BAIRD & BAIRD
[2016] FamCA 149
•16 March 2016
FAMILY COURT OF AUSTRALIA
| BAIRD & BAIRD | [2016] FamCA 149 |
| FAMILY LAW – PROPERTY SETTLEMENT – Where the parties agreed it was just and equitable for their property interests to be adjusted – Where the evidence did not support a finding the husband’s expenditure over the last 12 months was wasteful – Where the parties’ contributions were equivalent – Where several features of the evidence justified an adjustment of 5 per cent in the wife’s favour – Where the wife’s overall entitlement to the parties’ net assets and superannuation interests is assessed at 55 per cent – Where the husband’s corresponding entitlement is assessed at 45 per cent – Where part of the adjustment of the parties’ interests can be achieved by way of a superannuation splitting order to more evenly distribute their respective interests in their self-managed superannuation fund |
| Family Law Act 1975 (Cth), ss 75, 79, 90MT, 90MZD, 106A Family Law Rules 2004 (Cth), rr 14.06, 19.04 Superannuation Industry (Supervision) Act 1993 (Cth), ss 17A Superannuation Industry (Supervision) Regulations 1994 (Cth), rr 7A.03B, 7A.03C, 74.03D |
| Bevan & Bevan (2013) 49 Fam LR 387 Stanford v Stanford (2012) 247 CLR 108 |
| APPLICANT: | Ms Baird |
| RESPONDENT: | Mr Baird |
| FILE NUMBER: | NCC | 3261 | of | 2014 |
| DATE DELIVERED: | 16 March 2016 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Newcastle |
| JUDGMENT OF: | Austin J |
| HEARING DATE: | 1 & 2 March 2016 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Duane |
| SOLICITOR FOR THE APPLICANT: | LBK Solicitors |
| COUNSEL FOR THE RESPONDENT: | Mr Blackah |
| SOLICITOR FOR THE RESPONDENT: | Warren McKeon Dickson Lawyers |
Orders
The parties shall forthwith do all such acts and things and sign all such documents as are necessary to discharge any encumbrance over the real property comprised in Folio Identifier … being the property more commonly known as D Street, Suburb E, NSW (“the Sydney property”).
Upon compliance with Order 1 hereof, the wife shall forthwith do all such acts and things and sign all such documents as are necessary to transfer to the husband all her right, title, and interest in the Sydney property.
Within 60 days of the wife’s compliance with Order 2 hereof, the husband shall do all such things and sign all such documents as are necessary to:
(a)Transfer to the wife all his right, title, and interest in the real properties comprised in Folio Identifiers … and …, being the properties more commonly known as “Property B, G Street, Suburb H, NSW (“Property B”), free from any and all encumbrances; and
(b)Pay to the wife the sum of $259,622.
Subject to the husband’s compliance with Order 3 hereof:
(a)The husband is declared the sole legal and beneficial owner of the real property and improvements known as “Property C, G Street, Suburb H (“Property C”);
(b)The husband shall indemnify, and keep indemnified, the wife against any and all rates, taxes, statutory charges, mortgage repayments, and other encumbrances affecting or relating to Property C; and
(c)The wife shall forthwith vacate Property C.
In default of the husband’s compliance with Order 3 hereof:
(a)The parties shall do all such acts and things and sign all such documents as are necessary to list the Sydney property for sale by public auction on the following terms:
(i)The solicitors appointed by the wife shall be the solicitors acting on the sale of the property for the parties.
(ii)The property shall be listed by the parties for auction sale within 6 weeks of the husband’s default of Order 3.
(iii)The auctioneer, in the event of disagreement between the parties, shall be the auctioneer chosen by ballot from the respective choices of the parties.
(iv)The reserve price shall be as agreed between the parties, and in the event of disagreement between the parties, the reserve price nominated by the auctioneer.
(v)In the event the Property Cs not sold by auction, or private negotiation within a further 7 days, then the property shall be submitted to successive auctions within further 6 week periods until sold, otherwise on the same terms and conditions as applied to the first auction.
(vi)The parties are restrained from further charging, mortgaging, or encumbering the property, other than for the purpose of enabling the husband’s compliance with Order 3.
(b)Upon completion of the sale of the property pursuant to Order 5(a) hereof the parties shall cause the solicitors acting for them on the sale to disburse the proceeds of sale as follows:
(i)First, to pay all costs, commissions, and expenses of the sale and to pay any Council and water rates outstanding in respect of the property;
(ii)Secondly, to pay the balance then remaining, up to a maximum sum of $1,100,000 (the agreed value of the Sydney property), in diminution of the debt due by the husband to the Westpac Bank, which debt is partially secured by mortgages over Property B;
(iii)Thirdly, to pay to the wife any amount still due and owing to her pursuant to Order 3(b) hereof, together with any accrued interest;
(iv)Fourthly, to pay 55 per cent of any balance then remaining to the wife; and
(v)Fifthly, to pay 45 per cent of any balance then remaining to the husband.
In the event of the husband’s continuing default of compliance with Order 3 hereof, despite compliance with Order 5 hereof, then:
(a)The parties shall do all such acts and things and sign all such documents as are necessary to list Property C for sale by public auction on the following terms:
(i)The solicitors appointed by the wife shall be the solicitors acting on the sale of the property for the parties;
(ii)The property shall be listed by the parties for auction sale within 6 weeks of compliance with Order 5 hereof;
(iii)The auctioneer, in the event of disagreement between the parties, shall be the auctioneer chosen by ballot from the respective choices of the parties;
(iv)The reserve price shall be as agreed between the parties, and in the event of disagreement between the parties, the reserve price nominated by the auctioneer;
(v)In the event the property is not sold by auction, or private negotiation within a further 7 days, then the property shall be submitted to successive auctions within further 6 week periods until sold, otherwise on the same terms and conditions as applied to the first auction;
(vi)The parties are restrained from further charging, mortgaging, or encumbering the property, other than for the purpose of enabling the husband’s compliance with Order 3; and
(vii)The wife shall have exclusive occupation of the dwelling upon Property C, and access across Property C to and from the dwelling, until completion of the sale.
