Connor and Langton
[2012] FamCA 875
FAMILY COURT OF AUSTRALIA
| CONNOR & LANGTON | [2012] FamCA 875 |
| FAMILY LAW – PROPERTY - Value of property – Whether non transferrable tax-losses of one party’s corporation through which the parties’ income is generated should be added as an asset of the party to the property pool where the company has a nil value otherwise - Should a substantial loan account a party holds in a private company which is unable to pay the loan if the company was wound up be treated as an asset of the party on the balance sheet. FAMILY LAW – PROPERTY – Initial Contribution – Where parties’ property has been segregated – Whether an initial contribution is off-set by other contributions made during the marriage |
| Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) |
| Cabbell & Cabbell [2009] FamCAFC 205 GWH & PGH [2005] FamCA Pierce & Pierce (1999) FLC 92-844 |
| APPLICANT: | Ms Connor |
| RESPONDENT: | Mr Langton |
| FILE NUMBER: | SYC | 5094 | of | 2008 |
| DATE DELIVERED: | 28 March 2012 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Le Poer Trench J |
| HEARING DATE: | 20 & 21 June 2011 28 February- 2 March 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Lethbridge |
| SOLICITOR FOR THE APPLICANT: | Stuart & Mills Lawyers |
| COUNSEL FOR THE RESPONDENT: | Mr Grieve Ms Coulton |
| SOLICITOR FOR THE RESPONDENT: | Bell & Johnson Solicitors |
Orders
The wife is to manage the funds held in two ANZ bank accounts, being funds allocated to meet the children’s education expenses together with a similar fund held in Elders term deposit. When the children have concluded their secondary and tertiary education, or at any earlier time the parties mutually agree upon, the remainder of the funds held in the above accounts or any subsequent investment are to be divided between the parties equally.
Each party is to be declared the absolute owner of items of real property, personal property, shareholdings, superannuation and resources currently standing in their sole names or being in their control.
All outstanding interim orders and applications/responses in relation to final orders in this court are otherwise dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Connor & Langton 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 SYDNEY |
FILE NUMBER: SYC
| Ms Connor |
Applicant
And
| Mr Langton |
Respondent
REASONS FOR JUDGMENT
Introduction
The parties seek property orders which deviate only in the amount of cash each seeks the other pay by way of property settlement. Each of the parties owns substantial property interests in their sole name and they do not own any property in their joint names.
The parties have two children. They are H aged 18 and B aged 16. The children live in an equal shared time regime between the parents. Each parent has a residence in Sydney. The husband maintains his residence and business interests in N Town, NSW.
The parties hold investment funds for the children’s education. They have agreed that the wife should administer the funds until the children have concluded any tertiary education and then divide the balance of the funds, if any, between them equally. The wife is to administer the funds in the meantime.
I wish to record that determining this case provided a welcome respite from the “usual” type of litigation conducted in this court. Each of the parties in this case presented as decent, honest and likeable people who did not have a bad word to say about each other. Each, in an apparently unrehearsed manner, were complimentary about aspects of the others contributions, abilities and parental contributions. Each appeared as connected with their children and supportive of the children’s relationship with the other parent.
Orders Sought
The orders sought by the wife are set out in her Application for Final Orders filed 1 September 2008. In that document the wife sought a payment by the husband to her of $400,000. She sought transfer to her of the “education fund”. She sought transfer of an ANZ joint account to herself. Otherwise she sought each retain the assets standing in their sole names.
The husband relied upon his Response to an Application for Final Orders filed 6 November 2008. On the first day of the resumed hearing the Court was told the husband sought to amend the orders sought to substitute the sum of $758,419 for the figure appearing in paragraph 1 of the orders sought. He no longer pressed for the orders set out in paragraphs 7 to 10 inclusive. He also said he would consent to the wife controlling the children’s education fund with any surplus to be divided equally at the conclusion of the children’s education. The husband was said to be seeking an equal division of the parties’ assets.
Background Facts
On 2nd June 2010 the parties jointly prepared a chronology of background facts. That chronology has been marked as exhibit X1 in the hearing. The following background facts are drawn from that document and the evidence in the case which is not contentious. There is very little in the chronology which is disputed, nor is there much information of relevance outside of the acquisition of property owned by the parties. As a consequence I shall omit from the chronology information relating to the acquisition of property by the parties, which is set out in the Affidavit evidence of each party.
The husband was born in 1961 and passed his early life on the property “O” near the town of N in New South Wales. The wife was born in 1963, and passed her early life on her family’s property “T” near N Town in New South Wales.
The parties married in 1989.
The wife was employed throughout the marriage. She ceased work outside the home between 1993 and 1996 in order to care for the children. During that time, the wife acted as the primary carer for the children and undertook an MBA as an external student. She returned to work in 1997 on a casual basis, then worked on a part-time basis until 2000, after which time she was employed on a full-time basis.
The husband drew a salary from the O Pty Ltd, and engaged in farming business on the O property. He also engaged in off-farm work which paid him a salary, undertaking farming business on properties other than O and undertaking employment with representative bodies, particularly representative bodies for primary industry.
The parties resided, throughout the course of the marriage, in a house located on the property O, near the New South Wales town of N. The house was provided to the parties rent free, as part of the husband’s remuneration/package prior to March 1995. The land was transferred to the husband on 10 March 1995.
The parties’ first child, H, was born in 1993 and their daughter, B, was born in 1995.
The parties separated in 2007, at which time the wife moved to Sydney. At the time of separation, H was attending boarding school in Sydney and B was attending primary school in N Town. B remained in her father’s care for the last term of the school year and began attending boarding school in Sydney in 2008. Both children remained as weekly boarders until 2010, spending alternate weekends with each parent and half of school holidays with each parent. In 2010, the children became day students and began to live on a week about basis between the parties. They spend half of each school holiday with each parent.
After separation, the parties jointly paid for the children’s upkeep through a joint account set up and contributed to equally by both parties.
Credit
Each of the parties gave their evidence in a straightforward and apparently honest manner. Each was an impressive witness. The wife appeared to me to have a better recollection of historical facts and financial matters than did the husband. The husband on a number of occasions, deferred to the wife’s better recollection of events. Whilst the wife showed no sign of disrespect to the husband the husband offered a number of unsolicited concessions about the wife.
Overall I consider the wife’s recollection of fact is better and more proportioned and realistic than the husband and, unless I state to the contrary during these reasons, I do accept her evidence in preference to that of the husband where they conflict.
The Husband’s Affidavit Evidence
The husband claimed an initial contribution to the marriage. Cohabitation commenced between the parties at the date of marriage in 1989. At that time, the husband owned part of the property known as O at N Town, being 400 hectares of that property. (I note the wife has annexed a copy of a transfer to the husband dated 15 December 1989, which shows the transfer of 215 acres to the husband). He had a 25% interest in the partnership of J Pty Ltd. He had one share in A Lodge, T Town and he had household items of furniture including antiques. At the same time, he was liable for a mortgage in respect of the O property of $1.434 million. He had a liability as part of a fixed and floating charge over the O Pty Ltd and he had a liability for various farm equipment loans of approximately $100,000.
There is no evidence of the value of the husband’s interest in the property O or in the partnership of J Pty Ltd. The husband provided an estimate of value which was objected to and struck out. However, even if the husband’s estimates had not been struck out and assuming the Court could give any weight to those estimations of value of assets at that date, on his own evidence his liabilities exceeded his assets at the commencement of the cohabitation.
In relation to the husband’s share in the A lodge his evidence is that he had purchased the share in 1982 for $10,000.
At the time of the marriage between the parties the husband says there were a number of inter-related family companies operating which were subsequently wound up. The husband named 7 companies falling into that category. He did not receive any benefit from the winding up of any of those companies. At the time of cohabitation the husband had little or no superannuation.
During the cohabitation the parties lived in a house being a large 5 bedroom weatherboard homestead situated on the O property. The husband had use of the house as part of a rent free benefit from J Pty Ltd.
The husband contributed his salary to the parties’ joint account. The exact extent of his contribution to the joint account is difficult to determine. The husband in paragraph 3 of his affidavit set out his taxable income for the period 1999 to 2010 with the exception of a few years where he clearly did not have information available to him. The first thing to note is that the uncontradicted evidence of the wife in relation to the husband’s financial contribution to the joint account is that in the early years of the marriage he contributed $2,600 per month to the joint account and then $4,600 per month throughout the bulk of the marriage. $4,600 per month equates to $55,200 per annum.
The further evidence of the wife, uncontradicted or challenged, is that when the parties employed a house keeper or nanny to assist, the salary for that person was initially paid from the joint account. However, throughout the majority of the time that the parties employed such assistance the salary was paid by the husband’s operating company and was then deducted from his monthly payment which was deposited to the parties’ joint account.
As can be seen for the majority of the years referred to in paragraph 3 of the husband’s affidavit, his taxable income was insufficient to meet the annual commitment of $55,200 to the joint account. The funds to make up the difference, in the absence of any specific evidence from the husband, must reasonably have been assumed to have been drawn against the husband’s loan account in O Pty Ltd.
To compound this difficulty in determining exactly what the husband contributed financially during the course of the marriage and the source of such contribution, the husband says in paragraph 3(c) of his affidavit that he paid all domestic accounts of the household utilities including power, water and telephone as well as swimming pool, fuel and maintenance expenses from company funds available to him. No evidence is given as to how those payments, which were clearly payments which in the normal course would not be a tax deduction for the company, where dealt with in the company accounts. Again, in the absence of specific explanation, it is reasonable for the Court to conclude that these expenses were met from funds borrowed by the husband from the company.
The husband supplied, through the vehicle of the O Pty Ltd, motor vehicles which were provided for the wife’s use. At the time of separation the wife was driving a German car which was a transferred to her name following separation. During the cohabitation the husband also had available for his use motor vehicles, usually farm utilities, paid for by the same company. The husband says that other benefits were provided for the children which were funded by the said company. This included keeping horses used by the children for recreation. I note the wife says the German car was leased and payments made from the parties joint account immediately before separation.
In 1995 the husband became the sole shareholder and director in the company O Pty Ltd and the owner of the balance of the O Property. The husband said that at that time, the value of that property and the O Pty Ltd was no greater than the liability owed by the company at that time. Further, in 1995 or 1996 the husband says the State Bank mortgagee expressed a view that there was no equity in either of the entities. The husband obtained the consent of the mortgagee to continue funding without taking possession of the assets of the husband for a period of 5 years. At the conclusion of that time the husband said “We had established equity of approximately 40% in the property [O].” Given that both the real estate and the company were the subject of charges to the State Bank it is difficult to determine exactly what the husband meant by that assertion. In his oral evidence he said he was referring to the difference between the value of the rural property and the amount owed to the State Bank by both himself and the company O Pty Ltd.
The husband said that between 2005 and 2007, because of drought conditions, the rural property was unable to provide an adequate income and he did work off the farm.
