Beasley and Yates

FAMILY COURT OF AUSTRALIA

BEASLEY & YATES

[2013] FamCA 855

FAMILY LAW – PROPERTY SETTLEMENT – De facto relationship – just and equitable to make orders altering present property interests of the parties – significant issue as to value of business acquired by the parties during cohabitation from the de facto wife’s parents – significance of parties continuing to pay over-market rent to the de facto wife’s parents subsequent to acquisition of business – determination as to weight to be attached to parties contributions – consideration as to just and equitable outcome.

Family Law Act 1975 (Cth) ss 79, 90SB, 90SF, 90SK, 90SM

Stanford v Stanford [2012] HCA 52
Bevan & Bevan [2013] FamCAFC 116

APPLICANT:

Mr Beasley

RESPONDENT:

Ms Yates

FILE NUMBER:

PAC

2875

2012

DATE DELIVERED:

1 November 2013

PLACE DELIVERED:

Suburb J

PLACE HEARD:

Suburb J

JUDGMENT OF:

Foster J

HEARING DATE:

24 and 25 October 2013

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Lloyd SC

SOLICITOR FOR THE APPLICANT:

Maclarens Lawyers

COUNSEL FOR THE RESPONDENT:

Mr Maddox

SOLICITOR FOR THE RESPONDENT:

Calvin Nelson & Co

Orders

That within 14 days from this date the wife pay to the husband or as he may otherwise direct in writing the sum of $100 000.
That upon the payment of the sum of $100 000 the husband do all necessary things and sign all necessary documents to transfer to the wife and or assign to the wife his shareholding and other interests in B Pty Ltd and resign as director and/or secretary of the said company and that thereafter the wife indemnify the husband from all or any liability arising out of the trading affairs of the said company and indemnify the husband from all or any liability arising out of the joint Westpac Commercial Bill Facility.
That within four months from this date the wife pay to the husband or as he may otherwise direct in writing the further sum of $634,677 and in consideration of that payment the husband do all necessary things and sign all necessary documents to transfer to the wife all of his interest in the property situated at C Street, Suburb D and concurrently with the said payment the wife do all things necessary and sign all necessary documents so as to procure a discharge of the present joint mortgage encumbrance secured over the said property so as to release the husband from all or any liability in regard to that mortgage.
That pending the transfer of the property at C Street, Suburb D to the wife as provided for in the preceding order the wife shall have sole use and occupation of that property to the exclusion of the husband and shall indemnify the husband from all or any liability arising from the joint mortgage secured over the said property and any property outgoings as and from this date.
That as and from this date the wife shall be entitled to receive all dividend entitlements declared by B Pty Ltd to the exclusion of the husband.
Liberty to apply as to implementation or enforcement of these orders.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Beasley & Yates 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 SUBURB J

FILE NUMBER: PAC 2875 of 2012

Mr Beasley

Applicant

And

Ms Yates

Respondent

REASONS FOR JUDGMENT

The Proceedings

The humble towbar provides the background for these proceedings with one of the primary aspects of the property dispute between the parties relating to the circumstances of acquisition and the value of a business purchased by the parties from the de facto wife’s parents. That business for many years has supplied wholesale and retail products to the market.
These are proceedings between the applicant de facto husband (“the husband”) and the respondent de facto wife (“the wife”) where both parties seek adjustive orders as to property.
The applicant sought orders that provided for the property of the parties to be divided equally between them and to give effect to those orders there be a sale of the former matrimonial home at C Street, Suburb D in order to facilitate payment of a cash sum to the applicant or in the event that the respondent wishes to retain that property that she pay to him a cash sum and the applicant transfer to the respondent his interest in the Suburb D property and his interest in the company B Pty Ltd.
The respondent de facto wife sought orders that in summary provided that she pay to the applicant by way of property adjustment the sum of $560,000, that in consideration of that payment the applicant transfer his interest in C Street, Suburb D to her, that concurrently with the transfer she discharge the existing mortgage on the Suburb D property and that the husband transfer to her his interest in the company B Pty Ltd.

