Eaton and Eaton
[2008] FMCAfam 944
•29 August 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| EATON & EATON | [2008] FMCAfam 944 |
| FAMILY LAW – Property settlement – methods as to valuation of business – consideration of allegations of waste – deterioration in relationship effecting operation of business – balancing suspicion and distrust against actual evidence – consideration of relevant principles – calculation of assets for distribution – consideration of contribution including different roles within operation of business – consideration of section 75(2) factors including responsibilities for children over the age of 18 years. |
| Family Law Act 1975 (Cth) ss.75(2), 79(2)(4)(a)(b)(c)(d)(e)(f) |
| Kowaliw and Kowaliw (1981) FLC 91-092 Browne & Green (1999) FLC 92-873 Russell v Russell (1999) FLC 92-877 Pastrikos and Pastrikos (1980) FLC 91-987 In the marriage of Lee Steere and Lee Streere In the marriage of Ferraro (1993) FLC 92-335 In the marriage of Clauson (1995) FLC 92-595 In the marriage of Whitely and Whitely (1996) 92-684 D & D (2005) FAMCA 356 AB & GB (No. 2) 2005 FMCAfam 402 NHC & RCH (2004) FLC 93-204 Brigginshaw and Brigginshaw (1938) 60 CLR 333 |
| Applicant: | MS EATON |
| Respondent: | MR EATON |
| File number: | BRM 20092 of 2006 |
| Judgment of: | Coker FM |
| Hearing dates: | 17 & 18 June 2008 |
| Date of last submission: | 18 June 2008 |
| Delivered at: | Townsville |
| Delivered on: | 29 August 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Betts |
| Solicitors for the Applicant: | Paul Loane Solicitor |
| Counsel for the Respondent: | Ms Demack |
| Solicitors for the Respondent: | Sanderson & Parks |
ORDERS
BY WAY OF PROPERTY SETTLEMENT:
That the Wife transfer to the Husband all of her right, title and interest in and to the property situate at Property T.
That the Husband forthwith refinance any liability attaching to the said property and indemnify and keep indemnified the Wife in relation to all liabilities attaching to the property.
That the Wife transfer to the Husband all of her right title and interest in and to the campervan, trail bikes, Harley Davidson, boat, furniture in the husband’s possession, sundry motorcycles, ANZ Access Advantage Account [1], AMP shares and 2006 Toyota Trayback.
That the Husband indemnify and keep indemnified the Wife in relation to any liabilities attaching to any of the property referred to in order 3 herein.
That the Wife transfer to the Husband all of her right, title and interest in and to the plant and equipment held in the name of or on behalf of the business “[L] Excavator Hire”.
That the Husband indemnify and keep indemnified the Wife in relation to any liabilities attaching to such property referred to in order 5 herein.
That the Husband transfer to the Wife all of his right, title and interest in and to the property situate at Property L.
That the Husband forthwith refinance any liability attaching to the said property and indemnify and keep indemnified the Wife in relation to all liabilities attaching to the property.
That the Husband transfer to the Wife all of his right title and interest in and to the furniture in the Wife’s possession, motor vehicle in the Wife’s possession, and the balance held in any of the following accounts:
(a)Progress Saver Account No [2]
(b)Access Cheque Account No [3]
(c)ANZ Access Advantage Account [4]
(d)ANZ Access Advantage Account [3]
(e)ANZ V2 Plus Account [5]
(f)ANZ Premium Cash Management Account [6]
(g)ANZ Business Classic Statement GST [7]
(h)ANZ Term Deposit Account [8]
That the Wife indemnify and keep indemnified the Husband in relation to any liabilities attaching to any of the property referred to in order 9 herein.
That the Husband pay to the Wife within 28 days of today the sum of $17,868.90.
That save as set out above, each party retain as their own property absolutely, all superannuation entitlements or other assets currently in the possession, power or control of that party, which assets shall from the date of this order become the sole and absolute property of that party currently having the possession, power or control of such assets.
Each party have liberty to apply within 28 days of the date of this order in relation to any point of clarification in relation to the orders and in respect of costs.