The husband asserts he made a contribution as homemaker and parent during the cohabitation. He claims an equal contribution to the care of the children during the cohabitation. After separation, the child B remained residing with the husband for the remainder of the school year before moving to Sydney to attend boarding school.
Nowhere in paragraph 6 of the husband’s affidavit does he claim a contribution towards the domestic chores of the household such as cooking, washing, ironing and cleaning. His only contribution claimed in this area is to the supervision and interaction with the children from the time of their birth until the separation.
Post-separation the husband claims the following contributions:
a)The husband has contributed to the ongoing funding school fees through the joint account with the applicant wife on an equal basis.
b)Post separation the husband acquired a residence in Sydney principally so that he could share in the care of the children on a week about basis. The husband has provided H (the parties’ child) with the use of a motor vehicle. H turned 17 in 2010. I have assumed, in favour of the husband that the provision of the motor vehicle was sometime shortly after that birthday. The husband met the cost of the vehicle’ approximately $8,000’ together with meeting the running costs of the vehicle, including fuel costs.
c)The husband provided mobile phones and laptop computers to the children which cost him approximately $3,000.
d)The husband regards his home as being O at N Town. He lives there when he is not in Sydney sharing his residence with the children. He says the cost of travel to and from Sydney for the children is more than $7,500 per annum.
e)The husband has also met the living costs of the children whilst they are in his care in Sydney and N Town during school holidays.
f)The children spend one half of their school holidays with the husband. He also has daily contact with them by phone or email. He has the children living with him during every second week during school term.
The Wife’s Affidavit Evidence
The wife has a shareholding in C Pty Ltd. That company is the owner of a company called T near N Town in NSW. The wife has never received any dividend payments from that shareholding. The company is effectively controlled by her mother.
In 1983 the wife graduated with a bachelor of commerce.
The wife’s father died in 1978 when she was 15 years of age. She inherited part of his shareholding in a company D Pty Ltd which owned a grazing property at KD Town in NSW.
In 1982 using the proceeds of workers compensation payment of $32,000 arising out of the death of the wife’s father, the wife’s mother acquired a unit at L Street, M suburb for $149,659. The property was purchased in a manner which gave the wife a 24% interest in the property.
In 1985 the wife purchased a property in W Street, UT suburb. The purchase price was $46,000 and the wife borrowed $42,000 to purchase the property.
In mid 1988 the company D Pty Ltd was wound up and the wife received $560,000 for her shareholding therein. She also received a cash bequest from her grandmother of $10,990. The wife used part of those funds to purchase a property at X Street, Q suburb for $315,000. She lived in that property until the date of marriage in November 1989. With part of the funds received from the D Pty Ltd winding up, the wife acquired a share portfolio in relation to which she expended $30,000. She also paid funds to her superannuation and had some cash remaining.
At the date of marriage the wife was employed by a Petrochemical Corporation earning $33,000 per annum. She resigned that position a month before the marriage. At marriage she moved to live at O property with the husband.
In 1985 the wife received a 16.7% interest in T Partnership. This partnership manages the pastoral pursuits for the family. The wife received distributions from the partnership during the marriage. The partnership is fully managed by the wife’s mother, the wife has at no point been involved in the operation of the partnership.
The husband’s evidence is that at the date of marriage he owned approximately 400 acres of the property known as O. The wife has annexed to her affidavit copy of a transfer to the husband dated 15 December 1989 of property which she says represents 215 acres acquired by the husband on that date. That is a date, of course, after the commencement of the marriage. The wife was not challenged on her assertion.
The wife says, and she was not challenged on this, that in January 1994 the husband’s monthly payment for managing O Pty Ltd increased from $2,600 per month to $3,600 per month. However, $1,000 per month of that sum was paid to the husband’s brother Mr E. A total of $20,000 was paid to Mr E. In November 1994 the husband’s wage from the partnership increased to $4,600.
It is common ground that any payments made by the partnership to housekeepers or nannies employed by the husband and wife were deducted on a monthly basis from the husband’s salary. This arrangement continued after the incorporation of O Pty Limited.
In February 1990 the wife received an inheritance of $55,000 from her great aunt. In April 2007 the wife received an inheritance from Mr G of $40,000. The wife used those funds for investments or for the children’s education expenses.
Throughout the marriage the wife continued to consolidate her investments. In April 1993 the wife acquired a property at H Street, I suburb. A mortgage of $130,000 was advanced.
In October 1994 the wife sold her Q suburb property for $400,000. The wife invested the proceeds of the sale in buying shares on the stock market.
Any money earned by the wife from personal exertion was paid by her to the parties’ joint operating account.
In August 1996 the wife purchased a commercial property at K Street, ND Town for $530,000. The wife borrowed $310,000 from the National Australia Bank.
In July 2000 the wife purchased a property at P Street, RT Town. The purchase price was $690,000. With costs and stamp duty the cost was $724,000.
In August 2007 the property at L Street, M suburb was sold and the wife received a total of $207,251, being her 24% share in the property.
On three occasions between 1992 and 1998 the husband borrowed money from the wife which was repaid with interest. The total amount borrowed was almost $180,000. In October 1995 the husband withdrew $33,500 from the parties’ joint account to buy a plane. He repaid that amount to the joint account.
With the exception of a period between 1992 and 1996, the wife was employed throughout the marriage. She provided evidence of her income which began to rise significantly from the financial year ending June 2000 onwards.
During the period commencing 1 July 1989 and concluding 30 June 2007 the wife received a net income of $526,606 from personal exertion. This sum was deposited into the parties’ joint account. Between the date of marriage and November 1994 the husband deposited net in the parties’ joint account his wages of $2,600 per month. In January 1994 they had increased to $3,600 however, $1,000 per month was paid to his brother Mr F until a total of $20,000 had been paid. That would have taken until July 2005. In November 1994 the husband’s monthly income was increased to $4,600 per month where it stayed until the date of separation. That sum was paid to the parties’ joint account with the exception of the periods which the company met the cost of housekeepers or nannies for the children, in which circumstance, the cost of same was withdrawn from the husband’s monthly account.
In any event, assuming an income of $4,600 per month was deposited in the account from 1 July 1995 and $2,600 per month was deposited to the account net in the period from marriage until 1995. That would have provided, during the period 1 July 1989 to 30 June 2007, a total payment of $849,600 into the joint account.
In my view, little flows from a comparison of the parties’ net income after tax which was derived from personal exertion. The exercise which the Court is required to undertake is an assessment of all contributions made by the parties during the relevant time and the provision of net income is but one contribution to be considered. I refer to it only because it was a matter which was raised during the course of the hearing.
The wife studied during the marriage as a part time student. She obtained a Masters of Business Administration majoring in Accounting and Finance. This required 2 years of participation on her part although her oral evidence was that she was not required to physically attend at the university but rather did all her study as an external student. During the marriage the wife also obtained accreditation with the Sydney Futures Exchange as a registered representative. Any costs associated with the wife’s studies were met from her private resources. During the time that the wife resided at N Town with the husband, she held a number of responsible positions with various employers. The wife was also involved in community activities such as the development of a centre in N Town.
In 2002 the wife was successful in gaining a scholarship. She participated in a part-time program in May 2002. In June 2006 the wife was awarded an Australian Institute of Company Directors Diploma following the completion of a Directors Course. That was funded by her employer. The wife contributed to superannuation during the course of the marriage, as did her employers.
During the marriage the parties embarked on a project to save money for their children’s education. Monies were transferred on a monthly basis from the parties’ joint operating account to the Australian Scholarship Group (“ASG”). In addition to contributions from that source the wife made equal contributions from her investment funds held in her name. The wife managed these funds.
The contributions to ASG commenced in 1995 for H and in 1996 for B. Monthly contributions commenced at $200 per month for each and increased to $400 per month. The contributions ceased on the completion of year 6 for each of the children. ASG provides an annual draw down which is provided in February of each year. Those funds are used to pay the first two terms of school fees for each child. There is also a tertiary fund which is being contributed to by the parties from their joint operating account at $140 per month.
Commencing in about 1996, the wife would transfer approximately $500 per month from the trading account to a higher interest earning account. When there were sufficient funds available she would buy a parcel of shares. These savings increased to $600 per month in March 2000 and continued through to May 2006. In October 1999 the education account had 930 BHP shares and 500 BHP endowment warrants, 560 NAB shares and 750 Telstra shares. When liquidated in November 2008 the fund realised a value of $210,000, which was placed on term deposit to be drawn as needed for the children. The wife has controlled those funds. The parties have agreed that they should continue to do so into the future and that once the children no longer need support in secondary and tertiary education the balance of any fund should be divided equally between them.
Throughout the marriage, each of the parties conducted their own personal financial affairs. With the exceptions of the joint account to which both parties contributed for the running of the household and the education funds established for the benefit of their children, the parties held no other joint accounts nor did they own any other asset jointly. The joint operating account to which both the parties contributed was used to meet all the household expenses such as food, clothes, holidays, childcare and sundries. O Pty Ltd met household electricity, insurance expenses together with fuel, repairs and maintenance for the parties’ vehicles. The company also funded housekeepers and nannies from time to time. The wife managed the account and paid all the bills and from time to time, as stated earlier, and invested any surplus funds in higher interest bearing accounts. Apart from having a general understanding of the types of investments each had in their private capacity, the wife’s case is that neither shared any detail of their investments held in their sole name.
In relation to her homemaker and parent contribution the wife says that upon marriage she moved into the homestead at O which consisted of a five bedrooms, two bathrooms and an ancillary facility residence. There was an additional two bedroom wing added in 2007. There were extensive gardens with an in-ground pool. The homestead had become “a little dilapidated” after the husband’s parents left the property in 1986 and moved to Sydney. The wife contributed to refurbishing the home, and the gardens were regenerated largely by her but with some assistance from the husband.
At the time of the marriage the husband was involved in the sport of polo and continued that until 1994. The wife assisted him as a groom and caring for his polo stock. Other grooms were employed on an ad hoc basis. All those associated expenses were met by the husband. Until the birth of the children the wife worked outside the house in employment and also contributed to the maintenance of the home and household chores. After the children were born in 1993 the wife says she was the carer of the children. She received assistance from the husband when he was available.
During the infancy of the children the husband was appointed the Chairman of a regional primary industry association and the federal Director of the industry association. The wife says that this involved her in entertaining visitors and attending with the husband at various functions, a role which she enjoyed. As the children grew the wife became involved in local organisations. She was a committee member for five years, and the president for two years, of the V Child Care Centre. The children attended the Centre on a part-time basis prior to them commencing formal schooling.
The children rode in local pony clubs and both the husband and wife were instructors and co-ordinators of the club. The wife cared for the children’s ponies. She maintained an interest in the children’s extra-curricular activities such as swimming, athletics and Rugby Union. The wife acknowledges that the husband, when available, would also attend functions with the children. She said, “We were to all intents and purposes a close family unit.”
