DASHWOOD & BENNETT
[2011] FMCAfam 93
•4 February 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DASHWOOD & BENNETT | [2011] FMCAfam 93 |
| FAMILY LAW – Property – post separation contributions – notional add backs excluded – s.75(2) factors – just and equitable. |
| Family Law Act 1975, ss.75(2), 79 |
| D & D (2003) FamCA 473 Lee Steere & Lee Steere (1998) FLC 91-625 Hickey & Hickey (2003) FLC 93-143 AJO v GRO (2005) FLC 93-218 Wilde & Wilde [2007] FamCA 1044 Re NHC & RCH (2004) FLC 93-204 Townsend & Townsend (1995) FLC 92-569 Bonnici & Bonnici (1992) FLC 92-272 Mitchell & Mitchell (1995) FLC 92-601 B & B (No 2) (2000) FLC 90-031 |
| Applicant: | MS DASHWOOD |
| Respondent: | MR BENNETT |
| File Number: | ADC3289 of 2008 |
| Judgment of: | Kelly FM |
| Hearing date: | 30 June and 1 July 2010 |
| Date of Last Submission: | 16 August 2010 (written submissions) |
| Delivered at: | Adelaide |
| Delivered on: | 4 February 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr A Jordan |
| Solicitors for the Applicant: | Alderman Redman |
| Counsel for the Respondent: | Mr P Heinrich |
| Solicitors for the Respondent: | Karla McCulloch |
ORDERS
The net matrimonial asset pool shall be divided 55% to the wife and 45% to the husband, with settlement to be implemented as specified in a Minute of Order to be drafted by the parties in accordance with my Reasons.
The parties prepare and file draft minutes of order to implement the property settlement in accordance with my reasons hereunder, to be filed within 14 days.
The proceedings are adjourned to 2 March 2011 at 2.15pm for final orders to be made.
IT IS NOTED that publication of this judgment under the pseudonym Dashwood & Bennett is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADC3289 of 2008
| MS DASHWOOD |
Applicant
And
| MR BENNETT |
Respondent
REASONS FOR JUDGMENT
Introduction
The parties were married for nearly thirty years before separating in April 2008. They have been unable to resolve their property settlement and it now falls to the Court to determine this matter.
Background
The wife was born in 1955 and the husband was born in 1955. They married in 1978 and have three children, [X] born 1985 and twin girls [Y] and [Z] born in 1989. [X] is an [occupation omitted] and is financially independent of his parents. He spends his time between both parents’ homes. [Z] lives in [interstate] and is also financially independent. [Y] returned to live with the wife shortly before the trial. She is studying and works on a part time basis in the family business.
The parties had purchased a property at [C] prior to their marriage. They lived in those premises for approximately five years before selling this property and purchasing a property at Property B, [B]. In 1989 the parties also purchased a property at [E] and established a partnership raising cattle on the property. The family eventually lived on the [E] property.
At the time the parties married the wife was employed by [omitted] and the husband worked in a [omitted] business owned by his parents. The parties purchased the business in 1982 and renamed it [Bennett] Consultants. The business operates through a family trust, the [Mr Bennett] Family Trust (“[Mr Bennett] Family Trust”). Their company [Mr Bennett] Nominees Pty Ltd is trustee of the [Mr Bennett] Family Trust. The parties established the [Bennett] Investment Trust in 2005.
The husband continued to operate the business during the marriage with assistance from the wife. The wife continued in full time employment until September 1983 and subsequently commenced part time study in 1985. Following [X]’s birth in 1985, the wife combined her parenting responsibilities with her study commitments. She was subsequently diagnosed with depression and did not pursue further study until 1995, when the twins commenced school.
Each of the children experienced health problems which required additional parental input and support. [X] was diagnosed with Attention Deficit Hyperactivity Disorder (“ADHD”) when he was six years old. [Z] developed asthma as a child. [Y] developed anorexia when she was approximately 15 years old. She recovered from her illness but subsequently her sister [Z] developed bulimia. The children’s health difficulties placed further pressure upon the wife during the marriage.
Nonetheless the wife completed her [omitted] Degree in 1999 and then commenced a Bachelor of [omitted] Degree in 2001, completing those studies in 2003. In May 2004 she commenced part time employment as a [occupation omitted].
In 2005 the wife experienced further mental health difficulties and was diagnosed with bi-polar disorder. Despite these difficulties the wife obtained part time employment at [omitted] from July to November 2005 but has been unable to obtain employment since that time.
The parties’ marriage was not a happy one. Their relationship deteriorated and in December 2006 the wife decided to leave the marriage. She withdrew the sum of $198,000 from the business account, but later repaid the sum of $61,507, at the request of the husband. Their separation was brief and the parties reconciled in January 2007 before finally separating on 28 April 2008. The wife moved into the [B] premises and has lived there since that time. The husband remained in the former matrimonial home at [E].
In September 2007 the wife’s mother died. The wife was a beneficiary under her mother’s Will and eventually received an inheritance totalling $148,660 in 2008.
The husband has continued to operate [Bennett] Consultants since separation and the bulk of the matrimonial assets remain in his control. The wife initiated proceedings on 20 August 2008 and the husband filed his response on 21 October 2008. On 23 December 2008, the parties entered into consent orders for the husband to pay the wife $150,000 by way of partial property settlement.