IT IS NOTED that publication of this judgment under the pseudonym Eaton & Eaton is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT TOWNSVILLE |
BRM 20092 of 2006
| MS EATON |
Applicant
And
| MR EATON |
Respondent
REASONS FOR JUDGMENT
This application is in relation to distribution of the property, accumulated during the relationship which existed between Ms Eaton whom I shall refer to as the wife and Mr Eaton whom I shall refer to as the husband.
The wife's application was filed on 6 October 2006. In that application, she detailed what should occur with regard to the distribution of property as between she and her husband. The application sought orders in these terms:
1. That the Husband transfer to the Wife his right title and interest in the residential property including all furniture situated at Property L.
2. That the Husband disclaims any right title and interest in the motor vehicle currently in the Wife’s possession.
3. That the Husband transfer to the Wife his right, title and interest in the residential property including all furniture situated at Property T.
4. That the Wife re-finance the mortgage held over the Property T property with a current liability of approximately $106,000.00 and indemnify and keep indemnified the Husband against all future liabilities thereunder.
5. That the Wife transfer to the Husband her right title and interest in the Campa trailer, Harley Davidson motor cycle, trail bikes, boat, Landcruiser motor vehicle and trailer all currently in the husband’s possession.
6. That the Husband disclaims any right, title and interest in the funds invested in the ANZ Bank V2 Deposit Plus Account No. [5] and the ANZ Cash management Account No. [6] in the name of the wife.
7. The husband retain his superannuation with AMP and the wife disclaims any other right title or interest in the husband’s superannuation benefit.
8. The wife retain her superannuation interest with AMP and QSuper and the husband disclaims any right title or interest in the wife’s superannuation benefits.
9. Each party is to be responsible for their individual tax liabilities and indemnify and keep indemnified the other party against all future liabilities thereunder.
10. That the Wife transfer her right title and interest in the business of “[L] Excavator Hire” together with all plant and equipment to the Husband.
11. That the Husband re-finance the overdraft facility and release the mortgage registered over the property at Property L securing the overdraft for the business. The Husband will indemnify and keep indemnified the wife against all liabilities associated with the business.
12. That each party be responsible for their own share of the tax liabilities for the year ending 30th June 2006.
13. There are no orders herein pursuant to section 77A of the Family Law Act relating to lump sum spousal maintenance.
14. Save as is expressly mentioned herein all property and assets presently in the name of the husband shall remain the property of the husband and the wife disclaims any interest with respect thereto.
15. Save as is expressly mentioned herein all property and assets presently in the name of the wife shall remain the property of the wife and the husband disclaims any interest with respect thereto.
16. Each party shall execute all documents and do all acts and things necessary to give validity and operation to these orders and in the event that either party refuses or neglects to do so the Registrar of the Family Court is appointed to execute such documents in the name of the defaulting party and do all acts and things necessary to give validity and operation to these orders.
17. Each party shall have the liberty to apply to this Court for interpretation and/or enforcement of the terms and conditions hereof upon the giving of seven (7) days notice in writing to the other party.
18. Any other orders this Honourable Court may deem meet.
The husband filed a response in relation to the application on
10 January 2007. Again, he detailed what should occur in relation to property settlement as between he and the wife and such proposals were in these terms:
1. That the Wife transfer to the Husband all her right, title and interest in and to the residential property including all furniture located therein, situated at Property T.
2. That the Husband re-finance the mortgage on the property referred to at paragraph 1 hereof and forever indemnify the Wife against all future liabilities on the said mortgage.
3. That the Husband receive the sum of $133,800.00 from the proceeds held in the ANZ V2 Account No [5], with the Wife retaining the balance of the proceeds in the amount of $241,080.00. The Wife further retains all funds in the ANZ Cash Management Account No [6] in the name of the Wife.
4. That the business known as [L] Excavator Hire, including all plant and equipment associated thereto, be placed on the market with [omitted Real Estate] and upon sale of the business and after payment of the overdraft linked to the security over the property at Property L and all other expenses including advertising fees, legal fees, commission and any other fees incurred in connection with the sale of the business, the net proceeds be distributed between the Husband and the Wife with the Wife receiving 55% of the net proceeds and the Husband receiving 45% of the net proceeds.
