CUTHBERT & CUTHBERT
[2017] FamCAFC 6
•6 February 2017
FAMILY COURT OF AUSTRALIA
| CUTHBERT & CUTHBERT | [2017] FamCAFC 6 |
| FAMILY LAW – APPEAL – PROPERTY – Treatment of a debt owed to a company owned and operated by the parties prior to their separation – Where the primary judge found that the wife should not bear responsibility for the debt – Where the primary judge included the company at nil value in the list of assets and the debt in the list of liabilities – Where the wife argued that by not excluding the debt from the calculation of the asset pool, she in fact shared in the liability – Where the primary judge erred by not excluding the debt from the list of assets and liabilities – Appeal allowed – Order made for an additional payment to the wife by the husband. FAMILY LAW – CROSS-APPEAL – PROPERTY – Whether the primary judge incorrectly valued a company held by the husband – Where the valuation of the company depended on whether a sum of money, which had been drawn from the company and used by the husband for personal expenses, could be characterised as a company purchase expense – Where there was conflicting evidence as to whether the transactions could be attributed to the company’s loan account or its expenses ledger – Where the primary judge’s findings were open to him – No error established. FAMILY LAW – CROSS-APPEAL – PROPERTY – Whether the primary judge failed to take into account or give sufficient weight to the husband’s post-separation development of a company – Where the majority of an inheritance the wife received had been expended on the parties’ businesses – Where the funds used by the husband to establish the company were derived from the parties’ joint assets – Where the increase in value of the husband’s company was not solely due to his efforts – No error established – Appeal dismissed. FAMILY LAW – APPEAL – COSTS – Where the respondent was wholly unsuccessful – Husband to pay the wife’s costs of both the appeal and the cross-appeal. |
| Family Law Act 1975 (Cth) ss 75(2), 117(2A) Family Law Rules 2004 (Cth) r 17.02 |
| Cuthbert & Cuthbert [2015] FamCA 438 |
| APPELLANT/CROSS-RESPONDENT: | Ms Cuthbert |
| RESPONDENT/CROSS-APPELLANT: | Mr Cuthbert |
| FILE NUMBER: | NCC | 3270 | of | 2009 |
| APPEAL NUMBER: | EA | 112 | of | 2015 |
| DATE DELIVERED: | 6 February 2017 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | May, Ryan & Aldridge JJ |
| HEARING DATE: | 28 October 2016 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 12 June 2015 |
| LOWER COURT MNC: | [2015] FamCA 438 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Batey with Mr Othen |
| SOLICITOR FOR THE APPELLANT: | Moylan Family Lawyers |
| SOLICITOR FOR THE RESPONDENT: | Jodhi Coady Lawyer |
Orders
The appeal be allowed.
Order 1 made by Foster J on 12 June 2015 is varied by deleting the figure $159,470 and in lieu inserting the figure $456,672.52.
The husband pay the wife’s costs of both the appeal and the cross‑appeal within 28 days of agreement as to quantum or assessment.
Notation
(A)THE COURT NOTES that of the $456,672.52 payable, it is agreed that the respondent husband has already paid the appellant wife the amount of $356,423.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Cuthbert & Cuthbert has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 112 of 2015
File Number: NCC 3270 of 2009
| Ms Cuthbert |
Appellant
And
| Mr Cuthbert |
Respondent
REASONS FOR JUDGMENT
Introduction
On 12 June 2015 Foster J made final orders in a long running property dispute between Ms Cuthbert (“the wife”) and Mr Cuthbert (“the husband”) (Cuthbert & Cuthbert [2015] FamCA 438).
