E & E

[2006] FamCA 720

FAMILY LAW ACT 1975

IN THE FAMILY COURT OF AUSTRALIA
AT BRISBANE No. TVF2217 of 2005

BETWEEN:
MRS E

Applicant Wife

AND:

MR E
Respondent Husband

BEFORE THE HONOURABLE JUSTICE O’REILLY

REASONS FOR JUDGMENT

Dates of Hearing: 1 December 2005, 30 and 31 January and 1 February 2006

Date of Judgment: 9 August 2006

Appearances: Mr Scott-Mackenzie of Counsel, instructed by M S Kelly & Co, appeared on behalf of the applicant wife
Mrs Pack of Counsel, instructed S R Wallace & Wallace, appeared on behalf of the respondent husband

Applications

Mrs E (the wife) and Mr E (the husband) each seek a final property order.

Relevant background facts

The husband is 50 years and the wife 45 years.
They commenced cohabitation in 1979. They married in April 1983. Final separation occurred on 20 March 2004.
Thus, the marriage subsisted for nearly 21 years; although the period of cohabitation and marriage was about 25 years.
The parties’ divorce became final on 14 August 2005.
There are three children of the marriage, A 21 years, J 19 years and C 16 years.
A has almost completed an undergraduate degree at the University of Queensland. He resides in Brisbane.
J is studying at the University of Queensland, now in her third year. She resides in Brisbane.
C is in Year 11 at the W School. C resides with the wife and has contact with the husband on alternate weekends and for half of the school holidays. C plans to attend university when she finishes her secondary education at the end of 2007.
The husband resides partly on a rural property of about 4,000 acres owned by the parties, the D property, near L (D property), on which is constructed a modest dwelling; and partly at P (The P property), a property of about 5 acres in far north Queensland owned by the husband on which is constructed a shed, made habitable by its housing a caravan and internally constructed bathroom and laundry facilities. The husband resides, usually, about four days at the D property and about three days at the P property.
The wife resides at U in North Queensland (the U property), a small rural property owned by the parties comprising about 28 acres on which a modest but conventional home is constructed. As mentioned, C resides with the wife.
Throughout the parties’ cohabitation and marriage, the husband has worked as a farmer. Between 1991 and 2004, the parties conducted a farming business partnership styled E partnership, involving both livestock and grain. That business was carried on at the D property, purchased by the parties in 1991. Since the final separation, the husband has carried on that business on his own, and since July 2004 has banked all of its income to an account in his own name. Whilst there has not been any formal dissolution of the partnership, it is common ground that the wife has not participated in the business of the partnership since the final separation in March 2004 and that since July 2004 the husband has regarded all of the partnership income as his own. Thus, effectively, the partnership was dissolved as at July 2004, although it is common ground that the effective dissolution date should be regarded as 30 June 2004.
The property at U, in which the wife resides, was purchased by the parties in 2000.
The property at P, in which the husband partly resides, was purchased by him in August 2004.
At the commencement of the cohabitation in 1979, the parties resided in Victoria.
In 1981, they moved from Victoria to T in North Queensland.
Between 1981 and 1991, the husband worked at T. In 1984, the parties constructed a home at T, from which they moved in 1991 to the D property.
Since the final separation in March 2004, the husband has continued to operate the farming business at the D property in his own name, and hopes to be able to continue to do so, despite desperate drought conditions as at the date of the trial, which the husband described as “drought for three years, going into the fourth year”.
Between 1981 and 1983, the wife worked as a nurse at the T Hospital. The child A was born in 1984. The wife returned to work at the T Hospital about six months after J’s birth in 1986. Between 1987 and1989 the wife was employed by the T Neighbourhood Centre. Between 1989 and 1991 she was employed at the T School.
Following the parties’ move to the D property in 1991, and the final separation in March 2004, the wife worked in various roles within the primary school system. Since 2000, she has been employed by the M School. The wife is still engaged in that employment.
The wife hopes, however, when C finishes her secondary education at the end of 2007, to engage in a three month retraining program to again become employed as a nurse.
During the parties’ relationship, in addition to the wife’s employment which I have mentioned, she assisted the husband in the farming business conducted as a partnership between 1991 and 2004, including physical assistance (the husband says with the livestock, but not the machinery) and also has fulfilled the role as the primary homemaker and primary carer of the children.
Thus, whilst the husband primarily has been responsible for the parties’ income attributable to the farming business partnership, the wife primarily has been responsible for her role as the primary homemaker and primary carer of the children, has physically and in other ways assisted with the farming business partnership and, additionally, has worked as an employed person outside the partnership farming business.
In the mid 1990s, in addition to the farming business partnership conducted between 1991 and 2004, the parties engaged in share farming with a Mr H. The parties sued Mr H in the Supreme Court of Queensland for breach of contract in relation to the share farming arrangement, resulting in judgment on 21 July 2003 of $312,217, including interest and costs. See E v H [2003] QSC 222, 21 July 2003; and see ex 27 for a summary of the damages, interest and costs received, which, to the extent of $186,156 was for lost income suffered by the breach of contract in the years 1999 to 2001.

The issues

The parties raised several issues relating to the nature and value of the pool, contribution and the s 75(2) factors.
In relation to the pool, the principal issues raised are:
·     Whether future lease payments of $27,000 in relation to two silos on the D property, $6,000 for each of the next three years and a final balloon payment of $9,000, which payments are secured against the D property, should be brought to account in assessing the value of the pool
·     Whether the P property, purchased in August 2004, should be included in the pool at its net value, $145,000, or only included in the pool as an “add back” against the husband of $29,513, being the initial costs of the acquisition, which the husband acknowledges comprised joint funds
·     Whether the wife’s superannuation with QSuper, presently valued at $8,000, should be included in the pool, and if so at that value, or the value of $4,000, being the value at the date of the final separation; or be regarded as a separate pool; or, having regard to all of the circumstances including the wife’s age and the small value of the superannuation interest, it be considered only in relation to the s 75(2) factors
·     Whether there should be an “add back” against the wife of $57,935 withdrawn by her from their partnership account having regard to the use made by her of that money and the use to which the husband put an equivalent amount left by her in that account for the husband’s use.
In relation to contribution, the principal matters raised are:
·     The husband’s greater initial and early financial contribution
·     The contributions made by the husband’s family
·     The contributions made by the wife’s family
·     The parties’ own contributions during the period of their cohabitation and marriage
·     The parties’ post separation contributions.
In relation to the s 75(2) factors, the principal matters raised are:
·     The parties’ respective ages and the state of their health
·     The parties’ present and future income earning capacities
·     The parties’ traditional and anticipated standards of living
·     The wife’s modest superannuation interest (if it should not be included in the pool)
·     The circumstance that, until C is 18, it is expected that she will continue to reside with the wife
·     The child support for C since the final separation including assessed child support against the husband, child support actually paid by the husband and child support which the husband has offered to pay for C until she turns 18
·     The relevance of, and if relevant the impact of, two future expectancies by the wife, including their value, and an assessment of whether she may receive them, and if so when she may receive them
·     The circumstance that, since July 2004, the husband solely has had the benefit of the income from the farming business, although the business was established by the parties together as a partnership, so that the husband has the continuing benefit of what the parties “built up” together
·     The circumstance that the husband may be liable to income tax in respect of the forced sale of livestock in the financial year ended 30 June 2005
·     The circumstance that the wife may be liable to income tax in relation to a drought bond received by her in the financial year ended June 2004.

The nature and value of the asset pool

The nature and value of the asset pool was largely agreed between the parties. It is convenient to set out the Schedule as presented by the parties, with changes to accord with my determination as to the matters in dispute, and then to address in respect of each item the parties’ agreement or, where there is dispute, my determination and the reasons for my determination.
In the Schedule, the bold letter H against any item denotes the parties’ agreement that the husband should have that item, and the bold letter W against any item denotes the parties’ agreement that the wife should have that item.

SCHEDULE

1.      The D property, in L, agreed value $1,085,000; less $27,000 agreed value of debt in relation to two silos included in the property valuation as fixtures, but which debt is secured against the property (H)

$1,058,000

2.      The D property plant and equipment (H)

$200,000

3.      The D property livestock (H)

$77,710

4.      The U property, agreed value $675,000; less agreed mortgage $39,000 (W)

$636,000

5.      The P property, agreed value $240,000; less agreed mortgage $95,000 (H)

$145,000

6.      Wife’s motor vehicle (Hilux) (W)

$10,000

7.      Husband’s motor vehicle (Jackaroo) (H)

$20,000

8.      Add back wife (Ford Fiesta motor vehicle sale proceeds) (W)

$3,700

9.      Furniture from the U property (W)

$10,000

10.     Furniture from the D property (H)

$2,000

11.     Dinghy boat and trailer (H)

$4,000

12.     Wife’s superannuation interest (W)

Nil

13.     Drought bond purchased September 2003 (W)

$50,000

14.     Add back wife (money transferred to wife’s bank account) (W)

$28,967

15.     Horses (one old pony, two useable horses and one other) (H)

$1,500

16.     ANZ school account (W)

$12,220

17.     ANZ cheque account (W)

$2,194

18.     Ride on mower, lawn mower, whipper snipper, gurney (W)

$2,500

TOTAL

$2,263,791

Item 1

In relation to item 1, it was common ground (stated orally at the trial) that the two silos on the D property were valued as part of item 1 as fixtures, and secured against the D property. Thus, it is appropriate (and at the trial the parties agreed) that the amount of the debt relating to the silos, $27,000, be deducted from the agreed value of the D property so as to reduce it from $1,085,000 to $1,058,000.