5. That the Wife pay to the Husband a lump sum of $60,000.00.
The applications and in particular the orders that each party sought, became more and more refined during the conduct of negotiations and of course, preparation for trial. In the end, the wife's position in relation to the matter remained very much unchanged and was basically in the vicinity of an equal distribution of the matrimonial assets, though there was an enormous difference between the position taken by the wife and the position taken by the husband, insofar as, what constituted the assets of the marriage.
The wife sought to include the value that she had obtained in relation to the business, [L] Excavator Hire, which placed the business somewhere in the vicinity of $650,000. That included a very considerable amount in relation to the actual operation of the business. The husband says that it has no operating value whatsoever at this time and that therefore the total that should be included, was more in the vicinity of $285,000, being the value of the plant and equipment, rather than the inclusion of any other sum in relation to the value of the business.
That becomes the most significant aspect in relation to this matter, as in fact was suggested by counsel, for both parties, at the commencement of the hearing.
It was indicated that there was virtually total agreement in relation to the value of assets, excluding the value that might be placed on [L] Excavator Hire and that the argument was one that turned almost entirely on issues of waste and diminution, in the value of the business.
The husband in the outline of case, which was filed in relation to the proceedings, detailed more precisely the orders that he sought in relation to the matter. Those orders detailed within the case outline, dated 16 June 2008, were in these terms:
1. That the net assets of the parties be divided 50/50 in favour of each party and that this division be effected as follows:
a. That the Husband and Wife do all things necessary to payout the ANZ Residential Investment Loan [10] with respect to the property at Property T (referred to as the “T property”) from the monies currently being held in the ANZ V2 Plus Account – Account No [5].
b. That the Husband retain and the Wife relinquish all her right title and interest in and to the following:
i. Property T;
ii. Campervan;
iii. Trail bikes;
iv. Boat; v. Harley Davidson;
vi. Furniture located at T;
vii. Superannuation (in the Husband’s name);
viii. Any motor vehicles in our client’s possession.
c. That the Wife retain and the Husband relinquish all his right title and interest in and to:
i. Property S,
ii. Property L;
iii. Furniture located at L property;
iv. Any superannuation entitlements;
v. GOSuper (in Wife’s name);
vi. Any motor vehicle the Wife’s name.
2. That the total balance of any money currently standing in any bank accounts in the name of the Husband and in the name of the Wife be divided 50% in favour of the Wife and 50% in favour of the Husband.
3. That Husband and Wife do all things and sign all documents necessary to appoint [omitted] Valuers and Auctioneers for the purpose of the sale of the plant and equipment identified in the valuation report of [omitted] Valuers and Auctioneers dated 22 February 2007.
4. That the Husband and Wife do all things and sign all documents necessary to deposit the net proceeds of sale from the sale of the plant and equipment pursuant to order 3 into the joint ANZ Business Classic Account No [9]. The Husband and Wife are to do all things and sign all documents to ensure that the net sale proceeds are distributed as follows:
a. All sale costs associated with the sale of the plant and equipment including but not limited to auction fees and transport costs;
b. Any tax liabilities such as CGT or GST liabilities associated with the disposal of the plant and equipment;
c. Any income tax liabilities attributed to the partners share of half of the net profit/loss of the partnership;
d. Accountancy fees associated with the dissolution of the joint partnership;
e. That the balance of the proceeds be divided 50% in favour of the Wife and 50% in favour of the Husband.
5. That upon the sale of the plant and equipment pursuant to order 3 and the transfer of the T property to the Husband then Husband and Wife do all things necessary and sign all documents to dissolve the joint partnership of Mr & Ms Eaton including but not limited to:
a. Nominating [X] Financial Services Pty Ltd to prepare all documents necessary to dissolve the partnership of Mr & Ms Eaton;
b. To provide to [X] Financial Services Pty Ltd all documents and accounts requested by them;
c. Sign any elections recommended by the partnership accountant to transfer any item of property to the Husband or Wife as specified in these orders including but not limited to plant and equipment, real property and motor vehicles at book value as opposed to market value;
d. Executing of all necessary documents as requested by [X] Financial Services Pty Ltd to finalise their partnership tax return.