His Honour found that the parties’ net assets amounted to $2,515,052, together with superannuation of $80,760 (at [148]). The parties’ contributions to those assets up to the time of separation were found to be equal (at [164]). Having regard to the parties’ post separation contributions, his Honour assessed the wife’s contributions as 55 per cent and the husband’s as 45 per cent (at [171]). After taking into account s 75(2) of the Family Law Act 1975 (Cth) (“the Act”) the primary judge found that a further adjustment of 2.5 per cent in favour of the wife was warranted (at [180]). This led to the finding that the wife was entitled to 57.5 per cent of the net assets, namely $1,492,591 (at [181]). That entitlement was to be satisfied by the wife retaining the assets then in her hands and receiving a payment from the husband of $159,470.
After his Honour published the reasons for judgment, the wife brought an application under r 17.02 of the Family Law Rules 2004 (Cth) to correct the orders. She contended that the primary judge had wrongly taken into account a liability of $174,347 when identifying the parties’ assets and liabilities and had incorrectly included a liability of $342,527 as a liability of the parties when, in fact, it was a liability of the husband alone.
In his judgment published on 16 September 2015 the primary judge rejected the first proposition but determined that the second of the wife’s contentions was correct and that an adjustment to the pool of $342,527 was required due to this “inadvertent error” (Cuthbert & Cuthbert (No 2) [2015] FamCA 763 at [6]). This led to the wife’s entitlement increasing to $1,689,544. The husband was thereby required to pay to the wife an additional $196,953.
The wife’s Amended Notice of Appeal, filed 20 May 2016, raises issues as to the primary judge’s decision in relation to the parties’ assets (including superannuation) and liabilities. In particular, she challenges the treatment of the liability of $174,437 in the 12 June 2015 Reasons. The orders made on 16 September 2015 in relation to the liability of $342,527 were not the subject of an appeal. The wife asked for a further payment of $100,249.52. It will be seen that in allowing the appeal, the order we have made provides for that exact sum.
The husband relies upon a cross-appeal which primarily challenges the value ascribed to B A Pty Limited and the weight that was given to the husband’s contributions in developing it.
The orders sought by the husband were for a reimbursement by the wife of $356,423.00, and in the event the wife did not pay that sum, then a property be sold to satisfy that sum.
Background
The parties commenced cohabitation in March 1980, married in 1983 and separated in February 2009. The property proceedings were commenced by the wife in the Federal Circuit Court of Australia later that year and, having been transferred to this court some two years later, came before the primary judge for hearing on 2 April 2014. The parties’ financial affairs were complicated because their businesses were conducted through a partnership and several companies. There had been a considerable dispute between them as to disclosure and as to valuation of properties and the companies.
The appeal
The wife’s appeal primarily concerns the narrow issue of the primary judge’s treatment of a debt owed to B Pty Limited, a company owned and operated by the parties prior to their separation.
The 2010 financial statements for this company showed that the parties owed the company $174,437. The primary judge referred to the figure $174,347 throughout his reasons. We assume that this was merely a transcription error. As at 30 June 2009 (not long after separation) the position of the loan account was that the company owed the parties $28,102.
After the parties’ separation, the husband retained the day to day control of the company. It was he who withdrew the funds from the company, giving rise to the debt of $174,437. His Honour included this debt in the list of the parties’ property and liabilities as a joint debt payable to B Pty Limited.
In relation to the debt the primary judge said at [139(d)]:
…The husband was unable to explain the debt or indeed why it was in the joint names of the parties. No loan account schedules were produced to support the husband’s contention as to the liability, yet his evidence is that in lieu of wages he draws funds from the company that are paid to his ANZ account. The treatment of those drawings is left to his accountant to be debited against the loan account. This loan account debt is included in the valuation of his corporate interests as an asset so the effect on the asset pool in reality is nil but the husband shall be required to indemnify the wife from any liability in regard thereto.
(References omitted)
The wife correctly draws from these findings two propositions. First, that it was the husband who received the benefit of those funds taken from the company. Secondly, the primary judge considered that the wife should not bear any responsibility for that debt, a point which was reinforced at [139(h)(i)] of the trial reasons.
It is important to understand that the company was included in the list of assets and liabilities at a nil value (at [147]). Its assets consisted almost entirely of related party loans including the loan of $174,437.