Background

The wife is presently aged 45 years. The husband is presently aged 44 years.
The parties commenced cohabitation in City E, Country F in early 1997 and separated under the one roof in July 2010 with the husband finally moving out of the Suburb D family home in November 2010.
There are two children of the parties’ relationship; G now aged 12 and H now aged 9. The children reside primarily with the mother and spend four nights a fortnight with the father. The child G attends the I School at Suburb J. The child H attends the K School at Suburb J. There is no child support arrangement in place between the parties and to date the children’s private school fees have been met by way of contribution from both parties from dividends received post separation.

At Cohabitation and Shortly Thereafter

At the commencement of cohabitation the wife was not in employment but was undertaking a course in the travel industry. At this time the wife had $75 000 from a property settlement, a car, furniture, some other savings and superannuation. The wife obtained employment in about August 1997.
At the commencement of cohabitation the husband was in employment and had savings of about $25 000, a car subject to loan and some furniture. During this early period of cohabitation the parties contributed to the rent on the property occupied by them equally and otherwise kept their finances separate.
In September 1997 the parties purchased a property in City E, Country F to the sum of $171 000. The purchase price comprised a loan from the wife’s parents in the sum of $115 000 and the balance from the parties’ funds at that time. From this time on the parties combined their financial resources.
The wife concedes that probably by the time of purchase in September 1997 the sum available to her at the commencement of cohabitation may have diminished but that she had some other savings.
Upon completing her course the wife obtained employment and the parties were able to repay from their combined incomes and an inheritance received by the wife of $30 000, the loan from the wife’s parents by 2000.
In part of the period from late 1997 until mid-2000 the husband’s income exceeded that of the wife.

Move to Sydney

On the suggestion of the wife’s mother, the parties in May of 2000 rented their City E home and moved to Australia and initially resided with the wife’s mother until about mid-2002.
After moving to Sydney the husband and wife commenced employment in the wife’s parents business B Pty Ltd that was in the business of supplying, retailing and fitting parts and accessories.
The business had been operated by the wife’s parents since about 1973.
Subsequently over a period the parties took over the management and day to day operations of the business in conjunction with senior staff with the wife’s parents continuing to be the sole directors and shareholders. The wife acknowledges that she and the husband worked diligently in the business. The business traded strongly under the management of the parties and the wife says that she and the husband were employees of value to the business.
In December 2000 the husband and wife purchased a home at Suburb L for the sum of $415 000. The purchase price comprised the parties’ savings at that time and bridging mortgage finance from Westpac.
In late 2001 the parties sold their property in City E, Country F and applied those funds together with further mortgage borrowings to the construction of a new home on the Suburb L property. Following construction the parties moved from the wife’s mother’s home to Suburb L in mid-2002.
After the birth of the parties’ first child in December 2001 the wife undertook administration, banking and office work for the business from the home office whilst the wife’s mother cared for the child and later the wife attended the Suburb M business premises on days that the child was in care two days per week.
Subsequent to the birth of the second child in April 2004 the mother attended to administration work for the business at her mother’s home whilst her mother cared for the children and otherwise undertook administration work at the parties’ Suburb L home.

Acquisition of B Pty Ltd

In 2005 the parties primarily through the wife commenced discussions with the wife’s parents about the possibility of the parties acquiring the business of B Pty Ltd from the wife’s parents.
From late 2005 until early 2006 there were various discussions and consideration of financial documents in seeking to settle upon an appropriate purchase price.
At a meeting on 8 June 2006 agreement was reached in relation to the proposed purchase. In attendance at that meeting were the wife, her mother, the Westpac bank manager, Mr N the business chartered accountant and his assistant accountant Ms O. Minutes of the meeting evidence that the purchase price was to be approximately $1,268,326 calculated at “2.5 times the average goodwill over five years and the net assets after takeover.” The minutes noted, inter alia, that a lease agreement needed to be prepared as the real estate upon which the business traded was not included in the sale. The minutes also noted that the purchase price was to be funded primarily by a commercial bill facility from Westpac with the primary security for that loan being the Suburb P premises owned by the wife’s mother.
The wife acknowledges that most of the discussions as to the purchase price were between her mother and Mr N and that she spoke to Mr N from time to time. The wife also undertook some calculations as to a price herself.
Ultimately a purchase price of $1.2 million was agreed and the purchase price was funded by way of a commercial bill from the Westpac Banking Corporation secured over the real estate owned by the wife’s mother who also guaranteed the advance.
It was put to the wife by counsel for the husband that the deal was “an arm’s length transaction with no favours to each other and a fair price”. The wife responded that it was “cheaper but a fair price”.
The purchase was completed on 1 July 2006. Subsequent to the purchase the parties became the sole shareholders and directors of the company B Pty Ltd.
After the purchase there was a separation of responsibilities in the parties’ roles in the business. The wife mostly worked from home attending to the financial aspects of the business including accounts and banking whilst the husband worked hands on at the business premises attending to customers and supervision of staff and selling product. The wife acknowledges that the husband was “good at it”.
Following the acquisition of the business by the parties the company continued to pay rent to the mother’s parents in relation to the premises at Suburb P and Suburb M from which the business was conducted.
Following the purchase of the business the husband and wife drew salaries of $80 000 per annum each and were paid other remuneration by way of dividends being distributions of profit in each financial year. In the financial years ended 30 June 2007 to 30 June 2010 total dividends to the parties were about $805 000.

