Bray and Bray
[2011] FMCAfam 906
•16 September 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BRAY & BRAY | [2011] FMCAfam 906 |
| FAMILY LAW – Property – trauma insurance payment – effect on division of assets. |
| Family Law Act 1975, ss.75 and 79 |
| Hickey & Hickey & Attorney for Commonwealth of Australia (Intervenor) (2003) FLC 93-143 Munroe & Monroe [2009] FamCAFC 173 Strahan & Strahan [2009] FamCAFC 166 |
| Applicant: | MR BRAY |
| Respondent: | MS BRAY |
| File Number: | ADC 1852 of 2009 |
| Judgment of: | Cole FM |
| Hearing dates: | 3, 4 & 9 November and 23 December 2010, 28 January, 16 & 23 February, 7 & 15 March and 11 April 2011 |
| Date of Last Submission: | 11 April 2011 |
| Delivered at: | Adelaide |
| Delivered on: | 16 September 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr Jordan |
| Solicitors for the Applicant: | David Burrell & Co. |
| Counsel for the Respondent: | Mr Heinrich |
| Solicitors for the Respondent: | Adelaide Family Law |
ORDERS
The husband pay to the wife the sum of $530,023 as follows:
(a)the sum of $230,023 within fourteen (14 days); and
(b)the sum of $300,000 within sixty (60) days.
Simultaneous with the payment in paragraph 1(b), the wife sign such documents (the cost of the preparation of such documents to be at the husband’s expense) and do such actions as are reasonably required:
(a)to resign from any office she may hold with the Bray Family Trust;
(b)to transfer any interest she may hold in the Trust assets to the husband including the interest in [G] and the Mercedes van;
(c)to transfer her right, title and interest in the property situated at Property S, [S], being the whole of the land comprised in Certificate of Title Register Book Volume [omitted]; and
(d)to enable the husband to obtain finance for the purposes of complying with these orders by the provision of the signed documents on such terms as agreed between the parties.
Save and except that the wife will pay her PAYG tax and income tax for the 2009, 2010 and 2011 financial years, the husband indemnify the wife and keep her indemnified in respect of any liabilities arising from her interest in the Bray Family Trust.
Any interest the husband may have in:
(a)the property situated at Property P, [P];
(b)the Honda Motor vehicle;
(c)the VW motor vehicle in the wife’s possession;
(d)the [business] equipment; and
(e)the chattels and personal items in her possession and control
vest in the wife absolutely.
The wife indemnify the husband and keep him indemnified in respect of any liability arising from the property in the wife’s possession including but not limited to:
(a)the mortgage secured against the [P] property;
(b)her credit card liabilities; and
(c)her personal tax liabilities.
Any interest the wife may have in:
(a)the property situated at Property M, [M];
(b)the boat in the husband’s possession;
(c)the husband’s superannuation entitlements; and
(d)the chattels and personal items in his possession and control
vest in the husband absolutely.
The husband indemnify the wife and keep her indemnified in respect of any liability arising from the property in the husband’s possession including but not limited to:
(d)the mortgage secured against the [M] property;
(e)his credit card liabilities; and
(f)his personal tax liabilities.
There be liberty to the parties to apply as to consequential orders.
The proceedings be otherwise dismissed and all extant orders be discharged.
IT IS NOTED that publication of this judgment under the pseudonym Bray & Bray is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADC 1852 of 2009
| MR BRAY |
Applicant
And
| MS BRAY |
Respondent
REASONS FOR JUDGMENT
Introduction
The parties seek a division of the assets they acquired during the course of their relationship.
The parties cannot agree on, amongst other things, how the payment received by the husband of $428,069 when he was diagnosed with mantel cell lymphoma, should be treated and the value of some of the more significant assets including their business, the real estate owned by the business and that owned by the husband.
Whilst it was conceded that the payment be included in the pool there was significant disagreement on how it affected the division of the assets.
The wife seeks 65 per cent of the net value of the assets whilst the husband proposes that she receive 57.5 per cent of the assets excluding the payout, or in the event the trauma insurance payout is included in the pool, 40 per cent
Orders were also sought by the wife for spousal maintenance and adult child maintenance. These applications were abandoned in the course of the trial.
Background
The parties commenced cohabitation in 1981. It is conceded that they had nominal assets at that time.
Shortly after cohabitation, the wife received a neck injury payment of $4,000.
The parties married [in] 1982.
The parties had four children namely [W] who is aged 28, [X] who is aged 26, [Y] who is aged 23 and [Z] aged 21. [X] resides with the husband whilst [Y] and [Z] reside with the wife. [W] is independent and resides elsewhere.
In September 1988, the parties commenced the business known as [B] which grew to include amongst other things, the [R] agency for the State of South Australia.
That business is continuing to operate and is held by the Bray Family Trust, the trustees being the husband and the wife.
In March 2008, the husband was diagnosed with mantel cell lymphoma. Fortunately, he was able to call on the benefits of his income protection insurance with [omitted] and received payments of $6,500 per month whilst he was receiving treatment.
On 28 August 2008 he received an insurance payment of $428,069 from the [T] Insurance Company.
In November 2008 he had a stem cell bone marrow transplant.
On 17 January 2009, the cancer being in remission, he ceased receiving income protection insurance.
In February 2009 he returned to work.
In or about June 2009, the husband took over the bookwork for the business.
Post separation, the husband paid to the wife by way of partial property settlement (and I note here that the wife disputes how this should be brought to account):
a)a sum of $3,000 on 13 November 2009;
b)a sum of $65,000 by way of partial property settlement pursuant to the orders of this Court on 22 December 2009; and
c)
a sum of $300,000 by way of partial property settlement on
22 June 2010.
On 18 December 2009, the husband settled the purchase of his current residence at Property M, [M] for $450,000.
On 25 February 2010, the sale of the former matrimonial home at [C] took place and the parties received net proceeds of sale of $527,363;
Of this money, $300,000 was then paid to the wife by way of partial property settlement referred to above.
On 25 May 2010, the wife purchased Property P, [P] for the sum of $530,000.
This matter was listed for trial in April 2010 and August 2010. Both trial dates were vacated on the wife’s application.
The matter proceeded to a hearing on 3, 4 and 9 November 2010.
The issue of the taxation liability of the parties needed to be resolved and orders were made directing the filing of a further Affidavit and the filing of written submissions. After a number of appearances, the parties spoke to those written submissions on 11 April 2011.
Evidence
The husband
The husband seeks to rely on:
a)his Amended Initiating Application filed on 30 July 2010;
b)his Trial Affidavit filed on 30 July 2010;
c)his Financial Statement filed on 23 August 2010;
d)his Affidavit of Documents filed on 15 March 2010;
e)the Affidavit of Mr M filed on 18 August 2010;
f)
the affidavit of his Accountant, Mr R, subsequently filed with the Court on 10 December 2010 pursuant to the orders made on
9 November 2011;
g)the Affidavit of Mr B filed on 4 February 2011;
h)the Affidavit of the husband filed on 15 February 2011; and
i)the Affidavit of the husband filed on 15 March 2011.
In the course of the hearing, he sought to rely on the evidence of his Accountant, Mr R and produced a copy of email correspondence between Mr R and the wife’s Accountant by way of evidence-in-chief. Mr R attended Court and was subjected to cross-examination. The husband and Mr M also gave evidence and were cross-examined.
The husband’s evidence
The husband gave evidence in a forthright and appropriate manner.
He confirmed the receipt of the income protection funds during his treatment for cancer noting that they were credited as his drawings for the period they were received. He had three months off work before the payments began. All payments were declared.
He was clear that his understanding of the insurance policy is that should he suffer further trauma he will not get paid. He does however, have in place, life insurance.
He agreed that the policies for income protection and trauma were in place before separation with the premiums being paid by the business.
He was criticised for his failure to provide disclosure and it was apparent that he had not been as careful in the provision of documents as he should when for example; he produced to the Court the policy document for his insurance policy. This omission seemed to more an act of carelessness than deception. I found his demeanour and his responses in the course of his evidence to be acceptable and I did not have cause to have any concerns about his credibility.
The wife
The wife sought to rely on:
a)her Amended Response filed on 28 October 2010;
b)her Trial Affidavit filed on 15 September 2010;
c)the Affidavit of Mr C filed on 29 July 2010;
d)the report of Mr C dated 1 November 2010;
e)
her Financial Statement filed on 16 September 2010 and
29 September 2009; and
f)the Affidavit of Mr E filed on 31 January 2011.
The wife gave evidence and was cross-examined. Mr C gave evidence and was cross-examined. Mr E, the wife’s Accountant was not called.
The wife’s evidence
The wife presented as someone convinced that the husband was hiding essential information.
She could not concede that he had made proper disclosure; that the business was not as financially secure as she thought or that she was receiving her fair share.