Items 2 - 4

These items and values were agreed between the parties.

Item 5

It is common ground that the P property has a present market value of $240,000 and secures a mortgage of $95,000, leaving a net value of $145,000. I note that the husband has an overdraft debt of $4,408 also secured against the P property. However, I am not satisfied on the evidence that this should be regarded as a joint debt. It appears that the amount may be a post separation debt of the husband and thus should not be brought into the pool.
The P property was purchased by the husband about five months after the final separation by contract dated 13 August 2004, for the purchase price of $119,000. Settlement occurred in early September 2004.
The husband acknowledges that, in addition to the mortgaged borrowing of $95,000, he drew $29,513 from a National Australia Bank account no …4 which he established in his name after the final separation (ex 13) using $5,000 for the deposit, $20,613.73 to settle the contract and $3,914.21 stamp duty and legal fees, totalling $29,527.94 (husband’s affidavit, par 24), but agreed at trial as $29,513. The husband’s NAB account received, on 23 July 2004, the whole balance of the parties’ former NAB farm account no …5 (ex 12), $86,684.86 so that, in effect, the $29,513 which enabled him to complete the purchase and pay the legal costs was paid by him from the parties’ joint funds.
The husband contends that in respect of the P property, there should be an “add back” against him of $29,513 and that otherwise the full net value of the P property should be regarded as a post separation asset acquired by him out of his post separation income.
The market value of the P property has increased from the purchase date ($119,000) to the date of trial ($240,000) by about $121,000.
The wife contends that the present net value of the P property should be included in the pool on the basis that the acquisition cost, over and above the loan facility, was paid out of the parties’ joint funds.
The husband however contends that some or all of the increase in value is attributable to improvements which he has made between September 2004 and now. The improvements are described in the husband’s affidavit, par 44.
In turn, the wife contends that many of the improvements also were paid out of the parties’ joint funds.
The husband conceded in cross examination that all of the improvements were paid from his NAB farm account, saying “I only have one account” (namely, his account no …4).
Mr Scott-Mackenzie of Counsel, for the wife, relied on the circumstance that, to the extent that the improvements may have been made in the financial year ended 30 June 2005 (the financial year following the final separation) the “bulk of the income” for that year, all of which was banked by the husband to his account no …4, substantially was “earned” by the parties jointly in the preceding financial year. For example, the husband conceded in cross examination that the income from grain sales in the financial year ended 30 June 2005, $160,018 (see the draft financial statements for the year ended 30 June 2005, Primary Production Account, ex 11) was attributable to grain produced in the preceding financial year, because he ensured, in each year, that the income from grain sales was banked in July of each year, being the grain sales income attributable to the preceding year, so that, in effect, the $160,018 income from grain sales banked in July 2004 and counted as income in respect of the financial year ended 30 June 2005 was attributable to grain sold in the financial year ended 30 June 2004 (final separation having occurred in March 2004, in that financial year).
Mr Scott-Mackenzie submitted further that the livestock sales income recorded in the Primary Production Account in the draft financial statements for the year ended 30 June 2005 (although these were forced sales, and thus extraordinary income), was attributable to livestock reared on the D property over the year or years preceding the financial year ended 30 June 2005. In this regard, the husband gave evidence that the attributed income in the Primary Production Account for the year ended 30 June 2005 (ex 11) $6,161 was a portion only of the income from forced livestock sales in that year, $53,908.45 including GST (see ex 19) because of taxation legislation allowing the actual income received to be averaged, for income tax purposes, over five years. Thus, in the financial year ended 30 June 2005, the husband acknowledged that the actual income which he received by the forced livestock sales was $53,908.45 including GST, not $6,161, as shown in exhibit 11.
Although the financial statements for the farming business for the year ended 30 June 2005 (ex 11) are draft financial statements, the husband said in evidence that he has examined them and is satisfied that they are reasonably accurate.
I accept Mr Scott-Mackenzie’s submissions, based upon this evidence, that in effect, whilst the husband paid for the improvements (whatever their value) out of his own NAB farm account no …4 between September 2004 and the trial, much of that income should be regarded as income in fact earned by the parties’ joint farming operation in the financial year ended 30 June 2004, although banked in the following financial year ended 30 June 2005 (the partnership effectively having been dissolved on 30 June 2004, as I have earlier observed); so that the husband cannot claim that the improvements to the P property were paid out of his own “post separation income”.
Moreover, the husband acknowledged (husband’s affidavit, par 43) that since the final separation the wife has said that she has carried out improvements to the U property (see also the wife’s affidavit filed 1 December 2005, par 12). According to other evidence, the cost of these improvements was paid, possibly, from the wife’s own post separation earnings, or possibly out of the “school fees account”, being moneys contributed by her father.
Thus, in my view, it would be inequitable not to include the full net value of the P property in the pool. In short, in relation to the increase in value since September 2004, on the evidence it appears that whilst all of the post separation improvements were funded by moneys in the husband’s own account, properly the moneys used for the improvements should be treated as the parties’ joint funds. Alternatively, the husband has failed to prove that the improvements were paid by moneys which properly ought to be regarded as his own post separation earnings. Moreover, the initial acquisition costs comprised joint funds, and it is not insignificant that the whole borrowing (about $95,000) is still outstanding. (The purchase price was $119,000. When the joint funds of $5,000 and $20,613.73 ($25,613.73) are deducted (leaving aside the stamp duty and legal fees, $3,914.21 also from joint funds) it is plain that the husband has not reduced the mortgage).

Items 6 - 11

These items, and their values, were agreed between the parties.

Item 12

In Coghlan and Coghlan (2005) FLC 93-220, the majority of the Full Court (Bryant CJ, Finn and Coleman JJ) held (par 53) that superannuation interests are to be regarded as “another species of asset” in relation to which orders can be made and (par 65) that a trial Judge has a discretion as to how superannuation interests will be treated in a particular case.
It is common ground that the present value of the wife’s superannuation interest is about $8,000; and that its value at the final separation was about $4,000.
Thus, it appears that the accretion of $4,000 since the final separation may be attributable partly to the wife’s contributions since then; and partly (perhaps) to growth on the value of the $4,000 held as at the final separation.
Mrs Pack of Counsel, for the husband, submitted that the full value of the wife’s superannuation interest should be included in the pool (although half of it has accrued since the final separation).
Mr Scott-Mackenzie of Counsel, for the wife, contended that only $4,000 should be included in the pool.
However, both Counsel conceded, properly, that in the exercise of my discretion it is open to me to exclude the wife’s superannuation interest from the pool, and to have regard to it only under s 75(2), as “another species of asset” to which the wife ultimately will become entitled.

In the exercise of my discretion, I have decided to exclude the wife’s superannuation interest from the pool on the bases that (1) it is modest; (2) there was only $4,000 value as at the date of the final separation; and (3) having regard to the wife’s age, now only 45 years, she will not have access to her superannuation, potentially, for some 15 or so years into the future. Further, my decision to exclude the wife’s superannuation interest from the pool has the effect that I must take it into account under s 75(2) as an asset available to the wife in the future.
If it should be said that I have erred in the exercise of my discretion, then it seems plain that only the $4,000 value as at the date of the final separation should be included in the pool, as it is clear that the wife has worked since the final separation and thus had the benefit of post separation employer contributions made to her superannuation interest; and there is no evidence of any amount related solely to growth in the amount of the superannuation interest as at the date of the final separation. Thus, any consequential adjustment to the husband, if, for example, the final percentage division of assets should be 50%/50%, would be only $2,000 (or adjusted modestly otherwise according to the ultimate percentage division).

Item 14

During Counsels’ final submissions on 1 February 2006, there was controversy as to whether the parties’ (then agreed) inclusion in the Schedule of $57,935 as an “add back” against the wife, being about half of the balance in the parties’ National Australia Bank account as at the date of the final separation, had the effect of foreclosing the wife from arguing that this item should be ignored. The controversy arose by Mrs Pack of Counsel’s objection to the inclusion in Mr Scott-Mackenzie’s written submissions (pars 34 and 35) of a contention that the amount withdrawn by the wife at separation should be ignored for the purpose of valuing the net property of the parties, on the basis that the amount withdrawn was half of the balance of the partnership account at the time.
Counsel were not able to deal with this matter on 1 February 2006. In the result, after argument, the matter was listed for 2 June 2006, limited to further evidence and submissions on this issue. However, by emails to the Associate on 27 March 2006, the parties notified that they had resolved this issue on the basis that half of the disputed amount should be added back against the wife, namely $28,967. Accordingly, I have included that amount as an agreed “add back”.

