evidence or to question the valuer about it.

64 As for the structure jointly built by the [B family] and the [T family], I consider

it in the same vein as the existing improvements. From the parties’ evidence this structure was constructed solely on the parcel of land occupied by the [B family], and further there was never any discussions or intentions amongst the owners for this structure to be considered joint property of the [T family] and the [B family] and recompense made.

65 It appears to me that neither party has arrived at a value that accords the other

fairness.

66 The value of the parties’ interest in the property should be included at $835,500, calculated by an equal division of the land valued at $1,295,000, being $647,500 plus the improvements made by the husband and wife at $129,000, and the additional amounts of the existing structures and the jointly built structures totalling $59,000.

• [The Stud]

67 From about 1969 the parties particularly the wife were involved in breeding,

showing, agisting and boarding animals. The genesis is likely to have been the wife’s passion for [animals]. This business was originally conducted in the husband’s name, it would appear, to provide him with some tax relief as the business ran at a loss. By the mid 1980s the husband was no longer interested in the animals and the wife operated the business alone. From 10 May 2000 the business has been solely operated by the wife. She continues to operate the business.

68 The assets of the business are now essentially her horses. She has attributed

a value of $6,200 to the business. The husband attributes a value of $10,000 to it. The wife gave evidence that the majority of her horses are of little value being “virtually pet meat”. In the absence of any reliable and up to date evidence relating to the value of the business it is impossible for me to determine its worth. In accordance with the remarks of Finn J in Khademollah and Khademollah (2000) FLC 93-050 at 87,763 I take the view the party asserting the greater value has the obligation to produce evidence to support that value. I therefore adopt the wife’s value.

• Sale proceeds of husband’s [business]

69 In 2002 the husband wished to retire. To that end he sold his [business] to

another accountant through a business broker. The selling price was $316,800. He says he ultimately received only $303,000. He received an initial payment of $171,800 on 1 March 2002 and the balance was paid by monthly instalments over a period of three years. There was a dispute with the purchaser in relation to the final

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payment and thus the amount ultimately received did not correspond with the original
purchase price.

70 The wife says that the money received for the [business] which was established

and built up during their marriage has not been appropriately accounted for. This was
only raised by her counsel at the conclusion of the evidence.

71 After the sale of the [business] the husband and [Mrs T] were involved in the

purchase of various parcels of land in [a regional centre]. The evidence is that from June 2002 lump sums were paid by the husband towards the purchase of these properties. The husband only deposes to the payment [for the first property] coming from this source. The lump sums paid are:

12 June 2002	[property number one in the regional centre]	$120,485
purchase price
4 April 2003	[property number two] and [property number	17,596
three] mortgage discharged
5 September 2003	[property number four] mortgage discharged	94,000

TOTAL 232,081

72 The husband deposes that:

“119. From when I finished work, I did not have a source of income other than rentals from the [regional centre] properties and dividends from [company] shares. I also had some savings and was receiving the monthly payments from the sale of the [business].”

73 He also deposes to employing farm workers on a part-time basis for at least three years until he was unable to afford to continue this.

74 The detail about the balance of the sale proceeds is extremely scant. On the

basis that it is likely he discharged the [property number four], [property number two] and [property number three] mortgages from the proceeds a balance of some $70,000 remains. Given the time that has now elapsed since the sales, his lack of paid employment, his illness and lack of meaningful superannuation I conclude the monies are likely to have been spent on his support and also towards maintaining assets which the wife has sought to characterise as matrimonial. He also retains savings. There will be no provision in the asset pool for this item, most of which is included in other assets which are included.

• The [regional centre] properties and associated issues

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75 In order to appreciate the nature of the issues relating to the [regional centre]

properties it is necessary to review the chronology of the dealings between the
husband and [Mrs T].

76 The husband and [Mr T] had a longstanding friendship. In about 1961 the couples established a warm friendship that endured for many years. In about 1985 [Mrs T] and the wife had a falling out.

77 On 1 June 1988 [Mrs T] started working with the husband in his [business]. She

did this as a favour to assist in paying off his overdraft. She agreed with him that she would not be paid for her services. The husband deposes to offering to pay her on a number of occasions but she insisted she receive no remuneration for her work. Initially she was to fill in for three months but she continued past that time.

78 On 1 January 1992 after her husband’s death [Mrs T] purchased land

[in the nearby suburb] in order to build [premises] that would accommodate [a business office]. The building was completed by 1 April 1995 at which time the husband started to conduct his business from the premises. No lease was executed between the husband and [Mrs T]’s entity, [C] Pty Ltd until 1 January 2000. The lease was stamped prior to the husband selling his [business]. No lease payments were ever made although the husband paid rent as a book entry from 1 April 1995. [Mrs T] paid tax on the rent received. The husband deposes to not recalling why rent was not actually paid.

79 The husband says the outstanding rent due to [C] Pty Ltd is $338,996. An

acknowledgment of this debt prepared by his solicitors was executed by the husband on 15 September 2005 and stamped on 19 December 2005. The husband says this is rent from the financial year ended 1995 up until the financial year ending 2002. In his Papers for the Judge he says $18,674 was paid but gives no detail about this – when, how or why it was paid.

80 [Mrs T] worked with the husband in his [business] for 14 years. She says she

was never paid any wages. The husband deposes that once his business started making a profit he was in a position to declare income being paid to [Mrs T] as a contractor. Between June 1988 and June 1994 no claim for income was made. Between 1 July 1994 and 30 June 2002 the taxation records show that a total of $124,917 was claimed as income for secretarial services paid to [Mrs T]. No such wages were paid although [Mrs T] paid income tax on the amounts alleged to have been directed to her.

81 On 15 September 2005 an acknowledgment of this debt prepared by his

solicitors was signed by the husband. This acknowledgment was stamped on
19 December 2005.