The Value of the Business Acquired by the Parties

The family accountant at the time of purchase “valued” the business at between $1.139 million and $1.397 million depending on the multiple to be applied to the previous five years average profit of $258,706.
In the financial year prior to purchase ended 30 June 2005 overall rental payments paid by the business to the wife’s parents or their superannuation fund increased from previous years by about $80,000 to a total of about $210,000 per annum whereas in previous years rent had been approximately $130,000 per annum.
The wife knew of the overmarket rent payments in June 2006. The wife was of the understanding that the rental arrangement at the time of purchase was a benefit to her parent’s superannuation fund that owned one of the underlying properties on which the business traded. She spoke to the husband about it and they agreed that the benefit of maintaining the business in its current premises outweighed the cost of moving after looking at market rent for two other properties.
Calculations by the family accountant had looked at average profit over the previous five years incorporating average rental payments paid over that period, notwithstanding that the significant increase in rent would be paid in each year following purchase, absent agreement otherwise, with the wife’s parents.

The Single Expert Accountant

The single expert accountant, Mr Q was instructed by the parties to undertake a historical valuation of the value of the business at the time of acquisition. He valued the business at $1.949 million.
However to achieve that valuation, in part, the rent paid by the business to the wife’s parents or their entities was adjusted back to market level as determined by an independent valuation commissioned by the parties. This resulted in an adjustment by reduction of rent payable by the business of $61,065 in 2005 and $55,924 in 2006 financial years.
Otherwise the single expert assumed for the purpose of his valuation that there were “informal leases with the wife’s parents”. What this assumption meant was not explored in evidence. For the historical valuation his prime consideration was to adjust rent to market.
The overpayment of rent as against the market continues to date. Over the financial years 2010, 2011 and 2012 this adjustment saw an average reduction in rental payments of approximately $77,500. It is reasonable to infer from the historical valuation figures and the valuation as at 30 June 2012 provided by the single expert that rental payments over the period since purchase to 30 June 2012 have been overpaid as against the market by an average of about $70,000 per annum or a total of $420,000.
However the single expert acknowledged that his historical valuation based on his expertise may not translate itself into a market price by reason of a particular bidding purchaser looking at value to him.
There is no valuation of the business historically as at 30 June 2006 by reference to the actual rent paid except that undertaken by the family accountant Mr N. That calculation estimated a valuation in the range as set out above. The single expert acknowledged that a different result could have been obtained by Mr N for the value at that time by using only the 3 or 4 years previous figures and not 5 as had been used and by recognising certain anomalies in the figures used by him. The extent of that difference is not known.
It is the wife’s contention that the business acquired by the parties in 2006 was acquired at a significant undervalue by reason of the family connection. Apart from the task undertaken by the family accountant, Mr N, there is no other evidence before the Court as to the value of the business as acquired by the parties at the time of its purchase.
It is significant that in the context of this issue the wife failed to call her mother to give evidence as to the negotiations and/or her intentions at the time of the sale of the business. The wife’s mother was clearly available to give evidence. The wife proffered no explanation for her mother not being called on the issue. The wife did not call evidence from Mr N. He was available if required. It can be inferred that their evidence would not have assisted the wife’s contention.
The Court is satisfied that the purchase price paid reflected the intention of all parties to the transaction in that it reflected a fair price in the circumstances at that time.
However it is common ground that the purchase could not have proceeded without the wife’s mother making available security over her Suburb P property and her personal guarantee for the advance from the Westpac Bank by way of commercial bill.
Subsequent to the acquisition of the business the wife’s parents and their superannuation fund received as it were a windfall to some extent in relation to rental payments received. On the other hand the parties to these proceedings were able to acquire a business that provided to them a valuable financial resource in relation to future salaries and dividend income.