The wife recommenced working in paid employment in 1996 and nannies and cleaners were engaged to assist in the care of the children and the home. The wife said she maintained the gardens and the upkeep of the homestead. She consulted with the husband in relation to any maintenance and repairs. The wife said in her oral evidence that the husband mowed the lawns.
Post-separation the wife has made considerable changes to her private investments. Upon separation the wife moved to Sydney and accepted a position with the Y Council as its Executive Director, Corporate Resources. She still holds that position. She is also the Chief Financial Officer. Since holding that position she has gained Certified Practicing Accountant accreditation in 2010, after completing three years of part-time study. Her current salary is $177,800 per annum and there is the possibility of an additional payment equivalent of 10% of that package at the discretion of the Council and is based upon performance.
In 2010 the wife’s contract was extended for 2 years. She gave oral evidence that the contract will not be renewed again by mutual agreement.
When the wife first moved to Sydney she moved to the apartment at M suburb owned by her mother. She paid no rent but met some outgoings. In September 2008 she sold her share portfolio for $520,998, her property at U suburb for $389,000 and her property at H Street for $640,000. With those proceeds she purchased in April 2009 a property at E Street, S suburb for $1.7 million. That is now her residence. In order to purchase the property she borrowed the $140,000 from Bank West. She paid capital gains tax of $122,883.
Following separation, B remained living in N Town with the husband to complete the last term of year 6 at the conclusion of 2007. In that same year H was at boarding school in Sydney in year 8. At the commencement of 2009 the children became weekly boarders and in 2010 became day students.
The parties had agreed that they would, and in fact did, implement an equal time shared parenting arrangement. The children now live in a week-about arrangement between the parties and school holidays are shared. The children’s school fees are paid either from the ASG Scholarship Fund or from money held in the accounts referred to earlier, which had been designated by the parties as created for that purpose. The parties each contribute $800 per month to a joint account which meets medical expenses, family medical health insurance, orthodontic works, clothes, school clothes, books, excursions, mobile phones and sundry expenses for each child. Whilst the children are in each party’s care, they pay the appropriate costs of living. There is no child support paid by either parent to the other. The wife continues to be involved in organisational support for the children. The husband is also involved in the same type of support.
The wife attests to the fact that she is now 48 years of age and enjoys good health.
Wife’s Oral Evidence
The wife said her employment contract will expire in December this year. It will not be continued by agreement between herself and her employer. She has an expectation she will obtain appropriate employment.
The wife conceded that during the marriage the husband paid for a Ford motor vehicle and a European motor vehicle and later a German motor vehicle. She said that the Ford was purchased with a trade in of the motor vehicle she brought to the marriage. The German motor vehicle, being the motor vehicle she had at the time of separation, was leased and the payments were met from the parties’ joint account. The wife agreed that during the marriage from time to time she lent some of her funds to the husband which were all repaid with interest.
The wife denied that when she was studying between 1994 and 1996 the husband assumed greater care of the children. She denied his contribution as equal. She asserted he was not at home enough to assist her. She denied that during the marriage when the husband visited his share farming activities away from the property he returned each day by air. She said that in relation to the overseas investment he was absent overseas for one week per month over a space of about two years.
Prior to the children going to school she said their care was attended to by her 85% of the time. Further, until the children went to school in Sydney the same proportion of care continued. When H went to boarding school at the beginning of 2006 the care for him became about equal. Notwithstanding there were housekeepers employed to assist the wife, she asserted that of the homemaking tasks 90% of them were performed by her. She said the husband always mowed the lawns but he rarely cooked.
The wife agreed that when Ms Z was the housekeeper she attended 3 to 4 days a week between 2pm and 6pm. When she attended she did the cleaning of the house and cooking the evening meal. The husband provided a motor vehicle for Ms Z to collect the children from school. After Ms Z there were other housekeepers.
The wife conceded that when the children were in primary school the husband participated in taking the children to Pony Club, swimming and football. He took H to swimming lessons for two years in the summer five days per week at 6 a.m.
Husband’s Oral Evidence
The husband took issue with the wife’s assertion as to the division of responsibility between the parties in respect of homemaker and parent contributions. In relation to homemaker contributions, he said most of his responsibilities were outdoors. He said both parties contributed to the schooling and extra-curricular activities such as riding. Sometimes he cooked the evening meal in the winter when he was home earlier than the wife.
The husband confirmed in cross-examination that the adjournment of the case in June 2011 occurred because it was necessary to update the financial records of the company O Pty Ltd. Since that time the statutory accounts for the company for the year ended 30 June 2010 have been amended. In addition the returns for the 2011 year have now been completed. The husband attested that those records, including the Financial Statements for the company, are accurate.
When the proceedings commenced in 2008, the husband filed a Financial Statement. As at June 2011 he had not filed any amended Financial Statement. He conceded that there had been material changes to his financial position during that time.
On 1 September 2011 the husband filed a Financial Statement. He said he read it before he signed it. However, he did not read the section under the heading “Affidavit.” He had not read Rule 13.04 before he signed the affidavit. He was aware he had an obligation to make a full and frank disclosure of relevant information. The husband said he had disclosed all matters referred to in Rule 13.04.
The husband agreed that on 1 September 2011 he was sharing his property at HI Street, KG suburb with Ms WL. Thereafter until the husband acquired Ms WL’s interest in the HI Street property they shared a bedroom. When asked why he had not included Ms WL and her daughter as members of his household in Part E of the Financial Statement he said “I considered my household was at N Town.” The husband conceded that he had not referred to the acquisition of a 66% interest in the HI Street property in any affidavit filed by him in the proceedings. He denied that he had deliberately left out details of his relationship with Ms WL and/or their ownership of a property from his sworn testimony filed in the Court. His relationship with Ms WL concluded in 2011.
In January 2012 he completed the purchase of her interest in the property. In order to do so he borrowed from the bank and also took over fully the commitment in respect of the bank mortgage registered against the title to the property. He agreed that at that time he was able to convince the mortgagee that he could meet the commitments under the mortgage as they fell due. He agreed that the accounts of O Pty Ltd over a number of years show a history of loss. He has propped the company up through sales of assets. He has lost money in the company in each year since 2005. He denied that in 2011 he was still losing money from rural pursuits.
He agreed that the apartment block in KT Street, N Town was profitable in 2011. He now operates a share-farm arrangement on the O property. It commenced in the winter of 2010. There is a share-farming agreement which is kept on his computer.
The husband was taken to his Financial Statement sworn 1 September 2011. He was taken to that section of the document which required him to provide details of property disposed of by him in 12 months before separation and since. He conceded it was blank. He conceded that he had disposed of property since the separation. He did not provide the information in that document because he considered that the information had been reported elsewhere. He had sold a portion of O and to do so he engaged solicitors HP & Co. He also sold some water licenses, some machinery owned by the company and a property at 68 NW Street, N Town which had been owned by his family trust. The N Town property was also sold through his solicitors HP & Co. They are a different firm of solicitors to the solicitor representing him in these proceedings. He told me he had provided to his solicitor, in this matter, copies of the settlement statements in respect of each sale very shortly after he received it.
The husband conceded that the sale of land and water licenses in September 2009 netted him $2,139,000. He also sold in excess of $200,000 (ultimately proved to be around $300,000) worth of machinery in late 2010. He disclosed in his Financial Statement filed in Court on first day of trial a sale of $94,225 which was received from the property in NW Street, N Town. He conceded that in addition to that fund he received the balance of the deposit. The deposit was $10,500 and he estimated he received $7,500 after payment of agent’s commission. The husband denied that he had sought to hide this sale and asserted that he had provided to his solicitor in these proceedings a copy of the contract for sale.
The husband was asked about the affidavit sworn by him on 17 January 2011, which was the only affidavit read by him in the proceeding apart from his Financial Statement. In paragraph 7(a)(3) of his affidavit, the husband said that he had purchased a modest house in Sydney. He agreed he had not set out how much he had paid for it or how he had financed it. He agreed he had not said he had purchased it with a co-owner. In response, the husband said that upon completion of the purchase he provided to his solicitor acting for him in these proceedings a copy of the settlement sheet provided to him by the solicitor acting on the purchase. The purchase was completed in January 2010.
The husband has been able to meet his commitments under the mortgage. Ms WL was a one-third owner of the property, however, she only provided $25,000 cash towards the purchase and the husband provided the balance, effectively lending her the balance of funds required to make up her one-third contribution to the purchase price. The purchase price was $945,000 and the bank lent the husband and Ms WL $725,000. The husband and Ms WLT together contributed $220,000 of which Ms WL contributed only $25,000. The husband conceded he had provided none of this information in his affidavit.
In relation to the purchase, Ms WL owed the husband $45,000 which carried interest at the rate of 8% or 9%. Recently the husband acquired Ms WL's interest in the property and in so doing paid her a sum of money which was not calculated by way of interest in the property but rather as an overall settlement. He paid $50,000. The basis of the settlement is not clear. However, the husband and Ms WL were able to resolve the matter without recourse to litigation. The husband now proposes to renovate the property with an expenditure of about $100,000.
The husband was asked about the sale of the property at N Town which had been owned by his family trust. The husband said the money received by him from that sale was deposited to the O Pty Ltd Pty Limited bank account. At the time he deposited the funds to the farm management account it was in credit.
Although asserting that his loan account in the O Pty Ltd is of no value, he had in fact increased the loan account since separation. In 2009 he sold land and water rights. He agreed he had not consulted with the wife before he effected the sales. He agreed he received in excess of $2 million from those sales and he deposited the proceeds into the bank account of the O Pty Ltd Pty Limited. He was not clear on what he had done with the funds other than deposit them in the bank. He agreed that $1,666,000 only was used to reduce debt of that company. He agreed that he could have set out in his affidavit a statement of receipt of the funds and application of the funds following on the sale of the land and water rights. He had not done so.
It was put to the husband that $479,000 of the funds received had been applied by him not in reduction of debt. He did not accept that. He was not in a position to say exactly how much had been applied to reduction of debt. He said the money was either used to pay debt or put into other investments. The other investments would include the serviced apartment block in N Town and the home at KG suburb. He agreed he borrowed $1 million from the bank to purchase the serviced apartments in N Town. The purchase price was $850,000. He agreed that none of the sale proceeds from the land and water rights had gone to the purchase of the N Town serviced apartments. The husband agreed that he had borrowed $1.4 million to acquire and re-furnish the serviced apartments in N Town. None of the funds from the sale of the land and water rights had been used.
The husband conceded that $1,666,000 was the correct total of repayment of debt to the bank. Of the in excess of $400,000 (closer to $480,000) left from that sale of land and water rights he acquired the property in Lane Cove and paid himself wages. The property at KG suburb was bought in January 2010. The husband contributed $195,000 to that purchase, he said. This later proved to be closer to $220,000.
The husband was asked about the amendment to the 2009 O Pty Ltd tax returns. In relation to the company his attention was drawn to the fact that the 2009 loan balance was reduced to $1,798,216. That was the amount of money owed by the company to him. The amendment from the previous figure was some $475,000. When asked what had happened to that amount the husband said he did not know but thought there had been an erroneous carry forward of trade creditors.