(b)Upon completion of the sale of the property pursuant to Order 6(a) hereof the parties shall cause the solicitors acting for them on the sale to disburse the proceeds of sale as follows:
(i)First, to pay all costs, commissions, and expenses of the sale and to pay any Council and water rates outstanding in respect of the property;
(ii)Secondly, to discharge any encumbrances registered over or affecting Property B and Property C;
(iii)Thirdly, to pay to the wife any amount still due and owing to her pursuant to Order 3(b) hereof, together with any accrued interest; and
(iv)Fourthly, hold the balance in escrow pending the husband’s compliance with Order 3(a), following which the balance is to be paid to the husband.
The husband shall be solely liable for and shall indemnify the wife against, and keep her indemnified against, the parties’ existing liability for land tax.
The husband is declared the sole legal and beneficial owner of, and the wife shall forthwith transfer to him all of her right, title, and interest in, the parties’ jointly owned Wesfarmers shares.
The wife is declared the sole legal and beneficial owner of, and the husband shall forthwith transfer to her all of his right, title and interest in, the parties’ jointly owned unregistered Toyota vehicle.
Declaration that the parties, as trustees of the Baird Superannuation Fund, have been accorded procedural fairness in respect of these superannuation splitting orders, and orders ancillary thereto.
Order that these orders are binding upon the parties in their capacity as trustees of the Baird Superannuation Fund.
Order, pursuant to s 90MT(2) of the Family Law Act, that for the purpose of these orders:
(a)The value of the wife’s interest in the Baird Superannuation Fund is determined to be $14,361, being a value with which the parties agree; and
(b)The value of the husband’s interest in the Baird Superannuation Fund is determined to be $449,535, being a value with which the parties agree.
Order, pursuant to s 90MT(1)(a) of the Family Law Act, that whenever a splittable payment becomes payable in respect of the husband’s interest in the Baird Superannuation Fund:
(a)The wife is entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001, using a base amount of $217,587 of the splittable payment; and
(b)There is a corresponding reduction in the entitlement of the husband to that splittable payment.
Order that these orders shall have effect from the operative time, and for that purpose the operative time shall be 7 days from the date of these orders.
Unless otherwise provided:
(a)Each party shall be the sole legal and beneficial owner of all other assets in their respective possession as at the date of these orders, and for that purpose bank accounts are deemed to be in the possession of the person named as the account holder, investment accounts are deemed in the possession of the named investor, and superannuation entitlements are deemed in the possession of the superannuant; and
(b)Each party shall be solely liable for and shall indemnify the other against any and all debts attaching or relating to the property in their respective possession and any debts in their respective sole names, including any individual liability for capital gains tax arising out of the sale by the parties of real property pursuant to these orders.
In the event of either party refusing or neglecting to sign within 7 days of a written request to do so any document necessary to implement the terms of these orders the Registrar of the Family Court of Australia at Newcastle is empowered to execute such documents on behalf of the parties pursuant to s 106A of the Family Law Act.
Costs are reserved for 28 days.
Any and all outstanding applications are dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Baird & Baird has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: NCC 3261 of 2014
| Ms Baird |
Applicant
And
| Mr Baird |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings concern alteration of the parties’ existing property interests pursuant to Part VIII of the Family Law Act 1975 (Cth) (“the Act”) consequent upon the breakdown of their marriage several years ago.
The parties married in 1996, but began cohabitation about 12 to 18 months beforehand. They finally separated in October 2011, so their relationship subsisted for over 16 years.
They have two children – born in 1997 and 2000. The eldest child is now an adult, though he still lives with the wife. The youngest child is nearly 16 years old and she currently lives with the husband.
The parties began their married life in Sydney, but in 2003 they began acquiring rural property in the J Town region. In 2007 the family relocated permanently from Sydney to one of their two farming properties. Presently, each party occupies one farming property and their Sydney property remains rented.
The parties agreed it was just and equitable for their property interests to be adjusted; they just disagreed over how it should be accomplished. They each claimed entitlement to 60 per cent of the net assets and superannuation interests. The parties began the trial arguing over their entitlement to ownership of one of the two farming properties, but curiously ended the trial arguing over what should become of their Sydney property. They also disagreed over the distribution of their superannuation interests.
The evidence
The wife relied upon:
(a)Her financial statement filed on 1 February 2016;
(b)Her affidavit filed on 1 February 2016;
(c)The affidavit of her father, Mr K, filed on 1 February 2016; and
(d)The affidavit of her partner, Mr L, filed on 24 February 2016.
The husband relied upon:
(a)His financial statement filed on 28 January 2016; and
(b)His affidavit filed on 28 January 2016.
Legal principles
Orders under s 79 of the Act altering the property interests of parties may only be made if the Court is first satisfied, pursuant to s 79(2), it is just and equitable to make such orders. The Act then identifies in s 79(4) the matters the Court must take into account in considering what order, if any, should be made (see Stanford v Stanford (2012) 247 CLR 108 at [22], [35]). While those two inquiries are not to be conflated (see Stanford at [35], [40], [51]), it is permissible for the s 79(4) factors to inform the inquiry under s 79(2) (see Bevan & Bevan (2013) 49 Fam LR 387 at [83]-[89], [163], [169], [171]-[172]).
It is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying the existing legal and equitable property interests of the parties. It must not be assumed that the parties’ rights to or interests in marital property should be different from those that then exist or that a party has the right to have the parties’ property divided by reference to considerations set out in s 79(4) of the Act (see Stanford at [37]-[40], [50]). Commonly, however, it will be just and equitable for the parties’ property rights to be altered because the breakdown in their relationship will end their fiscal unity and deprive them of common use of their property (see Stanford at [42]; Bevan at [68]-[70], [82], [164]-[165]).
If and once determined it is just and equitable for the property interests of the parties to be altered, the process of evaluating the proper orders to make is dictated by the factors enumerated within s 79(4) of the Act. The Court must necessarily identify and assess the parties’ contributions within the meaning of ss 79(4)(a)-(c) and then take account of the relevant matters referred to in
ss 79(4)(d)-(g) and 75(2) of the Act.