Items 15 - 18

These items, and their values, were agreed between the parties.

Contribution

The husband’s initial and early contribution until about 1981 – by him or on his behalf

Before considering the evidence in this regard, it is useful to set out the relevant principles as to initial financial contributions by or on behalf of a party.
In Kessey & Kessey (1994) FLC 92-495 (Full Court) at 89,151 the Full Court made clear that ultimately all that is necessary is to evaluate the weight that should be given to each party’s contributions relative to the contributions of the other party:
… In many – indeed probably in most – property settlement cases the Court has to evaluate and assess contributions to property in the absence of precise valuations of the contributions in question. Indeed, where the contributions to property are indirect or non-financial, precise valuation is impossible, and even where the contributions are direct or financial so that a valuation might be provided, other factors (not capable of precise mathematical statement) may well have eroded the initial value of such contributions. In a case such as the present, it is not necessary to arrive at precise mathematical valuations of the parties’ contributions - all that is necessary is to evaluate the weight that should be given to each party’s contributions relative to the contributions of the other party.
[italics and bold added]
In Pierce & Pierce (1999) FLC 92-844 (Full Court) at 85,881 a differently constituted Full Court (except for Baker J) said:
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: …
[italics and bold added]
In Farmer & Bramley (2000) FLC 93-060, Kay J clearly stated two things, namely:
· The Court’s task is to evaluate all of the contributions from the time of the commencement of the parties’ relationship until the time of the hearing and to give such weight to such contributions as the Court thinks is appropriate in the circumstances (par 68); and
· There is nothing in the legislation that requires s 79(4)(a)(b) and (c) contributions to be measured only in terms of what either party contributed to the assets of which the parties are presently possessed (par 69).
In Figgins & Figgins (2002) FLC 93-122 (Full Court) Nicholson CJ and Buckley J made the timely reminder, at par 134:
134. … Marriage is and should be regarded as a genuine partnership to which each brings different gifts. …
It is useful also to set out the relevant principles as to gifts by a party’s family or relatives.
In Gosper & Gosper (1987) FLC 91-818 at 76,168, Fogarty J said:
Normally, where title to a property is transferred to one or both of the parties that would be the strongest indicator of the intention of donor.
…
Where a gift is made solely to the donor’s relative … and that spouse applies that property to the marriage, that is a direct financial contribution solely by that party and will be assessed in the ordinary way alongside other contributions by each party to the marriage. ...
…
In many such cases that gift was made only because of that relationship and in reality as a means of benefiting that relative in that marriage. It was made “because she was a daughter of that family” as was said in W’s case at p. 75,527.
…
In other cases the evidence, including evidence that the donor intended to benefit both spouses, may not justify that conclusion. If so, the application by the parties of that property to the marriage would, at least at that point, be an equal contribution by them.

[italics added]

In Kessey & Kessey (1994) FLC 92-495, the Full Court referred to the lack of evidence in that case to establish intention to benefit other than the donee (at 81,149-150):
In the present case the trial Judge found (as earlier quoted) that the evidence did “not clearly establish the intention of the deceased mother” and that it would not be open to him to infer what probably her intention was. We would say at this point that we were not taken to any evidence that would challenge his Honour’s finding that the evidence did not establish the intention of the deceased mother. We also agree that the trial Judge was correct in concluding that it was not open to him to infer intention on the part of the mother.
Then, as to principle, the Full Court said (at 81,150):
… It may well be, however, that the trial Judge’s approach and our approval of it, go somewhat further than what was said by Fogarty J. in Gosper. This is because this case would establish that where there is no evidence of any intention by a parent-donor as to whether he or she wished to benefit only his or her child or also to benefit the spouse of the child as well as the child, then the fact of the parent-child relationship, especially in circumstances where that has been a relationship of support on the part of the child, will be sufficient to establish a contribution of the donation by or on behalf of the child of the parent. In other words, a contribution by a parent of a party to a marriage to the property of the marriage will be taken to be a contribution made by or on behalf of the party who is the child of the parent unless there is evidence which establishes it was not the intention of the parent to benefit only his or her child.

[original italics]

In L & L (unreported) [2004] FamCA 1010, 5 November 2004, the Full Court (Kay, Holden and Guest JJ) observed (par 31) that the correct approach to gifts coming from the family of one of the parties is settled law, adding that such gifts “ought generally be treated as being a contribution made by or on behalf of the party from whose family it came”, unless there is evidence that the donor intended to benefit both spouses, in which case the Court may determine that “it should be treated as an equal contribution by both parties to the marriage”.
At the commencement of the parties’ relationship in 1979, the husband had:
·     An interest in a house property in Victoria, in which the parties resided until their relocation to T in North Queensland in 1981, sold in about 1981 for $20,000 (the husband had owed his father $8,000 in relation to this property, which debt was subsequently forgiven)
·     A parcel of land at S registered in his name and apparently adjacent to the husband’s parents’ property at S, which parcel of land was sold for $75,000 and that amount then gifted to the husband by his parents
·     A utility motor vehicle which the husband initially estimated at $10,000 value, but which during cross examination he agreed may have been worth less, namely about $5,000
·     An AMP endowment policy (no value specified as at 1979)
·     Farm machinery owned by the husband, comprising a tractor and header.
In about 1981:
· The parties used the sale proceeds from the property in Victoria and the S land, collectively about $95,000, to commence a share farming business at T, in respect of which the parties also used the husband’s farm machinery referred to above (tractor and header).
· The husband’s father gifted farm machinery of about $20,000 value also used by the parties in relation to the share farming business carried out by them at T.
In this context, the wife (wife’s affidavit, par 16) said that some or all of the $95,000 referred to was used to purchase machinery and a caravan in T, in which caravan the parties lived until early 1984 (including after their marriage in April 1983) and (par 17) that in 1984 the parties moved into a house at T which the parties had built.
The wife’s initial financial contributions, according to the husband’s evidence, were limited to a Morris Minor motor vehicle worth about $2,000 and her personal effects.
Thus, leaving aside the husband’s AMP endowment policy, to which I will refer below, it appears that the value of the husband’s initial and early contributions, by himself and his parents, amounted to about $120,000 value, plus the husband’s tractor and header, whereas the wife’s, in comparison, was almost negligible.
In the absence of any specific evidence that the husband’s family intended to benefit both the husband and the wife, it is appropriate that the contributions by the husband’s family be regarded as contributions on his behalf.
I accept the submission of Mrs Pack of Counsel, for the husband, that the contributions by the husband or on his behalf between about 1979-1981 had a “springboard” effect not only in funding and thus facilitating the parties’ share farming operation at T commencing in 1981 (as to which I note the wife’s concession that these contributions enabled the parties to commence share farming in North Queensland at a time at which otherwise they could not have afforded to do so); but also, as will be seen, had a “springboard” effect in relation to other properties subsequently purchased by the parties, in particular, a parcel of land at B in 1988 and ultimately the D property in 1991.
In the evaluation exercise however, it is proper that I have regard not only to the use to which the parties put these early contributions by the husband or on his behalf, but also to the circumstance that these initial and early contributions by the husband or on his behalf occurred very early in the parties’ lengthy cohabitation and marriage of nearly 25 years. Mr Scott-Mackenzie of Counsel, for the wife, submitted that these contributions were made “so long ago” as to have little or no bearing on the parties’ just and equitable property division now. However, whilst it is true that the initial and early contributions occurred a very long time ago, nearly 25 years before the date of the final separation, it would be contrary to principle to ignore them.