82 At a case assessment conference convened on 9 August 2005 the husband was

ordered to file a statement of financial circumstances by close of business on 20 September 2005. When the statement was eventually filed on 19 January 2006 both debts were included. They were also included in a financial statement filed 8 December 2006. Despite no payment, at trial only the rent was sought. His most recent financial statement filed 23 October 2007 has not included the secretarial

[2008] FCWA 46

services as a debt. Thus, of the original total of $463,833 the husband now claims
only $338,966 (or $338,996 depending on which document one refers to).

83 On 28 August 1995 the husband and [Mrs T] purchased two properties in [the

regional centre] – [property two] for $80,000 and [property three] for $73,000. The husband paid a deposit and other expenses of $29,278 from his [business account] and the balance of $117,000 was borrowed from the Westpac Bank. The properties are held by the two as joint tenants.

84 The husband deposes:

“104...It was agreed that although the properties were purchased in the joint names of [Mrs T] and me that I would pay the deposit to compensate [Mrs T] for my not having paid her to work for me over the years. [Mrs T] and I jointly borrowed the sum of $117,000 from Westpac which was secured by mortgage over both properties…

105…

106. The purpose behind the purchase of the [regional centre] properties was to recompense [Mrs T] for the unpaid work she had done over the years. The rent on the properties were sufficient to cover the mortgage and expenses and the intention was to pay the mortgage off over 10 years and for [Mrs T] to get the benefit of the capital appreciation on the properties. I was not in a position to pay back [Mrs T] all the money I owed in one payment, but this way anticipated with the capital appreciation, she would eventually get her money when the mortgage was repaid after 10 years, the income was to be shared between us, as I had no superannuation and whoever outlived the other party would ultimately receive the property.”

85 On 4 April 2003 the husband paid out the balance of the liability on the

mortgage secured against these two properties which he believes was approximately
$17,596. [Mrs T]’s half share is now worth $297,500.

86 On 29 October 1998 the husband and [Mrs T] as joint tenants purchased another

property [number four], [in the regional centre] for $118,000. The husband paid the deposit of $28,139 and funds of $94,000 were jointly borrowed from Westpac Bank. Again the intention was to recompense [Mrs T] for her unpaid secretarial services. On 5 September 2003 the husband discharged the [property number four] mortgage of $94,000. On 25 November 2004 he transferred his half interest in [property number four] to [Mrs T] for a notional amount of $75,000. A half share is now worth $162,500.

87 On 12 June 2002 the husband and [Mrs T] purchased as joint tenants a further

property [property number one], [in the regional centre]. The property was in joint names and the husband paid $120,485 cash for the purchase. The rent from the property was deposited into a joint account of the husband and [Mrs T]. Again the understanding was that the purchase of an interest for [Mrs T] was in compensation for her unpaid secretarial services. On 19 August 2004 the husband’s interest in [property

[2008] FCWA 46

number one] was transferred to [Mrs T] for a notional amount of $72,500. The
property is now worth $355,000.

88 The husband offers some explanation for the transfer of his shares in the

[property number one] and the [property number four] to [Mrs T]. He deposes that these transfers were carried out as a result of [Mrs T]’s concern that if she predeceased the husband then he would acquire all the assets and her family would not receive her share. He then goes on to say that the transfer of the [property number one] and [property number four] were “appropriate recompense for some of the unpaid work she did for me over 14 years, and some of the unpaid rent I owed on the office at [her office building].”

89 When the acknowledgment of debts were signed there was no recognition of the

interest of [Mrs T] in these properties. It is to be noted the first properties were purchased at a time when the secretarial services and rent monies were outstanding and allegedly continuing to accrue. No effort was made to then discharge the existing debts although funds were available. When the husband sold his [business] he again made no specific payment to these debts.

90 A decision was made instead to invest the money in real estate. There is no

evidence of any attempt by the husband and [Mrs T] to quantify what was outstanding
at either time.

91 The wife seeks to set aside the transaction of 19 August 2004 pursuant to

s 106B of the Act whereby [Mrs T] became the sole owner of the [number one] property. Thus, she seeks the husband retain his original half share and also that the original half share gifted to [Mrs T] be added back to the asset pool.

92 She also seeks to set aside the transaction of 25 November 2004 pursuant to

s 106B of the Act whereby the husband’s half share in [property number four] was transferred to [Mrs T]. In closing her counsel also sought to addback the original half share he acquired for [Mrs T].

93 The wife now also seeks to addback all the gross rent for [property number four]

for the period from 22 November 2004 until trial based on a figure of $175 a week. She originally sought only half that amount. She seeks all the gross rent for [property number one] for the period 2 August 2004 until trial based on a figure of $220 a week. The former is $29,750 and the latter is $40,920.

94 The wife’s counsel accepted the Court did not necessarily have to consider

setting aside transactions pursuant to s 106B of the Act if it was minded to include
these amounts in the pool of assets utilising another principle.

95 At this juncture it is apposite to consider the legal position in relation to what are commonly called “addbacks”.

96 In the decision of Omacini and Omacini (2005) FLC 93-218, the Full Court reviewed the cases dealing with the notation of addbacks. Three clear categories of cases were identified as being appropriate to notionally addback to the pool of assets monies that no longer existed. These categories are:

[2008] FCWA 46

• where the parties have expended money on legal fees;

• where there has been a premature distribution of matrimonial assets; and

• where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effect or value of assets or has acted recklessly, negligently or wantonly with assets.

97 These categories obviously have to be considered within the factual context of

each case and a trial judge has a wide discretion in relation to the addback issue. However it is necessary to bear in mind the words of the Full Court in C & C [1998] FamCA 143:

“Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives”.

98 Although the parties did not ultimately separate until 2002 they lived quite different lives for many years beforehand.