Her attitude was that with $1,500 per week, she was struggling to survive. She gave evidence that at times, she and the children went without food saying there have been weeks when she cannot afford to buy food.
She attempted to present as someone who had made a contribution to the business through her book work, implying she was a good financial controller.
This contrasted sharply with the fact that:
a)she had made no attempt to get employment since January 2008 (stating she was not aware she had to get a job; shortly after telling the Court she could not afford to buy food);
b)she gave the Honda motor vehicle to her son to use (a vehicle on which the parties were paying $900 per month) and purchased, with finance another vehicle entering into a finance contract for $53,988;
c)her son, the recipient of the motor vehicle, is employed by [omitted] in a full-time position. When asked why she did it, her response was “I guess I’m a good Mum”;
d)she broke her lease to purchase and move into her current house which meant that she was having to pay rent of $415 per week and a mortgage of $500 per week in addition to the car repayments whilst not being able to buy food;
e)her son [Y] and her daughter each receive a benefit from Centrelink of approximately $700 per fortnight and yet no contribution was sought from them despite the fact that she was struggling to put food on the table;
f)having purchased the property, it was necessary to spend more money on it (although strangely at a time when funds were tight she could not remember how much the renovations cost) and she did concede that when arranging finance for the house, she borrowed an extra $20,000 for anything needed in the house.
g)her explanation as to why there were significant differences between the information supplied to the ANZ Bank when applying for the loan for her mortgage and the information she set out her financial statement which she filed with this court.
She then in evidence advised the Court that “I have had to be very careful because I am on a limited income” and went on to say “I have always managed money”.
I have a number of concerns about the wife’s evidence and her capacity to comprehend the financial consequences of her actions.
Matters agreed
The parties have agreed that the wife will retain the furniture and chattels in her possession and the husband will retain the furniture and chattels in his possession save that the husband will deliver up to the wife the antique furniture currently stored at the business premises, being two antique furniture cabinets.
I have also noted the parties have agreed that the issue of adult child maintenance and spousal maintenance will not be pursued.
In addition, the wife has conceded that she will not press the allegation that the husband extracted large amounts of cash from the business.
The law
In determining what orders should be made for the division of the matrimonial assets, I am required to take an approach that involves four inter-related steps, namely to:
a)identify and value the property, liabilities and financial resources of the parties at the date of the hearing (“the asset pool”);
b)identify and assess the contributions of the parties within the meaning of s.79(4)(a), (b) and (c) of the Family Law Act 1975 (“the Act”), and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties (“the contributions”);
c)identify and assess the relevant matters referred to in s.79(4)(d), (e), (f) and (g), including the matters referred to in s.75(2) of the Act so far as they are relevant and determine the adjustment (if any) that should be made to the contributions-based entitlements the parties established at step two (“financial resources and needs”); and
d)consider the effect of these findings and determination and resolve what order is just and equitable in all the circumstances of the case (see Hickey & Hickey & Attorney for Commonwealth of Australia (Intervenor) (2003) FLC 93-143).
I will now consider these matters.
The asset pool
The parties presented a consolidated pool showing the values they attributed to the various assets. This pool is set out below. From this, it is apparent that some of the issues that remain are:
a)the value of Property M, [M];
b)the value of the Bray Family Trust (which includes the [R] agency);
c)the treatment of the Eos motor vehicle, Toureg motor vehicle, Mercedes van and the value attributed thereto;
d)the value of the Honda motor vehicle;
e)the treatment of the partial property settlement received by the wife;
f)the inclusion of the wife’s credit card debts;
g)the inclusion of the wife’s accountant fees;
h)the inclusion of the unpaid legal costs;
i)the inclusion of Mr C’s account of 1 November 2010;
j)the inclusion of the husband’s accountant’s fees, valuer fees and legal costs totalling $84,000;
k)whether the sum of $428,069 should be included in the asset pool.
The table is set out below.
| DESCRIPTION | WIFE’S VALUES | HUSBAND’S VALUES | AGREED |
| ASSETS | |||
| Property M, [M] | $495,000 | $460,000 | |
| Property P, [P] | $530,000 | ||
| Property S, [S] | $730,000 | $580,000 | |
| Bray Family Trust (exclude land) | $320,374 | $245,882 | |
| Wife’s bank account – NAB | $153 | ||
| Husband’s bank accounts – Form 13 | $79 | ||
| Boat and trailer | $16,500 | ||
| Wife – VW Eos motor vehicle | $45,000 | No equity | |
| Husband – VW Toureg motor vehicle | $76,000 | Included in business | |
| Mercedes van owned/leased by wife | $40,000 | Included in business | |
| DESCRIPTION | WIFE’S VALUES | HUSBAND’S VALUES | AGREED |
| Honda owned/leased by wife | $20,000 | No equity | |
| Wife’s [business] equipment | $0 | $1,500 | |
| Proceeds of sale of [business] trailer | $0 | $2,210 | |
| ADD BACKS | |||
| Husband’s bond payment to wife Net value of husband’s part property settlement payments | $0 | $3,000 $92,000 | |
| LIABILITIES | |||
| VW Finance – lease on wife’s VW Eos motor vehicle | $45,000 | Excluded - no equity | |
| Wife – Ford Credit – Honda finance | $26,000 | Excluded - no equity | |
| Wife – Ford Credit debt for Mercedes van | $35,000 | Included in business | |
| Husband – VW Toureg debt | $63,570 | Included in business | |
| Wife – AMEX card | $900 | $0 |
| DESCRIPTION | WIFE’S VALUES | HUSBAND’S VALUES | AGREED |
| Wife – David Jones account | $2,000 | $0 | |
| Wife – Visa card | $9,000 | $0 | |
| Wife – [P] home mortgage debt | $280,000 | ||
| Wife – accountant fees | $6,000 | ||
| Wife’s unpaid legal costs – Trial Affidavit | $90,000 | ||
| Wife – Mr C account 1/11/2010 | $825 | ||
| Husband – accountant fees | |||
| Husband – valuer fees | |||
| Husband – legal costs | $84,000 | ||
| Husband – [M] mortgage debt | $25,000 | ||
| Husband – Mortgage debt increase since 30/12/09 | $111,146 | ||
| Wife – PAYG Arrears | $60,500 | ||
| 2009 Tax | $10,102 | ||
| 2010 Tax | $25,997 | ||
| Husband – PAYG Arrears | $33,404 |
| DESCRIPTION | WIFE’S VALUES | HUSBAND’S VALUES | AGREED |
| 2009 Tax | $34,131 | ||
| 2010 Tax | $21,956 | ||
| BAS Adjustment Debt | Not agreed | $17,887 | |
| 2011 Tax | Agreed each pay own | ||
| Joint accounting fees | Agreed ignore | ||
| SUPERANNUATION | |||
| Husband – 7/3/2011 balance | $21,327 | ||
| Wife | $0 | $0 |
Parents’ Loan
The wife attempted to bring to account a loan allegedly made by her parents to assist the parties in 1996. She did not call the parents, nor did she seek to produce an Affidavit sworn by them. Save for a letter annexed to her Affidavit there was nothing to support any claim that the amount, if received by the parties, should be repaid.
The husband does not concede the issue and there is little or no evidence to support the wife’s position. He agrees there was a loan but does not concede it remains owing to them.
The wife concedes she has not spoken with her parents for some years. The evidence is inadequate and I therefore do not include the alleged amount in my consideration of the division of assets.
Bray Family Trust (The Trust)
On receipt of the joint instructions of the parties, Mr M undertook a valuation of the Bray Family Trust.
In the course of his valuation, he was provided with two independent valuations of a property owned by the Trust at Property S, [S], South Australia.
The valuations were $580,000 and $730,000.
He was unable to determine which valuation should be preferred. He therefore presented his conclusion of the value in the alternative including one of the two valuations. In each alternative this means that, if the property was valued at $580,000 then he valued the Trust at $822,136 however if the property was valued at $730,000 the Trust was valued at $972,136. I will deal with the issue of the valuation of [S] and the conduct of the valuers now.
The valuation of the [S] property
An order was made by this Court, being paragraph 5 of the orders of 4 August 2010 that:
“In the event that the wife is seeking to rely upon her own valuation evidence, the parties do take all reasonable steps to organise a conference with the valuers to confer on or before 3 September 2010 and to furnish each of the parties a document evidencing the results of their conferral.”
The evidence is that the valuers attended to their valuations and each received a copy of the other’s work.
Each valuer purports to have expertise in providing evidence for the purposes of litigation.
Each valuer conceded that there was a meeting, Mr O suggesting it lasted no more than five minutes whereas Mr C suggested it lasted fifteen minutes.