The period from about 1981 to the final separation in March 2004

In about 1988:
· The husband’s father lent the parties $20,000 which was used towards the purchase of land at B for the purchase price of $85,000
· The balance of the purchase price was sourced by the parties’ share farming earnings during 1988, which the husband described as an “unusually profitable year”.
The parties sold the B property in 1990 for $160,000, at which stage the $20,000 loan from the husband’s father was forgiven.
In 1991, when the parties purchased the D property:
· The husband’s mother (the husband’s father then having passed away) lent the parties $40,000, which was repaid by the parties over ten years at $4,000 per year, interest free
· The husband’s mother lent to the parties some of her late husband’s farm machinery, some or all of which is still located at the D property. See the affidavit of the husband’s mother filed on 21 November 2005, par 5, listing 26 items of lent farm machinery, although, in his oral evidence, the husband excluded from that list items 3, 8, 9 12 and 21 as farm machinery owned by him, included by error.
The D property was purchased by the parties in 1991 for $450,000, as made up by the B property proceeds, $160,000, a Young Farmers Loan of $250,000 borrowed from QIDC and the $40,000 borrowed from the husband’s mother (since repaid).
Before the parties purchased the U property, the husband had cashed in his AMP endowment policy (referred to above) and sold AMP shares which had issued to him upon AMP’s privatisation, generating collectively about $25,000. The purchase price of the U property, $300,000, was funded by a secured borrowing of $150,000, the husband’s realised AMP contribution of $25,000, an amount of $15,000 gifted by the wife’s father (I will refer to this further below) and otherwise by the sale of Grainco shares held by the parties.
Thus, in relation to the contributions by the husband or on his behalf between 1981 and the date of the final separation, it is necessary to have regard to the husband’s father’s further gift of $20,000; the proceeds of the husband’s AMP interests, $25,000; the loan of $40,000 by the husband’s mother repaid over ten years at $4,000 per year, interest free; and the parties’ ability to use the husband’s late father’s lent farm machinery.
Mrs Pack of Counsel, for the husband, submitted that the true value of the $40,000 loan from the husband’s mother was not just that it was interest free over ten years, but that it enabled the parties to purchase the D property in that the parties’ QIDC Young Farmers Loan was available to them at the maximum amount of $250,000; and that at that stage from their own resources the parties had available only the B property proceeds of $160,000; so that without the husband’s mother’s loan of $40,000 the parties would not have been able to purchase the D property for $450,000, now worth over one million dollars. However, the state of the evidence does not allow me to conclude necessarily that absent the interest free loan of $40,000 from the husband’s mother, the parties would have been unable to borrow that additional amount required on commercial terms. (The Young Farmers Loan carried a maximum of $250,000; and was beneficial; however, that does not mean that the parties did not have any other borrowing capacity and there was no evidence to that effect). Mrs Pack pointed also to the circumstance that the husband’s mother’s assistance in facilitating the purchase carried the added advantage to the parties of a stamp duty saving of some $18,000 because of their QIDC Young Farmers Loan borrowing.
During this period there were considerable contributions also from the wife’s family. In the absence of any specific evidence that the wife’s family’s contributions were intended to benefit both the husband and the wife, it is appropriate that the contributions by the wife’s family be regarded as contributions by the wife.
The gifts on the wife’s behalf in the period 1981 to the final separation were:
·     $131,337 from the wife’s father for the children’s education expenses (but, as to which as I have mentioned, $15,000 was used towards the U property purchase)
·     $13,000 from the wife’s father, $10,000 of which was used in relation to the D property and $3,000 for a refrigerator and a Kenwood mixer
·     $20,000 from the wife’s father, used to set up and furnish the U property
·     $4,000 from the wife’s great aunt’s estate, used to purchase a wall unit still at the D property
·     $1,000 from the wife’s grandmother’s estate
·     $19,000 received from the wife’s mother to purchase a motor vehicle.
(See the wife’s affidavit, par 57).
These amounts total $188,337.
The wife’s affidavit, par 57a, refers to the amount of $188,937 contributed by her father “mostly” for the children’s education expenses but from which also $15,000 was used towards the purchase of the U property. However, at the trial, it was common ground that in the period with which I am presently dealing (1981 until the date of the final separation) $131,337 was contributed (and, see below, the further amount of $48,878 contributed in the period after the final separation until October 2005, totalling $180,215 overall). The wife’s affidavit, at par 57, treats the gifts from her father of $13,000 and $20,000 discretely, that is, as not comprising part of the amounts contributed for the children’s education expenses.
Mrs Pack of Counsel, for the husband, submitted that these contributions on the wife’s behalf between 1981 and the final separation in March 2004 “do not equal” the husband’s contributions during that similar period; and “do not equal” the husband’s greater contributions overall, including in relation to the initial period up to 1981.
Mrs Pack also argued that the amounts contributed by the wife’s father for the children’s education during this period, $131,337, were not intended for the benefit of either the husband or the wife but for the benefit of the children, and thus should be regarded “discretely”. Mrs Pack argued (on the husband’s evidence) that if these amounts had not been contributed the children would have attended the local State high school, rather than the private schools which they attended; and pointed to the circumstance that these amounts were held in an account designated “school fees account”.
However, contributions to the “welfare of the family”, constituted by the parties to the marriage and any children of the marriage, are expressly recognised under s 79(4)(c) as contributions to be taken into account. Moreover, in Farmer & Bramley (referred to above) Kay J (at par 69) made clear that there is nothing in the legislation that requires s 79(a), (b) and (c) contributions to be measured only in terms of what either party contributed to the assets of which the parties are presently possessed.

The parties own contributions during the course of their cohabitation and marriage

It was common ground at the trial that the parties’ own contributions during the course of their cohabitation and marriage, direct and indirect, financial and non financial, should be regarded as equal.

Contributions post separation

It was common ground that between the parties’ final separation in March 2004 and the trial, the wife’s father contributed a further $48,878 to the “school fees account”; but the wife has had or will have the benefit of $12,220 of that amount for her own use (item 16 in the Schedule).

The husband does not challenge (wife’s affidavit, par 57d) that at or after the final separation A, the parties’ first child, received about $7,000 from the wife’s late mother’s estate when he attained 18 years (which he put towards a car) and that J, the parties’ second child, received about $8,000 from that estate when she attained 18 years, which amounts “reduced the cost on us their parents”.
Mrs Pack of Counsel, for the husband, urged that since the final separation the wife and the parties’ third child, C, have resided at the U property “rent free”. However, the husband, since the final separation, has resided at the D property “rent free” (about four days per week) and otherwise at the P property (about three days per week). I gather however that the point of Mrs Pack’s submission is that the husband, since the final separation, has serviced the mortgage on the U property, as well as the P property.
Mrs Pack submitted also that the wife has had “no involvement” in the operation of the farming business at the D property, formerly conducted by the partnership, as to which, it is common ground, the wife has had no involvement since the final separation. However, equally, since the final separation the husband solely has had the income from the D property although, as I have explained above, I have treated some of the income received by him in the financial year ended 30 June 2005 as the parties’ joint income for the purpose of deciding whether to include the P property in the pool (see item 5 in the Schedule above and the decision relating to it).
Mr Scott-Mackenzie of Counsel, for the wife, urged that post separation, whilst the husband has contributed about $10,400 plus $400 weekly until July 2004 (that is, for three or four months post separation) towards the wife’s spousal maintenance, and the (virtually nominal) amount of $1,320 child support for C for the period 1 July 2005 to 31 December 2005, out of those amounts the wife has been required to meet living expenses for herself and C; pay an income tax liability for the year ended 30 June 2004 of about $20,000; and make a repayment to Centrelink of about $2,000 for “isolated children second home allowance” initially claimed by the husband and then disallowed.

Conclusions as to contribution

I have carefully considered all of the arguments and submissions put by Counsel, whether or not I have expressly referred to them.
In my view, in evaluating the weight which should be given to the various contributions by each party relative to the contributions of the other party there should be a contribution weighting in the husband’s favour of 8% overall (allowing a 16% differential of about $362,206 in his favour) having regard to all factors.
In particular, I have taken into account the “springboard” effect in relation to the use which the parties made of the husband’s initial and early contributions and those of his parents as contributions on his behalf; but also the lengthy period of the parties’ cohabitation and marriage; the contributions by the wife’s parents and others as contributions on her behalf; and the parties’ post separation contributions, to which I have referred.
In so concluding, it has been necessary to have careful regard not only to the dollar value of the contributions, but also the time during the course of the cohabitation and marriage at which they were made, the designated purpose of the contributions and the use the parties made of them.

The s 75(2) factors

Age and health

The parties are of similar age (husband 50 years, wife 45 years).
Neither of the parties has any significant health problems. The wife suffers depression. At the trial she was on prescribed antidepressant medication. However, she expected not to need the medication after the trial.

The parties’ present and future income earning capacities

There is a considerable income earning disparity between the parties.
The husband now has the sole benefit of the farming business built up by both of the parties together at the D property since 1991.
The D property presently is suffering extreme drought conditions. The husband said that as at 30 June 2005 the drought had extended for three years and was “going into the fourth year” with the effect that the gross income from the farming business has been “very down” in comparison with the years before the drought onset. There was no indication, on the evidence, of when the drought conditions may be likely to ease. However, even a cursory glance at the financial statements for the years 2001-2005 (exs 7-11) shows that, even in the extreme drought conditions in recent years, the business (with the exception of one year) has been profitable and indeed showing net profit as follows:

2000 $124,000

2001 $77,203

2002 $76,086

2003 $55,274

*2004 $229,873

2005 $42,303

The 2004 year (denoted with the asterisk) should be ignored, for present purposes, as it included as income $312,217 entered as “Grain Sales – Court Case” (see ex 10, Primary Production Account) which was extraordinary income related to E v H which I have mentioned above (and see ex 27).
The Primary Production Account and the Statement of Financial Performance for the 2004 year show that, but for the extraordinary income, the farming business in that year would have made a loss. However, in the financial year ended 2005, the business returned to net profit, showing (ex 11) $167,730 gross income, including grain sales $160,000.
Exhibits 7-11 show the worst grain sales years as $120,102 (2003) and $43,479 (2004). However, the years before the drought onset showed grain sales of $225,389 (2000), $195,723 (2001) and $197,335 (2003). Expenditure throughout the years 2000-2005 was $136,038 (2000), $165,489 (2001), $182,535 (2002), $143,407 (2003), $185,136 (2004) and $139,020 (2005), a range of (minimum) $136, 038 to (maximum) $185,136, a variable range of about $50,000.
Between 1991 and the date of the final separation, the parties were able not only to repay the husband’s mother the $40,000 lent by her towards the purchase of the D property but also the QIDC mortgage of $250,000 so that the D property became unencumbered (except for the encumbrance now in relation to the two grain silos being relatively recent lease transactions); and as well, the parties were provided with sufficient income to meet all of the needs of the husband, the wife and the children (leaving aside the children’s private school fees which, as I have said, were funded by the wife’s father). In addition, on 23 July 2004 the husband was able to pay out the farm overdraft account $86,684. (It appears however that this amount may have been paid out of the damages award in E v H, $312,217, of which $186,156 was attributable to lost share farming income in the years 1999-2001. See ex 27).
Thus, based upon the historical position, it is plain that the D property has the ability to produce a higher level of net income when not in drought than when in drought.
Mr Scott-Mackenzie of Counsel, in his written submissions, pars 66-84, made several observations in relation to the financial statements of the D property farming business, in particular in relation to the “real” net profit for the year ended 30 June 2005, despite the treatment of the income for taxation purposes (pars 67-71), based on annexure DWE13 to the husband’s affidavit, submitting that the net profit in that year actually was $112,955. Thus, Mr Scott-Mackenzie distinguished between the 2005 financial statement as it relates to “taxation legislation” (par 68) and the apparent actual gross income based upon the husband’s own document, annexure DWE13 (par 69).
The table set out at par 83 of the written submissions shows a “reallocation” of the lost income awarded in E v H (ex 27). The real point of this exercise, it seems to me, is to demonstrate that although “but for” the extraordinary income received in 2004 in relation to the damages award, the business would have shown a loss in 2004 (as I have observed above already); similarly “but for” the breach of contract by Mr H which led to the award the net profit for the years 2000 and 2001 would have been higher, as set out in the table. I note however, immediately, that the share farming income related to the award is not relevant to the D property as the share farming was conducted at a separate property, so that the “lost income” reflected in the award should be disregarded in assessing the net income capable of being produced by the D property.
Whilst I have referred to pars 66-84 of Mr Scott-Mackenzie’s written submissions, expressly, I do not rely on them, as they are not supported by expert evidence.
Rather, I rely instead upon my own analysis and observations in relation to the financial statements which I have set out above.
I will however make one specific observation and finding in relation to Mr Scott-Mackenzie’s submissions, relating to the adding back of depreciation to produce (on paper) higher net profits in each year. Whilst it is true that the amounts for depreciation in each expenditure table (exs 7-11) do not relate to actual expenditure in the years to which the depreciation is attributed, I accept the husband’s contention, explained in his cross examination, that the depreciation method allowed by the taxation legislation is the only way by which necessary capital expenditure, paid out of earnings, can be “expensed”, having regard to the distinction between expenditure for capital improvements and expenditure deductible against income. Thus, whilst I fully understand Mr Scott-Mackenzie’s approach to and reasons for adding back depreciation, and am fully cognisant of the point of the exercise, I do not accept that, in real terms, the net profit in any given year should be regarded as greater by such adding back.
Further, whilst it is true that in respect of the 2005 year, $6,161 only was included as income from the forced sale of livestock, I note that this was extraordinary income because of the forced sale circumstances; and, as I have observed already, the forced livestock sales in the 2005 year actually realised $53,908.45 including GST in the 2005 year, to be averaged over five years, that is, over four more years.
Mrs Pack of Counsel, for the husband, urged that I should find an average net income from the farming business of $67,000 per year for the years 2000-2005 (based upon figures in her written submissions – handwritten portion). However, this submission, whilst open on the basis of the matters included in the written submissions, fails to have regard to the circumstance that for most of the years 2000-2005 the D property has been in drought. Thus, the submission in my view is not a suitable basis for assessing the husband’s future income earning capacity; and, indeed, ignores that the figures include the worst grain sales years in 2003 and 2004 (excluding the damages award in the 2004 year); and that, as shown, in non drought years the D property is capable of producing $124,000 net profit (exemplified by the 2000 year), in which grain sales totalled $225,389.
The wife presently earns $14 gross per hour through her employment at the M School, where she works about 23 hours in each week (but reassessed each semester). The wife explained however, which I accept, that her income is greater than, for example, 23 hours x $14 gross per hour in that the payments made include provision for the holiday periods, so that her income provides to her about $24,000-$25,000 gross per year.
When C has completed her secondary education at the end of 2007, the wife proposes to undergo a three month retraining program to enable her again to become employed as a nurse. She then proposes to engage in full time employment, which will yield her (on present rates) between about $35,000-$38,000 per year gross.
I accept the wife’s position that it is reasonable for her not to undergo her full time retraining or re-enter the workforce full time until C has completed her secondary schooling. The wife’s traditional role throughout the relationship has been as the primary carer of the three children; and, as the wife pointed out, C should not be deprived of the advantage which A and J have had of their mother’s availability in their final high school years.
Mr Scott-Mackenzie urged that the husband’s net income earning capacity should be assessed as exceeding three times that of the wife, after she has retrained, which she will not commence until about 2008, when regard is had, for example, to the net income from the farming business in the 2000 year (before the drought onset). Even on Mrs Pack’s figures of (average) net income of $67,000 from the farming business, (which, as I have said, I do not accept as a reliable indicator of the husband’s future earning capacity), the husband’s anticipated net income would be nearly twice that of the wife, after she has retrained in 2008.
It is true that the husband’s present and future income earning capacity will be dependent upon his own labour at the D property and his ability to retain the D property in the property settlement. However, the wife’s income earning capacity similarly will be dependent upon her own labour.
It is not necessary for me to determine a specific ratio of the anticipated net income of the parties. It is sufficient to say that I find, on all of the evidence, as is plain, that the husband has a significantly greater income earning capacity than the wife, and to observe that there is no present reason to think that the disparity will not obtain for the balance of their income producing years. Even on Mrs Pack’s figures, the husband’s net income may be likely to be (at least) $32,000 more than the wife even after the wife retrains (in my view a very conservative disparity comparison) over about 10-15 years. If the D property should come out of drought then the annual net income disparity may be likely to be greater.

Standard of living

Each of the parties has suffered a diminished standard of living since the final separation.
Each is entitled to anticipate a reasonable standard of living after the conclusion of these proceedings.

Superannuation

The wife’s present superannuation interest is about $8,000. However, absent the application of the hardship rules, she is unlikely to have the benefit of it until her eventual retirement.
The husband has no superannuation.

The wife’s role as C’s primary carer

C is 15 years, and resides with the wife. She is in Year 11. Until at least the end of 2007, it is expected that the wife will continue to be C’s primary carer, although, as mentioned already, C has contact with the husband on alternate weekends and for half of the school holidays.
C, like her siblings A and J, proposes to attend university, so that she is likely to continue to be a dependent student for some time after she completes her secondary education.

Financial responsibility – child support

The husband has stated the intention to pay C’s private school fees and other education costs, including her university expenses. In this regard, the wife gave evidence that her father is now directing moneys towards the education of other grandchildren and no longer makes contributions for the “school fees account”. It is likely that the husband will be liable also for any additional assessed child support for C until she turns 18 years.
It appears that the husband had paid $1,320 assessed child support for C up to 31 December 2005.
The wife will be required to provide housing, food and living costs for C supplemented, as I mentioned, by any additional assessed child support, assuming that the husband honours his stated intention to pay C’s private school fees and other education costs, including her university expenses.