Existing Property Interests
Eventually, after the oral evidence was complete, the parties tendered a jointly prepared balance sheet setting out the identity and value of their assets, liabilities, and superannuation interests.[1] The parties acknowledged the contents of the exhibit differed from some of the evidence they each adduced in their affidavits and financial statements, but it was understood that, in the event of discrepancy, the contents of the exhibit prevailed and should be adopted as the accurate evidence.
[1] Exhibit A
The wife’s assets, liabilities and superannuation interests are as follows:
No.
Assets
Value
Total
1
Suburb E property (50 per cent)
550,000
2
244 Wesfarmers shares (50 per cent)
4,760
3
Sale proceeds of unregd car (50 per cent)
7,500
15
CBA Acc #...
98,216
16
CBA Acc #...
2,895
17
CBA Acc #...
42
18
308 IAG shares
1,743
19
2,400 NIB shares
9,240
20
4WD
14,600
21
Unpaid invoices J Town Country Life
15,000
22
Furniture and household effects
5,000
23
Livestock breeding materials
3,000
Sub-total
711,996
711,996
Liabilities
25
Mortgage (Suburb E) (50 per cent)
nil
26
Land tax (50 per cent)
1,633
34
CBA credit card
2,498
35
Flexirent computer lease
3,612
Sub-total
7,743
-7,743
704,253
Superannuation
36
Baird Super Fund
14,361
37
NGS Super
151
Sub-total
14,512
+14,512
Net assets and superannuation
718,765
The husband’s assets, liabilities and superannuation interests are as follows:
No.
Assets
Value
Total
1
Suburb E property (50 per cent)
550,000
2
244 Wesfarmers shares (50 per cent)
4,760
3
Sale proceeds of unregd car (50 per cent)
7,500
4
“Property B” property
1,300,000
5
“Property C” property
2,000,000
6
M investment
nil
7
Intech CU Acc #...
(99)
8
CBA Acc #...
15,980
9
CBA Acc #...
nil
10
Company P shares
16,808
11
Japanese car
3,000
12
Farming enterprise
777,793
13
Furniture
5,000
14
SUV
36,000
Sub-total
4,716,742
4,716,742
Liabilities
25
Mortgage (Suburb E) (50 per cent)
nil
26
Land Tax (50 per cent)
1,633
27
Mortgage (Property B & Property C)
2,068,930
28
Farming enterprise liabilities
214,133
29
Tax debt
33,000
30
CBA credit card
nil
31
AMEX credit card
20,915
32
Accountants fees
nil
33
Intech credit card
346
Sub-total
2,338,957
-2,338,957
2,377,785
Superannuation
36
Baird Super Fund
449,535
+449,535
Net assets and superannuation
2,827,320
The dispute between the parties over the valuation of two items was quickly conceded by the husband. He abandoned his contention that one of the wife’s bank accounts should be notionally attributed with the value of the interim property settlement sum he paid her pursuant to interim orders[2] and accepted the actual balance of the account was its proper value (item 15). He also conceded that, following one of the wife’s objections being sustained, there was no evidence to prove he owed any debt for accountancy fees (item 32).
[2] Order 1 made on 1 April 2015
During final submissions the wife contended for the parties’ respective expenditure on legal fees to be added-back as the parties’ notional assets and, for that purpose, she sought orders that the parties’ lawyers each comply with Rule 19.04 of the Family Law Rules. In purported compliance with a procedural order,[3] the parties later forwarded directly to chambers the documents prepared for each of them. Since the documents were not filed as ordered, they were marked as exhibits.[4] The wife has incurred legal costs and disbursements of about $60,000 and the husband about $109,000.
[3] Order 1 made on 2 March 2016
[4] Exhibits W4, H2
There was little evidence about the source of funds used by the husband for payment of his costs but, at least inferentially, the costs were paid from the redundancy funds he received in February 2015 and/or the investment funds he received in August 2015.[5] Those funds belonged to him and, in the absence of injunction, he was free to do with them as he wished. Although the wife contributed indirectly to the husband’s ownership of those funds, her interest in the funds arose, if at all, under Part VIII of the Act. The husband’s use of his own money to pay his own legal fees should not result in any add-back of such expenditure as a notional asset now available to him.
[5] Husband’s affidavit, paras 60(b), 60(q), 60(s)
Nor should the wife’s expenditure of money on legal fees, from the funds paid to her by the husband as an interim property settlement, result in the add-back of that expenditure as a notional asset now available to her.
Section 79(2)
Both parties contended, either expressly or implicitly, for adjustment of their existing property interests. They were correct to acknowledge the justice and equity of such an outcome.
Their relationship was lengthy, they each made substantial contributions to the accumulation of their property and superannuation interests, and they each made substantial contributions to the care and support of their children. In such circumstances it is iniquitous that the value of the husband’s net assets and superannuation interests exceeds the wife’s by a factor of about four. In addition, unless severed by adjustment orders, the parties’ financial affairs remain inextricably linked through jointly-owned real estate, shares, and a car.
Sections 79(4) and 75(2)
At the time of commencement of cohabitation the wife had a car, some household goods, minimal superannuation, and some savings.[6] As she conceded in cross-examination, those assets were of very modest value.
[6] Wife’s affidavit, para 5.1
The husband brought an encumbered apartment into the relationship, but the encumbrance was equivalent to its value so he had little equity in it. The husband also had some household goods, some savings, and some superannuation.[7] By then he had been working with his employer for about
12 years so, although unquantified, his accumulated superannuation must have been a noteworthy sum.
[7] Wife’s affidavit, para 5.2; Husband’s affidavit, para 7
The wife moved into the husband’s apartment to begin their cohabitation.