It was pointed out to the husband that the difference between the 2008 and revised 2009 loan account figures were $697,000. He agreed with that. It was put to him that he had the benefit of those funds. He denied that. A number of possible alternatives were explored with the husband, however, he was not able to confirm any of those put forward.
The husband agreed that between the financial year 2006 and 30 June 2009 the company had total losses of $1.2 million. He was asked whether he had considered winding the company up. He replied “No.” He had been hopeful of a profit. He agreed that he had presented a case to the bank, when borrowing the funds to acquire the N Town serviced apartments, that he could turn things around. The husband said that the company is now profitable. He had entered into a contract with another company by the name of RT to share-farm the property. Although the expense of the farming was met by the share-farmer, there were some expenses the husband had to meet including the repair of pumps and levies. The sharefarmer only operates on part of the O property and the husband farms cattle on the balance. He currently has 45 head of cattle but the property could carry more.
The husband agreed that recently he had provided to the bank a statement of assets and liabilities in order to obtain funds to pay out Ms WL. In that statement he agreed that he had included his loan account with the company as an asset. The husband says he receives a salary from primary industry research and he also does some other consulting, the income of which is paid to O Pty Ltd. Notwithstanding the size of the debt in relation to the KG suburb property and the serviced apartments in N Town, the husband is confident that he will be able to continue to meet his commitments under the mortgage and pay the debt in full.
The husband, on the third day of the trial, was able to provide some explanation for the reduction in his loan account between 2008 and 2009. He said that in relation to the sale of the land and water rights it included some pumps and other equipment which in fact belonged to O Pty Ltd but which had not been recognised in the original accounting. Thus the adjustment of the accounts was required. The husband agreed that the amount debited from the loan account in relation to the sale of that equipment was some $476,000. He was unable to explain the additional $220,000 adjustment at that time. The husband said that in late 2010 he had a clearing sale and sold machinery receiving $310,000.
The husband was taken to various associations and bodies of which he was a member from the time of the marriage to the time of the separation. He agreed that he held responsible positions with those associations and that they required him to attend meetings, sometimes necessitating overnight trips. He also agreed that he farmed land at GG Town (30 minutes drive away) and WW Town (30 minutes drive). He agreed he often worked 7 days a week. He agreed that the homemaker tasks not attended to by the housekeeper were done by the wife. He agreed he worked in the garden. At one time during the marriage the husband agreed that he was farming a property at RW Town three hours drive away. He said he would usually fly to that property. The husband agreed that for 18 months to 2 years he endeavoured to create a business overseas with a partner. He agreed that this involved him being away for one week for each month in Indonesia.
In re-examination the husband was asked “You said the serviced apartments were profitable. When you said that did you take into account the borrowing?” The husband answered “No.” It is difficult to understand what the husband meant by that answer. He has a clear understanding of the amount borrowed to acquire, renovate and equip the N Town serviced apartments. He must have a clear understanding of the monthly interest commitment on that mortgage and any reasonable interpretation of the word “profitable” must carry with it an understanding that the monthly or annual takings have deducted from them the amount paid in interest on the borrowing in order to ascertain profitability.
During the course of the hearing there was tendered exhibit “W9.” This was a profit and loss statement for the period 1 July 2011 through January 2012. This showed a profitability of the operations of the company O Pty Ltd. The husband was asked whether there is any event which has occurred since which might cast doubt on that profitability. He said there had been a flood and a pump washed away. The crop may have been damaged by the water.
The husband was asked about servicing his loan commitments. He said that he had no difficulty servicing the loan. He is proposing to repay the bank all money advanced in respect of the purchase of the KG suburb property when he sells it in about two years time.
Oral Evidence of Single Expert Mr BB
Mr BB agreed that if all the assets of O Pty Ltd were sold there would be a significant deficiency in the secured loan to the National Australia Bank. That shortfall would be in the order of $346,160. In such circumstances, the husband’s loan account would be entirely irrecoverable by him. He would also be personally liable for the deficiency to the bank.
Mr BB agreed that the profit calculated in the 2011 financial year was attributable to the sale of assets. Without that sale there would have been a loss of $120,000.
Mr BB agreed that the discount rate of 70% applied by him to the loan account of the husband was really a guess on his part, having regard to the circumstances.
Mr BB said it would be to the advantage of the husband if he were able to continue operating the company. Provided the husband continues as the sole shareholder of the company he could change the company’s operations to different investments and enterprises and still have the company able to take advantage of tax losses which have accrued. Further, once the company becomes profitable there is the opportunity to repay the husband’s loan account and thus the husband would receive those funds from the company as repayment of capital and not payment of income.
Mr BB was shown a copy of the company’s profit and loss account for the period 1 July 2011 through January 2012. The account showed an increase in return from share farming from the 2011 years at $84,197 to $171,000 for the year to the end of January 2012. Mr BB said that if the profitability of the company continues as indicated in the accounts to the end of January 2012 it would assume profit of $191,000. With that type of turn around in the company’s performance, Mr BB said it would affect his prediction about the husband’s ability to take advantage of tax losses and to repay his loan account. Mr BB said that since 2006 more than $1.3 million has been invested by the husband to support the company.
Relevant Law
property: general principles
Section 79 of the Family Law Act 1975 (“the Act”) enables the court to make orders with respect to the property of the parties to the marriage. In considering what order, if any, should be made the court is required to take into account the matters under s 79(4).
It is now well established that the determination of a s 79 application requires a four step process (Ferraro and Ferraro (1993) FLC 92-335; McLay and McLay (1996) FLC 92-667; Hickey and Hickey (2003) FLC 93-143). The Court must:
a)firstly, identify and value the net property, liabilities and financial resources of the parties at the date of the hearing;
b)assess the contributions of the parties pursuant to s 79(4);
c)consider the relevant s 75(2) factors; and
d)lastly, consider whether such an order, in all the circumstances, is just and equitable. The final consideration is a reflection of the requirement under s 79(2).
Assessment of the s 79(4) contributions
In considering the alteration of property interests I am required to consider the contributions made by the parties in accordance with the matters outlined under s 79(4). Section 79(4) provides:
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
Section 75(2)
In making a decision in relation to property, s 79(4)(e) requires a consideration of relevant s 75(2) matters. I here incorporate the provisions of section 75(2).
(2) The matters to be so taken into account are:
(a) the age and state of health of each of the parties; and
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain; and
(e) the responsibilities of either party to support any other person; and
(f) subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l) the need to protect a party who wishes to continue that party's role as a parent; and
(m) if either party is cohabiting with another person--the financial circumstances relating to the cohabitation; and
(n) the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
(naa) the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i) a party to the marriage; or
(ii) a person who is a party to a de facto relationship with a party to the marriage; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p) the terms of any financial agreement that is binding on the parties to the marriage; and
(q) the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.
The first step I must undertake is to identify the property of the parties or either of them available for division between them.
The Court at the commencement of the hearing was provided with draft balance sheets prepared by the parties. Those were marked as exhibits WI and H1.
The Balance Sheet
At the conclusion of the case there was very little in dispute between the parties in relation to the balance sheet. The principal issues related to whether the husband’s loan account in the company O Pty Ltd should be included in the balance sheet at the written down value attributed by Mr BB in his valuation, and further whether the tax credits in the company should be included in the balance sheet as an asset of the husband.
Another matter to be considered is whether some entry in the balance sheet should reflect the payments made by the parties to each of their lawyers.
There is no superannuation splitting order sought. I raised during submissions why I should not approach the assessment of contributions to superannuation in the one pool of the parties’ assets rather than a two pool approach. The husband submitted that such an approach would be appropriate. No submission to the contrary was made by the wife in reply.
In relation to the husband’s loan account in the company the wife submits that it should be included in the balance sheet at the discounted figure of $942,358. The loan account is in the company balance sheet as in excess of $3 million. The wife relies upon the evidence of the husband that the company is now moving to profitability. She submits the loan must reasonably be seen as recoverable over a period of time. The income source of the company is diversifying. The husband now share-farms on part of O. This limits the company’s exposure to loss. Since this operation commenced, it has been profitable for the company. The company otherwise has the capacity to run cattle on the balance of the property. In addition, the company has an income from the N Town serviced apartments and from contract advising work which the husband is able to attract from time to time. The wife says the accounts prepared for the period from 1 July 2011 to the end of January 2012 are forecasting profit.
The wife agrees that it would not be erroneous for the Court to not include the discounted loan account in the balance sheet if it was taken into account under s 75(2).
The husband submits there is in reality no loan account. The husband points to the oral evidence of Mr BB in which he agreed that if the company was wound up today the husband would recover no part of his loan account. He would have to meet a shortfall in the payout of the loans to the NAB which would exceed $300,000. The husband is a guarantor of the company’s responsibility to meet the requirements of the mortgagee. The husband says no figure should be included in the balance sheet. Further the husband says that there is nothing for the Court to take into account, in any positive way, pursuant to s 75(2) against the husband’s interests.
The husband sought to include as a liability the sum of his contingent liability to the NAB which would arise on the winding up of the company should it occur today. The sum claimed was $346,160. I do not propose to include that sum in the balance sheet as it represents a hypothetical calculation. I do propose to consider the matter under s 75(2).
I conclude that it is not appropriate in this case to consider including in the balance sheet the discounted amount of the husband’s loan account. I consider each of the parties has merit in their argument, however, there is some middle ground to be considered and I propose to do that under s 75(2).
In relation to the tax losses in the company the wife submits that the husband is the sole shareholder of the company and so an asset of the company is in reality an asset of the husband. It is common ground that the tax losses cannot be sold and further the ability of the company to take advantage of the losses is governed by strict rules by the Australian Tax Office. Nonetheless there is no evidence that the husband proposes to change the shareholding of the company in the future or to wind the company up.
The husband says that tax losses fall for the same consideration as the husband’s discounted loan account. The Court needs to look at the reality of the current situation, namely that the company, should it wind up today, would lose the opportunity to use the tax losses. Thus it is submitted the Court should ignore the existence of the tax losses. Further, it is argued that for the husband to achieve any advantage from the tax losses the company needs to become profitable and the Court could have no confidence, based upon past performance, that the company will move into meaningful profit in the near future.
The wife points to the results for the company for the last half financial year and submits the company is showing every sign of moving to substantial profit. Further, the wife says the husband, by his actions over the last two years, shows great confidence in the company becoming profitable.
Like the loan account, I consider justice is more likely to be achieved in this case if I consider how the said tax losses might be taken into account when I come to consider s 75(2).
The husband included in his final balance sheet document AMH1 that the balance of his ANZ account was $15,000. I have therefore included that figure. It is higher than the figure contended for by the wife in AMW1.