The trial commenced before me on 11 December 2009 when limited evidence was heard. The parties then entered into intensive negotiations and reached an “in principle” settlement. The matter was adjourned to 25 February 2010 for minutes of order to be presented. Unfortunately the negotiations broke down and the hearing proceeded before me on 30 June and 1 July 2010, followed by written submissions.
The trial
The applicant wife relied upon the following documents:
a)her Amended Application filed 14 November 2008;
b)
her affidavits filed 30 August 2008, 14 November 2008,
18 December 2009 and 4 June 2010;
c)her Financial Statements filed 18 August 2008, 18 December 2009 and 4 June 2010;
d)affidavit of the wife’s sister Ms D filed 22 December 2009;
e)affidavit of the wife’s valuer, Mr K filed 22 December 2009;
f)affidavit of wife’s general practitioner, Dr G filed 22 December 2009;
g)affidavit of wife’s psychiatrist, Dr F, filed 22 December 2009.
The husband sought to rely upon the following documents:
a)his Response filed 21 October 2008;
b)his trial Affidavit filed 16 December 2009;
c)his Financial Statement filed 16 December 2009;
d)affidavit of the husband’s mother, Ms B filed 15 December 2009;
e)affidavit of the husband’s valuer, Mr B filed 15 December 2009.
Both parties gave evidence and were cross examined. I am satisfied that the parties endeavoured to give their evidence honestly and to the best of their recollection. At times the husband’s evidence was vague or uncertain, particularly regarding his drawings from the business, and whether these sums were subsequently allocated to a loan account or otherwise reflected within the financial records.
While one might expect a party would make some effort to clarify his or her financial arrangements prior to entering the witness box, I do not consider the husband was deliberately attempting to mislead or deceive the Court.
The wife alleges that the husband has acted in breach of the injunctive orders made by the Court in February and March 2010, however it seems that the consent orders entered into on 12 February 2010 nominated the wrong bank account in specifying the trading account that the husband was entitled to utilise. I am satisfied that the husband was not deliberately flouting the Court’s authority.
Dr G and Dr F were also cross examined, as was Mr K. Ultimately the parties reached agreement about the value of the business [Bennett] Consultants and further expert accounting evidence was not required. The wife’s sister and the husband’s mother were not required for cross examination.
In the course of the hearing the parties agreed that the wife will retain [Mr Bennett] Nominees Pty Ltd as part of the eventual settlement, as she will be better placed to maximise future taxation benefits by paying out dividends over a number of years. The parties also agreed that the husband will indemnify the wife and company with respect to any loan account liabilities between the various entities and third parties, such as the adult children or Ms B. All other loan accounts between entities would otherwise be forgiven, with no exchange of funds.
Legal principles
Section 79 of the Family Law Act 1975 sets out the factors that the Court must consider when deciding an application for property settlement. Various Full Court authorities have confirmed that the Court must follow a number of discrete steps when determining any adjustment of matrimonial property[1].
[1] Lee Steere & Lee Steere (1998) FLC 91-625
First the Court must identify the assets and liabilities arising from the parties’ marriage. Once the asset pool has been identified, the Court must then assess each party’s contribution during the marriage. The relevant factors pursuant to s.79(4)(a)-(c) include the parties’ direct and indirect financial contributions, any other contribution the parties may have made to the “acquisition, conservation or improvement of the matrimonial assets” and their respective contribution to the overall welfare of the family as a whole – what is often described as the “homemaker or parent contribution”.
The third step requires the Court to consider a range of factors set out in s.79(4)(d)-(g) including the matters set out in s.75(2) and the parties’ future needs. Finally the Court must be satisfied that the orders to be made are just and equitable as between the parties in accordance with s.79(2). As was noted by the Full Court in D & D[2]:
“… the task of the court in proceedings under s.79 is not akin to an accounting exercise. The task is to examine the facts of each case carefully to decide what is appropriate and just and equitable in the circumstances. There cannot be expected to be a universal answer to that question on any given set of facts. It is of the essence of judicial discretion that different minds may comfortably arrive at different conclusions.”
[2] D & D (2003) FamCA 473 at 49
I will set out my findings regarding the first three steps and then consider the overall justice and equity of the proposed outcome.
Asset pool
The parties agreed upon the value of most of the matrimonial assets. However, a number of disputes remain, as follows:
a)whether various distributions or withdrawals from the [Bennett] Investment Trust to or on behalf of the husband in the financial years ending 30 June 2009 and 30 June 2010 should be added back into the asset pool;
b)whether the $150,000 partial property settlement paid to the wife should be added back into the asset pool;
c)the value to be attributed to the husband’s boat, purchased with funds drawn from [Mr Bennett] Nominees P/L;
d)the value to be attributed to the investment based assets.
The parties have properly identified the tangible assets and the superannuation interests held by each of them. Both parties have conducted the case on the basis of one asset pool. While the superannuation interests are of significant value, they are held within a self managed fund. From time to time the parties may have chosen to retain funds within [Mr Bennett] Nominees P/L or made contributions to their superannuation fund, no doubt acting upon accounting advice. Given the age of the parties, together with the anticipated distribution of assets between them, I am content to follow the approach adopted by the parties and will deal with the tangible assets and the superannuation interests within one asset pool.
Should the distributions and/or withdrawals made from the business on behalf of the husband be added back into the asset pool?