It is argued on behalf of the wife that by not excluding the debt from the calculation of the asset pool, the wife in fact shares in the liability. This is because it has the effect of reducing the value of the parties’ net assets, from which the wife’s entitlement is ultimately calculated. It follows that given the company had no value and no tangible assets, the effect of the primary judge’s approach is that, contrary to what was said at [139(d)] and [139(h)], the wife in fact bears 57.5 per cent of the liability for the debt.
In the ordinary course, the primary judge’s approach would be quite correct. Whilst the inclusion of the loan account would see the wife bear 57.5 per cent of that liability, she would also receive 57.5 per cent of the value of the company, if it was worth more than the loan account debt, because the other valuable assets and the loan account would in effect balance each other out. Thus in a company with valuable assets, the effect of the order for indemnity would be that the husband would bear the entire responsibility for the debt.
However, that is not the case here. The company had no value and no tangible assets. Thus the liability for $174,437 was not matched by an equivalent increase in the value of the company. The effect was that the wife continued to be liable for 57.5 per cent of that debt, but could not obtain the benefit of a balancing increase in the value of the company. The primary judge clearly intended that the wife should not bear any part of this liability. The appropriate course in these circumstances was to exclude the debt from the list of assets and liabilities, in addition to making the order for indemnity.
In view of this clear error, we are satisfied that the appeal should succeed.
The parties agreed that in the event the appeal succeeded but the cross-appeal did not, the appropriate course was for this Court to make the necessary arithmetical adjustments to the property pool and make an order for an additional payment of $100,249.52 to the wife.
The cross-appeal
The cross-appeal contained 12 grounds. Grounds 2A, 3, 4, 10 and 12 were abandoned. It was accepted by the solicitor for the husband that ground 6 was in fact in response to the Notice of Appeal, and not a ground in the cross‑appeal. Ground 1 was not a proper ground of appeal as it merely sought the dismissal of the wife’s appeal.
At the conclusion of the husband’s submissions it was clear that there were only two issues being raised.
The first was whether the primary judge incorrectly valued B A Pty Limited, a company controlled by the husband, at $675,629. That value in turn depended upon whether $151,500, which had been drawn from the company and used by the husband for personal expenses, was claimed as a company purchase expense.
The second contention raised by the husband was that the primary judge failed to take into account and give sufficient weight to the development of B A Pty Limited by the husband after the separation of the parties. It was conceded that there would only be substance in this contention if the husband was unsuccessful in his primary contention that the value of the company should be $165,249.
Valuation of B A Pty Limited (Grounds 2, 5, 7 and 8)
Grounds 2, 5, 7 and 8 challenge the primary judge’s finding that the value of B A Pty Limited was $675,629. This company was incorporated in May 2010, approximately one year after the parties separated.
Originally, the single expert valuer valued the company at $165,249.
The wife’s lawyers then posed a number of questions to the valuer. Included was the following question (in the form recorded by the valuer in his supplementary report of 6 August 2014):
…Assuming expenditure totalling $151,000 is removed from the purchases expense of [B A Pty Limited] for the year ended 30 June 2013, I am asked to advise the effect on:
i. The profit of [B A Pty Limited] for the year ended 30 June 2013: and
ii.The valuation of [B A Pty Limited] as set out in My Earlier Report.
As the supplementary report makes clear, the reference to $151,000 is a reference to the $151,500 drawn from the company, which the husband said he used to repay a personal loan borrowed to enable the purchase of a boat.
The valuer described the effect of the assumption as follows:
6.The balance sheet effect of removing purchases of $151,000 is to increase the loan account of the Husband owing to [B A Pty Limited]. The accounting entries are as follows:
a. Debit: Shareholder Loan – [Mr Cuthbert] $151,000
b. Credit: Purchases $151,000
The effect of these changes is to increase the profitability of the company and hence its value. In the supplementary report the valuer said that, on this assumption, the value of the company would be $675,629.