The husband was employed full-time by Company M, in whose employment he remained until his retrenchment in February 2015.[8]
[8] Wife’s affidavit, para 15; Husband’s affidavit, para 9
The wife was employed on a full-time basis until her confinement with the parties’ first child in May 1997. She worked in a variety of professions. Thereafter, before and after the birth of the parties’ second child, she worked on a part-time basis and she took charge of the household finances.[9]
[9] Wife’s affidavit, paras 7, 8, 13, 16, 17, 20, 21, 27; Husband’s affidavit, para 10
The parties bought and sold real property for profit during their marriage.[10] In some instances the properties were improved by building work undertaken by the wife’s brothers at discounted cost.[11] The husband was reluctant to admit it but, in the face of his admission he did not know, I accept the wife’s evidence that her brothers charged less than commercial rates.
[10] Wife’s affidavit, paras 12, 19, 23, 25, 26; Husband’s affidavit, paras 11-15
[11] Wife’s affidavit, paras 12, 26
Between late 2002 and early 2003, the parties purchased the rural property known as “Property C”, situated about only three kilometres from the wife’s parents’ own farm.[12] The property was purchased in the husband’s sole name to maximise taxation advantages, though the wife guaranteed the parties’ debt.[13] The overhead costs of running the farm were tax deductions that reduced the tax otherwise payable by the husband on his substantial income.[14]
[12] Wife’s affidavit, para 28; Husband’s affidavit, para 15
[13] Wife’s affidavit, paras 29-30; Husband’s affidavit, para 15
[14] Husband’s affidavit, para 27; Exhibit W2
Between April and June 2004, the parties purchased another rural property known as “Property B”, which adjoined Property C. It too was purchased in the husband’s sole name for the same reason and, again, the wife guaranteed the parties’ debt.[15]
[15] Wife’s affidavit, para 33; Husband’s affidavit, para 16
The parties regularly visited the farms from their home in Sydney, improving the properties and learning how to conduct a beef farming operation from the wife’s parents.[16] Once the parties began the farming enterprise, although it was conducted in the husband’s name, the business duties were shared. The husband did most of the labouring work and the wife took responsibility for keeping all of the accounting records for the business.[17] The family moved to Property C permanently in January 2007 and rented their home in Sydney.[18]
[16] Wife’s affidavit, para 31
[17] Wife’s affidavit, paras 32, 40; Husband’s affidavit, paras 21-22
[18] Wife’s affidavit, paras 31, 37, 38; Husband’s affidavit, para 18
As the husband was moved to concede in cross-examination, but for the extensive unpaid effort of the wife’s father upon their farms, the parties would not have been able to sustain the farming operation from their home base in Sydney. His help remained a boon even after the parties moved to Property C in 2007 and that remained the case until the parties’ separation in 2011.
The parties established a self-managed superannuation fund in June 2006, styled the “Baird Superannuation Fund” (“the Super Fund”). The parties were and remain the joint trustees of the Super Fund.[19]
[19] Wife’s affidavit, para 35; Husband’s affidavit, para 68
In 2007, the parties increased the bank debt secured over Property C, Property B, and their rented Sydney property by about $700,000, so the debt increased from $1,473,000 to about $2,173,000. The extra cash was principally used to allow the husband to invest in an entity called “M”.[20]
[20] Wife’s affidavit, para 41; Husband’s affidavit, para 17
Property B had no dwelling built upon it so, in January 2009, the parties bought another small parcel of rural property adjoining Property B with a dwelling upon it (“the house block”). The purchase was funded by the Super Fund buying from the husband some of his investment in M and the husband then using those funds to buy the property. Again the property was purchased in the husband’s sole name.[21] Once that purchase was completed, the house block was regarded as part of Property B and the family moved from Property C to Property B. The house on Property C was then rented.[22]
[21] Wife’s affidavit, para 42; Husband’s affidavit, para 19
[22] Wife’s affidavit, para 44; Husband’s affidavit, paras 19-20
In July 2010, the parties sub-divided and consolidated the properties so that Property B was enlarged and Property C was reduced, with a view to the sale of Property C and the retention of Property B. However, the parties separated in October 2011 before Property C was sold. The husband declined to move from Property B and so the wife and children moved to Property C.[23]
[23] Wife’s affidavit, paras 46-48
Throughout the relationship, the wife was primarily responsible for care of the children and the performance of household duties. Apart from working outside the home on a part-time basis, she did the farm accounting work at home and devoted her time to the children and the household. The husband’s full-time employment took him away from the family home several nights each week on average.[24] He agreed in cross-examination that such travel was intra-state, inter-state, and international.
[24] Wife’s affidavit, paras 15, 17, 18
After the parties separated, aside from their individual occupation of adjoining farms, little changed. The husband continued to conduct the farming enterprise over both farms, the wife continued to maintain the farm accounts and records, the husband maintained his employment with Company P, the wife maintained her principal responsibility for care of the children, and the parties continued to manage the household income and expenditure in much the same way. That remained so for nearly three years until about May 2014.[25]
[25] Wife’s affidavit, paras 52, 53, 56, 60; Husband’s affidavit, paras 29-35
The change in financial arrangements probably motivated the wife, at least in part, to commence these proceedings in December 2014. Some months later in April 2015, on the wife’s application, Cleary J ordered the husband to pay her $150,000 by way of interim property settlement, but dismissed her application for spousal maintenance.[26]
[26] Orders made 1 April 2015; Wife’s affidavit, paras 56-57
The husband was retrenched from his employment with Company P in February 2015, for which he was paid a net sum of $361,847.[27] He used those funds to pay $150,000 to the wife several weeks afterwards, pursuant to the interim orders.
[27] Husband’s affidavit, para 59, Annexure pages 114-115
After his retrenchment, the husband focussed all of his attention and energy upon the conduct of the farming enterprise on Property B and Property C. He continues to live at Property B.
In or about June 2015, the wife formed a de facto relationship with
Mr L, who lives and works on a farm in N Town, which is situated about two hours driving time from the parties’ farms at Property B and Property C. The wife and Mr L live between the properties at N Town and Property C, but spend most of their time at N Town.
The parties’ eldest child remains resident with the wife and does not see the husband.[28] He lives at N Town and undertakes work for Mr L.