Neither valuer took any notice of the Court order requiring a joint statement to be provided showing the issues agreed or disagreed (although I would note that Mr O did subsequently provide a report with his comments on Mr C’s valuation). Their inability to meet and confer on a professional basis reflects upon their expertise.
Furthermore, it is disappointing that the instructing solicitors did not take this matter up with the valuers and the valuers attended for the purposes of giving evidence without any semblance of a meeting.
The fact that it was clear from the evidence of the valuers that they did not like each other, does not mean that they should be allowed to step around their professional obligations and the orders of this Court.
Having said that, referring to the evidence of the valuers, it is notable that each valuer has made the usual enquiries with respect to the location of the land and the zoning requirements.
It is clear that the building on the land in question has been used for office purposes after its conversion from residential use.
Mr O notes that the building has split system air-conditioning units to cool the premises. Mr O also notes that the layout of the building is rambling in nature and the plaster masonry internal walls some of which he takes to be load bearing, makes its conversion into a more efficient internal layout is likely to be difficult to achieve.
Mr O refers to sales that have occurred within the area and uses a similar sales method to reach his conclusion that the property is worth $580,000.
Mr C was approached by the wife to value the property. He confirmed that he had previously valued it on 7 November 2008. Reference was made to similar sales that had occurred within the area.
His valuation refers to the fact that he had inspected the property from the street on 23 February 2010 and had made the assumption that the property was in the same condition as originally inspected on 7 November 2008.
He referred to similar sales in the area.
He undertook the exercise of valuing the property by capitalisation of net returns method.
He does not explain in his report how he reaches a value of $560 per square metre including fences, paving and landscaping to achieve a value of $480,000. Furthermore, he does not explain how he reaches a value of $550 per square metre when valuing the improvements on the land. It is also unclear from his valuation when considering the capitalisation and net returns method how he chose a multiplier of 6.5 per cent or an estimated rental return per square metre of $130 per square metre for the office showroom and $95 per square metre for the warehouse.
When giving evidence, he had referred to the examples set out in his valuation but conceded, he had also relied on other matters which were not included in the report.
Whilst there was no joint statement of the items that the valuers had agreed and those that were remaining for Court, Mr O did provide a report to the husband’s solicitors setting out the issues he had with
Mr C’s reports. [Exhibit E] His concerns were amongst other things:
a)that Mr C misunderstood the purpose for which the premises were built or renovated, characterising it as [omitted];
i)he noted there was no signage on the building to suggest the nature of the business carried on;
ii)he further noted that the internal layout was rambling and disconnected and the entrance to the building was through the rear doors;
iii)there was nothing about it that would suggest it has a retail character or would attract retail rents; and
iv)Mr C’s description of the property as an older fifties house that had been extended and converted for office and showroom use contrasted with his opinion that the house appeared to have been extended for residential use and then subsequently used for the current purposes
b)the information on which he relied for the capitalisation of rents was inaccurate, using amongst other things the rents sought by the owners of the properties as opposed to the actual rents agreed and paid by the tenant;
c)the sales referred to by Mr C were not appropriate being easily distinguished from this property;
d)there was no differentiation between the office and warehouse components, when considering site improvements. Nor was there any analysis of the sales to support the values allocated to the land and building values arrived at;
e)the capitalisation of rents method of valuing was inappropriate, the property being owner occupied. In addition, the capitalisation rate applied was excessive. He referred to amongst other things the lower clearance rate for auctions as being indicative of buyers seeking to negotiate a lesser price for leasing premises. His opinion was that the capitalisation rate did not fit with the information from the market where the decline in values in 2009 meant that the yields have lengthened for these properties suggesting a higher capitalisation rate should be adopted.
Mr C did not accept these criticisms. When pressed however, he conceded amongst other things that there may have been a softening in the market but was unable to quantify it (without undertaking further research) and that the yields on properties such as these had lengthened. Nevertheless, it was his opinion that the market remains steady with superannuation funds being the most likely buyers for properties of this sort.
He conceded that in forming his view he had relied on other sales that had not been mentioned in the report.
Save for the fact that these properties were examined, I was unable to follow how he got from a comparison of those sales to the figures that were presented.
I had difficulty accepting his conclusions in this matter and would prefer the evidence of Mr O to that of Mr C.
I would therefore find the value of the [S] Property to be $580,000.
The Trust
With respect to the Trust valuation, I note Mr M in his report states that:
2.4[B] is the agent for [R], and [companies omitted] in South Australia.
2.5[B] receives commissions of 7 per cent on sales of [R] products to its customers in South Australia. Commissions of 8 per cent are received on sale of [omitted] products and 10 per cent on [omitted] products. Commission income from the sale of [R] products accounts for nearly all of the Trust commission income.
I further note his comments regarding the cycle for the sale of products on page 5 as follows:
2.14There are significant lead times for the sale of [R] products. The sale of products is divided into three seasons, known as summer, high-summer and winter.
2.15The wholesale sale of goods that will be available for retail sale from about October 2010 (summer 10) were made from approximately January 2010.
2.16The sale of high summer 10 goods will be available for retail sale from about October 2010 and are made in about June 2010. The wholesale sale of the winter 11 range that will be available for sale by retailers from February 2011 will be made in about August 2010.
He states further at the bottom of page 5 that:
2.20 The [R] agency cannot be readily sold.
2.21Attached as Appendix 3 is a letter from [R] dated 15 September 2009 which states, inter alia,
“[R]’s relationship with its independent sales agents (agents) has no fixed term and is subject to termination by either party. As with other [omitted] brands in Australia, [R] has in recent times terminated independent sales agencies and bought the relevant territories “in house”. [R] has done this in NSW, Western Australia and Queensland in the 2004 financial year and in Tasmania in 2007. When [R] terminates a State agency, it does not pay any lump sum compensation as it is not obliged to do so under its relationship with the agent. In line with normal commercial practice in this area, a reduced “trailing” commission on current season orders in our system as at the time of termination generated by the agent is paid, recognising their securing of those sales but that they will not service the sale.
We are constantly reviewing our situation in relation to agencies and reserve the right at our discretion to terminate any remaining agency, including South Australia.
Related to our moves to bring independent sales agency territories “in house” is a move towards vertically owned [R] branded retail stores, and our treatment of such stores as to sales commissions. The number and importance of these stores has grown significantly in recent years as we have a central [R] buyer and merchandiser for [R] stores, the role of the agent is no longer relevant and it is not appropriate to pay agents commissions on these accounts. Accordingly it is our policy not to pay agents commissions on such stores. In relation to South Australia, we recently acquired full ownership of the [business omitted], which had been part-owned by a third party. As we assumed full ownership, so the various functions normally performed by an agent (taking orders, liaising with the store, assisting with merchandising) were assumed by [R] and we, as is our standard practice, put in place an arrangement where a sales commission would no longer be paid to the agent in relation to sales to this store. This decision will have the annual impact of reducing the income to the South Australian agency by over $57,000 per year.
Similar documents were obtained from [omitted] Proprietary Limited acknowledging that there is no written contract dealing with the sales commission relationship.
The business was valued on the basis of the value to the owner. Consideration was given to various valuation methodologies. Whilst the discounted cash flow methodology was considered appropriate, capitalisation of future maintainable earnings was not, nor was capitalisation of dividends.
Mr M concluded that he considered the valuation of Mr and Ms Bray’s interest in the Bray Family Trust should be measured by having regard to the net assets of the Trust measured at fair market value (para.4.52 of his Report). He went on to say:
“In my opinion, this approach deals with all aspects of value, other than whether:
4.53.1allowance should be made for the capital gains tax if any that may arise on the disposal of the Property S property – I have assumed that no allowance needs to be made; and
4.53.2an additional sum should be included in the matrimonial asset pool representing the value in excess of fair market value that the business, [B], may have to Mr Bray.
4.54In circumstances where there is no market for a business, it may be relevant to the Family Court to consider whether a business is valued to an existing owner that is in excess of its fair market value.
4.55Such an approach applies because of the Family Court’s focus on value to the owner – a value that should be realistic and not necessarily limited to what sum the current owner may be able to realise by way of sale.
4.56I consider that any such value should be measured by the present value of the risk adjusted net cashflows that are likely to be derived by the owner – notwithstanding that the value may not be realisable on the sale. For the reasons described in section 7 of this report, it is my opinion that no additional value arises on this basis in this case, largely because of the substantial risks underlying future profitability and the threat of loss of the [R] Agency.”
He was cross-examined by Counsel in respect of a number of issues including the capital gains tax on the sale of the Property S property. His thoughts were that it should not be included as it would be brought to account against the parties as the funds were distributed, this has subsequently been agreed.
He was also questioned about the assets held by the Trust. He did not consider it appropriate in respect of the motor vehicles to have regard to anything other than their written down value at this stage.