In relation to each parties’ paid legal costs, evidence is found as to the amounts paid in exhibits W13 and H4. I pause here to note that neither party’s solicitor has complied with Rule 19.04(5). That is disclose the source of the payment of costs notified by the notice required under Rule 19.04(3). Exhibit H4 does not specifically show what costs have been incurred and what costs will be incurred to the conclusion of the hearing. It is also unclear whether any of the $30,000 paid by the husband to his solicitor has been applied to meet any of his liability for the costs incurred.
The wife submits that the husband’s payment of $30,000 to his lawyer, as evidenced by exhibit H4, should be added back in the balance sheet as the husband borrowed the funds and the liability is reflected in the balance sheet. In relation to that submission it is reasonable to predict that the payments came from borrowings by the husband however there is no clear evidence that this was the case. Exhibit H4 was only provided to the Court after the husband had concluded his evidence and therefore there was no opportunity for the wife to cross-examine him on the matter. I should add that no application was made to do so and in saying that I imply no criticism.
In relation to the wife’s paid legal costs of $50,600, there was some evidence given from the Bar table about the source of the funding, however, again no opportunity was extended to the husband to question the wife in relation to same. It seems reasonable to assume that the source of payment by the wife was a combination of savings and income.
Having regard to the circumstances of this case I propose to take into account under s 75(2) that the wife has incurred costs of $139,537 and paid $50,600. Further the husband has incurred costs of $204,560 (including GST) and has paid $30,000. In the wife’s case the payments made have come from her resources of savings and/or income and in the husband’s case from income and/or borrowings.
I find the assets and liabilities of the parties are as follows:
| Assets | ($) | |
| W | P , RT Town | $1,200,000 |
| W | K Street, ND Town | $850,000 |
| W | E Street, S suburb | $1,750,000 |
| W | Macquarie Bank Account | $10,094 |
| W | BankWest – Zero Transaction Account | $15,246 |
| W | BankWest – Smartsaver Account | $3,815 |
| W | NAB – Account | $45 |
| W | Motor Vehicle | $23,000 |
| W | C Pty Ltd | $519,947 |
| W | T Partnership | $222,503 |
| W | Jewellery | $44,370 |
| W | Household Contents and horse | $15,000 |
| H | O, N Town | $2,700,000 |
| H | HI Street, KG suburb | $925,000 |
| H | ANZ Account | $15,000 |
| H | NAB – Account – Langton / WL | (Nil) |
| H | Langton Family Trust | (Nil) |
| H | A Lodge, T Town | $15,000 |
| H | Loan to O Pty Ltd | (see 75(2)) |
| H | Tax losses in O Pty Ltd | (see 75(2)) |
| H | Household contents and motorbike | $24,000 |
| H | Shares in O Pty Ltd | $0 |
| W | Comsuper | $412,812 |
| W | Zurich Super | $52,674 |
| H | Langton Super | $84137 |
| Total Assets | $8,882,643 |
| Liabilities | $ | |
| W | Mortgage NAB – P Street, RT Town | $652,531 |
| W | Mortgage BankWest – E Street, S suburb | $140,000 |
| W | Mortgage BankWest – home – E Street, S suburb | $94,626 |
| W | Mortgage – K Street, ND Town | $0 |
| H | Mortgage NAB – HL Street, KG suburb | $725,000 |
| H | Guarantee of OPC’s debt to NAB | (considered in 75(2). |
| Total Liabilities | $1,612,157 |
| Nett Assets | $ |
| Nett Asset Pool (inclusive of Superannuation): | $7,270,486 |
Section 79(4) contributions to date of separation
Contributions Relied Upon by the Wife
I accept the wife made the following contributions.
Initial Contributions
At the time of cohabitation the wife owned the following property:
| Assets | Description | Amount |
| W Street, UT suburb | 1 bedroom unit purchased May 1985 @$46,000 | E$50,000.00 |
| X Street, Q suburb | 2 Bedroom terrace, studio and garage purchased Sept 1988 @$326,900 | E$350,000.00 |
| L Street, M suburb – 25% share | 3 bedroom unit with garage | E$47,500.00 |
| Cash & term deposits | St George Bank Account | $1,995.00 |
| Westpac BSB: 732050 a/c: 532033 | N/K | |
| Macquarie Cash Management a/c | $29,479.00 | |
| NAB Commercial bill | $184,572.00 | |
| Shares | Boral x 3,000 | $9,900.00 |
| General Property Trust | $9,804.00 | |
| Westpac x 1,800 | $9,648.00 | |
| Superannuation | Guardian Assurance: | $3,000.00 |
| Household contents | Various | N/K |
| Motor vehicle | Toyota | E$20,000.00 |
| Jewellery/personal effects | Various | N/K |
| T Partnership | 16.67% farming partnership formed 1 April 1985 | N/K |
| E$715,898.00 | ||
| C Pty Ltd | 1 ordinary share, family company formed 27 August 1965. Major asset being grazing property at U Town, NSW | N/K |
| Liabilities | ||
| W Street, UT suburb | Mortgage (Westpac) | E$30,000.00 |
| E$30,000.00 |
No objection was taken to the wife’s estimate of value of real estate as set out in paragraph 14 of her affidavit. However, she is clearly not qualified to give valuation evidence and so I propose to regard the estimate as simply her best endeavour to provide the Court with some indication of what she thought the value of each entity was at that time. Evidence of purchase price is useful in giving the Court some idea of relative value of assets. The wife is in a position to provide evidence as to the amounts of money held in bank accounts and the value of shares in public companies at that time. Those are matters which can be the subject of verification by the husband and, given that no challenge to those values has been made, I proceed on the assumption that they are not controversial.
Contributions made by the wife during the cohabitation
The wife worked during the course of the cohabitation and I accept her evidence in relation to the income earned and the application of that income. I accept the wife contributed the wages earned by her during the cohabitation to the parties joint account and that those funds were applied to family purposes. The relativity of the parties’ incomes is illustrated by comparison with the evidence in paragraph 57 of the wife’s affidavit and paragraph 3(b) of the husband’s affidavit.
When comparing those two pieces of evidence, it is important to remember that during a considerable period of the cohabitation the husband contributed $55,000 per annum to the joint account. That was far greater than he had available after payment of tax associated with his taxable income for the year. The husband has not been able to provide any income tax details for himself for the first ten years of the cohabitation. He as provided the 1999 year and then there is a gap until the 2003 tax year. He has guessed at his income for the 2006 year.
The wife’s income was quite modest until about the 2000 tax year. Thereafter her income increased considerably until the last year of cohabitation where her net income was $73,280.
The husband does not set out what the figures in his affidavit (as above specified) represent, i.e. taxable or net of tax. I did ask the husband what the figure was and he believed it was his taxable income.
The evidence does not establish for how long the company has carried tax losses. Without access to the loan account movements for the husband in the company during the cohabitation, it is impossible to accurately determine what his drawings from the company were. I have assumed that if it were possible to distribute income earned by the company to the husband by repayment of his loan account rather than the payment of wages or distribution of share dividends, then that course of action would have occurred.
The wife contributed by the good management of her investments during the cohabitation. It seems that the wife has been able to grow her assets considerably during the cohabitation using only the income that was derived from those assets and investments. The increase in her investments included the acquisition of K Street, ND Town for $530,000 in August 1996. In August 2000 the wife purchased P Street, RT Town for $690,000.
I accept the wife contributed as a homemaker and parent as she has asserted in her evidence. I consider her recollection of the parties input in this area is more reliable than the husband’s.
Following the commencement of cohabitation, the wife received further inheritances. In 1990 the wife received an inheritance from her great aunt of $54,000. She applied that to her investments.
In 2005 the wife inherited $40,000 from the estate of her step-father.
In submission the wife urged that the Court consider the parties contributions towards the assets of the wife in two separate pools. It was argued that the wife made no contribution at all to the following assets which she had at the date of marriage:
a)the interest in the M suburb property which had been purchased for the wife by her mother; and
b)her interests in the T Partnership and C Pty Ltd.
The evidence in relation to the M suburb property was that a workers compensation payout following the demise of the wife’s father in a workplace accident was used by the wife’s mother to acquire the property. A mortgage was also taken out which was met by the rental earned on the property. The evidence is not sufficient to really reach a definitive decision on this matter. There are a number of details missing such as “Did the wife actually receive any dividend from the rental of the property or was any dividend put towards reduction of the mortgage?” “Was the mortgage an interest only or reducible mortgage requiring regular payments of capital?” The reason I ask these questions is because it may be that the wife was in fact required to pay income tax on the rental attributed to her as her dividend from the property when she in fact received none. Thus she would have been required to use income generated from other investments acquired by her during cohabitation to which she acknowledges the husband should be seen to have made a greater indirect contribution.
In the annexure to the husband’s affidavit there is included copies of the wife’s income tax returns for the years ended 30 June 2007, 2006 and 2005. The husband also annexed a document being a “Comparative Taxable Income” schedule for the wife for the tax years ending 30 June 1996 to 2006. Those documents show the wife made very little income from the M suburb Unit. In each of the wife’s income tax returns for the years 2005 to 2007 there is no claim for interest paid.
The other assets, which it is submitted the husband made no direct contribution to and only minimal indirect contribution, are The T Partnership and the wife’s interest in C Pty Ltd. That company owns the land upon which the T Partnership carries on its rural business. In relation to that submission I find the husband made no direct contribution. Further I find the wife received income from the T Partnership without having to contribute any services. It was akin to a dividend from a public company in that she held an interest in the partnership and she was paid a proportion of the profit or loss each year. There is no evidence to establish how she funded losses from the partnership. There were small losses in 1996 and 1997 and a loss of $29,279 in 2003.
I consider that the best approach to assessment of contribution between the parties is to have all relevant assets in one pool rather than two pools as suggested. In my view it is not difficult for the court to balance all the parties’ contributions even where one party is assessed to make no direct contribution to a particular asset.
One of the matters I need to consider as a contribution is that the wife has included as part of her income the dividends received from the educational fund for the children and likewise any interest received from Interest Bearing Deposits containing the children’s education funds.
In about 1995 the parties commenced contributing to a fund to assist with the children’s education expenses. The contributions were made by the wife in the sum of $200 per month from the parties’ joint account and $200 from her personal account. This later increased to $400 from each account. Those contributions ceased when the children commenced secondary schooling.
During the course of the cohabitation the wife contributed to superannuation. It was during the marriage she joined Comsuper. The value of her entitlement in that fund is very significant. She has probably continued to make contributions through her employer since the separation. No details of the breakup of contribution is available, however, I note her salary post separation has been significantly higher than it was during the cohabitation and it is reasonable to assume her contribution post separation has increased to that being made annually prior to separation.
Wife’s contributions post separation
At the time of separation H was at boarding school in Sydney and B was in the last term of primary school in N Town. B remained living with the husband during that term. She flew to Sydney for a couple of weekends then spent her school holidays divided between her parents, as did H.