[28] Wife’s affidavit, para 59
The parties’ youngest child has moved around. She lived with the wife until February 2015 but, following an argument, she moved out and went to live with family friends for some months. In September 2015 she moved again to live primarily with the husband, where she presently remains.[29] The husband supports the youngest child and the wife pays him very modest child support.[30]
[29] Wife’s affidavit, paras 58, 85; Husband’s affidavit, paras 75, 77, 78
[30] Wife’s financial statement, para 31; Husband’s affidavit, para 76
One of the few significant factual disputes in this litigation concerned the wife’s contention that the husband wasted large amounts of money over the last 12 months before trial. The wife contended he did so deliberately, so as to reduce the assets available for distribution between them, or alternatively, recklessly and wantonly. The husband denied the proposition when it was put squarely to him several times during cross-examination, so resolution of the argument affects their entitlements.
First, the wife drew attention to the increase in farm debt. There was no dispute that, at the time of separation in October 2011, the bank-secured farm debt stood at $2,093,000 but the farm overdraft account was $104,173 in credit.[31] Presently, the bank-secured farm debt stands at $2,069,000 and the farm overdraft account is $12,682 in credit.[32] Comparatively, the farm debt has increased by about $67,000, but the relatively modest leakage of debt needs to be seen in the context of the value of the farm real estate and the value of the farming enterprise conducted upon it by the husband. When contextualised in that way the increase in farm debt over more than the last four years is relatively immaterial.
[31] Wife’s affidavit, paras 50, 54
[32] Exhibit A (items 12d, 27)
The husband re-financed the bank-secured debt over the farms during 2015, but that did not change the accuracy of the comparison between the level of farm debt at separation and currently, despite the wife’s attempt to assert over the husband’s denial that the re-finance increased the debt by some $161,000.[33] If, as the wife asserted, the debt was enlarged by $161,000 as a consequence of the re-finance, then the increase has since been reined in by the husband because the current level of debt was a matter of factual agreement.
[33] Wife’s affidavit, para 63; Husband’s affidavit, paras 49-50, 53-54, 56-58
The wife also complained about the husband’s recent entry into farming leases for stock and equipment,[34] but she conceded the farm now carries considerably more stock than it did before. The agreed value of the assets and liabilities which comprise the husband’s farming enterprise necessarily means it has a net value of $563,660.[35]
[34] Wife’s affidavit, paras 67-68; Husband’s affidavit, paras 40-44
[35] Exhibit A (items 12, 28)
The wife’s complaint therefore distilled to the manner in which the husband dissipated his redundancy payment and the money he received on the wind-up of his M investment.
Dealing with the redundancy payment first, the husband received $361,847 in February 2015, from which he paid the wife $150,000 in April 2015. It is common ground he spent the residual sum of around $211,000. In March 2015, the husband informed the wife in writing that he intended using the redundancy to service loan repayments on the farm debt, since he was no longer in the employ of Company P and therefore no longer receiving a wage.[36] The husband then deposed, in relatively precise detail, to the manner of his expenditure of all the redundancy funds.[37]
[36] Husband’s affidavit, para 53
[37] Husband’s affidavit, paras 60-61
In respect of that expenditure, the wife only directly challenged the husband in cross-examination about two items of expenditure. One related to his purchase of a vehicle[38] and the other related to a holiday he took to Country O.[39]
[38] Husband’s affidavit, para 60(m)
[39] Husband’s affidavit, para 60(p)
In respect of the vehicle, the husband explained he bought it because the other two farm vehicles to which he had access were incapable of towing a horse float. The parties’ daughter is a horse riding enthusiast and her horse needed to be transported to events. The husband said he also used the vehicle to tow farm stock he sometimes loaded into the float. He spent about $50,000 on the purchase of the vehicle, which was a second-hand SUV. The evidence does not permit a conclusion the expenditure was reckless or even unwarranted.
The husband took a holiday to Country O for about 10 days in May 2015. His discretionary expenditure included airfares, accommodation, and consumables while in Country O. It was hardly reckless of the husband to incur such cost. The family had previously taken overseas holidays so it was consistent with their past practice, he was recently made redundant by his long-term employer, and being past 50 years of age he wanted to derive some enjoyment from the wealth produced by his effort. Nothing about the extent of his expenditure on that holiday was eventually contended to be untoward.
As for the M investment, it was wound-up for reasons beyond the husband’s control in August 2015. The husband deposed to the precise details of the money he received, how it was banked, and how it was spent.[40] Over a period of about a month, on his evidence, he received $290,129, which sum is not too dissimilar from the wife’s belief he received $297,513.[41] Whatever the precise amount, it is common ground the money was all spent. The wife did not directly challenge the husband in cross-examination about any of the discrete items of expenditure from those funds.
[40] Husband’s affidavit, paras 63-67
[41] Wife’s affidavit, para 69
Ultimately, the wife’s grievance did not pertain to any particular item upon which the husband spent money after February 2015. Rather, she was aggrieved at the total amount he spent, which approximated $500,000. Undoubtedly that was a very large amount of expenditure in a period of only about 12 months, but the husband advanced explanations for it.
The husband was without income after his redundancy in February 2015, save for some trailing commissions of about $13,500 he received, so he supported himself on the redundancy and investment funds he received. That of itself was a significant factor because his gross annual income had recently been about $236,000.[42]
[42] Wife’s affidavit, para 83; Exhibit W2
Apart from the husband’s expenditure on himself and the children,[43] money was spent on the farms to improve the land, bolster the herds of animals, and enhance the farming enterprise.
[43] Husband’s affidavit, paras 79-81, 97
The expenditure of money to improve the farms and the farming enterprise should not have been surprising to the wife. She knew the husband had been doing it for years. He spent money on Property B and, after she expressed interest in taking ownership of Property B in these proceedings, he turned his attention and expenditure to Property C.[44]
[44] Wife’s affidavit, para 70
The wife asserted, and the husband accepted in cross-examination, that his farm expenditure on repairs, maintenance, and improvements during 2015 was about double the expenditure in previous years.[45] She regarded that as unjustifiably extravagant. Despite her doubts about the husband’s bona fides, such an escalation of expenditure is consistent with the availability to him of significant capital in 2015 that had not been available to him in prior years.