The husband argues that he effectively operates [Bennett] Consultants as a sole trader, even though the business operates through a corporate structure via the [Mr Bennett] Family Trust and the trustee company [Mr Bennett] Nominees Pty Ltd. To that extent, the husband argues any drawings he has made over and above his salary are effectively a distribution of profits generated by him and represent income earned by him, rather than company assets accessed by him.
The business is owned by the parties through the trust and trustee company, but I agree that the income earned by [Bennett] Consultants is largely generated by the husband’s efforts. He occasionally employs sub-contractors from time to time and also employs family members such as his mother and the adult children on a part time basis, but the reality is the husband generates the bulk of services offered by the business.
It must be remembered that the business and its client base were established by the joint efforts of the parties during the marriage and the husband has retained the benefit of those combined efforts. The parties remain joint shareholders and directors of [Mr Bennett] Nominees Pty Ltd. The husband has failed to account to the wife, or seek any input from her as to how the business should be run, or what expenses should or should not be paid from the profits arising from the business. In addition, there remains some uncertainty regarding the movement of funds between the various entities.
It is unclear whether all of the personal expenses paid by the business were paid from funds that arose purely from income earned by the husband, as opposed to funds drawn from Mr Bennett Nominee P/L, for example. In those circumstances there must be some limit on the husband’s entitlement to draw upon the business accounts for his own benefit. Nonetheless, the husband is entitled to receive an appropriate level of remuneration.
There is no dispute that the husband has accessed funds well in excess of the annual salary paid to him in both the 2009 and 2010 financial years.[3] The husband’s potential income in the post separation environment effectively consists of his salary, together with the further drawings made by him or on his behalf. The wife argues that the husband has effectively had the benefit of drawings and superannuation contributions approximating $450,000 over the past two financial years.[4] She is concerned there may have been further distributions which she has not yet been able to identify.
[3] Husband’s salary in the 2009 financial year $54,500 (see exhibit H9, 2009 [Mr Bennett] Family Trust Profit & Loss Statements). Husband’s salary in the 2010 financial year estimated by him at $58,000.
[4] See Annexure B to wife’s closing submissions filed 16 August 2010
Insofar as these funds are not otherwise reflected in the asset pool, the wife argues that they should be treated as a premature distribution of assets to a party and should therefore be included within the asset pool, either as add backs or through the husband’s loan account with the company.
I agree that it would be excessive for the husband to allocate to himself a remuneration package exceeding $225,000 per annum, to the detriment of the company. The contributions towards the husband’s superannuation of $100,000 in 2009 and $50,000 in 2010 were a legitimate attempt to receive the taxation benefits that follow, rather than any attempt by the husband to maximise his personal entitlements. Those sums are included within the asset pool and remain available for distribution between the parties in any event and I exclude them from any consideration of possible add backs at this point.
When one excludes the superannuation contributions, the husband has had available to him the benefit of his salary and drawings of approximately $300,000 over the past two years. While this may be a somewhat generous allocation of “income” to the husband, given the corporate structure, I note Mr E considered it was appropriate to allocate to the husband remuneration of $140,000 when assessing the likely profit relevant to determining the value of the business.[5]
[5] Annexure B, Affidavit of Mr E filed 16/12/09,Valuation report, para 4.8
Given the overall corporate structure, the husband’s reasonable remuneration at this point in time may be somewhat lower than that figure. However, I do not consider it is necessary to more precisely quantify that portion of the husband’s drawings that may exceed the remuneration reasonably allocated to him through the [Bennett] business.
The overall income of the business is largely generated by the husband. The drawings complained of by the wife in Annexure B[6] (excluding the distributions to the [Bennett] Investment Trust and superannuation contributions) are not so excessive, compared to the overall income of the business, as to justify an add back into the asset pool. I do not consider it is necessary for the Court to conduct a forensic examination of the financial arrangements between the husband and the company in order to establish what drawings were received by him over and above a reasonable income level.
[6] See note 2
The husband is entitled to spend income earned by him as he sees fit, whether buying a boat, a motor vehicle, or meeting expenses on behalf of the adult children. I note that certain of the items are reflected in the asset pool in any event, such as the boat and the Nissan Navara. The Court should be cautious to ensure that the husband does not receive any unintended advantage, but I consider this concern is better addressed when considering the parties’ contributions and the overall justice and equity of the final outcome.
The [Mr Bennet] Family Trust distributed profits to the [Bennett] Investment Trust in the sum of $58,355 in 2009.[7] The wife estimates a further distribution arising in the 2010 financial year of approximately $110,000. Insofar as the 2009 profits (and possibly the 2010 profits) have been distributed to the [Bennett] Investment Trust, I presume this reflects an accounting exercise between the relevant entities and that the real value of the [Bennett] Investment Trust remains at $10, as already agreed between the parties. I do not consider these “distributions” should be separately characterised as a premature allocation of matrimonial assets, to be added back into the asset pool.
[7] Exhibit H9 [Mr Bennett] Family Trust tax return 2009
As discussed further below, to some extent each party has expended matrimonial assets since separation. I am unable to attribute a dollar value to the husband in this regard and therefore it is impossible to determine a precise amount to be added back, even if this was the appropriate approach to take. As it is, I conclude that these monies are more properly dealt with pursuant to s.75(2)(o) as “a fact or circumstance which the justice of the case requires to be taken into account”.