The Suburb D Home

Subsequent to the purchase of the business and in 2008 the parties purchased the present family home at C Street, Suburb D for the sum of $810,000. The purchase was financed by a mortgage of $850,000 from Westpac. The mortgage had a redraw facility attached to it.
Subsequent to purchase the parties undertook significant renovations to the Suburb D property funded by their wage and dividends received.
In May 2009 the parties sold their Suburb L home for $1,321,000 and net proceeds of sale were paid in reduction of the Suburb D mortgage that was thereby reduced to $378,532.
Upon sale of the Suburb L property the parties moved to the Suburb D property where renovations had been completed.

Separation

In mid-July 2010 the parties separated under the one roof in the family home at Suburb D. The parties continued to work in the business.
On 1 August 2010 the wife redrew from the mortgage account the sum of $380,856 and paid those funds to her own account. Thereafter the wife redeposited to the mortgage account the sum of $300,000 reducing the mortgage balance to $238,000 and transferred the sum of $80,856 to a schooling account for the children.
In November 2010 the husband vacated the family home and obtained rented home unit accommodation. The children remained living in the family home with the mother. The husband thereafter spent time with the children as agreed between the parties. The parties acknowledge that the children have substantially been in the primary care of the wife.

The Suburb S Property

In February 2011 the mother exchanged contracts to purchase a property at R Street, Suburb S for the sum of $806,000. The purchase price comprised monies available to the wife from her dividends received post separation and a mortgage borrowing from Westpac of $685,100. The wife was also assisted by a loan from her mother of $60,000.
The property was rented out after purchase.

Post Separation

In the financial year ended 30 June 2011 dividends were paid to the parties totalling $553,000. Of that sum $85,000 went to interest payments on the commercial bill facility, $60,000 to the joint home loan account and the parties each received dividends totalling $204,000.
Following separation there were difficulties between the parties in relation to the ongoing conduct of the business and their own relationship.
From late September 2011 until mid-February 2012 the husband did not attend at the business premises for work. During this period he travelled interstate and internationally to Country F and the Country T.
In October 2011 the husband purchased a motor vehicle the sum of $75,000 with the purchase price funded in part by a loan and otherwise from funds available to him from post separation dividends. That motor vehicle was subsequent destroyed by fire and the husband received an insurance payout that in part applied to the purchase of another vehicle.
In March 2012 the husband travelled to Darwin and thereafter did not work in the business.

In August 2012 orders were made restraining the parties from withdrawing funds from the home loan secured over the Suburb D property except for the payment of education expenses to the children, health insurance, mortgage payments on the Suburb D property and property outgoings.
Subsequently on 15 October 2012 further orders were made providing that dividends be paid from the business as follows:
a)$40,000 per quarter to cover interest on the commercial bill;
b)$4,000 per month to cover the children’s school fees and expenses; and
c)$6,800 per month to each of the husband and the wife.
On 3 May 2013 orders were made that the sum of $80,000 be withdrawn from the home loan secured over the Suburb D property and paid to the husband for legal costs and $50,000 for legal costs be withdrawn and paid to the wife.
In the financial year ended 30 June 2013 dividends to the parties totalled $325,900. Of that sum of $118,000 was applied to interest on the commercial bill, $44,000 to the children’s school expenses, $11,550 to the home loan, $14,300 to pay valuation fees and the sum of $72,500 to each of the parties.