With the exception of that small period of time during the last term of Primary school for B, the parties have endeavoured to share equally in the care of the children and the cost of the care of the children. In assessing the parties post separation contributions as parents I consider those to be almost equal with a slight tilt in favour of the husband because of his caring for B during that last term of school in 2007. Post-separation the parties set up a joint account into which they each contribute equal amounts to cover the educational, medical and other expenses of the children other than the day to day cost of provision of food, housing and entertainment.
Since separation the wife has sold the I suburb property ($545,000 net) and the UT suburb property (378,861 net). She has also sold her share portfolio realising $479,218. She used those funds together with borrowings to acquire E Street, S suburb for $1,700,000.
The wife has continued to manage the children’s educational fund investments and pay the tax incurred.
The wife has maintained herself from her earnings which have been considerable. She has been able to extend her qualifications so that now she is an accountant. Her Financial Statement shows a weekly income from employment of $3,147. She may also be paid an annual performance bonus of up to 10% of her annual salary.
I accept the wife has continued to contribute to superannuation post separation.
Husband’s initial contributions
As stated earlier, the husband’s initial contributions consisted of part of O which he says was 400 hectares. The wife annexed to her affidavit a copy transfer of land to the husband dated October 1979. The consideration was $217,138.76. There was a mortgage registered at the same time. The husband’s parents and Uncle were named as “Borrowers” in that mortgage. The size of the land is not set out in the transfer.
The wife also annexes a copy Transfer document showing transfer to the husband on 15 December 1989 (after marriage) of a further parcel of land. No consideration is shown. The balance of the property at O was not transferred to the husband until March 1995.
The wife’s evidence on the subject of land owned by the husband at the date of the marriage is set out in paragraph 30 of her affidavit. She was not cross-examined on this evidence. She says the husband only owned 200 acres at the time of the marriage and acquired another 215 acres in December 1989. She annexes the copy transfers of land to support her assertions.
The husband was not cross-examined on his assertion that he owned 400 hectares of O at the time of the marriage. He did not attach any corroborative evidence.
Given that I have determined that the wife is the more reliable of the parties in relation to accurately recording the relevant financial transactions during the cohabitation and since, I will accept the wife’s version of fact. Little turns on the difference in any event. I am otherwise satisfied that the husband had a 25% share in the Langton partnership. He had a share in the A Lodge and he had personal possessions including some antique furniture. The value of the husband’s assets is unknown. The husband acknowledged he held responsibility with his other partners for a very substantial liability to the State Bank at that time. In the circumstances, I would have to conclude that the husband had very little, if any, equity in his assets at the time of commencement of cohabitation.
When the parties married the husband was the manager of the rural partnership of which he was a member and a benefit of that position was that the partnership provided the husband with the use of the homestead on the property. That was a large wooden building which was furnished.
Husband’s contributions during cohabitation
In 1995 the property at O, owned by the husband’s family was transferred to him as a gift. Unfortunately for the husband the gift had attached to it a condition that he took on the debt of the rural partnership and other liability which was charged against the property. The husband’s evidence is that he was provided with no equity in the property.
During the cohabitation the husband contributed his income earned from the O Pty Ltd, of which he was the sole director and shareholder. The company provided some direct benefits for the parties such as the payment of electricity consumed in the house, provision of maintenance to the house and property, and provision of vehicles for use by the family. In addition the husband drew initially $2600 per month, increasing to $4,600 per month, from the company and paid that sum to the parties’ joint account. In some years the husband may have had to draw against a loan account in the company to pay his $4,600 (after tax) payment to the joint account. In some years the husband’s income would have exceeded the amount necessary to meet the commitment of $4,600 per month after tax, to the joint account. Where that happened there is no suggestion that he would not have contributed those additional funds in some way to accumulate asset or as expenditure on the family.
In 2005 and 2007 the husband held paid positions outside of the property. I am satisfied he contributed his earnings either to the company or to the family via the joint account or otherwise.
The husband contributed as a homemaker and parent during the cohabitation. Initially, having read each parties affidavit evidence and having heard the cross-examination of the wife I understood there was a real issue between the parties as to the proportions of home maker and parent contributions made by each party. However, in cross-examination of the husband on the subject he agreed that the wife had made a greater contribution in this regard than he did. The husband acknowledged that he held a number of senior offices in rural based organisations and that involved him in significant off-farm commitments. At such times the burden of caring for the children fell more extensively upon the wife.
Notwithstanding that I do accept the wife’s evidence in relation to the proportions of contributions made by the parties as home makers and parents, I do accept the husband played a significant and meaningful role in the care of the children and the promotion of the children’s wellbeing and enjoyment of life.
The husband has made contributions to his superannuation during the marriage.
Husband’s post separation contributions
As set out earlier, each of the parties have contributed to the ongoing cost of the children by contributing to a joint account established for that purpose. Each party otherwise provided financial support for the children while they are in their care. Each parent has also been involved in supervising the children and supporting them in both schooling and extra curricular activities. The husband has had additional expense associated with transporting himself and the children between N Town and Sydney.
The husband had B living with him for the last term of her primary schooling in N Town.
At the end of 2010 the husband had his company provide a motor vehicle for H to use. He has also provided other benefits for the children such as mobile phones and laptop computers.
At the end of 2009 the husband acquired a residence in co-ownership with another, Ms WL, for the purpose of residing in Sydney with the children every second week during school term. The property is at HI Street., KG suburb. The husband acquired a two-thirds interest in the property and Ms WL acquired a one third interest. The property cost $945,000. The NAB advanced the purchasers $725,000. Ms WL provided only $25,000. The husband explained that he had lent Ms WL the balance of the funds she should have paid to make her one third share. That was a sum of $45,000.
Notwithstanding that Ms WL owed the husband approximately $45,000 together with interest thereon, when the relationship broke down the husband acquired her interest in the property by paying her $50,000. On the face of it he should only have paid her $25,000 less the interest she owed him for the loan of $45,000 for about a year. The husband effectively said it was more economic to pay her what she asked than to meet the cost of litigating with her. I do not consider such a position unreasonable. Nonetheless it was a problem of his own making and not the wife’s and I consider the additional payment made by the husband of about $25,000 to be something to take into account under section 75(2).
Post-separation the husband sold part of O, together with some water licenses. The sale took place in September 2009. He received $2,139,000 net. He sold in excess of $200,000 worth of surplus plant and equipment in 2010. He sold a property which belonged to the Langton Trust. The property was at NW Street Street, N Town. The husband received and applied to his own use the sum of $94,225 immediately upon completion of the sale and he also received about $7,500 being the balance of the deposit held by the agent who found the purchaser. It is the husband’s evidence that all of the proceeds of those sales were used to reduce debt to the NAB. The husband did concede that the funds from the sale of the Trust property in NW Street, N Town was paid into the company account which was in credit at the time, thus raising the inference that the money was not used to reduce debt to the NAB and thereby free up equity in the husband’s or the company’s assets.
After separation, the husband acquired a group of investment units in N Town which are let out as serviced apartments to the mining industry. The husband acquired the units for $850,000. He borrowed $1.4 million to set up the units as serviced apartments. The husband did not assert any of the sale proceeds of the property referred to above was spent on that purchase and refurbishment.
The husband conceded that of the funds received from the sale of part of O and water licenses, only $1,666,000 was paid to reduce the NAB debt. That left about $480,000 unaccounted for. The husband’s explanation was that about $220,000 went to purchase the Lane Cove property and the balance had been used to pay his wages.
The wife submits that the husband’s evidence does not provide a credible picture of what has happened in his financial circumstances since separation. The wife says the husband has received the following funds from the sale of assets post separation:
·Sale of Part O and water licences $2,139,140
·Sale of plant and equipment $ 300,000
·Sale of NW Street Street, $ 100,000
Total receipt $ 2,539,140
Less debt reduced $ 1,666,000
Balance $ 873,140
The wife says the husband spent $220,000 purchasing the Lane Cove property and an additional $50,000 purchasing Ms WL’s interest in the property about 12 months later. Assuming the funds to meet those expenses came from the sale proceeds of the O land and water licenses then it still leaves unexplained how the husband applied approximately $600,000 over a period of about two years.
I accept that part of the money was used to support the husband and his commitment to the children post-separation. I doubt that the husband has squandered or hidden the funds. However, the onus is on the husband in such circumstances to show clearly how the proceeds from the sale of assets owned during the marriage were applied. He has failed to do that in a clear and unequivocal manner and accordingly the Court needs to consider that in an appropriate manner. In my view the manner which is most likely to achieve a just result is to take this into account under s 75(2).
I accept that the husband has probably continued to make contributions to his superannuation post-separation. No detail was provided as to the entitlement of the husband at the date of separation.
Conclusion based on contribution
The wife submits that I should find that the contributions by both the parties to personal assets and O should be assessed as equal. I am not sure in relation to that submission what personal assets of the parties were being considered. In relation to the wife’s assets consisting of the M suburb property (now sold), the wife’s interest in the T Partnership and her interest in C Pty Ltd submitted I should assess the husband’s indirect contributions as no more than 10%. In relation to the other assets of the wife I should find the husband has no greater an interest than 30%.
AUTHORITIES TO GUIDE ASSESSMENT OF INITIAL CONTRIBUTION
The judgment in Pierce & Pierce (1999) FLC 92-844 continues to be the major point of reference as far as a statement of the Court’s position on the weight to be given to an initial contribution of a party.
The Full Court’s statement of the how the court is to deal with a situation in which the initial financial contribution of one party is greater has been quoted with approval extensively (for example (Cabbell & Cabbell [2009] FamCAFC 205 at paragraph 43) Ellis, Baker and O’Ryan JJ (in a joint judgment). The guide line appears in the following passage in Pierce.
25. In addition to referring to a short passage from the judgment of Fogarty J in Money and Money (1994) FLC 92 - 485, the trial judge noted that the passage was cited with approval by the Full Court (Nicholson CJ, Baker and Tolcon JJ) in Bremner and Bremner (1995) FLC 92 - 560.
26. In Way and Way (1996) FLC 92-702, the Full Court (Barblett DCJ, Finn and Butler JJ), said at 83,404:-
“In the subsequent Full Court decision in Bremner all three Judges expressly preferred the approach taken by Fogarty J in Money over that taken by Lindenmayer J in the same case. Thus, and notwithstanding the attempts by Counsel for the husband in this case to demonstrate that there was some inconsistency between what Fogarty J said in Money and what was actually said in the joint judgment of the Full Court in Lee Steere, we regard the law in this area as now settled by the statement by Fogarty J in Money (and subsequently accepted by all members of the Full Court in Bremner) that “...an initial contribution by one party may be “eroded” to a greater or lesser extent by the later contributions of the other party even though those later contributions do not necessarily at any particular point outstrip those of the other party”.”