Whilst the report was the subject of some criticism by Counsel for the wife, I did not find this was supported by the evidence. Mr M provided appropriate responses to the questions put to him and I accept his evidence on the value of the Trust.
There was no agreement to include the Mercedes Van and the Toureg motor vehicles in the Trust assets. Counsel for the wife submits in his 55 page written submissions, that the evidence does not support a conclusion that the Trust has the relevant legal or equitable interest in the vehicles.
It is conceded that the Mercedes is on the depreciation schedule for the Trust, is paid for by the Trust, and that it appears to be accepted for the purposes of the accounts of the Trust as an asset. The fact that the vehicle is registered in the name of the wife, one of the trustees of the Trust, and that she is the signatory to the contract to purchase the vehicle does not in my view alter the position.
The Toureg was purchased by the husband (one of the trustees of the Trust). A leasing arrangement was entered into to finance the acquisition of the vehicle. The expenses for the vehicle are met by the Trust and the vehicle is used in the course of the business of the Trust.
I do not accept that the vehicles should now be excluded. If I am wrong I note that Counsel for the wife concedes it will make little difference to the balance sheet, however, the husband’s drawings would be higher. In view of the agreement reached to equally divide the drawings, I do not think this matters.
Agreed Deductions/Addbacks to the Valuation of the Trust
Further agreement was reached following counsel, and the accountants separately conferring, that:
a)the sum of $42,021 allowed for tax (referred to at paragraph 7.25.1 of the report) on income received by the Trust will be removed as an asset on the basis that the parties have agreed the income will be taxed in their hands, not in the Trust; the evidence of Mr M which I accept is that if the income is taxed in the hands of the beneficiaries the amount should be removed and the valuation reduced by $42,021;
b)the sum of $16,470 allowed by Mr M as notional income tax to be paid on income received from the sale of sample stock should also be removed, that income being placed in the hands of the parties; and
c)the sum of $3,746 being further interest earned on the proceeds of sale of the Trust property at [C] should be added back.
The parties have also agreed that the Trust property at [S] should be treated as a separate item on the balance sheet in these proceedings. In view of the fact that the Trust is valued on the basis of its net tangible assets, and the controversy over the value of [S], I will list it as a separate item. I do not concede however, that it is not a Trust asset.
Mr M values the Trust (without the land) at $242,036. The parties agree that the following which are items set out in the comprehensive table that comprises appendix 12 to the report, should be adjusted:
a)the income tax $42,021 is not longer applicable and this amount which had been treated as an asset should be deducted ;
b)the notional tax $16,470 is no longer applicable and this amount which had been treated as a liability should be added back ; and
c)the interest of $3,746 on the proceeds of sale should be added.
This means that the value of the Trust is now $220,231 (which I will round to $220,230) plus the [S] land.
Amended BAS Statement
At the conclusion of the trial, the husband’s Counsel advised the Court that there appeared to be an error in the BAS Statements filed by the parties for the period of September 2008 to 30 June 2009. The error needed to be corrected and the advice was a further tax debt of some $20,000 would be incurred.
The matter was discussed extensively at the hearing of this matter on 7 March 2011.
Counsel for the wife argued that the matter had concluded and the debt should not be brought to account. I was not inclined to accept that submission.
He then argued that the amended BAS Statements had not been lodged. He said:
It should be clarified on the basis of actually seeing the filed amended BAS Statements. Our concern is someone has thought of an issue. If they are never going to be filed, or they are not filed, and you are just told someone has worked out a way – a debt is owed, we will need to see actual filed amended BAS Statements. Mr R can do that and once he has done that, we will then see how he has gone about doing it because that will have supporting workings and working sheets. (Transcript page 22 of 7 March 2011)
Directions were then made for the exchange of the relevant information and the matter was adjourned to 15 March 2011.
On 15 March 2011, Counsel for the wife confirmed the amended statements had been lodged but did not concede the liability.
He complained that the husband was alerted to this problem many months ago and should have attended to this then.
He went on to say that while lodging the BAS Statements may make the Trust liable:
Whether the husband acted properly and his calculations are correct hasn’t been proved, and we’ve got no way of doing that, because we will have to go through every single entry he has now put on MYOB. (Transcript page 3 of 15 March 2011)
He went on to say his client wanted the case to finish and did not want to go through all the documents and renewed his objection to the debt being brought to account.
An order was made for the husband to file and serve an Affidavit within 14 days annexing the information exchanged.
The amount outstanding in respect of the BAS debt for the period of September 2008 to 30 June 2009 is $14,056 plus interest of $3,696.71 being a total of $17,752.71.
The debt occurred in the period that the wife was doing the book work for the business.
Counsel for the wife submits that:
a)there is a discretion not to take into account the value of an unsecured liability in certain circumstances such as where it is vague or uncertain … Biltoft (1995) FLC 92-614;
b)the decision of the Full Court in the matter of Monroe [2009] FamCAFC 173 where the husband failed to make his book-keeper available for cross-examination in relation to evidence about liabilities of the partnership business that the parties had generated until shortly after separation.
In this matter, the parties continued to operate the business with the wife doing the book work until June 2009.
The parties agreed to distribute the income from the business between them up to June 2010.
There is no dispute that, on the face of it, there is a liability to the Australian Taxation Office in respect of the amended BAS returns.
The issue is whether the husband and his book-keeper correctly calculated the revised amount.
The wife is not prepared to check the calculations. She does not suggest that the husband is seeking to gain an advantage by filing the amended statements. She cannot however, concede their accuracy.
The controversy over what is a relatively small sum in the pool provides an example of the difficulties that have troubled this matter.
The wife’s position has consistently been that the husband is not to be trusted. I have difficulty accepting that position.
I cannot see how a debt such as this that relates to a period when both parties were benefitting from the income received through the business can be ignored.
The wife’s criticism that the debt was raised late in the proceedings is noted and if any further interest is accrued on the outstanding debt then the husband should bear that responsibility.
It would not be just and equitable to ignore the amount and it is appropriate that it be included.
Valuation of Property M, [M]
This property was purchased by the husband for the sum of $450,000. The deposit of $72,000 came from the trauma payout.
For reasons which escape me, the wife elected to value the husband’s property while the husband did not elect to value the property recently purchased by the wife.
Valuations were handed up by Counsel for the parties, being the valuation undertaken by Mr O (Exhibit G) which valued the property at $460,000 and the valuation of Mr C (Exhibit H) which valued the property at $495,000 as at 29 October 2010.
I have already commented on the valuation methodologies of the valuers.
Whilst Mr O undertakes the detailed analysis of sales within the area, Mr C, having set out some sales, concludes that:
“I note the subject property changed hands in a private sale through known parties with a sale price of $450,000. Settlement 21 December, 2009. I note that the Annual Cumulative Growth Rate – Median for [M] for all residential sales (Upmarket Software Services Pty Ltd and Clearer University of SA) has shown an increase of 15% since the date of sale.
If one assumes the sale amount at 21 December 2009 was at arm’s length, then the 15% increase would put the current value at $517,500.
I am of the opinion that the value lies under this figure due to the condition of the house being only fair at its best.”
He then went on to determine that the value as at 29 October 2010 was $495,000. The difficulty I have with this is that it appears to rely significantly upon the statistical information provided by the annual cumulative growth rate.
Mr O notes that whilst this evidence can be of use, it cannot be the determining factor. In other words, it would operate only as a guide. Mr C did examine similar sales and refers to these in his report however, when questioned, he conceded that he had also relied on properties that have not been referred to in his report.
It is not possible to determine how he reached the figure of $495,000 other than to rely on the 15 per cent increase that he says that has occurred in the value of properties in the area and then discount it for the condition of the property as observed by him.
The difficulty with relying on an overall increase in the value of the property in that area is that it assumes all properties have risen equally. This is clearly not the case. I therefore have difficulty with the valuation of Mr C. I prefer the valuation of Mr O and would bring the asset to account at $460,000.
Motor vehicles
I have addressed this previously. The Depreciation Schedule for the business shows the Mercedes Van and the VW Toureg as motor vehicles that are owned by the business.
These have been brought to account by Mr M when considering the value of the business or rather the interest held by the Trust in the business.
There is no evidence as to their current value.
The evidence as to the current payout figure relies on the Depreciation Schedule and the Financial Statement for the business.
In the circumstances, I consider it appropriate that Mr M’s method of bringing these assets to account be accepted.
Part property settlement / add back
Following separation, the wife received three payments as and by way of partial property settlement.
On 13 November 2009, a sum of $3,000 was paid to the wife, the receipt of which was confirmed by her solicitors as partial property settlement being moneys required to pay for the bond on a rental property.
On 11 January 2010, a sum of $65,000 was received by the wife, pursuant to the orders of this Court made on 22 December 2009 that the husband pay that sum to the wife by way of interim property settlement.