The Law

The parties cohabited in a de facto relationship from 1997 until 2010 and there are two children of that relationship. Accordingly the Court is satisfied under section 90SB of the Act that it is able to make an order as to property adjustment.
Otherwise each of the parties were ordinarily resident in the State of New South Wales, being a participating jurisdiction, at the time of the commencement of these proceedings and that both parties to the de facto relationship were so resident for at least a third of that relationship in New South Wales. The geographical threshold provided for in section 90SK of the Act is satisfied.
The approach to the determination of an application under s 79 of the Family Law Act 1975 (Cth) is set out in Stanford v Stanford [2012] HCA 52 and that decision was the subject of detailed consideration by the Full Court in Bevan & Bevan [2013] FamCAFC 116.
The approach is apposite to a consideration of property adjustment in the context of this de facto relationship.
The Court should firstly identify the present assets, financial resources and liabilities of the parties.
The Court should then consider whether, having regard to the circumstances before it, it would be unjust and unfair not to make orders for alteration of the property interests of the parties having regard to the provisions of s 90SM(3) of the Act.
The Court can then proceed to consider the contributions by each of the parties as contemplated by s 90SM(4) of the Act.
Having determined the contribution-based entitlements of the parties the Court can then consider the various factors set out in s 90SF(3) of the Act and whether any further adjustment to the parties’ contribution-based entitlements is appropriate.
The Court is then required to consider the justice and equity of the proposed orders and whether in all the circumstances the orders to be made are appropriate.

The Property of the Parties

The Court is firstly required as a starting point to identify the existing legal and equitable interests of the parties in the property, the liabilities and financial resources of the parties at the time of the hearing.
Exhibit D comprises the working balance sheet settled by the parties and tendered at the conclusion of evidence. There is significant agreement as to the pool and some items of specific disagreement.
Set out hereunder is the agreed existing pool. The Court will give consideration to the disputed and other items thereafter:
Assets:
Joint              C Street, Suburb D     $1 950 000
Wife               R Street, Suburb S  $   815 000
Wife               Contents including art work  $     16 140
Husband       Contents including art work  $       7350
Wife               Japanese car  $     43 550
Wife               Money at bank  $       8721
Husband       SUV car  $     54 400
Husband       Money at bank  $       3880
Husband       Interim distribution  $     80 000
Wife               Interim distribution  $     50 000
Joint              Shareholding in B Pty Ltd   In Dispute
Liabilities:
Joint              Westpac Bank commercial bill                 $1 175 000
Joint              Mortgage Suburb D property  $   804 904
Wife               Mortgage Suburb S property  $   685 100
Husband       Credit card debt  $     39 334
Husband       SUV car loan  $     33 674
Wife               Debt to Ms U  $     60 000
Wife               Credit card debt  $     48 170
Superannuation
Husband       MTAA superannuation  $    62 724
Wife               MTAA superannuation  $     74 593
Wife               Legal Super  $     13 879
$   151 196

Is it Just and Equitable to Make Orders?

The Court should determine whether it is just and equitable to make a property settlement order. The Court needs to conclude that it would be unjust or unfair to leave present property rights intact. In many cases this requirement is readily satisfied where the parties are no longer in a marital or de facto relationship and thus, for example, the common ownership or use of property by husband and wife will no longer be possible or the express or implicit assumptions that underpinned existing property arrangements such as the accumulation of assets or financial resources by one for the benefit of both have been brought to an end with the relationship. In particular such a circumstance arises where both parties seek adjustment orders but are unable to agree as to same.
In this matter over the period of the parties’ relationship, which was for some 13 years until separation, the parties accumulated joint property and financial resources. The strong inference being that such assets were accumulated for the common purpose of providing for their life into the future and in all probability ultimately for their two children.
The overwhelming majority of the parties’ assets are held jointly, firstly in the equity in the property being the former family home at Suburb D and secondly in the parties shareholding in B Pty Ltd.
As a consequence of the commencement of proceedings as to property settlement both parties seek disparate property adjustment orders identified above to separate their joint interests.
The Court in the circumstances is satisfied that it is just and equitable to make orders as to property adjustment under s 90SM of the Act.