The wife contended that as the withdrawals were not recorded in the husband’s loan account, an adjustment to the company’s value in accordance with the supplementary report should be made – her point being that the primary judge would infer that the withdrawals which made up the $151,500 had been wrongly treated as business expenses, along the lines actually noted by the husband on the companies’ bank records. On the other hand, the husband contended that the relevant sum had not been attributed to business expenses (general purchases) and was properly included in his existing loan account. Thus, he submitted, there should be no adjustment and the lower value of $165,249 for the company should be adopted.
It was not in dispute that the husband withdrew $151,500 from the company’s bank account by five separate transfers between 28 August 2012 and 5 September 2012. The withdrawals were paid to the account of the husband’s bookkeeper and partner, Ms N, who used those funds to repay the personal boat loan.
In April 2003 the parties had purchased a boat for $430,000. The purchase price was funded in part by a loan from the ANZ Bank in the sum of $250,000 secured over the parties’ property. It was this loan that was reduced by the payments made by Ms N.
It was the husband’s practice to notate the company’s bank statement by recording to whom payments had been made. The husband wrongly recorded the five transfers under discussion as being payments to named creditors and not as payments to Ms N or as payments made in reduction of the loan for the boat. The husband’s explanation for doing so was that he wished to show the notated statement to his bank to demonstrate that the five transfers were payments to creditors and not payments in reduction of the loan owed by the parties to the same bank.
The question which thus needed to be answered was whether these transactions were similarly wrongly recorded in the company accounts as payments to creditors or appropriately included in the husband’s loan account. It was common ground that the loan account was later repaid by the husband. That, however, did not put an end to the issue because if the payments had not been allocated to the loan account, the fact of the payment was irrelevant.
The valuer was not in a position to determine whether these five payments had been included in the expenses ledger of the company or in the husband’s loan account. He had been engaged to value the company but not to conduct an audit. His evidence proceeded:
HIS HONOUR: But Mr [W], the bottom line is in relation to your first report, is that you don’t know whether the 151,000 was booked as expenses or as a loan account entry either, do you?---In respect of the first report, no.
Yes, that’s right. So you would expect that the document that would evidence the true state of the loan account during that financial year would be the initial – I think we called it the bookkeeping journal prepared by Ms [N] and as provided to the company accountant?---Yes.
MR GOULD: It has not been raised ...
HIS HONOUR: So in reality, on one assumption your first report is right, and on another assumption your second report may be right?---Yes.
Now, how would you expect that we would resolve that difficulty by looking at the whole of the loan account entries for 2013 and the eBook compilation of that; is that right?---Yes. It’s not only the loan account, but also it’s a review of the purchases account of the company for that year - - -
Yes?--- - - - to see whether any of those transactions were, in fact, booked to expenses, namely, purchases.
So the value of the company may be somewhere between X and Y, or either X or Y?---Well, it’s either one or the other.
MR GOULD: X or Y.
HIS HONOUR: Yes?---It’s either X or Y, yes.
And you can’t resolve the problem?---No.
(Emphasis added)
(Transcript 8 April 2014, p.130, l.25 – 45; p.131, l.1 – 8)
Thus, the valuer identified the way in which the issue could be resolved, namely to examine the original records – that is, the book keeping journal and all loan account entries for the 2012-2013 financial year. It was uncontroversial that Ms N kept the company’s books at the relevant time.
The wife relied upon a copy of the general ledger, apparently printed on 13 May 2014 and produced by the company to the Court in answer to a subpoena served on it by her. This established that in the loan account for the husband for the relevant period, there were entries with various descriptions such as “[Mr Cuthbert] Drawing”, “[Mr Cuthbert] Personal”, “Purchase; [CD Pty Limited]” or “Purchase; [EF Pty Limited]”. Critically, the five transfers, which totalled $151,500 and which the husband described on the bank statement as being payments to GH Pty Limited, IJ Pty Limited and KL Pty Limited, did not appear.
If the transfers did not appear in the husband’s loan account, it followed that they had been brought to account elsewhere in the company’s accounts, for example in the purchases ledger.