A further sum of $300,000 was paid to the wife following orders being made on 22 June 2010 by consent that the wife receive that sum by way of partial property settlement.
Counsel for the wife argues that when an interim division of the property occurs, the requirement under the Family Law Act for the Court to make a final division of property settlement pursuant to s.79 that is just and equitable continues to apply.
Any interim division does not fetter or interfere with the requirement that the final division must be just and equitable, he submits, and refers me to the discussion in Lippman & Lippman [2010] FamCAFC 127 and Strahan & Strahan [2009] FamCAFC 166.
At paragraph 46 of the judgment in Lippman the Court said:
In light of the decision in Gabell and Yardley (supra), any distinction between” partial” and “interim” property orders for settlement of property is probably more apparent than real. However, the distinction between orders which finally determine proceedings and orders which do not remains potentially significant as this case clearly illustrates. To the extent that orders do not finally determine proceedings they are at least to some extent “interim”. We also note, without commenting further on its significance that the provisions of s.79(2) require the Court to make final orders that are just and equitable.
He then goes on to submit that the proper approach to property settlement is to identify all current property and resources and to value it all at trial. He submits, however, that there is no principle that if a party receives a pre-trial distribution of money from a bank account or by way of payment from the other party the full amount of that payment must be included in the asset pool, that is to be divided between the parties as part of the final settlement orders, whether or not that item of property exists at trial.
It is well settled, he submits, that it is not normally appropriate to require each of the parties to account for any monies they have spent post separation so as to determine whether or not that expenditure was reasonably necessary for their own self support, and to the extent that it was not, to determine whether it would be proper to add it back into the pool of assets available for division between the parties.
This, however, was a sum received by the wife by consent by way of partial property settlement. In other words, it was a premature distribution of part of the assets that she was to receive (Townsend (1995) FLC 92-569).
In determining whether or not the wife should be receiving a sum of $65,000 as sought by her Counsel in December 2009, consideration was given to the provisions of s.79 including, amongst other things, whether or not the decision would be capable of being reversed.
It would not be possible, nor would it be fair, to determine the wife’s entitlement to the current pool without bringing these prior payments to account.
This is not however, a matter where the wife was not receiving any additional income. She received, pursuant to the orders of this Court, the sum of $1,500 per week.
Furthermore, I do not accept that the funds were received as anything other than an interim property settlement. How she spent those funds is then a matter for her.
I accept that care must be taken not to account for the funds twice.
Both Counsel rightly concede that in view of the purchase of the wife’s current premises, there is a danger of double-dipping in having the amount paid to the wife and the equity in the house brought to account.
Counsel for the husband submits that as the purchase price for [P] (the wife’s evidence) was $530,000 and the mortgage being $280,000, the wife’s contribution was $250,000. The wife received payments of $368,000 ($300,000 + $65,000 + $3,000) therefore the amount of $118,000 should be brought to account.
Noting the costs of purchasing the property including stamp duty have not been included, for which I would allow $27,000, (noting the husband’s were $23,659.44) I would accept that the wife has had the benefit of a net sum of $91,000 which is not accounted for in the equity of the assets.
I have made adverse comments elsewhere in these reasons about the wife’s evidence and her assertions that she considered herself an astute manager of finances.
Her evidence about how she struggled to put food on the table contrasted with her willingness to incur significant expense through the purchase of a new car, the breaking of her lease and the expenditure of funds on her new property for which she provided minimal particulars.
Counsel for the wife would have me regard this as reasonable expenditure and would say these matters, amongst other things, account for the expenditure of the remaining $91,000. I do not accept this and would add that amount back into the pool.
The Painting Account
It is common ground that the parties agree that the former matrimonial home had to have significant work done on it prior to the property being sold.
In the course of undertaking that work, the wife contracted a Painter to undertake work on the property.
The Painter subsequently rendered an invoice for the sum of $4,500. The invoice was queried, the husband considering it not to be in the proper form and noting that there was no ABN on the invoice.
The wife sought reimbursement of the funds that she had allegedly paid to the painter.
The parties were unable to resolve the matter and the wife withdrew the funds to pay the painter from bank account for the Bray Family Trust.
It is not disputed that painting work has been undertaken on the property. The issue is in respect of the itemisation of the account and the form in which the account was provided.
It is noted that an ABN number for the painter was subsequently supplied. I do not propose to add this amount back into the asset pool as it would appear that the work was undertaken, the parties had agreed to meet the costs of any work undertaken on the property. The costs were met by the withdrawal from the Family Trust account.
Wife’s bookkeeping responsibilities and the debts to the Australian Taxation Office, Mr H and Ms B
It is common ground that the wife was, until July 2009 after the parties separated, responsible for the accounts for the Bray Family Trust business.
The husband in his Trial Affidavit notes that since July 2007, he discovered that the wife had been lodging documents late with the Australian Taxation Office and as a consequence of her conduct, the business had incurred penalties and interest payments on the outstanding amounts in the sum of approximately $18,000.
He also noted that the wife had not been making the compulsory contributions to the superannuation for the two sales people, namely Mr H and Ms B, thereby exposing the business to a further $25,000 debt in addition to any amount that would need to be bought to account when set off against the performance of the superannuation fund.
The difficulty with this argument is that the debts have essentially been bought to account through the valuation of Mr M.
In the circumstances, I do not consider it appropriate to bring these to account again subsequent to his valuation.
In addition, I note that the husband and the wife were the joint proprietors of the family business. It is not for the husband now to say that he did not take any notice of what the bookkeeper was doing and in the circumstances she must bear the entire responsibility for her actions.
The parties had made a choice to allow the wife to undertake the bookkeeping. The wife has no qualifications as a bookkeeper. There were no doubt joint savings having the wife undertake this work rather than pay a qualified person to attend to these tasks. With those benefits came the risk of having a non-qualified person undertake the task. This is a risk that the parties need to jointly bear.
Drawings
The husband argues, and submits by way of lengthy tables, that from January 2008 through to June 2009 the wife incurred credit card debt of some $104,356.72 whilst he incurred a credit card debt of $24,974.05.
He also notes that the wife accessed funds from the business of some $130,000 over that period whilst he accessed funds of some $27,000.
He concedes, at paragraph 56 of his Trial Affidavit, that he is not able to distinguish between business and personal debt save that the difference in the drawings and credit card debts is that significant that some allowance should be made.
I have difficulty quantifying the amount claimed and would consider this a matter that should be addressed when considering the contributions of the parties.
Honda Motor Vehicle and VW Eos Motor Vehicle
The parties agreed that these be brought to account as having no equity.
Husband’s insurance payment
The husband by order of the Court dated 9 December 2009 was injuncted from dealing with $140,000 of the funds held in the account.
The husband settled on the purchase of the property at [M]. The purchase price was $450,000 which with costs of purchase and stamp duty came to $473,659.44. The husband paid a deposit of $2,000 and the $70,000 he had lent to the vendors (from the trauma funds) was brought to account, meaning he had to find another $401,659.44.
He concedes that all of his insurance payment went into the purchase of the property either by way of direct payment or payment off the mortgage (being a line of credit for $200,000 on which he drew down $199,865 for the initial purchase). He subsequently paid in $175,000 to reduce the mortgage to $25,000. The mortgage has since increased by $111,146 however the husband does not seek to bring that increase to account.
His submission is that the trauma payment funds are now, save for those funds used for living expenses, represented by the equity in the matrimonial asset pool.
There is an issue about his transfer of the funds into that account and whether it breached the injunction to which I will refer later.
If however, the following sums were paid from the account in which the insurance funds were held being:
a)$12,000 being additional funds to “top up” the wife’s $300,000 payment;
b)$70,000 lent to friends and set off against [M] purchase price; and
c)the further $378,659.44 being the purchase price inclusive of costs of $473,659.44 less the $70,000 loan; less the $25,000 mortgage balance).
It is appropriate to accept the submission that the trauma payment is accounted for in the equity in the house.
The order required the husband to preserve the sum of $140,000 from the trauma payout. The husband had used a line of credit secured against the house for $200,000 to purchase the property. He chose to put the funds into that account, thereby reducing the interest payments, rather than hold them separately. He argues the funds remained available. I accept this submission. Whilst there may be some criticism in that he has not strictly complied with the orders, he has complied with the intent and that equity remains available for inclusion in the pool.
Wife’s credit cards
The wife does not seek to bring to account her credit card debt. In 70 pages of closing submissions this issue is not addressed.
The wife refers to the debt at paragraph 228 of her Trial Affidavit.
She annexes some statements to her Affidavit which do not assist me. She notes at paragraph 230 of her Affidavit that she had an increase in expenses when she moved from her rented accommodation to the [P] property. This was around the time that she also made the decision to purchase the VW motor vehicle. I have commented on this evidence elsewhere.