6. Except as otherwise provided in this Order, the Husband and Wife are entitled to be the sole legal and beneficial owners of all items of property including money, motor vehicles, insurances, equities, superannuation entitlements and personal effects currently in the possession or control of each of them respectively including any liabilities attached thereto, as at the date hereof and indemnifies the other party against any responsibility.
7. Any further or other orders as this Honourable Court deems necessary.
8. That the Wife pay for the costs of and incidental to the Husband’s application for property settlement.
Quite simply, both of the parties agreed that there should be somewhere in the vicinity of an equal distribution of the matrimonial assets. The difference, as I say, related to what value should be attributed to the business operated by the parties prior to their separation, but in fact, also for some time after separation.
I will address the aspects and issues that arise in relation to that matter in due course. Initially however, it is important, particularly in light of the allegations of waste being significant in relation to the proceedings, that there be some specific comments be made in respect of the evidence called on behalf of both the husband and the wife. Additionally, there was evidence called from Mr R, a chartered accountant, who had attended to two valuations in relation to the business, [L] Excavator Hire.
Mr R in an earlier valuation, placed the value of the business as at 15 March 2006, at $651,000. Subsequently, he indicated in his second report, that the business had a value of approximately $580,000 and that was based on a calculation relating to the operation of the business, as at the end of the financial year, 30 June 2006.
In fact, a considerable amount of the argument in relation to this matter related to issues with regard to the value of the business and how if at all, it should be included in relation to the assessment. Mr R had valued the business based on future maintainable earnings. He confirmed that in evidence which was given in relation to the matter.
He further indicated that the drop in value, between the first valuation and the second valuation, was related to reduced profits and also consideration of changes in interest rates, which made a difference to the capitalisation rate, which was utilised for the purposes of the assessment of the value of the business.
It was noteworthy that in cross-examination, Mr R, when asked whether there was any indicators between the date of the first valuation and the date of the second valuation of the business running down, or more specifically, of one party or the other being responsible for the running down of the business, indicated that there was nothing evident in that respect.
He said specifically, that his valuation was based on the assumption that the business was still operating. What is significant in that regard of course, is that Mr R had utilised figures which were available to him at the time and had not made any reference to diminution in the value of the business, attributable to such factors as reduced performance or profitability of the business or factors of that nature.
He was asked what the value of the business would be, on the calculations that he had done for the financial year ended 2008. He said there was no valuation done, as there is no business that could be valued. It was simply a case therefore, of the partnership equipment and other assets of the business being included for the purposes of a calculation now. Mr R's assessment in relation to this matter was obviously of considerable assistance because it provided information as to the position with regard to the business at or about the time of separation, and subsequent separation.
Of course Mr R, quite properly, was unable to comment in relation to any value of the business at the current time, certainly based on future maintainable earnings, because of the fact that the business was, for whatever reason, no longer operating. The issue in that regard is one for determination of the Court. Particularly, in light of the considerations which must be looked at in respect of, what are commonly referred to as, wastage cases.
I also had the opportunity to hear evidence taken from a former employee of the husband and the wife, Mr H. I intend to come back to Mr H following comments to be made in relation to both the husband and the wife. In relation to the wife, I had obviously the opportunity of considering the material that had been filed on her behalf, as well as seeing her in cross-examination.
I must say the wife impressed me. I gained the distinct impression that she was an extremely competent and determined woman. She and the husband had, during the period of their relationship which had existed for more than 20 years and certainly a marriage of 19 years, had developed a business, [L] Excavator Hire, which was both profitable and successful.
Certainly, it had during the time of operation, grown to the extent that there were a number of persons who worked within the business and quite clearly, the reputation as to the quality of the work and the competency with which it was performed, had led to significant growth. The parties had different roles within the business and it appears, even at this time to be agreed, that they had each taken a different position in relation to how the business was to be operated.