I decline to add back into the asset pool any of the non business related expenses paid by the company on behalf of the husband. I will address this issue further, together with the question of add backs generally when considering whether either party’s legal fees should be added back into the pool.
Should the partial property settlement received by the wife be added back into the asset pool?
The wife received the sum of $150,000 pursuant to consent orders entered into between the parties on 23 December 2008. The order reads as follows:
“1.That in partial settlement of property between the parties pursuant to Part VIII of the Family Law Act:
(a)on or before the 22nd day of January 2009 the husband do pay to the wife the sum of ONE HUNDRED AND FIFTY THOUSAND DOLLARS ($150,000);
(b) not relevant;
(c) not relevant.
2.The wife’s applications for final and interim spousal maintenance be and the same are hereby dismissed.”
All of the wife’s monies are intermingled and it is impossible to determine whether her remaining funds arose from the partial property settlement payment, her existing savings or her inheritance.
The husband argues that the $150,000 was clearly identified as funds paid to the wife in part settlement of her ultimate entitlement for an adjustment of property between them. As such, that sum should be deducted from the wife’s entitlement pursuant to any order for property settlement, save and except to the extent that these monies have found their way into other assets that already appear in the agreed asset pool.
Counsel for the husband conceded this was a difficult calculation to undertake, given that the wife’s funds are combined within her investments. He took a pragmatic approach, suggesting that the wife should account to the husband for one half of the payment of $150,000 such that her ultimate entitlement will be reduced by the sum of $75,000.
The wife rejects this approach, arguing that where a party relies upon their capital base to meet reasonable living expenses, it is generally not appropriate to add those amounts back into the asset pool. The Full Court has made it clear that parties are not expected to “go into a state of suspended economic animation once their marriage breaks down” [8]. The exceptions to this general approach have been well identified in the case law, such as funds spent on legal fees or expenditure that is determined by the trial Judge to be excessive or extravagant.
[8] Townsend & Townsend (1995) FLC 92-569
The wife argues that her post separation income was insufficient to meet her reasonable living expenses. The funds received by her were obviously used for this purpose and therefore well within the situation contemplated by the Full Court in cases such as Re NHC & RCH and Wilde & Wilde, where adding back expended funds into the asset pool is regarded as the exception rather than the rule.
The fact that these funds were paid to the wife by way of partial property settlement does not detract from the general approach taken by the Full Court. The situation should be treated no differently than if she already held the funds at separation.
However the Court must then determine the related question: is the wife’s post separation expenditure reasonable?
The wife’s income earned from investments is approximately $312 per week.[9] No up-to-date evidence was presented regarding the wife’s Part N weekly expenditure. However, an analysis of her financial statements filed 20 August 2008 and 5 July 2010 indicates that her overall expenditure is in the region of $860 per week, allowing for minor variations. The wife was not significantly challenged about her weekly expenditure and I accept that her expenditure is reasonable, given the parties’ financial circumstances overall.
[9] Wife’s Financial Statement filed 4 June 2010
The husband argues that the wife has disposed of assets to the value of approximately $180,000 since separation. In response, the wife gave evidence that she had spent approximately $39,000 on renovating and furnishing the [B] property, a sum which I do not consider to be excessive or extravagant. Her legal fees have exceeded $85,000. When these expenses are deducted, then her remaining expenditure of capital in the two years since separation is in the region of $28,000 annually, or $550 per week, which again is hardly excessive, or indicative of waste.
I will discuss the question of the parties’ legal fees further, but I conclude that it is otherwise inappropriate to add back the partial property settlement payment made to the wife.
Should the parties’ legal fees be added back into the asset pool?
As noted above, it is well accepted that capital used to pay legal fees may legitimately be added back into the asset pool, to ensure neither party offends s.117(1) or otherwise gains an unfair advantage. However, whether either party’s legal fees should be added back into the asset pool remains a matter of discretion for the trial judge to determine.[10]
[10] AJO v GRO (2005) FLC 93-218
Re NHC & RCH (2004) FLC 93-204
Wilde & Wilde [2007] FamCA 1044
The wife estimated her legal fees were in the region of $85,000 but no precise records were produced. Clearly the wife’s legal fees have been paid from her capital reserves, part of which arose from matrimonial assets and part of which arose from the inheritance. However it is impossible to discern from which source her legal fees have been paid.
The husband’s fees paid to date of trial were more precisely quantified in the sum of $59,316. The husband argues he has paid his fees from his ongoing earnings rather than from capital. As discussed above, while I consider the husband is entitled to draw an income over and above his salary, it would be excessively generous to allocate all his drawings as income. While some portion of the total drawings could potentially be treated as a premature distribution of assets I have declined to take that approach as it is impossible to determine a precise figure that should be added back into the asset pool.
On balance, I consider a more appropriate approach is to define the asset pool as presently exists, with no add backs on account of either party. Both parties are then in a similar position in terms of having accessed, and expended, a portion of the potential asset pool. The wife has received the benefit of her partial property settlement, to the extent those funds may have been directed towards her legal fees or are not otherwise represented in her current savings. Similarly, the husband has received the benefit of his drawings over and above a reasonable income level, including payment of his legal fees. I do not consider it necessary to define these benefits more precisely, given that the remaining asset pool overall exceeds $5 million.