The wife’s expectancies

Under the Will of the wife’s grandfather (annexure H to the wife’s affidavit), clause 3(b), upon the demise of her father, the wife is to receive one quarter of his interest in the estate of the wife’s grandfather, provided that she does not predecease her father. The wife is one of four siblings, hence, the one quarter interest, provided that none of her siblings should predecease her, in which case, if she does not predecease her father, her expectancy may increase.
Under the Will of the wife’s great aunt (annexure K to the wife’s affidavit), clause 3(c)(ii), upon the demise of the wife’s father, the wife is to receive such portion of his inheritance from the wife’s great aunt as may be appointed for her by her father by Deed, Will or Codicil, or in default of such appointment upon trust for such of the wife and her siblings as shall be living at the death of the survivor of the testator or the wife’s father, in equal shares as tenants in common.
However, the trustee under each Will may pay to the wife’s father, during his lifetime, upon his request, such part or parts of the capital of the residuary estates for his maintenance, benefit or comfort in life as the trustee may think fit.
The present value of the wife’s father’s interest in the estate of the wife’s grandfather is $2,691,753 (ex 5). Thus, the wife’s present expectancy (subject to the exigencies to which I have referred) is $672,938.
The present value of the wife’s father’s interest in the estate of the wife’s great aunt is $1,263,857 (ex 5). Thus, the wife’s present expectancy (subject to the exigencies to which I have referred) is $315,964.
As to clause 3(c)(ii) of the Will of the wife’s great aunt, no Deed, Will or Codicil, as contemplated by that provision, was put into evidence. However, the parties stated from the Bar table that it is common ground that the wife’s father’s Will contains a clause to provide that the wife should have one quarter of his interest in the residuary estate of the wife’s great aunt.
Thus, on present values, the wife has expectancies, subject to the exigencies to which I have referred, of $988,902, nearly $1 million.
With time, assuming prudent investment, the expectancy may increase. However, having regard to the provisions of each Will providing a discretion in the trustee under each Will to provide for the wife’s father’s maintenance, benefit or comfort in life, during his lifetime, at his request, there is at least the possibility (although not probability) that the value of the expectancies may diminish.
The principles relevant to the treatment of expectancies are well settled. In White and Tulloch & White (1995) FLC 92-640 at 82,463 the Full Court made clear that there is no absolute rule and that, to be relevant, there must be a “worthwhile connection” between a specific element of a party’s case and the suggested expectancy:
We do not consider there is any absolute rule. The ultimate criterion is whether the evidence is, or may be, relevant to the just and equitable process under s 79. An expectancy of inheritance will not be relevant in many s 79 proceedings. In the end, relevance must depend upon the nature of the claims being put forward and the facts of the particular case. For example, if the claims were based entirely upon contributions, it could not be suggested that an issue of expectancy could be relevant because no s 75(2) factors would be involved. Where the claim includes s 75(2) factors, the nature or degree of suggested relevance between those specific claims and the expectancy in question would need to be analysed. That is to say, there must be a worthwhile connection between a specific element of the party’s case and the suggested expectancy.
The Full Court then set out (also at 82,463) the factors which the Court should consider in its approach to the weight to be given to an expectancy:
This accords with what we understand to be the general practice at trials in this Court. That is, the initial relevant in the particular case needs to be established; once it is it becomes a question of weight and degree. The issue is then approached by considering it in a broad, general way, by taking into account the age of the relative or other relevant testator, state of health, some general assessment of his or her financial position and some general assessment of the suggested inheritance expectancy. Detailed evidence of these matters is rarely allowed. Although that approach has a deal of imperfection about it and is a process where the weight, if any, to be attached to it may be difficult to identify, it is, we think, a process which is much to be preferred to that which is potentially anticipated in this case.

The Full Court said further, at 82,464:
It is ultimately a question of fact and degree. During the course of argument a number of obvious examples at each end of the spectrum were referred to. In a case where the testator had already made a will favourable to the party but no longer had testamentary capacity and there was evidence of his or her likely impending death in circumstances where there may be a significant estate, and where there was a connection to s 75(2) factors, it would be shutting one’s eyes to realities to treat that as irrelevant. On the other had, the bald assertion that one of the parties has an elderly relative who has property and is or is likely to benefit that party is so speculative that it would be inappropriate to contemplate it as relevant in a s 79 determination, it being too remote to affect the justice and equity of the case in any worthwhile way.
In De Angelis & De Angelis (2003) FLC 93-133 the Full Court (at par 95) referred to and applied the principles in White & Tulloch. In that case, the Full Court upheld a 10% adjustment to the husband in relation to the wife’s expectancy, but expressly on the basis that the Court must accord justice and equity to the parties (par 95); and observed that most s 75(2) matters are concerned with events in the future and thus are by their nature speculative (par 98). However, each case must turn upon its own facts. In De Angelis, the Full Court upheld the trial Judge’s adjustment specifically upon two bases, first, that the husband had contributed to the properties which the wife would inherit and thus had contributed to the wife’s expectation, which contribution had led to the expectancy (par 74 of the trial Judge’s findings, set out at par 87 of the Full Court’s judgment at 78,243); and secondly that, on the evidence, the expectancy was likely to be realised “within the very near future” (par 98).
In L & L (unreported) [2004] FamCA 1010, 5 November 2004, the Full Court (at pars 45-46) referred to the principles and observations in White & Tulloch and De Angelis and said (at par 47):
47. It seems to us that generally the issue of a future inheritance may be more relevant to the defence of claim for an adjustment under s 75(2) than in support of such a claim. It is not appropriate for this Court to be effectively re-writing the will of the intended testator so as to give a benefit to a person he or she does not wish to benefit. If the wife’s parents wish to provide a bequest or a legacy for the husband they are free to do so. But if they equally do not wish to provide him with any bequest of legacy it should only be in unusual circumstances that the Court would effectively make an order which would have the indirect effect of creating such a testamentary disposition.
[bold emphasis added]
Then, more pertinently in relation to the present case, the Full Court said, at par 48:
48. As indicated one might readily rely on an anticipated disposition to defeat a claim for an increased share based on capital or income disparity, both present and into the predictable future. However it is more difficult to justify an adjustment in favour of the party who would not otherwise be receiving that adjustment unless there were pressing circumstances which would indicate that the reasonable requirements of the party would not be met from a contributions based assessment.
[bold emphasis added]
As to the facts in L & L’s case, the Full Court observed, at par 49, that the issue of the wife’s inheritance in that particular case was “marginal at best” on the bases that:
·     The wife’s inheritance remained an event which was predicted by the trial Judge to occur many years hence
·     There could be many intervening factors which would reduce the size of the inheritance which she would be likely to receive
·     The husband on the other hand would be receiving assets adequate to provide for his housing
·     The husband was in secure employment
·     The husband had the prospect of a reasonably comfortable superannuation policy when he retired
·     The husband also had the support of his present partner.
In relation to these factors, only the first four points are potentially relevant, in the present case.
I turn now to apply the relevant principles to the facts of this particular case.
The wife’s father, upon whose demise both of her expectancies are premised, said in his affidavit filed on 1 December 2005 that he is 75 years old, 5 foot 10 inches tall, 75 kilograms, fit and in good health, lives by himself in a detached house and regularly mows the lawn and carries out general gardening work. He said that because he is epileptic, he does not drive a motor vehicle. He said that he walks about three miles every day and cares for himself, cooking all of his own meals and doing all of his own housework. He says that his father died at age 86, his mother at age 59 but due to a blood clot that developed as the result of a plaster cast that had been fitted too tightly, and that his mother’s brother, his uncle, lived until 97 years. He said that he was diagnosed with bowel cancer some years ago but he does not believe that he actually had cancer, receiving no chemotherapy or radium treatment at the time and later being “cleared” of cancer and having had no recurrence. The wife said in her affidavit (affidavit in response) that her father had suffered from epilepsy since adolescence, that “about 15-20 years ago” he told her he had an operation for cancer, that there has been no recurrence of the disease, that otherwise her father is “well and very active” and that there is no reason to believe that he will not live for “many years to come”
The wife is 45 years. Based upon the evidence of the wife’s father and the wife to which I have just referred, which I accept, it reasonably may be anticipated that the wife’s two expectancies may not come to her for many years hence, possibly, not until she is 60 years or beyond although, plainly, probability is impossible to predict.
It is not presently anticipated that there may be “many” intervening factors to impede the wife’s inheritance or to reduce its size. However, at least one of the expectancies (Will of the wife’s grandfather) is contingent upon the wife surviving her father. The other is unclear on the evidence. (In relation to the Will of the wife’s great aunt the wife’s father has appointed under his Will; however, it is not in evidence whether there is a proviso in her father’s Will that she must survive her father to take the interest). In both expectancies, the trustee has a discretion to pay to the wife’s father, during his lifetime, upon his request, such part or parts of the capital of the residuary estates for his maintenance, benefit or comfort in his life as the trustee may think fit. As the Full Court observed in De Angelis (par 98) most of the s 75(2) matters are concerned with events in the future and “thus are by their nature speculative”. Thus, it is not as if it is certain that the wife will outlive her father so as to have her property settlement reduced by reason of the expectancies; it is by no means certain that she will receive her expectancies sooner rather than later; indeed, on the evidence, they may not be received until many years into the future; and there is at least some prospect that their present value may be diminished if there should be a need for the wife’s father to call upon any part of the residuary capital for his own needs; although, if such need did not arise, prudently invested it may be expected that the present value of the expectancies would increase.
It is not presently anticipated that the wife’s father may be likely to change his Will, insofar as relates to the expectancy under the estate of the wife’s great aunt.
The amount of the expectancies, presently, is a little less than half of the value of the parties’ own assets to be divided.
If (by way of example) the husband should achieve a 50% division of the parties’ own assets, he will have over $1 million net value in his own right (or correspondingly more or less); and his considerable income earning capacity to which I have referred, which is significantly greater than the wife’s, particularly having regard to the cumulative effect of their respective income earning capacities over, say, the next 10-15 years.
The likely division of the asset pool in the husband’s favour, according to the agreed division of assets in the asset Schedule, will be sufficient to provide the husband with housing (either the D property or the P property, or possibly both, subject to any amount which he may be required to borrow to pay to the wife).
The husband has no superannuation, however, the wife’s superannuation presently is only $8,000 value, which is modest and, having regard to her likely income earning capacity, the accretions by application of the superannuation guarantee levy are likely to be modest in each year.
Although the Wills of the wife’s grandfather and the wife’s great aunt were made in 1978 and 1974 respectively, so that there is no question of considering whether the testators did or did not wish to benefit the husband (L & L, par 47), nonetheless it is necessary to be cautious not to make an order which would have the “indirect effect” of creating a testamentary disposition in the husband’s favour (cf L & L, also at par 47).