However, when the husband produced a copy of the purchases ledger, it did not show the five payments as expenses. This copy was prepared by Mr M, the husband’s accountant, who swore an affidavit dated 8 August 2014 to which he annexed a copy of the purchases ledger. Mr M said the ledger was generated “from the completed MYOB client general ledger” for the company, which in turn “formed the basis of generating the end of financial year financial statements”. The copy was printed on 3 June 2014 (less than a month after the copy of the loan account relied on by the wife). The copy of the purchases ledger did not refer to any of the five transfers. He also produced an amended copy of the husband’s loan account which now included the five payments (for the $151,000 boat loan).
Thus the five transactions were not recorded in the loan account as at 13 May 2014 and did not appear in the purchases ledger produced by Mr M. So where were they? That question could only be answered in the husband’s case. He had control of the company, the evidence and the documents which should have answered this question.
The purchases ledger tendered by the husband was produced by Mr M after he “revisited the loan account transactions and MYOB file” in response to the question posed to the valuer by the wife’s lawyers. Mr M said that “the relevant loan account is made up of the following amounts” and then referred to the payments (which he there recorded as being $151,465.86). Thus, Mr M said that the payments were recorded in the loan account and not the purchases ledger prepared by him.
Even if Mr M’s evidence as to the revised loan account was accepted, as his Honour explained, that would not answer the question posed by the wife’s lawyers and the evidence of the expert. This is because if the payments had originally been booked to the purchases ledger, their later removal to the loan account by Mr M would have the effect noted by the valuer, namely to increase the profitability of the company and its value. If they had not originally been so booked but originally recorded in the husband’s loan account there would be no increase in profit or value. That is why the valuer had said it was necessary to see whether or not the payments had been originally booked to the purchases ledger. In other words, the critical issue was whether or not the payments had been booked to the purchases ledger and if they had been whether they had been removed from it prior to the original valuation. As the primary judge pointed out, Mr M’s evidence did not deal with this critical issue.
The following exchange is illustrative of the point:
HIS HONOUR: Well, with respect, Mr Gould, I’ve got one half of the issue.
MR GOULD: No, I hear what your Honour - - -
HIS HONOUR: There’s no doubt that the $151,000 wasn’t in the original bookkeeping journal, but Mr [M], he asserts appropriately, then journalled it into the loan account of the husband.
MR GOULD: Yes, your Honour.
HIS HONOUR: That’s half the issue. It has got to be journalled out of expenses.
MR GOULD: Yes.
HIS HONOUR: So that’s the other half of the problem. And that’s your case.
MR GOULD: Yes. Yes, your Honour. And I will seek to have those documents, either the ones I’m referring to, printed out, or, if they’re not, that printout then sent to my friend.
(Transcript 8 April 2015, p.143, l.27 – 45)
His Honour further said:
HIS HONOUR: Well, the issue, it seems to be that the accountant is alerted to the issue. He has done something in his journal, the mapped journal for the loan account, and it needs to tie up with the balances in the financial statements, if his evidence is to be accepted it was done at an appropriate time. I don’t think Ms [N] can throw any light on that. It’s really Mr [M’s] evidence that has raised the issue about its being addressed and corrected.
(Transcript 8 April 2015, p.144, l.44 – 47, p.145, l.1 – 2)
The upshot was that the primary judge had identified the impasse in the evidence. So as to resolve the evidentiary conundrum, the husband was granted leave to apply to re‑open his case. The husband availed himself of that opportunity and on 15 September 2014 he was granted leave to rely on further affidavits of Mr M and Ms N. The matter was fixed for further hearing on 27 and 28 January 2015. Subsequently, on 10 November 2014, the husband withdrew the affidavits of Mr M and Ms N and the proposed further hearing did not go ahead.