99 The starting point for the Court’s consideration here will be whether the money

claimed for unpaid secretarial services and the unpaid rent on the [office premises] are debts which are appropriate to take into account, at least at this stage, of the property settlement exercise.

100 A substantial intermingling of the husband and [Mrs T]’s finances appears to

have taken place after her husband’s death. This gathered momentum very quickly and I accept that by 1995 there was tacit agreement that there would be some form of quid pro quo between [Mrs T]’s work for the husband, his use of her premises and the purchase of properties. The initial purchase of [properties numbered two and three] was some months after the husband occupied the [business] premises in [the office building] and just over a year after he found himself in a position to declare income being paid to [Mrs T] although this did not actually happen.

101 Despite some lack of detail and precision about the manner in which the

amounts were quantified this aspect was never seriously challenged. I do accept that [Mrs T] carried out the work she details in her affidavit and that the husband had the use of the accounting premises until he chose to retire. That being the case it would be unjust for [Mrs T]’s specified claims to be ignored. I take into account that for many years she specifically refused payment of wages.

102 Although the wage debt and the unpaid work debt are now separately identified until about September 2005 they were merged, in my view, into one unspecified debt.

103 I am satisfied there was a debt for both unpaid work from 1 July 1994 and the

use of premises owing to [Mrs T] and as documented in the acknowledgments of debt.

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104 Even if it is accepted that the amounts were owing by the husband to [Mrs T]

and the amounts stated in the acknowledgments are an accurate reflection of those debts, it is difficult on the evidence to ascertain just exactly what the present position is.

105 Although I accept that there was a tacit agreement there would be some

repayment at some stage, there is no evidence that this was ever discussed in detail or
considered thoroughly until after proceedings were instituted by the wife.

106 The acknowledgments of debt state that the manner of repayment of the

principle sum is to be within 14 days of receiving a written demand from the creditor.
There is no evidence that any demand has ever been made for the amounts.

107 The issue of the quantification of assets and liabilities and debts by one party to

a marriage to a third party was canvassed by the Full Court in Biltoft and Biltoft (1995) FLC 92-614. The Court accepted that there is a general rule that where money is owed by the parties or one of them to unsecured creditors the Court ascertains the value of their property by deducting from the value of their assets the value of their total liabilities, including the unsecured liabilities. However it went on to say that the rule is not absolute, is not prescribed by statute and there are a number of well recognised exceptions. Although any third party rights must be considered there is no rule of priority as between a creditor claimant and a spouse. The Court, when talking about third party rights went on to say at 82,128:

“They must be recognised, taken into account and balanced against the rights of the spouse. That was the approach adopted by the trial Judge. In this case, there are uncertainties surrounding the debt, including the reluctance of Mr Horrocks to negotiate as to an amount, to institute proceedings for its recovery or to seek a stay of the proceedings in this Court. These factors must form part of the balancing equation.”

108 The Full Court in Biltoft referred to Prince and Prince (1984) FLC 91-501 where Evatt CJ at p 79,076 said:

“The assessment of debts and liabilities is not necessarily arrived at by a strictly mathematical or accounting approach in all cases. While some liabilities are charges upon the property which can be accurately assessed at a certain date, others are at large, or have not been precisely determined, e.g. tax liabilities…In some cases the amount of the liability can only be estimated generally…The Court can make an allowance for a particular liability if appropriate to do so. In some cases there are sufficient uncertainties as to the alleged liability to lead the Court to disregard it entirely or partly (e.g. a loan from a parent of the party not likely to be enforced).”

109 The Court may take the view that because of the circumstances surrounding the

incurring of a liability it ought, in justice and equity, to be wholly or partly disregarded
in determining the appropriate order to make under s 79.

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110 It is necessary for the Court to consider all matters before arriving at an appropriate allowance to be made for the money owing to [Mrs T].

111 There are a number of considerations here. The original amount said to be owing in 2002 is a total of $463,833. This amount was documented in late 2005. [Mrs T]’s half share in [properties numbered two and three] is presently quantified at $297,500. This will likely increase in the future. Rent is received on these properties.

112 The husband paid the deposit on these properties, he discharged the balance

owing under a mortgage and the mortgage was otherwise paid by any rent received.

113 There has never been any demand for an immediate repayment. The quid pro

quo for [Mrs T] was to be the subject of a future reckoning. Both the husband and [Mrs T] were vague in their evidence about present quantification of what [Mrs T] had received in discharge of the debt. Neither would acknowledge that she had received or was presently entitled to any monies. There was a rather untenable attempt to suggest that until each of the properties was sold or paid off it was impossible to suggest that any amounts could be taken into account as offsetting the actual debt. I do not accept this and although it may be somewhat imprecise the Court is required to do the best it can.

114 It was only after all the evidence that the wife sought to include all of

[property number four] as an asset of the husband. It seems to the Court that her
original position was more reflective of the evidence.

115 The present combined value of [Mrs T]’s half interest in [property number two]

and [property number three] is $297,500. If her original half share of [property number four] is included then the total value of her interests is approximately $460,100. This equates, approximately, to the amount originally outstanding on the debts the husband claims.

116 I am of the view that one half of [property number four] is a genuine accounting for the debt and it is not intended it be included in the asset pool.

117 [Mrs T] has also had the benefit of all of the [property number four] rent since

the property was transferred solely in to her name. Given I accept that her original one half share of [property number four] was in partial discharge of the debt, I find she is entitled to one half of the rent for that property. Taking into account her one share of these three properties and one half of the [property number four] rent which over the relevant period is a gross amount of $14,875 it appears to the Court that she has been repaid for her secretarial services and the rent on the [office] premises, along with any interest she may have earned on the amounts if the money had been available to her.

118 The Court needs to now consider the transfer of the husband’s original half share

of [property number four], the addback of all of the [property number one], all the
[property number one] rent and one half of the [property number four] rent.