In submissions, it was suggested to me and I accept, that the wife did the paperwork. Her area of expertise was in relation to the administration of the business, that she did the banking, prepared tax documentation, typed up tenders and quotations, and was involved in the operation and management of all of the clerical and office duties that were required to continue the proper and efficient operation of a profitable business.
It was submitted and again I accept, that the husband performed the operational side of the business. He attended to the maintenance and operation of equipment, he arranged for staff as and when necessary and arranged for the tendering process to be commenced. Though, of course, he provided rough documentation to the wife, which was then formed into the typewritten tender documents or quotations, which were utilised toward the operation of the business.
There was very much a differentiation of the roles to be performed by both the husband and the wife within the business and quite clearly the wife was extremely capable in the conduct of the aspects of the business, which were operated by her. I must say however, that I was troubled by some aspects of the wife's evidence, in relation to this matter. I gained the distinct impression that her position in relation to the matter was very much one, of her being in complete control of the business.
Quite obviously, she had been responsible and quite effectively, for the financial operation and other administrative aspects of the business.
I gained the impression however, that the wife was very controlling in relation to such matters and was even, I think, secretive in relation to provision of information to the husband. In that regard for example, it became obvious that the wife removed a very considerable amount of money, in excess of $200,000, from joint accounts, the moment it became clear to her, that the husband had achieved through internet banking practices, some semblance of knowledge as to the financial aspects of the business, and how it was operated.
In fact, even before separation, the wife had on one occasion removed in excess of $150,000 from joint funds, apparently to protect interests in relation to the business. When questioned about that, she was adamant she did it to protect the assets of the business and in particular, the cash which was held, because of concerns that the husband would be wantonly dissipating those assets or using them for purposes contrary to the best interests and the needs, of the business.
When challenged however, she was unable to point to any evidence in that regard. Even when given the opportunity to consider all of the bank documentation that was available in relation to the proceedings, the best that she could come up with, was a suggestion that the husband had, just prior to her removing funds from the bank, taken amounts of $1000, $1000 and $10,000, in or about August 2006.
What also was clear however, was that virtually on the same day that monies were apparently transferred and there was absolutely no evidence that they were the actions of the husband, but rather perhaps the actions of the wife, taxation liabilities and other payments which were required to be made, were made, which were in fact in excess of the $12,000 that the wife made reference to, as having been transferred allegedly by the husband.
I gained a far more direct impression in relation to what might have been the motivations in relation to this matter, when after the wife was given that opportunity to consider the drawings, which she says were excessive and inappropriate by the husband, the wife was unable to come up with anything, other than minimal drawings in the vicinity of a couple of hundred dollars on different occasions, for use towards purchase of groceries by the husband, payment of rent or the like.
When she was shown cheque butts in relation to the purchase by the husband of a 4WD motor vehicle, she gave that as an example and adopted it very quickly, as the husband's use of funds, for inappropriate measures. However, again she was unable to even accept that it was for the purposes of the operation of the business, and she herself had, on the next business activity statement, included such payments for the purchase of the vehicle as part and parcel of the operation of the business.
Interestingly, and I think most significantly, when asked whether she had done things without the husband's knowledge, she being very critical of the husband for that, said that she acknowledged that that had been the case, and that she had transferred funds, including very significant amounts, without the husband's knowledge. She acknowledged that she was the full financial controller and then with some determination, explained that she had had to protect the interest in the business, because as she put it, the husband had spent $8,000 or more on a ‘Variety Bash’ travel trip and that it had been used in particular as spending, when he was "with his mistress".
Again, the distinct impression that I gained, was that the actions taken in relation to this matter, and the difficulties that subsequently ensued in respect of the operation of the business and the relationship between the husband and the wife, related far more to the wife's hurt and dismay at the fact that the husband may have formed another relationship, and had travelled with other persons than her, than any real or proper suggestion that he had, in any way, utilised funds contrary to the interests and the proper operation, of the parties’ business.