The primary judge then proceeded to consider his decision on the basis of the evidence already received, which resulted in his Honour’s finding at [139(c)]:
Husband: [B A Pty Limited]. This issue is considered above and centres around $151,500 drawn from the company to payout the substantial portion of the [G] boat loan. The husband asserts it was debited to his loan accounts in the company and not claimed as a company purchase expense. The husband had clear opportunity at trial to put the issue to rest by the production of source documents but left the issue unresolved in circumstances where he and he alone could adduce evidence to resolve it. It is to be inferred that the evidence would not have assisted the husband’s contention. On balance the amended valuation of $675,629 for [B A Pty Limited] will be adopted with the consequent adjustments to the husband’s loan accounts.
The submission of the husband on appeal was, essentially, that Mr M’s evidence about the expenses ledger should have been accepted notwithstanding the above criticisms.
However, as the primary judge pointed out to counsel in an exchange to which we have already referred, the evidence of Mr M did not explain the apparent discrepancy between the loan account ledger produced by the company under subpoena and Mr M’s revised version. As we have said, having revisited the issue, Mr M placed the payments into the husband’s loan account. He did not say from where they were transferred, if, in fact, this is what he did. He did not set out the journal entries, which the valuer said were necessary in order to clarify the issue. If, in fact, there was a debit to the husband’s loan account there should have been a matching credit to another account. There was no evidence adduced of a matching credit; hence, the discrepancy that the five transfers appeared in neither the husband’s loan account tendered by the wife or the purchases ledger prepared by Mr M, when they should have appeared in one or the other. That, perhaps, may have something to do with the timing of when each ledger was printed or the way in which Mr M prepared the accounts but, as the primary judge correctly observed, that was a matter peculiarly within the knowledge of the husband and his accountant and his bookkeeper. Their affidavits, which may have made such an explanation, were withdrawn.
In light of the above circumstances, the finding of the primary judge as to the value of the company was entirely open. Indeed, it is difficult to see what other finding could have been made on the evidence.
By way of further challenge, the husband emphasised the fact that the transfers were used to reduce a loan owed by the parties. It was submitted on his behalf that as the husband had repaid the loan account to the company, “to attempt now to uplift the value of the company on the basis of a shareholder loan created to repay a joint loan, is unjust and disproportionate. The Husband does not draw a wage…”.
There are two difficulties with this submission. First, the submission is premised on the assertion that the five transfers were recorded in the husband’s loan account. Given the primary judge’s findings of fact which we have upheld, this premise is not established. Secondly, the value of the company did not depend on notions of justice and proportionality imposed by a judge. Rather, the value had to be determined by reference to the evidence. The uncontested evidence of the valuer was that the company had a value of either $165,249 or $675,629, depending on whether the five transfers were attributed to the loan account or the expenses ledger. The resolution of that issue was again a matter for evidence and not amorphous notions as suggested by the husband.
The husband further submitted that the parties had agreed that the value of the company was the value asserted by him. The husband claimed that the agreement had been reached at a meeting, held during the course of the trial, between the valuer, the husband’s accountant and the expert accountant retained by the wife.
The evidence of the valuer referred to above at [35] is inconsistent with any such agreement.
We are not satisfied that there is any merit in these grounds of appeal.
Failure to take into account or give sufficient weight to the husband’s post-separation contributions to the development of B A Pty Limited (Grounds 9 and 11)
The gravamen of these grounds is that the primary judge gave insufficient weight to the husband’s post-separation contributions to the value of B A Pty Limited of $675,629.
Appellants who seek to challenge such an exercise of discretion face a high bar: Gronow v Gronow (1979) 144 CLR 513; Norbis v Norbis (1986) 161 CLR 513.
In September 2007 the wife received an inheritance of $391,460, the majority of which was expended on the parties’ businesses. This led his Honour to find:
165.It must thus follow that the contributions of the wife to separation must be regarded as greater than those of the husband. The whole of her inheritance was absorbed into the parties’ finances in various ways including significant reduction of debt and use as working capital at the time. Those funds totalled $391,460 and were introduced late in the relationship. Those funds equate to about 15 per cent of the present pool for adjustment.