Counsel for the wife conceded in closing submissions that the debt was set out to illustrate the wife’s current financial circumstances.
Parties’ bank accounts
The parties’ bank accounts are included in the schedule, however either no value is attributed to them or the amount is nominal. There is criticism of the husband’s disclosure, however I have difficulty finding that it was deliberate. Furthermore, there is no evidence to suggest that the value of the accounts is anything other than nominal. I therefore do not include them in the pool for consideration.
Delay in proceedings
It is common ground that the parties experienced some delay in:
a)obtaining information necessary to complete the 2009 and 2010 taxation returns;
b)obtaining documents to ensure that Mr M was in receipt of all relevant information.
Each party blames the other.
Each party has filed Affidavits containing a significant number of annexures including annexures setting out correspondence between the Solicitors for the parties demanding information.
Save for the fact each has chosen to issue demands by way of letter, there is no evidence of either party taking constructive steps to meet with the Accountant responsible for preparing the taxation return; for example, to ensure that the information is available and dealt with in an orderly manner. The general impression is of parties lost in litigation.
The husband appears to claim that the documents were in the wife’s possession, the wife having been in control of all relevant bookkeeping up to and around the date of separation, whilst the wife claims that the documents were either supplied or remained in the husband’s possession remaining at the business premises.
Whilst the letters make some attempt to define the issues, there is no definitive checklist of information sought, action required, and when that action was completed. The wife alleges that she attempted to arrange a meeting with her Accountant to address these issues, however, her access to documents was restricted. It would appear that the personal agenda of the parties overcame the practical need to get the documents together and provide them to the Accountants to enable some resolution to occur quickly.
I have difficulty finding one or the other party is to blame. I do not consider however either party can be particularly proud of their conduct during the course of these proceedings.
Accountant fees, unpaid legal costs, valuers fees etc.
Each party notes a number of outstanding liabilities. Neither of them presses to include them in the pool. As Counsel for the wife submitted in respect of the credit card liabilities, they are there to note the parties’ current circumstances. They are noted, however not included in the pool.
The pool
For the reasons set out above, I find the asset pool to be as follows:
The table is set out below.
| DESCRIPTION | WIFE’S VALUES | HUSBAND’S VALUES | VALUE |
| ASSETS | |||
| Property M, [M] | $495,000 | $460,000 | $460,000 |
| Property P, [P] | $530,000 | ||
| Property S, [S] | $730,000 | $580,000 | $580,000 |
| Bray Family Trust (exclude land) Note: parties agree tax addbacks | $320,374 | $245,882 | $220,230 (including agreed addback of tax etc.) |
| Wife’s bank account – NAB | $153 | Nominal | |
| Husband’s bank accounts – Form 13 | $79 | Nominal | |
| DESCRIPTION | WIFE’S VALUES | HUSBAND’S VALUES | VALUE |
| Boat and trailer | $16,500 | ||
| Wife – VW Eos motor vehicle | $45,000 | No equity | No equity |
| Husband – VW Toureg motor vehicle | $76,000 | valuation | Included in business |
| Mercedes van owned/leased by wife | $40,000 | valuation | Included in business |
| Honda owned/leased by wife | $20,000 | No equity | No equity |
| Wife’s [business] equipment | $0 | $1,500 | $1,500 |
| Proceeds of sale of [business] trailer | $0 | $2,210 | $2,210 $1,810,440 |
| ADD BACKS Wife’s part property settlement | $91,000 | ||
| ASSETS SUB-TOTAL | $1,901,440 | ||
| LIABILITIES | |||
| VW Finance – lease on wife’s VW Eos motor vehicle | $45,000 | Excluded - no equity | Agreed no equity |
| Wife – Ford Credit – Honda finance | $26,000 | Excluded - no equity | Agreed no equity |
| DESCRIPTION | WIFE’S VALUES | HUSBAND’S VALUES | VALUE |
| Wife – Ford Credit debt for Mercedes van | $35,000 | Included in business | Included in business |
| Husband – VW Toureg debt | $63,570 | Included in business | Included in business |
| Wife – AMEX card | $900 | $0 | Excluded |
| Wife – David Jones account | $2,000 | $0 | Excluded |
| Wife – Visa card | $9,000 | $0 | excluded |
| Wife – [P] home mortgage debt | $280,000 | ||
| Wife – accountant fees | Not included | ||
| Wife’s unpaid legal costs – Trial Affidavit | Not included | ||
| Wife – Mr C account 1/11/2010 | Not included | ||
| Husband – accountant fees | Not included | ||
| Husband – valuer fees | Not included | ||
| Husband – legal costs | $84,000 | Not included | |
| Husband – [M] mortgage debt | $25,000 | ||
| DESCRIPTION | WIFE’S VALUES | HUSBAND’S VALUES | VALUE |
| Husband – Mortgage debt increase since 30/12/09 | $111,146 | Not included | |
| Wife – PAYG Arrears | $60,500 | ||
| 2009 Tax (wife) | $10,102 | ||
| 2010 Tax (wife) | $25,997 | ||
| Husband – PAYG Arrears | $33,404 | ||
| 2009 Tax (husband) | $34,131 | ||
| 2010 Tax (husband) | $21,956 | ||
| BAS Adjustment Debt | Not agreed | $17,887 | $17,887 |
| 2011 Tax | Agreed each pay own | ||
| Joint accounting fees | Agreed ignore | ||
| $508,977 | |||
| SUB-TOTAL | $1,392,463 | ||
| SUPERANNUATION | |||
| Husband – 7/3/2011 balance | $21,327 | ||
| Wife | $0 | $0 | |
| $1,413,790 |
Contributions
The parties commenced cohabiting in 1981 and married [in] 1982. They separated some 26 years later in January 2008. The parties separated for a short period of some two months between October and December 2003.
Financial Contributions
At the commencement of cohabitation the parties had nominal assets. The husband was working as a [omitted] and the wife was employed as a [omitted].
In 1984 they purchased a block of land at Property R and then constructed a property on the land and commenced occupying that property in December 1984.
In 1988, they established the [B] business. The wife alleges they received some funds from her parents. The husband does not concede this point.
In 2004 the parties purchased the former matrimonial home at Property C, [C]. The home was purchased through the Bray Family Trust.
In January 2008, the husband left the former matrimonial home to reside in the property he now owns at Property M, [M].
In April 2008, the husband was diagnosed with mantel cell lymphoma. He was unable to work for approximately ten months.
In June 2008, he commenced receiving income protection payments. On 28 August 2008, $428,068 was paid pursuant to the insurance contract.
In September 2009 the husband purchased Property M, [M] from his friends for the price of $450,000.
On 23 June 2010, following the sale of the property at [C], the wife purchased the property at [P]. The cost of the property was $530,000.
This is a long marriage that has ended with the parties having an asset pool with a net value in excess of one million dollars.
They each worked and contributed throughout the course of the marriage either through their employment, their non financial contribution to the care and maintenance of the assts, amongst other things, or the contribution to the welfare of the family.
Neither party disputes that the parties’ contributions up to the date of separation were equal.
The husband, however, submits that post separation the wife’s “contributions” have been such that there should be an adjustment in favour of the husband.
Putting the insurance payout to one side he submits that recognition should be given to his:
a)management and preservation of the business post separation;
b)the wife’s significant post separation drawings when compared to his; and
c)her post separation use of the former matrimonial home.
The parties separated in February 2008. They each continued to draw on the business account until on the wife’s evidence her drawings were restricted in June 2009.
The husband was absent from the business, due to his cancer treatment, returning to work in January 2009. The wife continued to “do the books” from home. Her efforts during this time, when the husband was undergoing treatment, are noted.
In June 2009, the husband removed the computer from the home.
The husband then had control of the business.
Whilst I am critical of the wife’s evidence, particularly her capacity to understand the financial consequences of the separation, I note she continued to care for the parties’ adult children (albeit her efforts are subject to some criticism).
The husband took over all of the management in or about June 2009. The difficulty with him taking that action is that it places a burden on him to keep his fellow Trustee, the wife, fully informed in respect of all aspects of the operation of the business.
The wife complains that he did not, and therefore failed in his obligation to provide full and proper disclosure.
I have already commented on the difficulty I had in finding a way through the parties’ allegations.
The wife complains for example, that the husband did not disclose the details of the trauma payout and yet for the period he was receiving the payments, her evidence was she was doing the books. She had knowledge of the insurance claim and payment. I therefore have difficulty with her submission.
There are concerns about the way that each party has approached this matter.
In respect of the business, the husband made a choice once he was well to assume control. I am not prepared to give him credit other than to offset his actions against the wife’s continuing care of the adult children.
This is a long relationship where the parties joined in the task of raising and providing for a family. Save for the input of the husband’s trauma payment, the asset pool has been accrued as a result of their joint efforts.