119 It is accepted that a premature distribution of matrimonial assets is one of the

clear categories of cases where a Court considers it appropriate to notionally addback

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to the pool of assets, assets that no longer exist. (Omacini (supra), Townsend and
Townsend (1995) FLC 92-569).

120 [Property number four] was acquired in 1998 and the mortgage discharged in

September 2003. [Property number one] was purchased on 12 June 2002 without a mortgage. The Court has taken into account the fact that these payments were made solely from the proceeds of sale of the husband’s [business]. That practice was built up during the course of the parties’ marriage. The husband provided for [Mrs T] with assets he was able to build up due, in part, to the way the parties ran their marriage. The properties were not acquired with assets or earnings generated after separation.

121 As in Townsend I am of the view that what occurred in relation to these assets is a premature distribution by the husband. It may be a portion of the assets to which the wife made little contribution but the husband distributed to a third party assets in which the wife had a legitimate interest. These transfers were not to discharge any debts.

122 This is not a matter appropriate to be dealt with under s 75(2) of the Act. The husband has had the sole benefit of the money from his [business] and has sought to precipitously dispose of that money or of what has been acquired with the money. On this basis his half share of [property number four] and all of [property number one] will be added back to the pool of assets.

123 The rent poses different considerations. I was not told how the amount of gross

rent of either property had been effected by any outgoings in relation to those properties. There was not a lot of evidence as to the use to which the rent was put. The money from these properties, on [Mrs T]’s evidence, has gone into an account now operated by her solely as opposed to the rent from the [property number two] and [property number three] properties which went into a joint account. I am mindful, however that there has been substantial intermingling of the finances between the parties.

124 I am also aware that [Mrs T] has paid the husband’s legal fees from the

[M Farm] account into which the rent from [property number four] and [property number one] was deposited. I intend to deal with the rent of [property number four] and [property number one] in the context of it very likely having been used to pay the husband’s legal fees or to assist in his living.

125 I do not intend to addback any amounts for the rent on either property into the asset pool for reasons more fully canvassed later in the judgment.

• Wife’s inheritance

126 The husband says that the inheritances the wife received from her aunt (1997)

and mother (1999) which were gifted and transferred to [Ronald] and an entity controlled by him should be added back into the asset pool. As a result of her actions the wife received no financial benefit from the inheritances. The wife does not agree to the inheritances being added back into the pool.

127 The amount the husband seeks to addback is $292,000. It relates to “property

dealings”. He does a calculation in his Papers for the Judge to support that figure.

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The figure, which was not the subject of evidence, and only scant submission, was unsatisfactory. The actual value of what the wife originally received was not the subject of evidence.

128 By way of explanation for her actions the wife says that she felt guilty for

bringing [Ronald] into the world in view of the way the husband had behaved towards
him when he was young.

129 [Ronald] gave evidence and was cross-examined. The essence of this was that

the money which originated from the inheritances no longer exists. It had been put
into unsuccessful ventures he undertook and he deposes to the funds being dissipated.

130 The wife accepted that she had not discussed how she intended to use the

inheritances with her husband. The tenor of her evidence was very much to the effect that the husband had previously used his finances to invest in real estate with [Mrs T] without reference to her and she had done no more than him in this respect.

131 On the husband’s case the inheritances were received by the wife some 20 years

after separation. On the wife’s case they were received shortly before separation. It is
acknowledged by the husband that he made no contribution to the inheritances.

132 The wife attempted to give an altruistic slant to her providing [Ronald] the

funds. This was unconvincing. Be that as it may, given the husband made no contribution to the asset and it was acquired by the wife just before separation it is hard to suggest he had much, if any, of an interest in it. This is a case where I do not consider it unjust to the husband to treat the wife’s conduct as a matter only for consideration within s 75(2) of the Act.

133 I do not intend to include this in the asset pool or as a separate category of

assets.

• Husband’s interest in the [M Farm] partnership

134 In his closing submissions the wife’s counsel sought to addback the husband’s

interest in the [M Farm] partnership which on 30 June 2004 had been transferred to [Mrs T]. He seeks an amount of $307,737 be added back. The basis for seeking this amount is to be found in the taxation documents for the partnership for the year ended 30 June 2005.

135 In approximately 1990 the husband bought five cows and a bull which grazed on

the north side of the [hills] property. Fencing was replaced and water troughs provided for the cattle on the north side of the property. After [Mr T]’s death the husband and [Mrs T] set up a partnership breeding cattle called [M Farm]. [Mrs T] managed the cattle and the husband deposes to both of them contributing to the expenses.

136 In 1993 the couple were given a farm service business styled [HFS]. They

contributed farm equipment accumulated by each of them over the years and
a contractor was employed to do the contracting work.

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137 On 1 November 2003 [HFS] ceased operation and on 1 July 2004 [Mrs T]

became the sole proprietor of the business [M Farm]. The assets of the operations became the property of [Mrs T]. She said in evidence that she had paid $10,000 to the husband in 2006 to compensate him for equipment she received.

138 [Mrs T] accepted the husband had put the start up capital into the partnership

and also funded any shortfall in its operation over the years. However, at the end of its
life the farming partnership itself had assets of little value.

139 Although [Mrs T] was cross-examined extensively about the profit and loss

statement for the partnership for the year ended 30 June 2005, the husband was not. The main focus of the wife’s counsel’s cross-examination was the amount of cash at bank which the wife’s counsel appears to suggest arises from the operations of the farming partnership. [Mrs T] explained that the cash at bank held in the [M Farm] account was held in that account as it was an operational business account and not simply a bank account relating to the farm partnership. It took into account all her investments including property investments. The wife’s approach to this issue was one of too little too late. The husband was never questioned about it and on the face of it, the explanation given by [Mrs T], leaves the wife’s innuendo as to unaccounted for assets as unconvincing.