The Pool for Adjustment Purposes

During the course of evidence it was apparent that the parties had utilised their salaries and significant post separation dividend income for their own respective purposes. The husband had purchased a motor vehicle, travelled overseas and at his election had remained out of employment. The wife for her part had purchased her investment property at Suburb S assisted in part with funds provided by her mother.
During the course of submission is it was conceded that some assets accrued and liabilities incurred by the parties post separation by reason of the way in which they respectively applied their financial resources should be excluded from the asset pool for adjustment.
In relation to the husband this related to his SUV motor vehicle, his money at bank, his credit card debt and his SUV car loan. As to the wife this concession related to her Japanese motor vehicle, her money at bank, her credit card debt and her debt to Ms U.
It was conceded by counsel for the husband during submissions that the husband could not assert that he made any contributions to the Suburb S property acquired by the wife post separation. In that circumstance it is appropriate that the property and the mortgage debt relating to it be removed from the asset pool for the purposes of adjustment.
The removed items will be considered in the context of s 90SF considerations.
Otherwise it was contended by counsel for the husband that the over-payment of rent to the wife’s parents as referred to above should be an add back to the pool of assets for adjustment. The circumstances of the continuing over-payment of rent compared to the market has been referred to above and has been taken into account in the value adopted for the business at the time of acquisition. As discussed later in these reasons that circumstance has also been considered in the Court’s findings as to the present value of the company for adjustment purposes. Thus no sum will be notionally included in the pool as was contended for.
The asset pool for adjustment purposes is as follows:
Assets:
Joint              C Street, Suburb D     $1 950 000
Wife               Contents including art work  $     16 140
Husband       Contents including art work  $       7350
Husband       Interim distribution  $     80 000
Wife               Interim distribution  $     50 000
Joint              Shareholdings B Pty Ltd       In Dispute
Liabilities:
Joint              Westpac Bank commercial bill                 $1 175 000
Joint              Mortgage Suburb D property  $   804 904
$1 979 904
Superannuation
Husband       MTAA superannuation  $   62 724
Wife               MT AA superannuation  $   74 593
Wife               Legal Super  $   13 879
$ 151 196

The Value of B Pty Ltd

The parties are in dispute as to the value to be ascribed to their shareholding in company that contains the business acquired by them.
It is common ground that the basis for their respective contentions arises from the alternate valuations provided in the single expert report but that in relation to those alternate valuations a sum of $163,964 should be added to the valuation determined by reason of an accumulation of retained profits in the company in the financial year ended 30 June 2013.
The single expert provided valuations of the business on the following basis as at 30 June 2012:
a)Assuming normal commercial leases in place and market rent is payable: $2,178,641
b)Assuming no formal leases are in place but market rent is payable: $1,870,991
c)Assuming normal commercial leases and that rent is paid as previously: $1,886,041.
d)Assuming no normal commercial leases and that rent is continued to be paid as previously: $1,618,816.
The husband contends for a valuation of $2,178,641 plus the agreed additional sum of $163,964 making a total of $2,342,605.
The wife on the other hand contends for a valuation of $1,618,816 plus the agreed additional sum of $163,964 making a total of $1,782,780.
As to valuation methodology the single expert says that:
The objective of the valuation is to find the value of the business to the owner, in this case the husband (sic). The fair market value is described as the price that would be negotiated in an open and unrestricted market between a knowledgeable, willing but not anxious buyer and a knowledgeable, willing but not anxious seller acting at arm’s length.
Neither party took issue with the various valuations provided by the single expert using a future maintainable earnings basis methodology. The single expert in determining future maintainable earnings normalised the earnings and removed non-business income and expenditure. The adjustments necessary to do so were as follows:
a)to eliminate non-trading income,
b)to normalise the accruing of the provision for long service leave,
c)to adjust related-party salaries to commercial salaries based on external markets salary data, and
d)to adjust rental paid to the wife’s mother and father to a market level as determined by independent valuation.
In determining the valuation figure provided for in 91(a) above the single expert worked on the assumptions that the business would continue to operate at its current locations, that the business would have appropriate commercial leases in place and that market value rent is payable.
In the context of the present proceedings none of those assumptions exist as a matter of fact. There is no evidence that a commercial lease would be available to a purchaser or that the subject business premises would be made available at a commercial rent. Nor is there any evidence to suggest that the wife’s parents would agree to a third party purchaser continuing to conduct the business from its present premises.
As the expert says:
…the absence of a formal lease adds uncertainty to the specific company unsystematic risk. The uncertainty attaches to the risk of having to move premises in the short term if the landlord decides to terminate the tenancy….
In his oral evidence the single expert acknowledged that the absence of formal leases would make a “substantial difference to the value of the business and thus the company”.
The wife’s evidence is that two years after separation she approached her mother about formal leases for the business premises. She was offered a 3x3 lease for the Suburb P site and no lease for the primary retail premises at Suburb M site as her mother had earmarked that property for prospective redevelopment.
In determining the valuation figure provided for in 91(b) above the single expert acknowledges that the absence of a formal lease will affect the valuation exercise and comes to the conclusion that in the absence of a formal lease the business would have the value ascribed. Yet that valuation figure relies upon the assumption that notwithstanding the absence of a formal lease a purchaser would be able to negotiate a 35 per cent reduction in rent with the wife’s parents.
There is no evidence to support that assumption and indeed the evidence before the Court leads to the very strong inference that the wife will continue to conduct the business on the same basis that it has been conducted in the past including over market rental payments to her parents. That circumstance will continue to impact on the profitability of the business as it has done to date.
Otherwise the single expert has next provided an alternate valuation in 91(c) above on the basis that over-market rent continued to be paid to the wife’s parents and on the assumption that there was a normal commercial lease in place, which there isn’t. Such valuation being in the sum of $1,886,041.
The single expert has then provided a valuation based on no commercial leases and rent continuing to be paid on an over-market basis. These factors appropriately reflect the current circumstances of the business and there is no evidence before the Court that those circumstances will change in the foreseeable future. The valuation figure thus obtained is $1,618,816. Subject to the additional sum referred to above and for the reasons set out above the Court is satisfied that this is the appropriate figure to be included in the balance sheet for adjustive purposes.
Accordingly the sum of $1,782,780 will be included in the balance sheet to reflect the present value of the business.
Thus the final pool for adjustment purposes between the parties is as follows:
Assets:
Joint              C Street, Suburb D  $1 950 000
Wife               Contents including art work  $     16 140
Husband       Contents including art work  $       7350
Husband       Interim distribution  $     80 000
Wife               Interim distribution  $     50 000
Joint              Shareholding in B Pty Ltd business         $1 782 780
$3 886 270
Liabilities:
Joint              Westpac Bank commercial bill                 $1 175 000
Joint              Mortgage Suburb D property  $   804 904
$1 979 904
Net:  $1 906 366
Superannuation
Husband       MTAA superannuation  $     62 724
Wife               MTAA superannuation  $     74 593
Wife               Legal Super  $     13 879
$   151 196