[45] Wife’s affidavit, paras 71, 73, 74
Not only did the husband spend money on repairs, maintenance, and improvements on the farms, he also enlarged the herds run on the farms. The enlargement was at least partly due to new stock leases worth $108,000,[46] but that does not account for the whole of the expansion of the herds, which are collectively now worth $476,000.[47] The wife was impelled to concede in cross-examination that the herds now run by the husband on the farms are much larger than before. Excluding livestock agisted on the farms by third parties, there are now 512 animals grazing on the farms and, by comparison, the wife admitted that three years ago in 2012 there were only about 120 livestock grazing on the farms (plus an unspecified number of calves).
[46] Exhibit A (items 28a, 28b)
[47] Exhibit A (item 12b)
Plainly enough, in the knowledge he was no longer in paid employment off the farms, the husband spent a large amount of capital that suddenly became available to him improving the farms and enlarging his commercial farming enterprise in an attempt to make it a more viable income stream. Others in his place may not have done the same and the wife may genuinely regard it as imprudent, but the evidence does not support a finding that the husband’s expenditure was reckless, wanton, or wasteful, much less deliberately so. I am not satisfied he should be disadvantaged, or alternatively the wife benefitted, on account of that expenditure in the assessment of their respective contributions pursuant to s 79(4)(a)-(c) of the Act.
The husband contended that comparison of the parties’ contributions to the present time resulted in his entitlement to 53 per cent of the net assets and superannuation interests. He attributed the slight inequality to his allegedly greater contributions in the period since separation in 2011, which he identified to be his continued operation of the farming enterprise and the contribution of the redundancy payment he received in February 2015, but his contention was misconceived.
As was earlier found and explained, the parties’ lives were largely unchanged up until 2014 when the husband purported to unilaterally re-structure the parties’ financial arrangements. Until then they each continued to work towards the family’s advancement and devoted their energy to that task in relatively equal measure. Afterwards, the husband continued to operate the farm single-handedly for his own benefit, though he paid $150,000 to the wife when ordered to do so. The wife has only since spent about one-third of those funds, but the husband spent the residue of the redundancy payment he retained. The wife continued her role providing primary care for the parties’ children, until February 2015 when the youngest child ceased living with her and until November 2015 when the eldest child attained his majority.
The husband placed great store in the significance of his receipt of the redundancy payment in February 2015. The quantum of the payment was related to the length of his service, which stretched over 31 years, but it was an error to simplistically minimise the wife’s contributions to the payment merely because barely one-half of it correlated with the duration of the parties’ relationship. The payment comprised several different amounts for accrued leave, ex gratia pay, pay in lieu, and redundancy, all of which were the subject of different taxation treatment.[48] To the extent that the “redundancy” component was calculated by reference to the whole 31 years of the husband’s employment, stretching back before the parties’ cohabitation, it was well and truly off-set by the value to the parties of the work done on their farms by the wife’s father over the years between 2003 and 2011. Without his help, the husband would probably not have had a farming enterprise at all and he would then have been deprived of the ability to (legally) virtually avoid paying any tax for the last decade. When the husband was challenged in cross-examination with the proposition he could not have established and conducted the farming enterprise without the help of the wife’s father he said “I’m not disagreeing with you”. The component of the husband’s redundancy payment which related to the period after the parties’ separation was off-set as a contribution by the wife’s contributions with the children over the correlative period.
[48] Husband’s affidavit, Annexure pages 114-115
The wife conceded the parties’ contributions were equal, save for her assertion of the husband’s unjustifiable expenditure of the redundancy and investment funds during 2015, which contention is rejected for reasons already explained.
Given the rejection of the parties’ respective contentions about why their own post-separation contributions should be regarded as comparatively superior, their acceptance otherwise of the general equivalence between their overall contributions was right. As the husband correctly said in cross-examination, they “worked as a team” and their efforts were a “joint exercise”.
The husband worked hard in employment, which resulted in his receipt of a substantial income and a sizeable redundancy package, and he worked hard on the farms, particularly after the family relocated to the farms in 2007.
The wife supplemented the household income with part-time employment, performed most of the household duties until separation in 2011, maintained the farm accounts until May 2014, remained primarily responsible for the care of the children until 2015, indirectly provided the invaluable assistance of her father around the farms, and indirectly provided the (much less significant) assistance of her brothers to renovate properties at somewhat less than ordinary commercial rates.
The parties are of reasonably similar age – the wife is 46 and the husband is 52 – and both are in good physical and psychological health.
The husband has not re-partnered and, although the wife has re-partnered with
Mr L, his financial circumstances do not materially alter the wife’s own financial position. The cross-examination of Mr L only served to confirm he is relatively impecunious. He manages a farm for his family, for which he is paid a modest wage and provided with a car and accommodation on the farm. He has minimal savings. The husband’s submission for an adjustment in his favour on account of those facts is rejected.
Nevertheless, several features of the evidence identified by the parties do justify adjustment of their interests from a position of equivalence. They were: the husband’s substantially greater income-earning capacity; the substantial farming losses accrued by the husband which will likely diminish his future taxation liabilities and thereby boost his expendable income; and the husband’s continuing role as the youngest child’s primary carer.
The wife has had fairly broad employment experience, elaborated in her curriculum vitae,[49] though much of it is now quite dated. The wife sacrificed her career opportunities at the husband’s request when they began their family.[50] The last paid job she held was contract work, for which she has not yet been paid.[51] Presently, the wife remains reliant upon rent and bank interest as her only form of income.[52]
[49] Husband’s affidavit, para 10, Annexure pages 6-9
[50] Wife’s affidavit, paras 16, 79, 80
[51] Wife’s affidavit, para 77; Exhibit A (item 21)
[52] Wife’s financial statement, paras 9-16
The wife’s plan for future income is to conduct her own farming enterprise on Property B with the help of Mr L. To that end, she recently acquired a diploma in agriculture.[53] Her plan is viable because the parties agreed she should retain Property B as part of the property settlement.