140 [Mrs T] said “her” rent from [property number four] and [property number one]

went into this account. Her evidence was also that the money she paid on behalf of the husband for legal fees came from this account. Since 1 July 2004 it had been operated solely by [Mrs T].

141 I will deal with this aspect further when I deal with the legal fees alleged to be

owing by the husband to [Mrs T]. Apart from this I do not intend to make any
provision in the asset pool for the [M Farm] partnership.

Liabilities

• Higher Education Contribution Scheme debt

142 The wife is currently enrolled in the first year of part-time [further studies] at

[university] which will take her six to eight years to complete. She is enrolled in the course as an interest having completed a [previous degree]. Be that as it may, she finds herself in debt for $26,212 as a result of undertaking this course. She has sought to have the amount included as a liability in the asset pool.

143 This debt was acquired by the wife after separation and indeed very recently.

Her studies, in my view, are more of a pastime than of any practical or financial use. I do not intend to include this debt in the pool of assets but will take it into account in a general sense pursuant to s 75(2) of the Act on the basis the amount will need to be paid at some stage.

• Loan for legal fees ([Mrs T])

144 The husband says he owes $44,031 to [Mrs T] being legal fees she paid on his

behalf. The husband’s financial statement says he owes [Mrs T] $40,000. There has been a substantial intermingling of their finances yet each has also maintained a

[2008] FCWA 46

separate bank account. [Mrs T] said she had very recently paid, on the husband’s
behalf, a further $40,000 which had been deposited in his solicitor’s trust account.

145 [Mrs T] said that the legal fees had been paid from the [M Farm] account into which the [property number one] and [property number four] rent are deposited.

146 I am not satisfied that this is a debt that will need to be called to account. There

is uncertainty about the amount. I am not satisfied it has even been paid from
[Mrs T]’s money.

147 I am satisfied the amount claimed of $44,031 and any other amount paid for

legal fees can be offset against the [property number one] and [property number four] rents received by [Mrs T] given the properties have now been added back into the asset pool.

• Tyres

148 The husband deposes that in about 1985 the wife arranged for a large number of

tyres to be delivered to the [hills] property. The wife says that tyres make appropriate fences. She also used them to minimise erosion. The tyres, which according to the husband and [Mrs T], number just under 3,000 are presently viewed by them as an environmental and health risk. The husband deposes that the Environmental Protection Authority and the [local] Shire has “threatened legal action”. The husband has estimated the removal of tyres will cost $41,956 although he presented no cogent evidence in support of this figure. The Court was not told why legal action was threatened – whether it was the fact the tyres were on the property or the fact the husband wanted them disposed of in an environmentally unfriendly manner. The lack of specific evidence precludes the Court making much sense of it all. I will not include this item in the pool of assets.

• CGT – possible sale of assets

149 The husband in his Papers for the Judge has calculated the capital gain he says is

likely to be paid in relation to the sale of the two [regional] properties he holds as a joint tenant with [Mrs T]. The husband confirms that he made the calculations. He said it was a “reasonable estimate of the cost”. There is no independent evidence in relation to the methodology used by the husband. His estimate is $32,279.

150 The issue of capital gains was recently considered by the Full Court in

Westmore & Westmore [2007] FamCA 1341. The Full Court identified that a liability for capital gains tax is dependent upon the calculation of:

(a)	the capital gain;
(b)	the marginal rate of taxation applicable to the capital gain; and
(c)	any tax offsets which can minimise the capital gain.

151 There was no expert evidence about the capital gain, the marginal rate of

taxation applicable to the capital gain or any tax offsets. Although none of the actual calculations were challenged in evidence it is clear the wife disputed the worth of the husband’s calculations.

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152 The husband did not seek to adjourn this issue pending the result of my

judgment.

153 The values of the two properties were agreed. There was no evidence about any

tax offsets which could minimise the capital gain. The Court is asked to assume that no efforts could be made to ameliorate the burden of the tax. This matter was not addressed at all.

154 In any event, the Court is uncertain about when or if any likely sale or sales will

take place and if any sale or transfer was to take place, whether it would involve both parcels of land or simply one. If it was only one parcel of land, there was no evidence about which parcel it would be. There are other possible parcels of land which could be disposed of.

155 The Court is left in doubt about the issue of capital gains tax – if the properties or one of them will be sold and the actual amount of capital gains tax that the husband would ultimately be responsible for. The Full Court in Westmore referred to Rosati v Rosati (1998) FLC 92-804 at 85,043:

“6.36…

(1)	Whether the incidence of capital gains tax should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.
(2)	If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any capital gains tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.
(3)	If … the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid term, then the Court, whilst not making allowance for the capital gains tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s 75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
(4)	There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incidence of capital gains tax into account in valuing that asset. In such a case, it may be appropriate to take the capital gains tax into

[2008] FCWA 46

account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.”

156 Although, I accept the land was bought originally as an investment there is much uncertainty about almost every other aspect of this issue.

157 I do not propose taking the actual estimated capital gains tax as a liability.

However, I will take into account pursuant to s 75(2) the fact that the husband may risk capital gains tax liabilities.

Schedule of assets

158 Having arrived at what comprises the asset pool it is necessary to now consider

the approach suggested by the husband’s counsel which was that there are a number of categories of assets which need to be considered separately. The wife’s case was run on the basis that a global approach was appropriate and that the value of all the various assets should be called into account in the one pool.

159 In most cases the authorities suggest the global approach is generally to be

preferred. However, each approach is permissible depending on the circumstances; Norbis v Norbis (1986) FLC 91-712, Lenehan and Lenehan (1987) FLC 91-814 and Zyk and Zyk (1995) FLC 92-644.