Assessment of Contributions

Having determined that it is just and equitable to make orders in that it would be unjust or unfair not to, the Court can then consider the contributions made by the parties as defined in s 90SM(4)(a)-(c) and thereafter the considerations set out in (d)-(g) of s 90SM(4).
It is submitted on behalf of the applicant de facto husband that overall contributions to separation should be regarded as equal and that thereafter contributions post separation to hearing should be regarded as equal.
It is submitted on behalf of the respondent de facto wife that contributions to separation should favour the wife as to 60 per cent to the husbands 40 per cent with this adjustment to reflect the modest disparity in contributions at the commencement of cohabitation including the wife’s inheritance and a significant recognition of the wife introducing into the relationship the business at, it is contended, an undervalue as compared to the historical value ascribed to it by the single expert as referred to above.
It is further submitted on behalf of the wife that post separation contributions should favour the wife by reason of her primary care of the children post separation and her primary role in the ongoing business to the date of hearing.
It is contended that by reason of these factors overall contributions should favour the wife as to 65 per cent and the husband 35 per cent.
At the commencement of cohabitation the wife had available to her a greater capital sum than did the husband. However the wife was out of employment for a short period at the commencement of the relationship but during that period the parties did not merge the finances. Subsequent to purchase of the City E property, by reason of their combined incomes and the inheritance received by the wife they were able to repay the funds advanced to them by the wife’s parents. During this early period the husband had income in excess of that of the wife.
As set out above, the Court is not able to determine the fair value of the business as acquired by the parties in 2006 by reason of the absence of objective evidence. The value of the business should be determined by reference to the sum agreed to by all parties.
However without the assistance of the wife’s mother in providing security for the commercial bill advance and providing her personal guarantee for the loan the parties would not have been able to fund the $1.2 million to acquire the business and thereafter derive from that business salaries and significant dividend income that they have received to date of hearing. This contribution on behalf of the wife through her family is deserving of recognition.
Otherwise during the course of the relationship to hearing the parties adopted differing roles in terms of the business and their role within the household and in relation to the children. The Court is not satisfied that a finding as to any disparity contributions in this regard is appropriate.
Overall contributions to date of separation favour the wife as to 55 per cent to her and 45 per cent to the husband.
Post separation to date of hearing the wife has had the primary care of the children but has occupied the family home to the exclusion of the husband for three years. He has been deprived of his equity in that property for that period of time and has been required to obtain rental accommodation at his expense.
The wife has after the husband’s cessation of employment in the business continued to manage the business without contribution from him.
Notwithstanding the cessation of his physical contribution to the business the husband has continued to receive strong dividends from the business post separation and otherwise part of the dividends that accrued to him have been applied by the wife as his contribution to home loan interest payments and school fees for the children.
There should be no adjustment as between the parties in relation to this period.
Overall contributions thus favour the wife as to 55 per cent and as to the husband 45 per cent.