166.Otherwise in the scheme of things the wife’s share trading made a modest profit only. It had no discernible impact on the accretion of the property pool.
167.Post separation the parties had recourse to various assets and income as described above with the husband of course having mostly control of the parties’ entities and income stream post separation. They make claim and counter-claim against the other as to the minutiae of transactions, losing sight of the Court’s obligation to assess contributions in a holistic way. The parties to an extent remained inextricably interdependent financially until 2013 when the husband was permitted to refinance the two major real estate assets of the parties so as to permit transfers of real estate to each of them. Overall it is appropriate to regard the parties’ contributions post separation as equal.
168.It is contended by the wife that contributions should favour her overall as to 55 per cent, and to the husband 45 per cent by reason of her inheritance and the husband’s post separation use of the parties’ assets.
169.The husband contends that overall the Court should regard the parties’ contributions as equal with the husband’s post separation contribution offsetting the significant inheritance of the wife.
170.The wife’s contention would see a disparity between the parties of about $259,581. This figure represents a significant diminution of her inherited funds injected late in the marriage.
171.Overall contributions will be assessed as favouring the wife 55 per cent to the husband’s 45 per cent.
It is to be recalled that B A Pty Limited was incorporated after the parties separated. The husband relied upon a valuation of this company as at 30 June 2011 of $14,082. Thus the husband contended that the increase in the value of the business to $675,629 (the value adopted by the primary judge as the value of the company at the time of the hearing) was attributable to his significant post-separation financial and non‑financial contributions.
These submissions, however, lose considerable force in the light of the primary judge’s unchallenged findings as to the source of B A Pty Limited’s funds and income. His Honour said:
94.On 25 May 2010 the husband transferred $16,150 from the [B Pty Limited] ANZ account to the [B A Pty Limited] ANZ account and rental payments thereafter received in relation to the [Suburb D] property were also deposited to the [B A Pty Limited] ANZ account.
95.After the husband incorporated [B A Pty Limited] he diverted income that would otherwise have been payable to [B Pty Limited] into [B A Pty Limited]. Otherwise payments to the partnership account for hire of the partnership’s equipment to [B Pty Limited] or the other entities ceased notwithstanding that the husband continued to use the assets and equipment of the partnership for the purposes of those entities and for the purpose of development work undertaken at the [Suburb I] property on his own account.
96.The husband later leased the [Suburb I] property to [B A Pty Limited]. Rental payments were paid to the husband’s personal ANZ account (Exh D). These payments totalled $45,918 in the 2012 financial year, $79,427 in the 2013 financial year (Single Expert Report Exh C) and were $7150 per month ($85,800 per annum) by early 2014.
97.Subsequently in November 2010 the husband procured the lodgement of the development application in relation to the property seeking approval for a proposed plant to be erected and that business to be conducted thereon.
…
101.Various other assets of the parties’ partnership or that of [B Pty Limited] have been used or disposed of by the husband with the proceeds going into the business, his account or used in relation to the [Suburb I] property.
102.In about late 2010 the husband refinanced a lease secured over [equipment] owned by the partnership and paid the $45,000 thus obtained into the [B A Pty Limited] account to pay for the environmental impact study consultant’s fees relating to the [Suburb I] property.
103.In May 2013 the husband used a 4WD motor vehicle owned by the partnership as a trade-in on the purchase by [B A Pty Limited] of a new model of the same vehicle. The trade-in value was $3000.
104.In July 2013 the husband sold [products] to the value of $9000 including GST. In February 2014 he sold [products] to the value of $5200 but accounted for most of these funds to the wife. In February 2013 the husband using his personal ABN number sold assorted [products] to the value of $51,068. These funds were deposited to the husband’s personal ANZ account.
105.The construction by [B A Pty Limited] of the plant and computer operated batching systems is now complete on the [Suburb I] property and the plant is operated by the husband through [B A Pty Limited] that pays rent to him for the use of the property.