[53] Wife’s affidavit, para 76
The husband has a similar plan. He proposes to continue conducting his farming enterprise, though it will contract to operate over only Property C and not Property B. The parties agreed the husband would retain Property C as part of the property settlement.
The husband’s future farming operation will be quite different to the wife’s for several reasons. First, it will be much bigger, because Property C is a much bigger farm than Property B. Secondly, the husband’s enterprise has been operating for many years and now occupies him on a full-time basis, whereas the wife’s planned enterprise will need to be commenced and will take time to build momentum. Thirdly, it was common ground the significant expenditure of the husband within his farming enterprise over the last couple of years produced large losses he is now able to carry forward into future financial years,[54] the effect of which will be to reduce his taxation liabilities. It was impossible to quantify the future taxation savings the husband will generate, but they are likely to be very substantial since, in the past, the deductions reduced his taxation liabilities to minimal amounts, if not nil.[55]
[54] Exhibit W1
[55] Husband’s affidavit, para 27; Exhibit W2
If the husband’s farming enterprise is the resounding success for which he hopes, his actual income will likely be far greater than the income the wife will be able to generate for herself from a much smaller farm.
The wife attempted to demonstrate, through the husband’s cross-examination, that the husband’s income-earning potential from his farming enterprise is quite limited because the income he can conceivably generate will likely be mostly, if not entirely, spent on maintaining the debt he will continue to carry. The husband rejected the proposition but, regardless, his income-earning capacity is superior to the wife’s.
Whether the husband’s farming enterprise fails, as the wife expects, or is only moderately successful, in either case it will not generate for him the income he could earn by seeking out remunerative employment in the vocational field in which he was so successful over so many years.
His annual gross income grew to more than $250,000 in the years preceding his retrenchment in 2015[56] and, immediately afterwards, he was pursued by a major bank to discuss future employment prospects. For reasons not fully explored in evidence, that opportunity did not come to fruition but it still demonstrates the value prospective employers perceive in his employment. The husband’s absence from his field of expertise over the last 12 months has not been so protracted that his skills are now stale.
[56] Wife’s affidavit, para 83; Exhibit W2
The husband contended that his firm intention was to remain a full-time farmer and reject any employment opportunities away from the farm.[57] That is his prerogative, but his choice does not confine the Court to consideration of merely the income he will probably actually earn in the future. The Act expressly implores the Court to contemplate the husband’s earning “capacity” (s 75(2)(b), (h), (j), (k)), but at the very least invites it to do so (s 75(2)(o)). The husband probably now has the capacity to earn similar income from paid employment as he did in the past; he is just unwilling to exercise his capacity.
[57] Husband’s affidavit, para 98
The youngest child has lived with the husband for the last six months or so, but within the last 12 months her attitude has been unpredictable. She may decide to remain living with the husband but, while that is not a strong probability, it is currently no less probable she will remain living with the husband than it is she will return to live with the wife. If she remains with the husband, he will retain responsibility for her and receive only modest child support payments from the wife.[58]
[58] Wife’s financial statement, para 31; Husband’s financial statement, para 13
The husband’s significantly greater earning capacity and his prospective ability to minimise his tax and thereby increase his usable income over foreseeable years collectively warrant an adjustment in the wife’s favour, ameliorated to some extent by the reasonable chance the husband will remain primarily responsible for the youngest child for the next two years or so over the remainder of her minority.
Conclusions and orders
The wife’s overall entitlement to the parties’ net assets and superannuation interests is assessed at 55 per cent. In monetary terms, that proportional interest computes to $1,950,347 (= 55 per cent x (718,765 + 2,827,320)). The husband’s corresponding entitlement to 45 per cent computes to $1,595,738.
The husband’s contention that he was entitled to 60 per cent of the parties’ net assets and superannuation is rejected. So is the wife’s contention that she was entitled to as much as 60 per cent. The moderate percentage adjustment of five per cent in the wife’s favour, resulting in a 10 per cent differential overall, properly reflects statutory considerations. The adjustment of five per cent, which alters the underlying conclusion of general equality between the parties’ contributions, results in the wife’s receipt of about an extra $177,000 in net assets and superannuation. That is indeed a large sum of money, but still much less than the gross income the husband could earn in a single year of remunerative employment for which he is well qualified.
Presently, the wife has assets and superannuation interests with a net value of $718,765, but it was agreed she should assume sole legal proprietorship of Property B (being both the farm and the house block), the encumbrances over which would be discharged by the husband (items 4, 26, 27). If she divests herself of the half-interest in the Sydney property (item 1), as the husband wants, but takes sole proprietorship of the jointly-owned car (item 3) and retains the other chattels and superannuation interests she already possesses (items 15-23), then she will be left with property worth $1,473,138 net. The husband would then need to give to her, from some source, extra cash of $477,209 (= 1,950,347 – 1,473,138).
That would leave the husband with sole proprietorship of Property C (item 5) and the Sydney property (item 1), though he would need to obtain his bank’s consent to transfer the existing mortgage security over Property B to the Sydney property (item 27). Such consent may not be forthcoming because, as collateral for the debt, the Sydney Property Cs worth less than Property B. Otherwise, the husband would retain his farming enterprise and its attendant debts (items 12, 28), the jointly-owned shares (item 2), his other chattels (items 6, 7, 8, 9, 10, 11, 13, 14), and his superannuation interest (item 36). The husband would bear responsibility for his own debts (items 29, 31, 33), the joint debt (item 26), and the payment of $477,209 due to the wife. That would leave him with net assets and superannuation of $1,595,738.
The husband is already carrying business debt of $2,283,063, almost all of which is secured over Property C, Property B, and the chattels which form part of his farming enterprise. Given his current lack of income and the prospective reduction in the value of the security he can offer for existing debt, it seems highly unlikely he would be able to raise an extra $477,209 to pay out the wife’s proper entitlement, but he wants to try and no persuasive reason was advanced for why he should be deprived of the opportunity.