Husband’s insurance payout
It is agreed that the husband received $428,000 by way of a payment from [T] Life Insurance after he was diagnosed with mantel cell lymphoma.
There is no dispute that the husband had a life insurance/disability insurance policy for some time.
Both parties subscribed to the insurance policy as part of their business strategy.
The premiums were paid, for each policy, direct from the business account.
The value of the premiums were then credited as drawings to each party.
In February 2007, the policy was transferred or changed to [T].
In February 2008, the parties separated.
Post separation the husband was diagnosed as having mantel cell lymphoma.
He undertook treatment which lasted approximately ten months. He is now in good health.
The illness enabled him to claim a benefit pursuant to the policy and the husband subsequently received a sum of $428,000.
Counsel for the husband initially argued that this amount should be excluded from the asset pool.
The amount was received because of a policy that was taken out during the marriage and to which the husband contributed during and subsequent to the marriage which enabled a payout to be effected. I do not accept that in those circumstances the sum should be excluded from the pool.
Should however, the husband be given credit for the introduction of these funds into the pool, or should this be treated as a windfall?
He was, as a result of the illness, unable to work for some ten months. Whilst he did not receive payments for three months, income disability payments were received for the remainder of the time. Some of the financial loss occasioned by his absence was therefore mitigated.
As a direct consequence of the illness suffered by him, a sum of $428,000 was injected into the asset pool.
I have difficulty in not giving the husband some credit for this.
There is no dispute that the parties, not the Trust, are the owners of their policies, the premiums being credited against their drawings.
Some credit must be given for the contributions made to the insurance policies by the parties over the years. It was the husband however, who was diagnosed with mantel cell lymphoma and had the trauma of the illness and the treatment associated with it.
Counsel for the husband referred me to a series of authorities including Farmer v Bramley (2000) FLC 93-060 in favour of finding that the payment was either:
a)not matrimonial property (the wife having made no recognisable contribution);
b)could not be characterized as matrimonial property being a damages award arising post-separation (Aleksovski (1996) FLC 92-705); and
c)could only be considered a financial resource.
The High Court in the matter of Williams (1985) FLC 91-628 held that:
There is no general presumption that an award for damages for pain suffering and loss of amenity should be left out of account in determining what orders should be made under section 79.
In Aleksovski (supra) the court considered the damages award received by the wife in the context of the parties contributions. In their joint judgment Baker and Rowlands JJ said at 83,347:
In our opinion in most cases, a damages verdict arising from a personal injury claim is a contribution by a party who suffered the injury. It should not be considered in isolation, for the reason that each and every contribution, which each of the parties makes to the relationship must be weighed and considered at the same time.
This policy would not be in place unless the parties had made the decision to contribute to the premiums. There is interalia a history of payment of insurance premiums for income/disability insurance. The policy was changed just prior to separation however, the practice remained and the premiums continued to be paid.
The provision for this eventuality stretches back into the fabric of the relationship and cannot be said to arise from a one off event such as an accident or purchase of a lottery ticket that occurred after the parties separated.
There would be no payout unless the husband had satisfied the terms of the policy. The policy states that a benefit will not be paid unless the life insured suffers a crisis event for at least 14 days. A crisis event is defined as cancer.
In March 2008 the husband was diagnosed with mantel cell lymphoma.
In April 2008 he commenced “hyper c Vad” chemotherapy which consisted of eight treatments. He spent five days in hospital on each of the eight occasions with a minimum of a two week recovery following each round of treatment (para.23 xxxv Trial Affidavit).
In November 2008 his bone marrow was wiped out and he received a stem cell transplant.
He is currently in remission and there are no signs of the cancer recurring.
The husband’s concession that the payout should now be included in the pool accords with the decisions in matters such as Farmer v Bramley (supra) where Finn J noted that
As the Family Law Act currently stands, the jurisdiction conferred by section 79(1) to alter the interest of spouses extends without limitation to all the property which either spouse is entitled “whether in possession or reversion “ (s.4.) the only limitation is that the order must be just and equitable.
Counsel for the wife submits that any consideration of this matter should include the fact that the husband was unable to work for ten months, during which time the business hired an additional employee. The increased expenses directly affected the financial benefits available to the parties.
That expense he says is ongoing in the continued employment of another person in the business resulting in a current cost to the business of $90,000.00 per annum. The husband was cross-examined on this point and his evidence was that the staff are essential to the successful operation of the business. I accept that evidence.
The issue of the loss to the business due to the ill health of the husband is as previously mentioned mitigated by the income disability policy payments received.
In addition, the wife’s submission does not address the fact that despite his prognosis, the husband did not walk away from the business. Steps were taken to ensure that the business continued to operate thereby resulting in the preservation of the asset. Some credit needs to be allowed for this.
The net value of the asset pool is $1,413,790. The late inclusion of the trauma payout represents roughly 30 per cent of the available resources.
I do not however, consider this to be similar to a standard personal injuries case, the funds having been received because of an insurance policy that the parties had jointly subscribed to.
The husband however was the one who suffered the trauma and the subsequent treatment. In addition, he was the one who put in place the measures to ensure the preservation of the business.
I therefore consider an allowance should be made in his favour of some 10 per cent (which will mean that there is a variation between the parties of 20 per cent) and I would find the contribution of the parties to be 60 per cent in favour of the husband with 40 per cent to the wife.
Financial resources and needs
The husband is aged 51 years and remains in control of the business. The wife is aged 53 years and is currently unemployed.
The wife concedes that she was a [occupation omitted] until the parties’ second son [X] was born in 1985. She worked in the business since 1988 and has not been working as a [omitted] since that time. Her registration has lapsed and she would have to re-train.
In addition, she notes that she suffered a rota cuff injury to her right shoulder in 1979 which prevents her from holding her arm up for any extended period and would require a shoulder re-construction in order to recommence work as a [omitted].
She has no qualifications to work as a bookkeeper or tax agent.
She has taken steps to develop a [omitted] business. Her evidence is that the franchise would cost approximately $41,000 including equipment. She also claims she has a duty to maintain the adult children, namely [Z] and [Y], on an ongoing basis.
Having regard to the matters set out in s.75(2), it is common ground that the husband is aged 50 and the wife is aged 52. The wife’s evidence is that she is restricted by the rotator cuff injury to her right shoulder in 1979. She also states she suffers from depression and is an asthmatic. However, there is nothing to suggest that this restricts her capacity to obtain appropriate gainful employment.
The husband was diagnosed with mantel cell lymphoma. The report from his specialist, Annexure 4 to his Trial Affidavit, states:
“Mr Bray was diagnosed with an aggressive non-Hodgkins lymphoma and underwent intensive chemotherapy and antilogous stem cell bone marrow transplantation. He has completed this programme and is at this time in complete clinical remission. A diagnosis of an aggressive malignancy at any age is an extremely stressful event. In a person in the prime of life the effects of very intensive chemotherapy regime would be considered a highly stressful event and ideally one should seek to avoid ongoing stress.”
There is no evidence to suggest that the cancer does not remain in remission and that the husband is capable of appropriate gainful employment.
The wife attempts to argue that the husband, amongst other things, would be entitled to a further compensation payment should the cancer return.
In view of the findings that the husband is capable of working and there is no evidence to show it will return, I do not consider this submission to have any relevance.
The evidence is the husband is in reasonable health, he is working and he continues to pay the insurance premiums.
If I am wrong, his evidence is that having received a trauma payment, he is now only eligible for a death benefit. I accept his evidence.
In any event, I have not bought his health to account when considering the financial resources and needs other than as set out above.
Should he suffer a relapse that will be his problem to address at the time.
The income, property and financial resources have been thoroughly canvassed. Each party now owns a residential property in their own right. The husband continues to control the business held by the Bray Family Trust and there is no suggestion that this will not be ongoing whilst the business continues to hold the agencies from [R] and associated companies.
The wife has the physical and mental capacity for appropriate gainful employment, however, rightly points out that she has been working in the business since 1988, no longer has relevant [omitted] skills, has a physical injury that would prevent her from re-entering the workforce without surgery.
Neither party has the care or control of the child of the marriage who has not attained the age of 18 years.
Each party has set out their commitments necessary to support themselves to which the wife adds the needs for re-training or, in the alternative, setting up the [omitted] business. Should she be successful in that [omitted] business, however, her income is estimated to be $40,000 per annum and would be unlikely to exceed $50,000.
The wife alleges that she has the responsibility to support the two adult children, [Y] and [Z], both of whom reside with her.
[Y]
[Y] is 23 years of age and suffers according to the wife’s evidence from Aspergers. He is in receipt of a disability support pension.
The wife’s evidence is that he is on antidepressant medication and requires weight loss medication. In addition, she alleges he has suffered from suicidal tendencies and has self harm issues. She notes that he is covered by the parties’ private health cover. She does not produce any corroborative evidence.