160 As the Full Court (Nicholson C J, Fogarty and Baker JJ) said in Zyk and Zyk

(supra at 82,509):

“The global approach enables the Court to assess the contributions aspect of the s. 79 exercise in an overall way by considering the parties’ contributions to their property as a whole although factoring into that exercise the circumstance, if it be so, that they may have made varying contributions to the total property at trial or which formed part of the history of their property during the marriage. It is the generally preferred and the generally adopted approach. It enables a broad approach to be taken to the varying contributions of the parties over the years of their marriage and in particular it usually has the advantage of more easily dealing with and giving proper recognition to paras. (b) and (c) contributions. However, where the contributions to the components to the total property are disparate, caution needs to be exercised in this approach and the overall conclusion tested against the requirement that the orders be “just and equitable”. Lenehan is an example of a case where difficulties arose for that reason.

The asset by asset approach enables the Court to assess separately the parties’ contributions to particular assets or groups of assets. It is the less preferred approach largely because it can at times be an artificial exercise and also because it can create difficulties in the proper evaluation of paras. (b) and (c) contributions. But there are a number of circumstances where it may be appropriate to do so, for example an inheritance received post separation, or where the financial relationship of the parties during the

[2008] FCWA 46

marriage was such that they treated some property as exclusively the property of one party to which the other party made no, at least no para. (a), contributions to it. It may be convenient in cases like that to treat that property separately rather than assess the overall contributions of the parties to the totality of their property.

However, the trial Judge has a discretion as to which course to adopt and does so having regard to what appears more suitable to the circumstances of the particular case.”

161 In this case an asset by asset approach might arguably assist in assessing the

respective contributions. I say this, taking into account that a substantial amount of the property was acquired by the husband when he was involved in a relationship with [Mrs T] and the parties lived separate lives.

162 However, I respectfully agree with the Honourable Justice Thackray (as he then

was) when he:

“…. elected to adopt a hybrid position – i.e. I will assess very carefully the contributions the parties made to the three properties, but I will then assess their contributions globally. In doing so, I have in mind the advice given by Nygh J in G & G (1984) FLC 91-582 (which was cited with approval by members of the High Court in Norbis) that judges undertaking a purely asset-by-asset analysis sometimes risk mistaking the trees for the forest. (Yukhnevich and Stazzonelli [2006] FCWA 98 at para 25).”

163 I intend to adopt the same hybrid approach although I have prepared a schedule, for ease of reference, to show the assets acquired with [Mrs T] separately.

Assets “matrimonial” assets Ownership Value

[home property], [in the hills]	Husband	(to	$835,500
retain)

Retirement cheque account	Husband	27,323
Westpac cash management account	Husband	3,740
2000 [motor vehicle]	Husband	7,850
Household contents	Husband	200
Plant and equipment	Husband	3,000
Personal effects	Husband	500
Addbacks for legal fees	Husband	115,000

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Addbacks for legal fees (dollar for dollar order)	(a) Husband	9,385
(b) Wife	9,385
BankWest account	Wife	3,789
BankWest account	Wife	7,050
ANZ account	Wife	4,300
1998 [motor vehicle]	Wife	5,900
Household contents	Wife	2,000
[The Stud]	Wife	6,200
Jewellery	Wife	2,535
Addbacks for legal fees	Wife	59,866
Money held in Carr & Co trust account	Wife	25,146
Superannuation asset	Wife	6,910

Assets TOTAL	$1,135,579
Liabilities

Money owed to [Ronald] for legal fees	Wife	16,000
Credit card	Wife	3,024
Capital Funding	Wife	53,000
Money owed to [Mrs T] for valuations (joint)	Husband	3,398
Liabilities TOTAL	75,422

TOTAL NET Assets $1,060,157

Asset [T family]” assets	Ownership	Value
Half share – [property number two]	Husband	$152,500
Half share – [property number three]	Husband	145,000
[ Property number one]	Husband	355,000
Half share – [property number four]	Husband	162,500

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TOTAL	$815,000
Liabilities	Nil
TOTAL NET Assets	$815,000
GRAND TOTAL	$1,875,157
Contributions

164 The parties were married for around 45 years. They were together

approximately 41 years. Understandably there were different phases in their relationship. The husband accepts that from the date of their marriage in 1961 until 1978 there was an equal contribution to their assets. From that point in time the parties are apart on their view as to contributions.

165 The husband says that the [the Stud] business operated by the wife was a drain

on the family’s finances and that his accounting business and the money flowing from that was a substantial contribution he made solely. Following from that he says he funded the bulk of the purchase of the [hills] property and made a far greater contribution to the overall conservation and acquisition of assets.

166 I do not share the husband’s view that his contribution to what can loosely be described as the [hills] assets is greater than that of the wife.

167 I accept the wife’s evidence that although [the Stud] business was not an

enormous success, it provided the husband with some tax relief. There were times
when money was earned and times when debts needed to be paid.

168 I find that the wife made an overwhelming contribution to the welfare of the

family. Despite the husband’s very negative approach to the wife’s contribution, I do
not accept his criticisms are borne out by the evidence.

169 He deposes to working nights and weekends in the accountancy business. He

said he worked long hours to build it up. He played much less of a role in family life than she did. The wife did activities with the children and attended to most of their needs in the home. She said the children were her priority and her own activities were secondary. I accept her evidence in this regard.

170 The husband was overly critical of the wife’s housekeeping yet a photograph of

his living area at the [hills] property did not suggest he had a meticulous approach to
cleanliness or to cleaning up.

171 [Tanya] was not required for cross-examination. [Ronald] was cross-examined

on a number of matters but was never challenged on his recall of family life and how
the family operated. However, it was clear the husband had another view.

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172 Overall I prefer the wife’s evidence and the evidence of [Ronald] in that regard.