The wife advocated for immediate sale of the Sydney property and her payment out of the net sale proceeds, or alternatively, her conditional sole ownership of it,[59] but if the husband cannot raise the cash necessary to pay her out then sale of the Sydney property will be the inevitable result anyway. The transfer of the Sydney property by the husband to the wife, in addition to Property B, would surely result in destruction of the husband’s farming enterprise and force him to sell Property C since, deprived of use of the Sydney property in substitution for Property B as collateral for his bank debt, Property C alone does not offer sufficient collateral to support the entire debt. The husband could not conduct a farming enterprise if he does not own a farm.
[59] Exhibit W3, Order 2
Part of the adjustment of interests between the parties can be achieved by way of superannuation splitting orders to more evenly distribute their respective interests in the Super Fund, as the wife proposed.[60] The husband wanted to retain the whole of both parties’ superannuation interests in the Super Fund,[61] but that was in the hope or expectation he would receive a greater share of the overall property than the wife, which did not eventuate. The split of his superannuation interest will reduce the amount of cash he must raise to pay to the wife in fulfilment of her entitlement, which will presumably be advantageous to him.
[60] Exhibit W3, Order 5
[61] Exhibit H1, Orders 6-12
The combined value of the parties’ superannuation interests held in the Super Fund is $463,896, of which half amounts to $231,948. Allowing for the wife’s current interest of $14,361 in the Super Fund, she will have one-half of all the superannuation accumulated in the Super Fund if $217,587 is split from the husband’s current interest. Both parties wanted superannuation splitting orders and, since the parties are the joint trustees of the Super Fund, they have been accorded procedural fairness as required by the Act (s 90MZD) and the Family Law Rules (r 14.06). There was also agreement between them about the value of their respective interests within the Super Fund, so acceptance of those values satisfies the Court’s valuation obligation under the Act (s 90MT(2)).
The wife’s receipt of an extra $217,587 in superannuation by way of superannuation splitting order means the husband will only need to find an extra $259,622 (= 477,209 – 217,587) in cash to pay to the wife.
The husband proposed that the wife be compelled to resign as a trustee of the Super Fund once the superannuation split was accomplished,[62] but no such order is made. The wife’s splittable interest in the husband’s superannuation interest will remain locked in the Super Fund until his superannuation interest becomes payable or until the wife notifies of her requirement (under rr 7A.03B, 7A.03C, 7A.03D of the Superannuation Industry (Supervision) Regulations 1994 (Cth)) for the creation of a new interest for her, comprising the splittable amount, and she then rolls-out her separate superannuation interests from the Super Fund to another compliant superannuation fund. Until then, both parties must remain trustees of the Super Fund (s 17A(1) of the Superannuation Industry (Supervision) Act 1993 (Cth)). If and when the wife rolls-out her own superannuation interests from the Super Fund it is highly unlikely she will have any desire to remain a trustee of the Super Fund, bearing the concomitant obligations, and she will probably resign her trusteeship voluntarily.
[62] Exhibit H1, Order 12
If the husband is able to convince his bank to accept the Sydney Property in substitution for Property B as security to support the existing and extended debt, the wife will be the sole owner of Property B (free from encumbrances) and the husband will be the sole owner of Property C and the Sydney property. The husband must indemnify the wife against any debt connected to Property C and the Sydney property.
If the husband cannot raise the necessary funds for payment to the wife then, initially, the Sydney property must be sold and the proceeds used to achieve the wife’s sole ownership of Property B (free from encumbrances) and her receipt of the extra cash. If that is not enough to enable the husband to ensure the wife’s receipt of sole ownership of Property B (free from encumbrances) and her receipt of the extra cash, then the default sale of Property C will follow.
The husband must pay the small land tax debt for which the parties are currently jointly indebted (item 26). It was not addressed as an issue by the parties in their evidence, submissions, or proposed orders. His payment of that debt is already factored into the calculations of the parties’ entitlements.
The parties jointly own a parcel of Wesfarmers shares (item 2). Both parties proposed that the husband assume sole ownership of the shares and the wife transfer her interest in them to the husband.[63] The orders achieve that outcome.
[63] Exhibit W3, Order 3; Exhibit H1, Order 2(c)
The parties jointly own an unregistered SUV vehicle (item 3). Both parties proposed orders for sale of the car and equal distribution of the sale proceeds.[64] However, since the wife is in possession of the vehicle[65] and she wants carriage of the sale,[66] the orders provide for her to keep the car. She can then do with it as she pleases.
[64] Exhibit W3, Order 4; Exhibit H1, Order 3
[65] Husband’s affidavit, para 36
[66] Exhibit W3, Order 4
The wife sought an order for the husband to surrender up to her certain chattels, which she itemised on a list.[67] No such order is made for the following reasons.
[67] Exhibit W3, Order 6
When the parties separated in October 2011 the wife vacated Property B and went to live at Property C. She furnished Property C by taking some furniture from Property B, taking some of the furniture the parties had stored, and the use of some extra furniture she acquired.[68] She did not depose to the parties’ ownership of any extra chattels at the time of their separation,[69] she has since lived comfortably with the furniture she procured at that time, and the parties agreed the furniture presently in their respective possession is of equal value.[70] Such evidence was irreconcilable with the evidence given by the wife orally in cross-examination that she did not get her “fair share” of the parties’ furniture. Furthermore, in full knowledge the husband opposed her application for an order compelling him to surrender to her the items of furniture she nominated, she expressly abstained from his cross-examination on the topic. Consequently, after the elapse of several years, it remains unknown whether the husband even now possesses all or some of the items she wants and, even if he does, on her own admission, the furniture now possessed by him is collectively worth no more than the furniture possessed by her.
[68] Wife’s affidavit, para 49
[69] Wife’s affidavit, para 55, Annexure A
[70] Exhibit A (items 13, 22)
The orders set out at the commencement of these reasons represent a just and equitable alteration of their parties’ property and superannuation interests.
I certify that the preceding ninety seven (97) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on 16 March 2016.
Associate:
Date: 16 March 2016
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