The husband, whilst acknowledging the issues confronting [Y], disputes the fact that he is unable to obtain appropriate gainful employment.
Neither party has produced any evidence that would assist me in respect of this matter. There is nothing to show how severe his condition is or how it impacts on his ability to work.
All that is available at this stage is that [Y] has apparently satisfied the conditions necessary for him to receive a disability support pension.
[Z]
[Z] is 21 years old and is a full-time student. She is studying an [omitted] course which will last three years at TAFE.
In addition to that difficulty, the wife’s evidence is she suffers epilepsy and requires anticonvulsive medication which costs approximately $35 per month in addition to other expenses which include attendance upon a Neurologist every three months, the wife says she is responsible to pay [Z]’s TAFE fees in the sum of $2,830.
[Z] is expected to finish her course in December 2011. The wife’s evidence is that she will not be financially independent and will need time to find work.
Without any independent evidence to support this, I have difficulty with this proposition. However, I acknowledge [Z]’s dependence for the remainder of 2011.
Other persons
Save as set out above, neither party has any responsibility to support any other person.
The wife’s evidence, to which I will refer later, is that she has provided the Honda motor vehicle owned by her to her son for his personal and private use. Her son is in receipt of full time employment with [omitted] and is well able to afford his own car.
There is no suggestion that the husband has enjoyed a standard of living that is excessive in all the circumstances.
There are concerns raised, however, about the wife’s conduct in this matter.
The wife has been receiving a sum of $1,500 per week. In addition, she has been able to draw expenses from the business. Despite this, she has been unable to make ends meet and her evidence is that she has been living from pay to pay.
Her evidence, particularly, coming from someone who has had control of the financial accounts for the business since 1988, is extraordinary. She was questioned as to why she bought the new motor vehicle in her name. The wife at the time of the purchase was in possession of a Honda motor vehicle which had no obvious problems. Her evidence in response to these questions was less than satisfactory. She was then asked why she gave the Honda motor vehicle to her son for his use. Her answer “I suppose because I am a good mother”, was flippant and unacceptable.
The wife’s evidence in respect of her expenses and how she managed her accounts was unsatisfactory. The wife’s demeanour and her responses to the questions, suggested an air of entitlement in her answers about her spending habits. She saw no difficulty with the husband and the business paying for the expenses incurred including the purchase of a new motor vehicle.
I return to the wife’s purchase of the VW Eos as an example of this.
At a time when she was in the possession of a Honda motor vehicle, which was fully encumbered by a lease that was being paid for by the business, she made the decision to purchase a $45,000 VW Eos hard top convertible.
Her evidence is that the income she was receiving from the business at the time was taken up with the payment for, amongst other things, her rent and subsequently the mortgage on her current home, payment of her children’s expenses and, yet, she chose to take on a further debt which would mean a payment of some $900 per month for a motor vehicle she did not need.
All of this is against a background of ongoing significant litigation in which she was incurring substantial legal fees. At the date of swearing her Trial Affidavit, she had unpaid legal fees of some $37,000 and total fees exceeding $70,000.
At no stage in the course of this had she asked the children to contribute to the cost of running the home. It is acknowledged that [Y] receives a disability support pension of $350 per week whilst [Z] is not eligible for New Start because it is asset tested.
The extent to which the party whose maintenance is under consideration has contributed to the income of the other party
The wife assisted the husband with the establishment of the business. If she was not working in the business itself she was attending to the care of the home and the children, freeing up the husband to focus on business activities.
In addition, she joined with the husband in the establishment of the trust and was since 1988 a contributor and beneficiary of the trust.
The wife’s contribution has certainly assisted the husband in his business endeavours.
The husband and the wife were involved in a joint venture. The wife’s evidence is that her bookkeeping was a valuable contribution to the business. Whilst not qualified, she presents as someone with experience in running the accounts for a successful business.
In spite of her experience there is no evidence of any effort made by the wife to obtain employment or retrain to obtain employment.
The wife was a [occupation omitted] when she commenced the relationship. She can no longer work in that profession due to a rotator cuff injury. She gained experience in running a business with the husband. I have difficulty in accepting the length of the marriage has affected her earning capacity.
The wife’s evidence is that she is a careful money manager. She says she has had to be very careful because she is on a limited income. The limited income amounts to in excess of $78,000 per year. I have difficulty with the wife’s evidence.
The wife has assisted in the business since its inception. Some credit must be given for her role, whilst recognising that her primary commitment would have been to the care of the family.
The duration of the marriage and the extent to which is has effected the earning capacity
I have previously found that the parties joined in contributing over the twenty-seven years of their relationship. The roles meant that whilst the husband ran the business with the wife’s assistance, she was primarily responsible for the care and running of the family. As a consequence, she is left with book-keeping skills (of which the husband is critical), and limited skills for the employment market.
The need to protect a party who wishes to continue in their role of parent
The children are over the age of 18 years. The evidence to support a claim that they are dependant is inadequate and significantly diminishes the wife’s submissions on this issue.
Conclusion
The wife is aged 53 years. Her formal qualifications were as a [omitted]. She has not worked in that industry for many years.
The wife has made no effort to obtain employment. There is no evidence to suggest she is not capable of working. Her evidence was she would like to purchase a [omitted] franchise.
I do not consider however, that she would be capable of earning an income anywhere near that of the husband.
Should she be able to establish the franchise then the best estimate of her annual income would be approximately $40,000.
For the reasons set out above, I consider it appropriate that there be an adjustment in the wife’s favour of 15 per cent.
Just and Equitable
Pursuant to the orders for the division of the assets, the husband will receive 45 per cent of the assets whilst the wife will receive 55 per cent.
The wife is to retain the following:
[P] Property
$530,000
$280,000
$250,000
[business] equipment and proceeds of sale of trailer
$3,710
VW Eos
No equity
Funds received by way of part property settlement
$91,000
Subtotal
$344,710
She will have to pay:
PAYG arrears
$60,500
2009 tax
$10,102
2010 tax
$25,997
Subtotal
$96,599
Nett Value of assets retained by wife
$248,111
On the basis of the figures set out above:
a)fifty-five per cent of the net value of the asset pool of $1,414,790 is $777,134.50, which I round to $778,134;
b)the net value of the wife’s assets to retained by the wife is $248,111; and
c)The wife should then receive an additional $530,023.
The orders that I would make will mean that the husband would retain:
The [M] property
$460,000
The Bray Family Trust, and
Property S
$220,230
$580,000
Boat and trailer
$16,500
Superannuation
$21,327
Subtotal
$1,298,057
The husband would have to pay:
PAYG arrears
$33,404
2009 tax
$34,131
2010 tax
$21,956
BAS debt
$17,887
[M] mortgage
$25,000
Subtotal
$132,378
Nett value of assets retained by the Husband
$1,165,679
The net value of the property retained by him would be $1,165,679 from which he would have to pay the wife the sum of $530,023.
This would leave the husband with assets with a net value of $635,656 (due to the fact that I have rounded the amounts to the nearest dollar) and the wife having assets with a net value of $778,134.
The proceeds of the sale of the former matrimonial home of approximately $239,000 remain in an interest bearing account for the Bray Family Trust and are available to the husband to assist with payment of the funds to the wife.
In addition there is a significant amount of equity in the properties that are following these orders left in the husband’s control. The husband with an income stream of over $100,000 per annum should be able to service any loan to meet the required payment.
The wife following these orders will have cash reserves (once the mortgage is paid off) to meet her legal fees and set up her business.
Having regard to the above, I consider the outcome to be just and equitable and would make the orders set out at the commencement of these reasons.
Conclusion
The asset pool available for distribution has been enhanced by the application of the funds received by the husband to the acquisition of the [M] house, amongst other things.
The funds were received as a consequence of the husband being diagnosed with and treated for cancer.
The husband will, pursuant to the orders, continue to have control of the business. His income will be in the vicinity of $100,000 per annum.
The arrangement by which his agency sells the products for firms such as [R] can be terminated quickly and whilst that has been brought to account when considering the value of the business, it cannot be ignored when considering his income.
The wife is capable of employment although not as significant as that of the husband. Her evidence is that should she for example start up the [omitted] business, she could expect to earn approximately $40,000.
I have difficulty and do not accept that she must continue to support her adult children as if they were fully dependant.
There are funds available, being the remainder of the sale proceeds of the former matrimonial home that can be paid to the wife quickly. The remainder may take some time to arrange. I have therefore made orders that allow for the payment to be made in two instalments.
For the reasons set out above, I would make the orders set out at the commencement of these reasons.
I certify that the preceding three hundred and twenty-nine (329) paragraphs are a true copy of the reasons for judgment of Cole FM
Date: 16 September 2011
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