Such findings are of course critical in relation to the determination of this matter, particularly as it was indicated by both counsel, that the issue of waste, and therefore the deterioration in value of the business, was a significant matter in relation to the proceedings. It was a recurring theme in relation to cross-examination.
Counsel for the husband understandably came back repeatedly, to what they considered the hypocritical approach of the wife, in relation to the matter. She gave direction to various organisations as to how and where payments should be made. In particular she on one occasion gave a direction to the [B] to pay monies, which had previously been received by the husband for works performed for the shire council, to an account referred to as the GST account, but, which was to all intents and purposes, an account operated solely by her.
She took the $209,000 she says for purposes entirely appropriate and to preserve such monies. But when it became clear that other monies, particularly those paid in relation to accounts delivered to [A], had been received by the husband, she demanded and he cooperated with return of virtually the entirety of such monies, for the use within the business.
The hypocrisy of course, arises from the fact that the husband may have utilised in some manner, some proportion of approximately $30,000 but refunded the vast bulk of it, for the purposes of the continued operation of the business. However, the wife had retained $209,000 and had utilised that for purposes, other than for the business. It may be as she says, that those monies were not primarily for the operation of the business. But it was also clear that they were used regularly, prior to her retaining them for her purposes, specifically for topping up the business account and for the general operation of the business.
The wife seemed to lack any appreciation of the fact that her actions were exactly the same, if not more significant, than those of the husband, in relation to removal of funds from the operation of the business and yet she appeared to wish and to be determined, to take the moral high ground, in relation to such issues.
I also thought that the wife failed to in any way appreciate the difficulties that arose, following the breakdown in the relationship. She alleged that the husband had approached the residence on an occasion after separation, though the husband did not acknowledge that that was the time of separation, in an intoxicated state and that she had had him removed, from the property. She then almost immediately obtained a domestic violence order, which included preclusions on him entering into the house property. How that could not in some way and perhaps significantly affect the operation of a jointly run business, is beyond comprehension.
The lack of appreciation of the difficulties placed upon the husband however, were clear, when the wife was specifically asked about issues in relation to the continued operation of the business and the fact that the shed, which was on the property, and which the husband still had access to, had no real facilities, for example, even with regard to toilet facilities.
Her response in relation to such issues was telling, in that when asked where the husband might go for the use of toilet facilities after the domestic violence order had been obtained, and he was therefore precluded from entering into the house, she responded that she did not know and had not really given any thought to the issue. It showed clearly the distinction between the wife's appreciation of this matter and perhaps the more realistic appreciation of the difficulties that arose, in relation to the operation of the business.
Counsel for husband specifically emphasised that deterioration in business, and in particular, the increasing difficulties in relation to operation. It was submitted and I accept, that since separation occurred in early 2005, there were hurdles put up in relation to the continued efficient operation of the business. The fact is, it continued to work to some degree, but clearly would have been frustrating for both the husband and the wife. The hurdles would have continued to grow and would have become more and more difficult to contend with, particularly, after the wife brought the domestic violence application.
There was no appreciation of course, of the considerable difficulties put in place with regard to the husband's operation of the business and the exchange of information between the parties, which was conducted through a cupboard in the shed. When the husband on occasions, worked away for significant periods of time, this arrangement failed to take into consideration the obvious need in relation to the operation of any business, of prompt communication.
It was an impossible situation. It led to deterioration of the business, and it led to no doubt, a degree of frustration on the part of the husband, which gave rise to a lack of application on his part, in relation to the continued operation of the business.
I must say that I also was troubled by the fact that the wife seemed to have little appreciation of the husband's need to continue to have some source of funds directly attributable to the operation of the business. He was no longer living within the home. He lived elsewhere and obviously therefore had the costs of accommodation associated with rental. He clearly had to have the opportunity to draw funds in relation to provision of groceries and household needs, which would arise from time to time. The wife's attitude and response in relation to that might be understandable, but it was also quite clear that the wife had taken a very harsh stance, in relation to this matter.