173 The fact the wife made the overwhelming contribution to the children allowed

the husband to work the hours he did and establish himself in his accountancy business. It allowed him to build the foundation for future assets. Although he did sell one business before moving to the [hills] property he had established contacts and this enabled him to develop another business and to attract further clients. He retained a few clients from his original business. I have no doubt the husband worked very hard to do this but he was able to do so given the way the parties ran their marriage.

174 The wife and children moved to [the hills] before the husband. The husband

explained that the wife was in charge of the school routine and needed to be with them. When asked in cross-examination how the move to [the hills] was carried out he said he did not know as he was at work.

175 What cannot be ignored is that the wife also worked, albeit part-time, and her evidence is that the money assisted the household.

176 When cross-examined about her contribution to the [ hills] property she said she

had spent her earnings to, amongst other things, buy portable stockyards and supply household items. She had assisted in rock picking, establishing tyre fences to prevent horse damage and erosion. She had planted some trees, weeded and generally checked fences.

177 I accept the husband was mostly responsible for constructing a modest house on

the property.

178 Although the parties had an unusual way of sharing their life together as the wife

said “it was how we ran things”. [Ronald] has deposed to it being unusual but
essentially it worked for his parents. The wife said “it suited us and it worked”.

179 I find that the contributions to the [hills] property and related assets built up

during the course of the marriage were overall equal. However, this is not the end to it as there are other assets to consider and given the state of their relationship and the age of the children contribution considerations are different.

180 These assets were acquired by the husband with [Mrs T]. They were funded, in

the main, from money from his [business] and are parcels of real estate in the
[regional] area purchased from 1995 onwards.

181 I accept that [Mrs T] took the responsibility for overseeing the management of

the rental properties that now form part of the asset pool of the parties. Although they were managed by agents in [the regional centre], [Mrs T] was the point of contact in relation to any decisions and enquiries about the properties. This is a contribution on behalf of the husband.

182 The husband made the sole financial contribution to the properties. The money

for all the properties came directly from his income from his [business]. This [business] was built up over many years and I am satisfied that without the wife’s input early on to children and the parties’ properties then the husband would not have

[2008] FCWA 46

been in a position to devote so much of his time to his work. As a result of my
judgment he has discharged the debt to [Mrs T] for wages and rent.

183 The sale of the [business] took place just prior to separation. The properties have been rented and there was no evidence of improvements made to them.

184 Although the wife made no direct contribution, she did make some considerable

indirect contribution to the husband’s ability to earn an income and establish a business. The properties have increased in value, at least to some extent through market forces.

185 Overall, I assess the wife’s contribution as being 40% of the total asset pool.

Primarily prospective factors

186 The wife is almost 67 years of age. She works part-time as a [technician] at

[a school] and intends to continue in this position. There is no age limit to employment at the [school]. She earns a modest income. She is also a part-time university student.

187 She is still an active woman and continues her involvement with animals. She

would like to live a semi-rural lifestyle for the next eight to ten years. She is in
reasonably good health for her age.

188 The husband is 74 years of age and he is a retired [businessman]. He is in poor

health although [Mrs T] deposes that he is much improved but remains frail. His particular difficulties stem from two strokes he had – one in 2002 and one in 2005. He has also had surgery on his carotid artery on two occasions in 2005 and cataract surgery in 2006.

189 The wife has modest superannuation remaining. After separation she withdrew

$15,000 from her fund to use for living expenses. The fund is now worth $6,910. The
wife has no other financial resources.

190 On the other hand the husband has income from rental properties and what

appears to be freely given financial assistance from his present relationship with [Mrs T]. She has her own investments and financial resources. He and [Mrs T] have been financially involved since about 1991 and provide support to each other in that respect. Although he has no superannuation he has considerable resources available to him. He will retain the [hills] property on which he has access to comfortable living arrangements. He will retain some investment properties.

191 Both parties have lived in frugal circumstances at least since their move to the

[hills] property. However, I find the husband has had the choice of living in better conditions but for reasons perhaps known only to himself has chosen to live mostly in the more modest circumstances of the property he constructed on the south side.

192 The wife no longer has her inheritance. She made a choice about how that was

utilised and her modest circumstances, to a certain extent, may well have been

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alleviated with a more appropriate use of that money. She made a conscious choice to
divest herself of the money.

193 This is not a case where the money or inheritance was given to enable the son to

have a reasonable start in life. [Ronald] was not a child and was established in the
workforce (C & C (supra)).

194 Although the wife made a conscious decision to give the money away I am not

satisfied the evidence goes so far as to categorise her behaviour as embarking upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets as outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644.

195 The husband seeks to addback $292,000. However, it does not exist. It is no

longer a resource the wife has. In all the circumstances I do not intend to make any
adjustment for the inheritance.

196 Although it would be tempting for a Court to assume that her son would assist

her financially given the amount he did receive, having seen and heard him in the witness box this is not a conclusion that can be easily drawn. Although he is supportive of his mother, it appeared he had adopted a number of his father’s attitudes, behaviours and beliefs and may well not be financially accommodating to the wife.

197 Both parties have debts. The wife has a debt associated with her study and

a debt to her son. I do not consider that either debt is presently of a pressing nature. The husband says he has debts to [Mrs T] and again if this is the case, I do not consider those to be pressing. [Mrs T] had the benefit of whatever assets the [M Farm] partnership had acquired at its dissolution save for $10,000 paid to the husband for equipment. She has also had other benefits from the husband. It did not appear to me that the money she lent to the husband is something that requires immediate repayment. In all these circumstances I propose the husband pays the valuation costs owing to [Mrs T].

198 The husband will likely have a capital gains tax liability if he sells property other

than [in the hills]. I am unable to ascertain exactly any amount he is likely to pay but
the Court is aware such payment is a possibility.