27. However, it is important to put that quotation in its correct context. Fogarty J in Money and Money (supra) said at page 81,054:-
“ I am unable to agree with the criticism in his Honour by the passage in his judgment immediately after that quotation or of his analysis of the issues involved. In an appropriate case, in my view, an initial substantial contribution by one party may be “eroded” to a greater or lesser extent by the later contributions of the other party even though those later contributions do not necessarily at any particular point outstrip those of the other party. I feel, if I may say so with respect, that his Honour’s formulation to the contrary is unrealistic and does not correspond with common experience in the Court in many of these cases.
I think it is legitimate for me to say, as I was a member of the Full Court in Le Steere and Le Steere (1985) FLC 91-626 that His Honour has read too much into the passage to which he refers and that the term “off-setting contribution” does not necessarily mean “greater contribution”. It simply reflects the circumstance that the respective contributions of the parties over a long period of marriage “offset” the significance which might otherwise be attached to a greater initial contribution by one party. This is, in my view, made clear by the Full Court in White and White (1982) FLC 91-246 where that court pointed out that the principal in Crawford and Crawford (1979) FLC 90 - 647 is that the original contribution should not be carried forward as a mathematical proportion; ultimately, when it comes to the trial such a contribution is one of a number of factors to be considered. The longer the marriage the more likely it is that there will be later factors of significance and in the ultimate the exercise is to weigh the original contribution with all other, later, factors and those later factors, whether equal or not, may in the circumstances of the individual case reduce the significance of the original contribution”.
28. In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home: See also Campo and Campo (unreported, Full Court (Ellis, Lindenmayer and Finn JJ), Sydney, delivered 19 May 1995 at pages 21 and 22 of the joint judgment) and Zahra and Zahra (unreported, Full Court Sydney, delivered 3 October 1996, per Ellis J. at page 10).
Recent case law on the subject includes Cabbell & Cabbell [2009] FamCAFC 205, in which the Full Court (Boland, Thackray and O’Ryan JJ in a joint judgment) re-stated the principles elucidated in Pierce:
42. As the wife’s senior counsel appropriately and candidly conceded before us, there is no formula, nor could there be, given the wide discretion exercised under s 79, which prescribes how a court should deal with initial contributions in cases of property adjustment.
43. The principles enunciated in decisions prior to 1999 are conveniently reviewed in Pierce & Pierce (1999) FLC 92-844 at paragraphs 25 - 27 of that judgment. In those paragraphs the Full Court (Ellis, Baker and O’Ryan JJ) referred to the cases which discussed the concept of an initial contribution being “eroded” or offset to a greater or lesser extent by later contributions during the marriage, and the qualification to or expansion of this concept by Fogarty J in Money & Money (1994) FLC 92-485 at 81,054, namely that later contributions over a long marriage did not need to be greater, but rather those contributions (sometimes referred to as the myriad of other contributions) “offset” the significance which might be placed on greater initial contributions. Their Honours then, at paragraph 28, explained that in assessing contribution (including initial contributions) rather than considering if an initial contribution had been “eroded”, what was relevant was the “weight to be attached, in all the circumstances, to the initial contribution”. Their Honours then explained the initial contribution should be weighed with all other contributions, and in paragraph 30 stressed the need for a trial Judge “not only to identify the relevant contributions, but also to assess them”. That latter statement of principle is consistent with the discussion in Mallet v Mallet (1984) 156 CLR 605 where Mason J said in discussing s 79:
“The section contemplates that an order will not be made unless the court is satisfied that it is just and equitable to make the order (s. 79(2)), after taking into account the factors mentioned in (a) to (e) of s. 79(4). The requirement that the court “shall take into account” these factors imposes a duty on the court to evaluate them. Thus, the court must in a given case evaluate the respective contributions of husband and wife under pars. (a) and (b) of sub-s. (4), difficult though that may be in some cases.”
In Cabbell, the parties had been married 25 years. They had three children over the age of 18 years and they had both worked throughout the marriage. Their contribution throughout the marriage could be described as equal. The issue in question was whether the husband’s initial contribution was sufficient to make an adjustment in his favour. In particular, the matter related to the husband’s equity partnership in a law firm which, over the course of the marriage, merged with other firms and later joined a national law firm. The partnership funded the matrimonial home at the start of the marriage by the husband, plus several subsequent properties. The property portfolio was valued at between $8.5 and 9.5 million (value decreased due to GFC).
The Full Court (Boland, Thackray and O’Ryan JJ in a joint judgment) found that the Federal Magistrate’s finding of equal contribution by the parties was not open to the Court based on the facts in the matter. In their judgment they looked not only at the contributions of the parties, but how those contributions had affected the parties’ generation of wealth in the course of the marriage. Their honours examined the initial contribution of the husband as follows:
51. While there was no evidence about how the husband’s equity in his original firm was treated in subsequent mergers, and no evidence about the husband’s actual earnings during the marriage, the evidence about the source of the majority of the funds for the acquisition of the matrimonial home was undisputed. We do not suggest that the value of the matrimonial home at the date of trial should be transposed, or recognised at a value of $1,100,000.00 as a contribution in that quantum on the husband’s behalf. However, the source of its funding on acquisition required not only discussion but weighty consideration in the assessment process. Similarly, the husband’s contribution of the T property, which remained an asset at the date of hearing, was a relevant factor to be considered.
52. We think, with respect to the Federal Magistrate, that the facts of this case also called for some close analysis of what the parties had acquired by 1988, that is, some six years after the date of the marriage. The parties had by that time purchased all of the real estate (with the exception of the husband’s unit at O which unit was purchased after separation (“the P Property”)) retained at the date of the hearing. These properties had a value of $2,945,000.00 at the date of hearing.
53. While we are fully cognisant that the wife made significant contributions in the first six years of the parties’ marriage, including her earnings as a primary school teacher both before and after the birth of L, the contribution of her superannuation of $3,000.00 and her salary from work as a relief teacher between 1986 and 1987, there is no dispute there was no other source of income or capital to fund the purchase of the other real property investments other than the husband’s earnings as an equity partner in his legal practice. That ability to generate profits was as a result of his equity partnership acquired prior to the commencement of cohabitation.
54. We are satisfied that the Federal Magistrate did not adequately analyse and give weight to the husband’s initial contributions, nor did he sufficiently trace the use of initial assets and consider the foundation they laid for the parties’ substantial wealth at the date of trial.
The Full Court made an adjustment in the husband’s favour of 5%.
A matter which could be seen as analogous to the current set of circumstances is that of GWH & PGH [2005] FamCA. The parties in that matter had been cohabiting, both before and during marriage, for 18 years, and had 2 children. The husband had brought to the marriage a commercial property which effectively made up more than half of the parties’ property pool, but which had required little to no contribution by the parties during the course of the marriage. Other than the initial contribution, the parties were held to have contributed equally. At appeal, the husband argued that as the wife had not contributed either directly or indirectly to over half of the property pool, she could at best only claim a 20%. The Court applied the principle set out in Pierce and concluded:
45. We are also cognisant that before the trial Judge it was conceded on the husband’s behalf that the parties’ contributions, other than that of the commercial property, should be regarded as equal. We record the concession made by the husband’s counsel to the trial Judge as follows:
“[COUNSEL FOR THE HUSBAND AT TRIAL]: --- in terms of the
exercise of your Honour’s discretion. Take the other property out, when
we’d be then pretty close in contributions, I would’ve thought, putting
aside perhaps the inheritance – or maybe even leaving it in – close to
around the 50/50 on contributions, I would’ve thought.”46. That approach would have resulted in the wife receiving a contribution based entitlement in the range of $400,659 to $460,659. The trial Judge’s assessment of her contributions at 30 per cent resulted in a contribution based entitlement of the wife at $491,645. We are not satisfied that this was outside the reasonable range of the trial Judge’s discretion particularly having regard to the myriad of contributions made by each of the parties over their cohabitation and marriage which extended for 18 years and 8 months, and also having regard to the fact that the exercise being conducted by the trial Judge was not a strict accounting exercise.
The approach of the court to the assessment of contribution in cases where assets are brought to the marriage by one party and either retain their original characteristic or convert into other investment is helpful in assessing the contributions in this case.
In this case I need to weigh the contributions in a manner which gives proper weight to the wife’s initial contribution of assets which have not changed in character since the marriage and which have required no contribution of any substance from the wife during the cohabitation. I agree with the wife that the three assets nominated by her as her interest in the T Partnership, her shareholding and entitlements in C Pty limited and her interest in the property at M suburb purchased for her by her mother, all fall to be assessed as predominantly assets to which the husband has not made any direct or significant indirect contribution. In relation to the balance of the wife’s assets she acknowledges that the husband can claim an indirect contribution to those as the wife has applied income earned by her during the cohabitation from all her investments towards the expansion and increased equity in those assets. I nonetheless need to bear in mind that the origin of the present value of those assets came from the wife’s initial contributions and then management of those assets together with borrowings by her and further inheritances received by her.
In the balance sheet the net assets of the parties together with their superannuation amount to $7,270,486. Of that sum the wife’s interest in the T Partnership, the C Pty Ltd company and the sale proceeds of her interest in the M suburb property (amounting to $207,251 in the month before separation) total $949,701. That is 13% of the total pool. The balance of the wife’s assets and investments which had genesis in her pre-marriage assets and inheritances since marriage (together with earnings thereon) amount to 3,800,000 from which should be deducted the cash from the sale of M suburb unit given that it has found its way into at least one asset in that group, giving a net sum of $3,592,749 which is 49% of the net pool of assets and superannuation.
I am satisfied that each of the parties used the best of their skill and energy to manage and build their assets during the course of the cohabitation and also to contribute to the maintenance of those assets. I am also satisfied that each contributed as a parent to the children as they were available to do so and they carried out those duties in a proficient, interested and enthusiastic manner.
In my view the contributions, made over a 17 (almost 18) year period, when properly weighed tip in favour of the wife significantly. I assess overall the contributions favour the wife in proportion 60% to 40% to the husband. That balance reflects a 20% differentiation. I have included in that assessment the parties’ contribution to superannuation. This is a case in which, in my view, it is appropriate to consider the parties assets and superannuation in one pool.
Section 75(2) considerations
The husband is 50 years of age and the wife 48 years of age. Each is in good health.
The wife is employed in a senior position with the Y Council. She has a salary of $177,800 per annum and she has the opportunity to receive a performance bonus of up to 10% of her salary package. When the wife’s investment income is added to her salary she has an annual income of $309,140. If the wife is required to pay funds to the husband under orders of the Court then her income will probably reduce as she will have to borrow against her assets or sell same. The wife sets out details of all her expenditure which does not include the day to day living costs of the wife and the children when they are with her.
The husband has employment with the PPT Corporation as Chair of the Board of Directors. He receives an income of about $1,682 per week from that source. He also receives an income from O Pty Ltd of about $8,885 per week. The husband’s total weekly income is about $10,567. The husband claims expenditure of $7,898 per week, however, he provides detail of that expenditure only to about $2,510 in his Financial Statement. That expenditure includes the mortgage payment to the NAB on the Lane Cove property. The husband’s annual income is $549,484, which vastly outstrips the wife’s income. I do accept, however, that part of the husband’s income comes from rural production and consequently that income may fluctuate considerably from year to year.