Value of husband’s boat
The husband purchased a [omitted] boat in 2008 for the sum of $60,500. The sum of $59,000 was drawn from [Mr Bennett] Nominees Pty Ltd and paid towards the purchase of the boat. The husband argues the boat is now worth $40,000 and should be included in the asset pool at that value.
The wife argues that the husband has depleted the asset pool by the withdrawal of $59,000 and that amount should be added back into the asset pool, together with a notional sum to account for interest lost on those monies, which the wife calculated at approximately $6-8,000.
Given the approach I have adopted regarding the husband’s personal drawings from the business and add backs generally, I prefer the husband’s approach and will include the boat at its present value of $40,000.
Other issues regarding the asset pool
The husband sought to include the $12,500 cash retained by each party at separation within the asset pool. There is no dispute that these funds were retained by each party, but I consider it likely that the monies have been absorbed within the parties’ overall finances in the intervening two years. The amount involved is modest and of equal benefit to each party in any event. In the circumstances I decline to add the sum of $25,000 back into the asset pool.
What value should be attributed to [Mr Bennett] Nominees Pty Ltd?
The wife argued that the Court is unable to define the asset pool at present because the husband has failed to provide full and up-to-date disclosure of all relevant financial information. In particular, the wife argues that the actual value of [Mr Bennett] Nominees Pty Ltd remains uncertain until such time as a forensic accounting exercise to clarify the extent of the husband’s drawings (and therefore his loan account with the company) is undertaken.
Ms Dashwood may well feel aggrieved by the husband’s failure to provide prompt and up to date disclosure in the period since separation. At the same time, the Court should endeavour to finalise the parties’ financial relationship as far as possible. I am satisfied that the Court can attribute a realistic valuation to the company and otherwise achieve a just and equitable outcome on the information now available. I am not prepared to adjourn this matter or allow these proceedings to be re-opened for the proposed forensic accounting exercise to be undertaken.
The value of [Mr Bennett] Nominees P/L will obviously increase as the investment earnings accrue. For the purpose of these Reasons, I will rely upon the figure calculated by the wife[11] as more closely representing the actual value of the company at the time these orders are published and put into effect.
[11] The wife’s calculations are set out in Exhibit W9
What value should be attributed to the parties’ superannuation and shareholdings?
The parties’ superannuation is held through a self managed superannuation fund, The Bennett Investment Fund. The fund holds its assets as a share portfolio and obviously the value of the fund will vary from one day to the next, as will the value of the wife’s shareholdings. Both parties sought to rely upon certain figures at trial, and I have taken the higher figures as calculated by the wife for the purpose of these Reasons, as the investments are more likely to have increased than decreased in value over the intervening months. Obviously the value of shares owned by either party or by the [Bennett] Investment Fund will need to be updated closer to the settlement date.
Finally, the husband seeks to include various anticipated taxation liabilities as liabilities of the marriage. I accept that these are legitimate expenses that will need to be met either by the parties or more properly, through the entities they control, particularly [Mr Bennett] Nominees P/L. I will include these liabilities at the amounts estimated by the husband, for the purposes of these Reasons.
The wife seeks to include a Visacard debt of $400. Given the very small amount involved, I decline to include this debt as a matrimonial liability.
Taking into account all of the above, I find the asset pool is as follows:
Assets
Property B, [B] (agreed) $705,000 [E] property (agreed) $865,000 [Mr Bennett] Family Trust (agreed) $216,805 [Mr Bennett] Nominees Pty Ltd $1,177,000 [Bennett] Investment Trust (agreed) $10 Partnership Assets (agreed) $20,000 Husband’s share portfolio (agreed) $279,112 Wife’s share portfolio (agreed) $147,013 Wife’s savings at trial (agreed): Adelaide Bank CMA account $1,779 Ubank account [omitted] $46,876 Macquarie Cash XL account $190 Macquarie Private Wealth account $178,483 Cash at [omitted] $10 Husband’s savings at trial: Adelaide Bank CMT account (agreed) $82,857 CBA Smart Access account (agreed) $83 Mastercard account (agreed) $67 CommSec account (agreed) $11,910 Husband’s Toyota Landcruiser (agreed) $5,500 Husband’s boat
Husbands Nissan Navara (agreed)$40,000
$41,000
Wife’s BMW motor vehicle $53,228 Husband’s coins $451 Wife’s jewellery and gold coins
$5,500 Sub-Total E$3,877,874
Husband’s superannuation – [Bennett] Investment Fund (agreed)
$1,279,470
Wife’s superannuation as at 1 July 2010 (agreed)
$597,366
TOTAL ASSET POOL
E$5,754,710
Estimated liabilities
2009 tax on bank interest earned by [Mr Bennett] Nominees Pty Ltd (husband’s estimate)
$4,700
2010 tax on bank interest earned by [Mr Bennett] Nominees Pty Ltd (husband’s estimate)
$4,700
Contribution tax on husband’s superannuation contribution of $50,000 for 2009/10 financial year at the prescribed rate of 15%
$7,500
ESTIMATED NET ASSET POOL
E$5,737,810
I conclude that the net matrimonial asset pool available for division between the parties is valued at approximately $5,737,810.
Contributions
The parties were married for almost 30 years. They agree that their contributions during the marriage should be treated as equal and accordingly it is not necessary to discuss this evidence in any detail. The wife goes further and argues that no differentiation should be made regarding the parties’ contributions in the post separation period.