Thus the value of B A Pty Limited was undoubtedly increased by the intermingling, for many years after separation, of the parties’ funds and assets, including those of the company held by the parties for many years before separation (B Pty Limited). B A Pty Limited received funds and rent that belonged to B Pty Limited. It received the benefit of assets directly and indirectly owned by the partnership.
On the basis of those findings it cannot be said that any increase in the value of B A Pty Limited was due solely to the husband’s efforts.
We are satisfied that the findings of the primary judge were open to him and no error in the exercise of his discretion has been demonstrated.
The husband also submitted that the primary judge erred by including the value of B A Pty Limited in the general pool of assets and not in a separate pool. It was submitted both to the primary judge and to us that the husband’s post‑separation contributions to this company justified dealing with it in isolation from the other assets, in a separate pool.
Whilst there was no ground of appeal to which these submissions could be directed, we received them in relation to ground 9 and will deal with them briefly.
It is open to, but not mandatory for, a trial judge to deal with the parties’ property on an asset by asset basis, or by placing the assets in such groups or pools as may be desirable. One of the reasons for doing so is that there may be markedly different contributions by the parties to the acquisition of different assets (Zyk & Zyk (1995) FLC 92-644 at 82,509-82,510).
Although the husband sought to persuade the primary judge that an asset by asset approach was warranted in this case, which argument was not specifically addressed, it is plain that it did not find favour.
The findings of the primary judge to which we have just referred make it clear that his Honour did not accept the premise on which the submission is based. His Honour did not accept that the husband made the exclusive post‑separation contributions to B A Pty Limited for which he had contended.
As we have said, these findings were open on the evidence. Accordingly, the factual basis for these submissions has not been established.
In any event, even if the factual premise for the submission had been established, the primary judge was not obliged to deal with this asset in a separate pool. The husband’s contributions were taken into account, albeit in the context of contributions to the various assets to be distributed (Norbis v Norbis (1986) 161 CLR 513 at 523-524).
No error on the part of the primary judge has been identified.
It follows that the cross-appeal will be dismissed.
Orders
The appropriate orders are those as foreshadowed earlier.
The appeal will be allowed and order 1 of the primary judge’s orders varied so that there will be an order that the husband pay to the wife $456,672.52. The Court will note that of that sum, it is agreed that the husband has already paid $356,423.
Costs
The appeal of the wife has succeeded. It should be recalled that the wife attempted to remedy the orders by way of a slip rule application. It was heard by the primary judge who on 16 September 2015 rejected the wife’s argument that the sum of $174,437 should not have been included as a debt. The husband could have acceded to the wife’s application, thus avoiding the costs of this appeal.
There was no proper basis for the wife’s appeal to be resisted and subject to any relevant considerations contained s 117(2A) of the Act, the husband should pay the wife’s costs.
It was argued by the wife that as she bore the cost of preparing all of the appeal books, also relied upon by the husband in his cross-appeal, she would seek her costs in the event the appeal succeeds and the cross-appeal fails. In the alternative, the wife argued that if it was found the husband should not pay all of that cost, a cost certificate pursuant to the Federal Proceedings (Costs) Act 1981 (Cth) should be issued.
The solicitor for the husband argued in response that if the cross-appeal succeeded and the appeal was dismissed, he would also be seeking his costs. In response to the wife’s application, the solicitor for the husband submitted that he would resist an order for costs, noting that he has always complied with orders of the court and is currently in a difficult financial position.
After the adjustment made in favour of the wife as a result of this appeal, the husband retains assets valued at $1,322,930. As to the cross appeal, there is no substance in the grounds. As the primary judge correctly found, the husband made false statements in respect of the issues agitated in the appeal.
The appropriate order is that the husband pay the wife’s costs of the appeal and the cross-appeal.
I certify that the preceding seventy nine (79) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (May, Ryan & Aldridge JJ) delivered on 6 February 2017.
Associate:
Date: 6 February 2017
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