She took, on a basically dollar for dollar basis, equivalent amounts to those which were taken by the husband, notwithstanding the fact that she of course continued to remain in the former matrimonial home. The husband therefore drawing funds in relation to rental, was in a different position to that of the wife, who had the opportunity to continue to live within the home, and therefore not to pay expenses associated with rent.
The wife explained that there was a need on her part to provide for the children, and quite clearly that was an appropriate course to follow. But there was again, a distinction drawn between the wife's position, needs and requirements and the needs and requirements of the husband. I gained the distinct impression that the wife had taken a somewhat high-handed approach in relation to such matters, perhaps out of frustration, but without any real appreciation, of the changed circumstances that existed as between she and the husband and of course, the effect that those changed circumstances might have upon the husband.
The wife was clearly a competent and capable woman. She had worked outside of the operation of the business, but had continued to take on the administrative roles within the operation of the business. She was now in a position where she had employment, and was earning an income, in the role of an administrative officer, employed by [A]. She however, lacked an appreciation of how her actions may just as clearly, be responsible in some way for the deterioration of the operation and effectiveness of the business as may have been the actions, in some way, of the husband.
The wife was, quite clearly, suspicious of the husband. She indicated in cross-examination, that she had real concerns that the husband would in some manner re-enliven the business, after settlement had been effected.
She suggested that this had been brought to her attention by various persons within the L community, and in particular relied upon the husband's brother having recently registered a business name, using the surname "Eaton", that the husband may be involved in that. When asked who had told her this, she indicated that a business person had advised her, as well as two friends, but she was not prepared to divulge such information or sources of information to the husband or to the Court.
The suspicion that the wife had in relation to this matter, arose purely and simply from speculation. I gained the distinct impression, that the wife was in no way prepared to credit the husband with genuine motives, in relation to ceasing operation of the business, but rather took a suspicious and somewhat ungracious attitude to the operation of the business by the husband and of course, its deterioration.
The wife clearly was concerned at the deterioration in the value of the business and its effect upon her and by extension, upon the children. But as I have clearly indicated, I gained the distinct impression that she had similarly failed in any way, to appreciate the obvious difficulties and hurdles, which arose following separation, as to the continued operation of the business.
I also of course had the opportunity to see the husband in the witness box. Generally, I was impressed by the husband. I gained the distinct impression, that he had continued to operate the business to the best of his ability, but that there were concerns which arose following separation, and in particular, following his discovery some significant time later, that the wife had on different occasions, without any disclosure and certainly without any knowledge by him, withdrawn significant amounts from the business accounts and had failed in any way to provide him with information in relation to same.
The husband gave the impression that he was somewhat bemused at the suggestion that separation and the inherent difficulties, particularly following the obtaining of a domestic violence order by the wife, should not, at least in the wife's assessment, affect the operation of the business. The husband continued to attempt to operate the business though he must obviously have felt some degree of disinclination to continue working, with regard to the joint operation of the business, when the parties had separated. This was reflected in a lack of application and appreciation of the obligations of both parties, to continue to operate the business.
The husband, on a number of occasions during evidence, suggested that he had worked for 30 years "digging dirt" and that he was sick of doing that. Unfortunately of course, he did not have any other skills and therefore when he ceased to operate the business, there was really only one alternative open to him and that was to obtain similar types of work, though obviously no longer operating a business but rather working in an employed capacity.
He was asked whether there was any need for him to consider the fact, that he could earn a considerable amount more as the business proprietor, rather than simply an employee. He acknowledged that this was the case, but also noted that in the operation of the business, there were significant obligations that fell upon both he and a business partner, in this instance his wife, in relation to the outside operation of the business and that therefore, once expenses and other considerations of that nature were taken into account, there was little difference between what might be earned as an employee and what might be earned operating a business.
The husband acknowledged that the business had declined following 2006. It was strongly suggested to him that as a result of his receipt of the valuation prepared by Mr R in March 2006, that he had made determined efforts to see the business decline and in fact had made threats that he would run the business down. He was questioned particularly about that, and indicated that if there was a threat to run the business down, it was mis-interpretered.