The husband proposes to renovate the KG suburb property and sell it in the next two years. By that time he may no longer need to maintain a residence in the city as B will have completed her secondary education. The evidence supports a conclusion that the husband’s rural enterprise is now profitable, as is the serviced apartment block in N Town. Those enterprises operate through O Pty Ltd which has a tax loss bank which the husband can take advantage of. He also has a very large credit loan account. I will address the matters of the tax losses and the husband’s loan account later in these reasons.
During the marriage the wife was able to obtain an additional qualification which has enabled her to increase her earning capacity. She studied part-time for two years during the early years of the marriage and obtained a MBA. Since the separation she has studied further and obtained qualification as an accountant. Whether directly or indirectly the husband must be seen as contributing to the opportunity the wife had to undertake her MBA. Likewise the wife’s effort in obtaining the qualification must be seen as improving her income earning capacity for the benefit of the family.
Each of the parties will carry an ongoing burden of care for the children. The parties have shared that care since the separation. There is no reason to suspect they will not continue to do so. There is an education fund which was built up during the marriage. That has a current value of $228,733. The parties have agreed that the wife will continue to manage the fund and apply it to educational expenses of the children. The parties continue to contribute to a joint account which is used to meet the children’s expenses other than day to day care, which the parties provide equally by having the children spend equal time in each house.
Each party has set out in their Financial Statements their commitments necessary to support themselves and their children, although the wife did not complete Part N of the form which sets out daily necessity expenditure. The wife was correct in her approach as the Part is only required to be completed if there is an application for spouse maintenance or child support. To the extent her expenses are particularised they appear reasonable. As I have said, the husband has failed to specify how expenditure of $5,388 is made up.
The division of assets based upon assessment of contribution will see the wife with $4,362,291 worth of net assets and the husband with $2,908,195 worth of net assets. The difference is clearly very significant.
I excluded from the balance sheet the discounted value of the husband’s loan account in the company O Pty Ltd. The sum of the loan account was determined by the single expert Mr BB. He said the discounted loan account had a value of $942,358.
In addition, I excluded the sum of the company’s tax losses which can be offset against tax required to be paid in the future, should the ownership of the company not alter. There is no evidence that the husband has any proposal to take on any other shareholders. The tax losses are determined by Mr BB to be $823,233.
The husband argued that the Court can not or should not take the loan account of the husband or the company’s tax losses into consideration. It was submitted by the husband that the Court is restricted to considering the current position of the company where it has no goodwill. The Court is said to be restricted to taking into account the value to the husband of his interests in the company if it were to be wound up today. If that was the position the company would have insufficient funds to discharge the liability to the NAB and then the bank would call upon the husband to honour his personal guarantee which would see him out of pocket by a sum of almost $350,000. Further, in such circumstances the husband’s loan account would be completely lost and the tax losses incapable of being used in any other vehicle of enterprise the husband may establish.
On the other hand, the wife argues that these items have real value to the husband and should have been included in the balance sheet. She says if they are not an item on the balance sheet then they should definitely been taken into account as a very valuable resource for the husband in the future. The wife argues that the loan account of the husband represents funds he has injected into the company during the course of the marriage. To that extent the marriage lost the use of those funds. The husband now has the opportunity to retrieve those assets without having to provide any portion thereof to the wife.
In relation to the husband’s loan account in the company and the tax losses in the company (which I am reminded is solely owned by the husband) I do not accept the submissions of the husband state the correct approach to be taken nor do they represent the law in relation to the subject. I accept the submissions of the wife as correct on this matter.
Taking the husband’s company’s tax losses and his loan account into account, even at a discounted figure, I consider they are very valuable resources to the husband and I consider the evidence supports a conclusion that with the changes he has made to the way in which he causes the company to earn its income (through the serviced apartments and also through share-farming) he is turning the company to profitability. Exhibit W9 illustrates that point well. Even the husband is confident the company will be profitable and he has been able to convince the NAB that his and the company’s future is positive. The husband tried to put some caution on the profitability from farming this year because he said the recent floods had caused some damage to pumps and levies and may have damaged the crop. I accept that may be the case this year however, these things must be seen as cyclical and the husband clearly is optimistic that overall the company will become profitable. There may be more profit in some years than in others.
Each of the parties provided evidence of the costs incurred and costs paid in the proceeding. The wife has incurred costs of $139,537 and paid $50,600. Further the husband has incurred costs of $204,560 including GST and has paid $30,000. In the wife’s case the payments made have come from her resources of savings and/or income and in the husband’s case from income and/or borrowings. I will take those matters into account.
The husband entered into an agreement with Ms WL to purchase the property at HI Street, KG suburb. Ms WL was to provide 25% of the capital. She only provided $25,000. The husband covered her shortfall which was about $45,000. She was to pay interest on the loan advanced by the husband for the balance of her share. After 12 months of ownership the husband and Ms WL elected no longer to own the property together. The husband acquired her share for $50,000. He should only have been required to pay her $25,000 less the interest she owed him on the $45,000. As I have said, this was a problem of the husband’s making and the funding of the additional $25,000 has come from what would otherwise be savings of the husband’s or increased equity in an asset of his if he had to borrow the funds.
As stated earlier in these reasons, the husband has failed to provide a proper account of how he applied the proceeds of the sales of assets post-separation. As I have said, I accept that he has failed to show how he has applied about $600,000 of those proceeds over a period of two years. Although I consider it unlikely, given the nature of the husband in his presentation before the Court, that he has behaved in a deceptive manner and deliberately hidden assets, I consider it is entirely probable he has been able to obtain advancement in his financial circumstances either personally or through the company, in an unascertainable amount. I also consider at least some part has been applied in the support of the husband and the children whilst in his care.
This situation the husband finds himself in was entirely predictable given the clear obligation for parties to make a full and frank disclosure of all relevant financial dealings to the point of the trial. Again, it should have been very clear to the husband and those that represent him that where assets of parties are sold post-separation it is absolutely obligatory on the seller to account for the sale proceeds and how they were applied.
Conclusion on section 75(2)
Having regard to all the matters set out above I conclude there needs to be an adjustment in favour of the husband of about 2%.
In reaching that conclusion the matters which have had the greatest influence, in descending order, are:
a)the differential between the parties following assessment of contribution;
b)the husbands superior income (albeit subject to the caution I have placed on that matter);
c)the failure of the husband to account for the expenditure of approximately $600,000 post-separation;
d)the opportunity provided to the husband into the future by the tax losses in the company and the large credit loan account he has in that company.
The above determination will see the wife receive 58% of the parties’ assets and the husband receive 42%.
Just and equitable
The division of assets would see the wife receive $4,216,882 worth of net assets and the husband receive $3,053,604 worth of assets.
The determination will mean that the wife will be required to make a modest (having regard to the size of the asset pool) payment to the husband.
In the circumstances of this case I determine that result to be just and equitable.
Orders which should be made
I propose orders which will give effect to the following division.
The wife will receive:
| Assets | ($) |
| P Street, RT Town | $1,200,000 |
| K Street, ND Town | $850,000 |
| E Street , S suburb | $1,750,000 |
| Macquarie Bank Account | $10,094 |
| BankWest – Zero Transaction Account | $15,246 |
| BankWest – Smartsaver Account | $3,815 |
| NAB – Account | $45 |
| Motor Vehicle | $23,000 |
| C Holdings Pty Ltd | $519,947 |
| T Partnership | $222,503 |
| Household Contents and horse | $15,000 |
| Comsuper | $412,812 |
| Zurich Super TOTAL ASSETS & SUPERANNUATION | $52,674 $5,119,506 |
| Liabilities | |
| Mortgage NAB – P Street, RT Town | $652,531 |
| Mortgage BankWest – E Street , S suburb | $140,000 |
| Mortgage BankWest – home – E Street , S suburb | $94,626 |
| Mortgage – K Street, ND Town | $0 |
| Total Liabilities | $887,157 |
| Net Assets (including superannuation) | $4,232,349 |
The husband will receive:
| Assets | ($) |
| O, N Town | $2,700,000 |
| HI Street, KG suburb | $925,000 |
| ANZ Account | $15,000 |
| NAB – Account – Langton / WL | (Nil) |
| Langton Family Trust | (Nil) |
| A Lodge | $15,000 |
| Loan to O Pty Ltd | (see 75(2)) |
| Tax losses in O Pty Ltd | (see 75(2)) |
| Household contents and motorbike | $24,000 |
| Shares in O Pty Ltd | $0 |
| Langton Super | $84137 |
| Total Assets (including superannuation) | $3,763,137 |
| Liabilities | |
| Mortgage NAB – HI Street, KG suburb | $725,000 |
| Total Liabilities | $725,000 |
| Net Assets (including superannuation) | $3,038,137 |
The wife is entitled to retain $4,216,882 in net assets by division 58% in her favour. She has $4,217,349 in net assets as above set out. She will therefore need to pay the husband the sum of $467. As this is a de minimus figure, in the circumstances of this case I do not propose to order any payment by her to the husband. In the result each party will retain the assets which are currently in their name or control.
OTHER COMMENT
I can not leave this case without making comment about the presentation of the husband’s affidavit evidence including his Financial Statement. The preparation of the husband’s sworn evidence was in my view very poor. Had the husband not presented as such an honest and decent human being, a great injustice may have been done to him because of the way in which his written evidence was created.
There were significant omissions of relevant information. Examples of this included:
a)any reference to the sale of the Trusts property in N Town;
b)any reference to the details of acquisition of the property at KG suburb with Ms WL;
c)any relevant evidence as to the nature of his relationship with Ms WL;
d)any detail of the sale of part of O together with water rights; and
e)any detail of the application of the funds from sales of assets post separation.
The husband was able to say that most of the proceeds were applied to reduce Bank debt however there were examples of sales which had the proceeds paid to the company’s trading account at a time when the account was in credit.
I accept the husband’s evidence that he provided to his solicitor representing him in these proceedings copies of settlement statements following real estate transactions. I also accept that many, if not all, of such documents were disclosed to the wife through exchange of documents between the parties’ solicitors. I consider, however, that the manner in which very important information was omitted from the husband’s affidavit evidence, merely because a document which provided details of same had been discovered to the wife’s solicitor, was inappropriate. It led to the husband being seriously embarrassed by challenges as to where the evidence of these transactions was to be found.
As I have said, because of the otherwise honest presentation of the husband I do not accept he has embarked upon a course of action to hide important information from the wife; however, my point is that another Judge may well have taken a different view, which would probably have led to the husband suffering a great injustice.
I certify that the preceding two hundred and twenty-eight (228) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench delivered on 28 March 2012.
Associate:
Date: 28 March 2012
Key Legal Topics
Areas of Law
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Family Law
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Property Law
Legal Concepts
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Jurisdiction
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Statutory Construction
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Remedies
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