199 Neither counsel made any strong submissions as to any adjustment for the

factors set out in s 75(2) of the Act. I appreciate the asset pool as I have found it may not be as either anticipated. However, I have reviewed all the factors I need to and having done so my independent assessment is there should be no further adjustment.

Are the Orders just and equitable?

200 On my assessment on contributions, bearing in mind no further adjustment, the

wife will retain net assets worth $750,063 and the husband will retain net assets worth
$1,125,094.

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201 The wife’s current net assets are $61,057. On the basis the husband is to

reimburse [Mrs T] for the money advanced by her to the parties for the valuations, he
currently holds net assets of $1,814,100.

202 The outcome of the orders will require the husband to pay the wife $689,005.

203 This may necessitate the husband realising a number of his investment

properties. Given his relationship with [Mrs T] and her statement she would join with the husband to pay the wife there are a number of choices for him in this regard. He also has his interest in the [in the hills] property which is unencumbered.

204 In considering the justice and equity it is necessary to again address the issue of

the inheritance which was not added back to the pool of assets and for which no adjustment in favour of the husband was made. Despite the husband having to pay the wife a substantial amount of money he will still be left with an interest in property from which he receives some rent and he will be cared for by [Mrs T] who has other resources to which the husband, if they retain either of [property number two], [property number three] or [property number four], made a contribution to. He will have a substantial interest in the [hills] property. The wife will be able to re-house and also have some money to invest. Although she is employed part-time this will not continue indefinitely and she does not receive anything other than a modest income.

205 The orders I have made will allow each party to maintain themselves. Although

the wife works part-time the husband has more resources available to him. In all the
circumstances the outcome of the orders I propose to make are just and equitable.

The claim of [Mrs T]

206 Given the findings I have made generally and in particular to the value accorded

to the [hills] property it is appropriate that the declarations she seeks be made. The husband does not oppose the declarations and there were no cogent reasons advanced by the wife to refuse the making of the orders [Mrs T] seeks.

Orders

207 The orders I intend to make subject to submissions by counsel are:

(i)	Parties to the marriage
1.	Within 90 days of orders being made the husband pay or cause to be paid to the wife the sum of $689,005 (“the sum”).
2.	Upon payment of the sum or the expiration of 120 days, whichever is the later, the wife vacate the property situate at and known as “[YP]”, [in the hills].
3.	The wife retain for her sole use and benefit and within 90 days of orders being made the husband do all acts and things and sign all

[2008] FCWA 46

documents necessary to transfer to her all of his right, title and

interest (if any) in:

(a)	any funds standing to her credit in any banks, building societies, credit unions or other financial institutions;
(b)	the chattels located in or about the [hills] property;
(c)	the 1998 [motor vehicle] registered number xxxxxxx;
(d)	her jewellery;
(e)	her superannuation entitlements;
(f)	any animals in her possession; and
(g)	the businesses trading as “[AC]” and “[AK]”.

4. The husband retain for his sole use and benefit and within 90 days of orders being made the wife do all acts and things and sign all documents necessary to transfer to him all of her right, title and interest (if any) in:

(a)	any funds standing to his credit in any banks, building societies, credit unions or other financial institutions;
(b)	his 2000 [motor vehicle];
(c)	his plant, equipment and personal effects;
(d)	the entities referred to in these orders; and
(e)	the following pieces of real estate:

(i) the property situate at and known as [property number two], [regional centre] being more particularly described as Lot xxx on Deposited Plan xxxx and being the whole of the land contained in Certificate of Title Volume xxxx Folio xxx;

(ii) the property situate at and known as [property number three], [regional centre] being more particularly described as Lot xxx on Deposited Plan xxxx and being the whole of the land contained in Certificate of Title Volume xxxx Folio xxx;

(iii) the property situate at and known as [property number one], [a regional centre] being more particularly described as Lot xxx on Diagram

[2008] FCWA 46

xxxx and being the whole of the land contained in
Certificate of Title Volume xxxx Folio xxx; and

(iv) the property situate at and known as [property number four], [a regional centre] being more particularly described as Lot xx on Deposited Plan xxxxx and being the whole of the land contained in Certificate of Title Volume xxxx Folio xx.

5. Upon payment by the husband to the wife of the sum referred to in paragraph 1 the wife do the following:-

(a)	transfer to the husband her unit in the [WSU T];
(b)	transfer to the husband her share in [AS] Pty Ltd (“the Company”); and
(c)	resign as a director of the Company.

6. The husband indemnify the wife and keep her indemnified in relation to all existing liabilities of whatsoever nature and howsoever arising as a result of her involvement in:

(a)	[AS] Pty Ltd (save as provided for in these orders);
(b)	the [WSUT]; and
(c)	the [A]Trust;

including but not limited to any income tax payable by the wife as a result of any distribution of income made to her by any of the companies or entities referred to in these orders up to and including the financial year ending 30 June 2008.

7. The husband indemnify the wife and keep her indemnified in relation to all and any monies owed by him or any of the companies and entities referred to in these orders to [Mrs T] or any entities associated with her.

8. All applications otherwise be dismissed.

(ii) [Mrs T]

9. Upon payment of the sum referred to in paragraph 1 there be the following declarations against [AS] Pty Ltd as trustee for[TWS] Trust:-

[2008] FCWA 46

(a)	the [property number three] respondent is entitled to register a charge or equitable lien over all that land comprised in Certificate of Title Volume xxxx Folio xx together with improvements (“the property”) to secure the payment to her of the value of the improvements constructed by or on behalf of the [property number three] respondent and the late [Mr T] since 1 January 1985;
(b)	the value of the said improvements at the date of judgment is $462,000.

10. All applications in relation to the [property number three] respondent otherwise be dismissed.

I certify that the preceding [207] paragraphs are a true copy of the reasons for

judgment delivered by this Honourable Court

Associate