(10)There is no suggestion on the evidence that the husband contributed to the wife’s expectancies (cf De Angelis above).

I accept that there is relevance in this case (in the sense described in White & Tulloch) of the wife’s expectancies, especially having regard to my assessment of the husband’s significantly greater income earning capacity. In this regard, I would draw attention to L & L, par 47, first sentence, and par 48, first sentence, each set out above. The husband, it seems, seeks to have the wife’s expectancies considered not only as a “defence” to the wife’s claim for an adjustment under s 75(2) based upon his greater income earning capacity, or to “defeat” that claim, which matters are convenient to describe as coming within the first limb of par 48 in L & L; but also as an adjusting factor in itself, regardless of my findings as to his greater income earning capacity, which it is convenient to consider as coming within the second limb of par 48 in L & L.
The husband’s claim to have the wife’s expectancies taken into account as an adjusting factor under the second limb referred to is difficult to justify because there are not “pressing circumstances” which would indicate that his reasonable requirements would not be met from a contributions based assessment.
However, in respect of the first limb, as I have described it, it is necessary to balance my finding as to the husband’s significantly greater income earning capacity against the evidence in relation to the wife’s expectancies as to whether they should defeat her claim for an adjustment in her favour based upon the husband’s significantly greater income earning capacity.
Mrs Pack of Counsel, for the husband, submitted that a “big factor” in the case is necessary adjustment in the husband’s favour having regard to the wife’s expectancies.
Mr Scott-Mackenzie of Counsel, for the wife, submitted that the wife’s expectancies should not be taken into account at all in the circumstances of the case, citing C & M [2000] FamCA 1086, 30 August 2000, Moore J at pars 83 and 84:
83. … It was submitted on behalf of the husband that the wife has an expectation of inheritance from her mother in relation to a property situated at […]. Her mother, now aged 90 years, has lost testamentary capacity. …The wife … is the sole beneficiary of her mother’s estate under [her mother’s last Will]. …
84. … In my experience more often than not when it has been raised in a particular case, there has been a misunderstanding of the basis on which De Angelis proceeded. On my reading, it is confined to a narrow band of circumstances and is not an invitation to intrude and offend by a ghoulish pursuit of the current Will of a parent of one party, merely because that parent may be of advanced years, or of concessions about the value of their property.
[bold emphasis added]
The wife’s expectancies, although sizeable, are contingent upon her surviving her father and, if she does, may not yet come to her for many years into the future. The husband did not contribute in any way to the wife’s expectancies. However, despite these matters, it seems to me that I should not ignore her expectancies considering the appropriate adjustment in her favour, if any, in relation to the husband’s significantly greater income earning capacity. That is to say, in my view, it is appropriate that I consider her expectancies in relation to what I have described as the first limb of par 48 in L & L.
Mrs Pack of Counsel, for the husband, referred to Milankov & Milankov (2002) FLC 93-095 (Full Court) in relation to the wife’s expectancies, seeking to draw an analogy with the facts and findings in that case in which a significant adjustment was made in favour of the wife on the basis of a finding of fact in relation to a significant expectancy for the husband. In Milankov the Full Court (in particular Kay J) referred to the principles in White & Tulloch as applied by the trial Judge to the facts of that particular case, which had included findings against the credibility of certain of the husband’s witnesses. See, in particular, pars 128-133 and 138, per Kay J. However, as is plain, each case must turn upon its own particular facts, and the findings made in it. There is no principle to be extracted from Milankov’s case which is contrary to the principles in De Angelis and L & L, to which I have referred.

Other factors

The wife submits that I should take into account that since July 2004 the husband solely has had the benefit of the income from the farming business, although the business was established by the parties together as a partnership, so that the husband has had the continuing benefit of what the parties “built up” together.
The parties each submit that I should also take into account the circumstance that the husband may be liable to income tax in respect of the forced sale of livestock in the financial year ended 30 June 2005, and the circumstance that the wife may be liable to income tax in relation to the drought bond received by her in the financial year ended 30 June 2004 (drought bond purchased September 2003). In this regard, it is relevant to mention the evidence that the drought bond system is a tax deferral system. For example, if taxable income should be $100,000, a person is able to purchase a drought bond for, say, $50,000 so that income tax is payable only on an income of $50,000. However, when the drought bond is redeemed, the purchaser of it must then pay income tax on the $50,000 deferred as well as on the interest earned.

Conclusion as to s 75(2) factors

Having regard to all of the s 75(2) factors, it seems to me that there should be a significant adjustment in the wife’s favour having regard to the husband’s considerably greater income earning capacity, likely to ensue for many years into the future. I would assess this adjustment in the wife’s favour, having regard to the amount of the current and anticipated future disparity, and having regard also to the size of the pool, but ignoring, for the moment, the wife’s expectancies, at 10% in her favour.
I have considered also the wife’s argument to the effect that the husband’s greater income earning capacity is attributable, at least in part, to his ownership now of the farming business which they established together in partnership. In my view, however, to make a separate adjustment in respect of this factor would be “double dipping”.
However, against this assessment of 10% in the wife’s favour, there is the husband’s “defence” of it based upon her expectancies, in relation to which I would borrow the phrase used by the Full Court in L & L that it is “marginal at best”, based upon the circumstances surrounding her expectancies, to which I have already referred exhaustively.
It is not so marginal, however, to be ignored. I would thus reduce the assessment in the wife’s favour by 2% to 8%, having regard to the existence of the wife’s expectancies, in the context of my analysis above.
Further, there is the circumstance that the wife will be C’s primary carer at least until she turns 18 years in March 2008. However, having regard to the assessment already made in the wife’s favour as to the parties’ significant income earning disparity, it does not seem to me that a further adjustment is warranted in respect of C. In particular, in terms of the parties’ financial responsibility for C, I note that the husband presently intends to pay for her private school fees and university education costs. If he should fail to do that, then the wife will be able to invoke the aid of the Child Support Agency to make an assessment against him, at least until C is 18 years.
In these circumstances, it does not seem to me that there should be a further adjustment in the wife’s favour having regard to her current and proposed continued care of C.
In my view, the other factors raised by the parties are neutral, or alternatively do not warrant adjustment. In particular, it appears that each of the parties has a tax liability remnant from the course of their relationship and farming business, which, in all of the circumstances, should be their own respective liabilities. Further, I have referred already to the wife’s superannuation interest, which is modest, and in any event unlikely to be available to her for some years into the future. I have taken into account, in my assessment, that the husband has no superannuation.

Contribution and the s 75(2) factors before considering the fourth step

My evaluation of contribution has led to an assessment of 8% in the husband’s favour.
My evaluation in relation to the s 75(2) factors has resulted in an 8% adjustment in the wife’s favour.
It follows that, subject to the fourth step, the pool should be divided 50% in the wife’s favour and 50% in the husband’s favour.
According to the Schedule, the value of the husband’s items is $1,508,210, and the wife’s items $755,581.
The result is that the husband will be required to pay to the wife $376.314 (pool, $2,263,791 x 50% equals wife $1,131,895 less value of wife’s items $755,581 = $376,314).
The husband’s division, at 50%, will give him also $1,131,895.

The fourth step - Phillips case

In Phillips & Phillips (2002) FLC 93-104 (Full Court) at 88,985, the Full Court made clear its acceptance of the principle that at times the application of percentages does not necessarily produce a just and equitable result; that it is the order which is to be just and equitable, not just the underlying percentage division of the net value of the parties’ assets; that usually adjustment for the s 75(2) factors will be assessed in the range of 10% and 20%; but that a number of cases will justify an assessment outside those parameters; that in any event it is the real impact in money terms which is ultimately the critical issue; and finally, that in the consideration of whether the result is just and equitable, it is the justice and equity of the actual order not of the percentage distribution which must be considered.
According to the property division which I propose to make, the husband will have a substantial real property, valued presently at more than $1 million net as well as the plant and equipment and livestock on that property valued at a further $277,710 (plant and equipment $200,000; livestock $77,710). He may well have to sell the P property, present net value $145,000, in order to pay the wife the cash sum he is to pay her, and mortgage the D property; or not sell the P property and mortgage both. He will have a motor vehicle, furniture at the D property, a dinghy boat and trailer and the horses described at item 15 of the Schedule. The wife will have the U property, present net value $636,000, having regard to the mortgage debt in relation to it of $39,000. However, out of the moneys to be paid to her by the husband she will immediately be able to pay out that mortgage, and have a balance cash sum to invest. The wife will also have a motor vehicle, the furniture at the U property, her modest superannuation and the modest assets referred to at items 16-18 of the Schedule.