The husband disagrees. He argues that he has been solely responsible for the income earned through the business since separation. This post separation income is reflected in the asset pool by virtue of various assets acquired since separation, including the boat, the Nissan Navara motor vehicle and $250,000 contributed towards his superannuation.[12]. He seeks credit for his contribution to the asset pool in this regard.
[12] Annexure B, wife’s closing submissions; page 7, husband’s closing submissions
An analysis of the [Bennett] business general ledger listings for the 2009 financial year shows debits in excess of $500,000, including a netbank transfer in the sum of $212,270 on 25 November 2008.[13].
I note in passing that this transaction contradicts the husband’s evidence that he ceased moving funds between accounts once the parties separated in January 2008.
[13] Exhibit W12 Bennett [business]general ledger 1/7/08-30/6/09, p.14
The business gross profit for the 2009 financial year was $282,000 and the expenses totalled approximately $227,000. When these figures are taken into account together with the netbank transfer referred to above, it is impossible that all of the deductions from the business accounts arose from funds earned by the husband’s efforts.
I have already determined that the husband was largely responsible for the income earned by the business in each financial year since separation and he is entitled to be allocated a significant income through the business. I cannot be satisfied that the husband’s efforts alone provided the funds necessary for the purchase of the boat, the Nissan Navara motor vehicle nor indeed, the contributions to his superannuation fund, however his post separation contribution must be properly acknowledged.
Wife’s inheritance
The wife inherited $148,660 from her mother’s estate. Those funds were received after the parties had separated and have been merged with the savings held by the wife at separation and the partial property settlement funds received by her in 2008.
There is no dispute that the wife’s inheritance should be treated as property rather than simply a financial resource available to her.[14] The husband acknowledges that the full amount of the inheritance cannot simply be added to the asset pool because that would bring with it a significant risk of double counting with the funds still held by the wife. In written submissions, the husband concludes that “It [the wife’s inheritance] is probably best dealt with in isolation and not added to the general property pool. The answer may lie in the consideration of s.75(2)(o) and the overall requirement of justice and equity being done.”[15] He concludes that the fact of the wife’s inheritance justifies a 1.5% adjustment in his favour.
[14] Bonnici & Bonnici (1992) FLC 92-272
[15] Written submissions filed on behalf of the husband on 2 August 2010, p.5
The wife ultimately agrees the inheritance should be dealt with as a s.75(2) factor, but says that the overall impact does not justify any further adjustment. She argues her inheritance should be deducted from the assets presently held by her, to avoid any risk of double counting.
I disagree. In circumstances where the funds have been entirely merged and combined, I conclude it is more appropriate to deal with the inheritance as a post separation contribution to the asset pool made solely on behalf of the wife. Any further adjustment can be considered within s.75(2)(o) and when considering the overall justice and equity of the proposed orders.
Post separation share trading activities
The husband argues that he has undertaken successful share trading since separation represented by a $20,000 increase in the value of his share holdings since separation whereas the wife has suffered an equivalent downturn in the value of her shares.
The evidence in this regard is scant. I am not satisfied that the evidence regarding the parties’ share trading activities in the post separation period supports the husband’s contention. Given the impact of these amounts on the asset pool overall, I decline to make any adjustment in this regard.
Contribution of Ms B
The husband’s mother continued to provide bookkeeping services to the business for many years after the parties took over conduct of [Bennett] business. She has received payment for these services in the sum of $12,000 per year. At the time these proceedings commenced she sought to pursue a claim for unpaid wages on the basis that the work performed by her should have been paid at a substantially higher rate than an annual salary of $12,000.
Ms B is no longer pursuing her claim. However, the husband argues that his mother’s efforts, particularly in the period post separation, should be taken into account as a contribution on his behalf, as the business would otherwise have incurred the extra expense of employing a book keeper. I accept that Ms B has provided considerable services to the business across the years, however this arrangement obviously suited Ms B and the parties. I take it into account as an indirect contribution on behalf of the husband, albeit of modest significance.
I conclude that the husband has made a greater post separation contribution towards the maintenance and preservation of the matrimonial asset pool, however it is not a situation where a direct arithmetical calculation can, or should be adopted. Taking into account all of the above, I assess the parties’ contributions at 53% to the husband and 47% to the wife.
Section 75(2) factors
(a) age and state of health of each of the parties
Both parties are 55 years old. The husband has moved towards a consulting role within the [omitted] business, which is less physically demanding than actual [omitted] work. He hopes to reduce his workload in the coming years and the husband is obviously entitled to make that decision as he gets older. Nonetheless the husband has the capacity to earn a comfortable income in the coming years.
The wife’s situation is more problematic. Ms Dashwood has tertiary qualifications and holds many skills and attributes that would benefit future employers. She also experiences numerous health problems, particularly a longstanding history of bi-polar disorder.
The wife presented medical evidence from her treating psychiatrist,
Dr F, and her general practitioner, Dr G. Dr F said that while 40% of people with bi-polar disorder usually make a functional recovery, the wife is more likely to be in the other 60%, given that she has had two “break out episodes” in the last two years.[16] He noted that it was not uncommon for people with bi-polar disorder to return to work and the wife is certainly anxious to do so. However, she has been substantially out of the paid workforce for some time now, aside from a brief period of employment in 2009.