Effect on Earning Capacity s 90SM(4)(d)

The orders to be made by the Court will have no effect on the earning capacity of either party to this de facto relationship.

Other Orders s 90SM(4)(f)

There are no other relevant orders under this Act affecting the parties or a child of the parties.

Child Support s 90SM(4)(g)

There are presently no child support arrangements between the parties either informally or by reason of any assessment. The proposals of the parties in this regard were not the subject of evidence.

Section 90SF(3) Considerations

It is submitted on behalf of the husband that the relevant factors for consideration in this context are the wife’s future primary care of the children, the significant financial resource that will remain with the wife in terms of the business and the husband’s present lack of employment, although he has a capacity to work. It is submitted that a consideration of those relevant factors would lead to there being no adjustment having regard to the matters set out in s 90SF(3).
It is submitted on behalf of the wife that the relevant considerations under the section are the wife’s future primary care of the children and the wife’s future income capacity and financial resource through the business as against the husband’s present or future prospects. It is submitted that overall a consideration of s 90SF(3) would call for an adjustment at best of 2 per cent in favour of the wife or otherwise no adjustment at all.
The husband is aged 44 and the wife 44. Both parties are in good health.
At present by his own choice the husband is not working but his evidence is that he will now seek to move into the workforce once these proceedings are resolved. The wife is employed by the business on salary and has a reasonable expectation of receiving significant dividends from the ongoing profits of the business. However the future maintainable earnings of the business are a consideration in its valuation as reflected in the pool for adjustment.
Otherwise the property and financial resources including superannuation of the parties as they are and as they are considered by the Court for adjustment purposes are set out above.
The wife will retain the primary care of the children with the husband spending time with the children on four nights per fortnight and for periods during school holidays. The children are aged presently 11 and 9.
The Court has had regard to all of the factors in s 90SF(3) but particularly to each of the considerations set out above as more relevant.
Having regard to the above considerations an adjustment in favour of the wife of 2 per cent as sought by the wife is appropriate.

Overall: Just and Equitable and Appropriate

Overall an adjustment in favour of the wife as to 57 per cent and as to the husband 43 per cent is called for.
The overall pool for adjustment including superannuation is $2,057,562.
The husband is entitled to 43 per cent of that sum being $884,751.
He has:
Contents including art work  $       7,350
Interim distribution  $     80,000
MTAA superannuation  $     62,724
$   150,074
An adjustive payment from the wife in the sum of $734,677 is required.
During submissions it was agreed by the parties’ counsel that a slightly longer period for payment of that sum would be appropriate by reason of the wife’s need to attempt to raise finance in order that she might retain the Suburb D property, that extended time being on condition that there was a reasonably prompt lump sum payment of $100,000 to the husband.
In all circumstances orders will provide for an initial capital payment to the husband of $100,000 within 14 days in consideration of which he will transfer to the wife his shareholding and other interests in B Pty Ltd. Otherwise the balance outstanding to the husband in the sum of $634,677 is to be paid within four months from the date of orders.
Liberty will be granted to the parties to apply as to implementation or enforcement of orders.

I certify that the preceding one hundred and forty (140) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 1 November 2013.

Associate:

Date: 1 November 2013

[2013] FamCA 855

1 November 2013

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