The husband will have, for the balance of his income earning years, a significant income earning capacity; whereas the wife will have, in comparison, a modest income earning capacity. She has the expectancies, to which I have referred, which will benefit her provided that she outlives her father. However, by the time she may be likely to receive any benefit from her expectancies, which may well be 10-15 years into the future, the husband will have had the benefit of his greater income earning capacity over a similar number of years.
It has been said often in family law property cases that the s 79 exercise is not to engineer equitable wealth as between the parties, nor to embark upon any “social engineering” exercise so that, for example, projected 10 or 15 years into the future the parties may be likely to have similar assets. Rather, my function under s 79 is to ensure, having regard to all of the relevant principles, that the parties existing asset pool is divided upon the just and equitable basis.
It may well be that, some 10 to 15 years into the future, the wife may be better off than the husband. However, if so, that will be the result of the fruition of her (still contingent) expectancies.
The husband gave evidence that he has taken advice from a bank that he could “reasonably service another $150,000”. The existing liabilities which he is required to service are the $95,000 mortgage in relation to the P property and the $27,000 ultimate liability in relation to the two grain silos on the D property (payable, as I have said, for another three years at $6,000 per year, totalling $18,000 and then a final balloon payment of $9,000).
However, based on other evidence given by the husband, he seems to have assumed that he would be responsible also for the $39,000 mortgage in relation to the U property, so that the wife may have that property unencumbered. In this context, at one point in his evidence, the husband said to the effect “broadly speaking, [the wife] will get a house, contents, cash, no debt, I will support [C] through school and with child support and she [the wife] has her job and in retirement she will have the trust fund. I hope to have the farm [the D property] but anticipate a debt, I’ve got [the P property], but “no home” and my retirement is the farm and that is my super as I have no superannuation”.
Thus, it seems to me that the husband’s advice that he could “reasonably service another $150,000” may have been based upon existing liabilities to be serviced of $161,000 ($95,000; $27,000; $39,000). If that was the basis of the advice, then it has not had regard to the circumstance that, in my judgment, the wife will carry the debt over the U property, so that the husband’s borrowing capacity potentially would be increased accordingly.
As is plain, I recognize that the D property is the source of the husband’s livelihood, and also as such the basis for my determination of a s 75(2) award in the wife’s favour in relation to the husband’s greater income earning capacity which, plainly enough, is dependent upon his continued ability to own and work the D property. Thus, the husband’s ownership of the D property ought not be placed in jeopardy by requiring him to borrow more than he can service, in order to satisfy the cash adjustment to the wife.
However, in considering the ultimate justice and equity between the parties, there is no reason to think that, necessarily, the husband should end up with two properties, namely the D property and the P property, whereas the wife should have only one, namely the U property. Thus, whilst I acknowledge that the husband will need to retain the D property as the source of his income, there is no reason, in considering the ultimate justice and equity between the parties, why he should not sell the P property to realise its $145,000 equity and, at the same time, to relieve himself of the $95,000 borrowing in respect of it.
In short, whilst the husband offered at the trial, somewhat gratuitously, that he has been advised by his bank that he could borrow and “reasonably service” another $150,000, he did not come to trial with any expert evidence that this is the maximum limit of his borrowing capacity. I note that, excluding the P property, the husband will have $1,335,710 net value in the assets comprising items 1, 2 and 3 in the Schedule (item 1 already being reduced for the $27,000 silo liability), and excluding the P property $1,363,210 in assets overall. The husband has not adduced any evidence that, with net assets of that range excluding the P property and of $1,508,210 including the P property, he will not have the borrowing capacity to pay to the wife $376,314 (about 28% borrowing if he should sell the P property, and about 25% borrowing plus the existing mortgage on the P property if he does not), and at the same time to keep the D property, which is important in relation to his income earning capacity, whether or not he should be required to sell the P property. If the husband should sell the P property, his borrowing to pay the wife would be reduced in any event by about $145,000, so that he would need to borrow only about $230,000 with the effect that his borrowing ratio would reduce even further (to about 17%).
In all of the circumstances, I am satisfied that the order which I propose to make is just and equitable, and not just the underlying percentage division of the net value of the parties’ assets.
It is appropriate also that I declare, for all purposes, that the partnership styled E partnership was dissolved on 30 June 2004, as is common ground between the parties.

Declaration

IT IS DECLARED

The partnership styled E partnership was dissolved on 30 June 2004.

Order

IT IS ORDERED

Pursuant to s 79 of the Family Law Act 1975 the property and assets of the parties, or either of them, be divided as follows:

The husband have:
(a) The D property, at L
(b) The D property plant and equipment
(c) The D property livestock
(d) The P property
(e) Jackeroo motor vehicle
(f) The D property furniture
(g) Dinghy boat and trailer
(h) Horses (one old pony, two usable horses and one other)
less $376,314 to be paid by him to the wife.
The wife have:
(a) The U property
(b) HiLux motor vehicle
(c) Proceeds Ford Fiesta motor vehicle
(d) The U property furniture
(e) Her superannuation interest
(f) Her drought bond
(g) $28,967 of the money transferred to her bank account (add back)
(h) ANZ school account balance
(i) ANZ cheque account balance
(j) Ride on mower, lawn mower, whipper snipper, gurney
plus $376,314 to be paid to her by the husband.
The husband is to pay to the wife:
(a) $250,000 within 30 days from the date of this order;
(b) $126,314 within 60 days from the date of this order.
If the husband should default in paying the wife the amount in paragraph 3(a) within 30 days, she may take such enforcement steps as she may be advised.
If the husband should default in paying the wife the amount in paragraph 3(b) within 60 days, the husband must take immediate steps to sell The P property at a public auction to be conducted within a further 30 days, with the net proceeds to be applied:
(a)to the sale, commission, advertising and auction costs;
(b)$126,314 to the wife;
(c)the balance, if any, to the husband.
The husband indemnify the wife in relation to all encumbrances attaching to the property he is to have and the wife indemnify the husband in relation to all encumbrances attaching to the property she is to have.
The husband is to be solely liable for any tax liability in relation to the sale of livestock after the final separation.
The wife is to be solely liable for any tax liability in relation to the drought bond purchased in September 2003.
Otherwise the parties are to retain all assets, liabilities and financial resources in their respective name or possession.
Unless otherwise specified in this order:
(a)each party is solely entitled to the exclusion of the other to all property (including choses in action) in the possession of that party as at the date of this order;
(b)each party is solely entitled to the credit of any moneys in any bank accounts in his or her name;
(c)each party is to forego any claim he or she may have to any superannuation benefits belonging to or earned by the other;
(d)each party is to be solely liable for and to indemnify the other against any liabilities encumbering any item of property to which that party is entitled pursuant to this order.
The parties are to sign all documents necessary to give effect to this order and in default a Registrar of this Court is empowered to sign all such documents.
The parties have liberty to apply to O’Reilly J, by arrangement with the Associate, if there should be any calculation errors in the Reasons for Judgment, any matters which may fall within the “slip rule” or any further machinery orders required to give effect to this order or the Reasons for Judgment.

I certify that the preceding 185 paragraphs

are a true copy of the Reasons for Judgment

of The Honourable Justice O’Reilly

Associate

Date: 9 August 2006

[2006] FamCA 720

9 August 2006

Key Legal Topics

Areas of Law

Family Law

Equity & Trusts

Legal Concepts

Remedies

Injunction

Damages

Costs

1. The D property, in L, agreed value $1,085,000; less $27,000 agreed value of debt in relation to two silos included in the property valuation as fixtures, but which debt is secured against the property (H)	$1,058,000
2. The D property plant and equipment (H)	$200,000
3. The D property livestock (H)	$77,710
4. The U property, agreed value $675,000; less agreed mortgage $39,000 (W)	$636,000
5. The P property, agreed value $240,000; less agreed mortgage $95,000 (H)	$145,000
6. Wife’s motor vehicle (Hilux) (W)	$10,000
7. Husband’s motor vehicle (Jackaroo) (H)	$20,000
8. Add back wife (Ford Fiesta motor vehicle sale proceeds) (W)	$3,700
9. Furniture from the U property (W)	$10,000
10. Furniture from the D property (H)	$2,000
11. Dinghy boat and trailer (H)	$4,000
12. Wife’s superannuation interest (W)	Nil
13. Drought bond purchased September 2003 (W)	$50,000
14. Add back wife (money transferred to wife’s bank account) (W)	$28,967
15. Horses (one old pony, two useable horses and one other) (H)	$1,500
16. ANZ school account (W)	$12,220
17. ANZ cheque account (W)	$2,194
18. Ride on mower, lawn mower, whipper snipper, gurney (W)	$2,500
TOTAL	$2,263,791

2000	$124,000
2001	$77,203
2002	$76,086
2003	$55,274
*2004	$229,873
2005	$42,303