[16] Oral evidence
On the basis of the medical evidence, including the brief update report prepared by Dr F dated 2 June 2010[17], I am satisfied that the wife’s psychiatric history will impact upon her capacity to re-enter the workforce. Her capacity for full time employment in any field is uncertain.
[17] Exhibit W6
The wife also suffers from spondylosis[18] and a knee injury which she suffered in 2009. Both conditions may also affect her capacity for full time employment. Further it is common knowledge that a party in their mid-50s will find it more difficult to re-enter the workforce and I take judicial notice of this reality. [19] The wife’s underlying health conditions will make this challenge even greater for her.
[18] Spondylosis is a degenerative spinal condition
[19] Mitchell & Mitchell (1995) FLC 92-601 at p.81,997
I am satisfied that the wife wants to return to the workforce. Hopefully her capacity to manage the demands of paid employment will improve once these proceedings are behind her. However, I note the cautionary tone in Dr F’s report dated 2 June 2010, suggesting that it will be challenging for the wife to meet the emotional demands placed upon her if she undertakes professional employment as a [omitted].
(b) earning capacity of the parties
The available evidence suggests that the husband has the capacity to earn income in the region of $150,000 to $200,000 per annum through his the business. He will be able to continue in gainful employment for some years yet, should he choose to do so.
I am satisfied the wife has the capacity to earn an income but she is likely to be restricted to part time employment and her income is unlikely to match that achieved by the husband. The wife will continue to earn income from her investments and that income will increase once she receives her entitlements arising out of these proceedings. Notwithstanding this, the husband’s income will be significantly greater.
(c) care or control of a child under the age of 18 years
(d) commitments of each of the parties necessary to support him or herself or a child the party has a duty to maintain;
(e) the responsibilities of either party to support any other person;
(g) where the parties have separated or divorced, a standard of living that in all circumstances is reasonable
The three children are all over 18 years of age. The parties have continued to provide support and accommodation to their children from time to time and it is not uncommon for adult children to remain living with their parents well past the age of 18 years. At the time of trial [X] was based at the wife’s home and the wife was assisting him with transport to and from work. The husband has provided the children with employment and has met expenses such as tax obligations for them from time to time.
These are commitments that the parties choose to adopt out of love and concern for their children. While they may consider they have a parental obligation to do so, neither party has an ongoing legal obligation to support their adult children, in the absence of any order for adult child maintenance.
Both parties filed Financial Statements in 2008 which provide some guide to their reasonable weekly expenditure. Given the parties’ financial history and overall financial circumstances, I am satisfied the parties are entitled to maintain a comfortable standard of living.
(n) effect of the property settlement orders
It is clear that both parties will retain assets of significant value once these proceedings are finalised. The husband’s assets will include the [Mr Bennett] Family Trust and the business, which will enable him to earn a comfortable income into the future. The wife will be in a position to earn a reasonable income through [Mr Bennett] Nominees P/L and her other investments.
(o) any other fact or circumstance
The wife’s inheritance has been discussed elsewhere briefly in these Reasons. The wife’s financial resources, including her inheritance, are intermingled. The value of her inheritance is modest when compared to the asset pool overall. On balance, I do not consider it warrants any further adjustment in either party’s favour.
I take into account the reality that both parties have had the benefit of funds that might otherwise have formed part of the asset pool, including payment of their legal fees. It may be that one party or the other may have received some benefit over and above the other in this regard, but I consider any such advantage is likely to be relatively modest, when compared to an asset pool exceeding $5.7 million.
The husband has an expectation under the terms of his mother’s Will, but I do not consider this should affect my determinations to any degree.
Findings regarding s.75(2) considerations and future needs
I conclude that an adjustment on account of s.75(2) factors is appropriate and, indeed, the husband concedes a 5% adjustment in the wife’s favour.
The wife seeks an adjustment of 10%. On her own calculations, she would then retain 60% of the asset pool and the husband retaining 40%. In support of this contention, Counsel relied upon the Full Court decision B & B (No 2)[20], where the wife received a 30% adjustment in her favour on account of s.75(2) factors.
[20] B & B (No 2) (2000) FLC 90-031
While there is some similarity between these proceedings and the facts in that case, the bulk of the wife’s entitlement in B & B (No 2) was represented by the former matrimonial home. Here, Ms Dashwood will retain her present accommodation together with significant other assets from which she will earn interest and dividends.
Taking into account all of these matters, I consider an adjustment of 8% in the wife’s favour is appropriate.
Conclusion
My findings result in an outcome where the wife will retain 55% of the net asset pool and the husband will retain 45%. Given the net asset pool is worth approximately $5,737,810, the wife will therefore retain assets to the value of approximately $3,155,795 and the husband retain assets to the value of approximately $2,582,015.
Both parties agree that the property settlement orders should be structured so as to transfer ownership of [Mr Bennett] Nominees Pty Ltd to the wife. They also agree that the husband will indemnify the wife and company with respect to any loan account liabilities between the various entities and third parties, such as the adult children or
Ms B. All other loan accounts between entities will otherwise be forgiven, with no exchange of funds.
The calculations that follow are estimates only, as the position may have varied somewhat with interest earned, particularly regarding the final value to be attributed to [Mr Bennett] Nominees Pty Ltd and the superannuation fund. The table sets out the assets to be retained by each party, but the amount of the final adjustment is still to be determined, dependent upon the value of the investment based assets.
Assets/Liabilities to be retained by each party
| Assets | Value | Husband to receive | Wife to receive |
| Property B, [B] | $705,000 | $705,000 | |
| [E] property | $865,000 | $865,000 | |
| [Mr Bennett] Family Trust | $216,805 | $216,805 | |
| [Mr Bennett] Nominees | $1,177,000 | $1,177,000 | |
| [Bennett] Investment Trust | $10 | $10 | |
| Partnership Assets | $20,000 | $20,000 | |
| Husband’s share portfolio | $279,112 | $279,112 | |
| Wife’s share portfolio | $147,013 | $147,013 | |
| Wife’s savings at trial | $227,338 | $227,338 | |
| Husband’s savings at trial | $94,917 | $94,917 | |
| Husband’s Toyota Landcruiser | $5,500 | $5,500 | |
| Husband’s boat | $40,000 | $40,000 | |
| Husband’s Nissan Navara | $41,000 | $41,000 | |
| Wife’s BMW motor vehicle | $53,228 | $53,228 | |
| Husband’s coins | $451 | $451 | |
| Wife’s jewellery and gold coins | $5,500 | $5,500 | |
| Husband’s superannuation | $1,279,470 | $1,279,470 | |
| Wife’s superannuation | $597,366 | $597,366 | |
| Sub-total | $5,754,710 | $2,842,265 | $2,912,445 |
| Liabilities | Value | Husband (Debit) | Wife (Debit) |
| 2009 & 2010 tax on bank interest earned by [Mr Bennett] Nominees Pty Ltd (E$4,700 x two years) | $9,400 | $9,400 | |
| Contribution tax on husband’s superannuation contributions | $7,500 | $7,500 | |
| Sub-total | ($16,900) | ($7,500) | ($9,400) |
| ASSETS HELD BY EACH PARTY | $5,737,810 | $2,834,765 | $2,903,045 |
| estimated further adjustment to be paid by the husband | ($252,750) | +$252,750 | |
| TOTAL ASSETS TO BE RETAINED BY EACH PARTY (estimated) | $2,582,015 | $3,155,795 |
The wife will retain the assets presently in her possession, together with the company [Mr Bennett] Nominees P/L. The husband will retain the assets in his possession, save as to the necessary further adjustment to be paid to the wife. I note that the husband will be retaining assets worth approximately $2.6 million, nearly half of which is superannuation. By contrast, the wife will be retaining assets worth approximately $3.16 million, of which roughly 20% is reflected in her superannuation.
In the circumstances I consider that the further adjustment should occur by way of a superannuation splitting order in the wife’s favour.
Is this outcome just and equitable?
I take into account that the wife is likely to be living off her investment income and her capacity to improve her financial circumstances will be limited. Even if she obtains employment, she may be limited to part time work. By contrast, the husband is able to earn well in excess of $150,000 per year, whether by way of salary or other employment benefits such as superannuation contributions.
The wife’s entitlement under these orders exceeds the husband’s by approximately $500,000. Assuming the business continues to trade at current levels, the husband should be able to recoup his financial position within the space of three to four years.
Both parties will retain substantial superannuation interests. While there are restrictions on how those funds can be used prior to retirement, this outcome ensures that each party’s long term financial security is well provided for.
Both parties have had the benefit of assets or monies since separation without those funds now being added back into the asset pool. The partial property settlement paid to the wife in December 2008 resolved her application for interim spousal maintenance, an application that may have otherwise succeeded. The husband has been able to draw a very comfortable income from the business, together with further drawings from time to time.
It is not necessary to conduct a precise arithmetical comparison between the parties’ respective situations, nor is it anticipated that a property settlement should place the parties on an equal financial footing. I consider that the parties’ financial circumstances since separation have been properly accounted for, as have their future needs. I am satisfied that the outcome determined by me represents a just and equitable division of the matrimonial asset pool between the parties.
I will direct the parties prepare draft orders to implement this decision, as they will need to ensure that all matters regarding transfer of assets, resignation from entities and the relevant indemnities are fully addressed. The timing of asset transfers may also require some consideration, given that we are now half way through the current financial year. The parties may seek further accounting advice in this regard and I will allow them the opportunity to do so.
Insofar as there may be further accounting or legal costs involved in implementing this decision, I consider the parties should share those expenses equally. I consider a settlement period of approximately two months should be sufficient to enable all relevant documentation to be prepared, but I am happy to hear further from the parties in that regard.
I propose that the investment based assets be valued on an agreed date seven or 14 days before settlement, with the parties to use those figures in calculating the total asset pool and the adjustment required through the superannuation splitting order. I assume the parties are the trustees of the superannuation fund and formal service upon them as trustees is not required, in my view. The operative time can be specified as the settlement date, or a short period thereafter, say seven days.
I now make orders as published at the commencement of these Reasons.
I certify that the preceding one hundred and twelve (112) paragraphs are a true copy of the reasons for judgment of Kelly FM
Associate:
Date: 4 February 2011
Hickey & Hickey (2003) FLC 93-143
AJO v GRO (2005) FLC 93-218C & C [1998] FamCA 143
Re NHC & RCH (2004) FLC 93-204
Wilde & Wilde [2007] FamCA 1044
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