He acknowledged that there were harsh words and heated exchanges between he and the wife in anger and that there may have been exchanges to the effect that the business would run down, and that he may even be less inclined to continue to operate the business. I gained the distinct impression however, that that was not the husband's intent in relation to this matter and that there was no deliberate run-down of the business.
He was asked particularly, about an exchange that apparently occurred in the presence of the legal representatives. The wife had taken his comments specifically to be a threat to run the business down. The husband indicated, and I accept, that what had been said by him was much more to the extent that the business could not continue to operate as efficiently as it had, when the parties were separate and apart and there were difficulties in their relationship and that with a lack of communication and a lack of trust, there was little opportunity for the business to continue to operate as effectively.
As I say, I was far more inclined to an interpretation along those lines than the suggestion made on the part of the wife that there was a direct intent to run the business down.
I note also that there was reference to a threat made in the form of a text message exchanged between the husband and the wife. Interestingly, the information allegedly contained within the text was not provided to me, nor in fact was there any production of evidence with regard to such a threat. As I say, I gained the impression that the wife was a most capable woman and I would have thought it incredible that if such a text were received it would not be available for presentation to the Court and retained on the part of the wife.
I am far more inclined therefore, to the position taken by the husband in relation to the matter, that when communications became more difficult, provision of finances became, not necessarily precluded but certainly more difficult as a result of the communications, that in the end he had come to the position that it was simply more convenient for him to stop operating as part of the business and to obtain employment for himself.
I was concerned about the effect upon the children, of the cessation of operation of the business. This arose in evidence specifically when it was put to the husband, that he had suggested to their son, that there would be the opportunity to work within the business. There were two concerns that arose in that regard. The first of course, was that there was no mention whatsoever in the wife's material of such a promise being made and secondly that therefore there was, an implied suggestion that the business would keep operating.
There were difficulties in communication. The parties may have had different expectations in relation to what the future might hold, but the one very clear consequence in this matter, is that the business operation would become more and more difficult, as the relationship between the husband and the wife deteriorated. The wife's suggestion that there was a continued capacity to operate the business and that there was a degree of communication between them, flies in the face of the evidence which was given. For example, the husband’s lack of any real appreciation of the financial operation of the business and just as clearly the wife's evidence that when there were difficulties with regard to the repair of one of the pieces of the plant and equipment, the Hitachi, it was not communicated to her.
The business was in decline. The business was in decline as a result of the circumstances that existed between the husband and the wife, but quite clearly in my assessment, it was not in decline as a result of a determined intent on the part of the husband. In that regard, I turn specifically to the evidence of the employee, Mr H whom I referred to previously.
I was enormously impressed with Mr H. He gave me the distinct impression that he was might what be referred to as a "salt of the earth" character. He spoke of his affection and relationship with both the husband and the wife. He did not draw distinctions between the husband because he worked on a day to day physical basis with him, and a lesser appreciation of the wife because she worked within the administration of the business.
He in fact in evidence confirmed that he loved working for both of the parties. He appreciated the work and the contribution made by both and appreciated the opportunities that he had, over a considerable number of years, in working with the husband and the wife. His evidence was absolutely honest and I accept it without a second's hesitation.
In that regard therefore, his evidence was critical in relation to this matter, because it was clearly suggested and continues to be suggested by the wife, that the husband, following March of 2006, made a determined, considered and inappropriate decision, to run the business down.
That flies in the face of the evidence given by Mr H. Mr H said that there was a decline in the business. Mr H confirmed that some of the employees moved on, but when asked whether the husband had said things which might indicate that there were difficulties in the operation of the business, he was adamant that that was not the case. He confirmed that the husband had indicated that the situation between he and the wife was rough, but when asked whether the husband might have said words to the effect of him (Mr H) getting another job, Mr H was adamant that in fact the husband was acting in an entirely different manner to that.
His response to that suggestion was that the husband had in fact said to him, that that was not the appropriate course to follow, and that Mr H should stick around. And as Mr H quoted, the husband said, "we'll work it out". He was then given another opportunity to clarify that and in cross-examination was asked whether the husband had ever said that things were not looking good. He was adamant again, that that was not the case. What the husband had said was that he should stick around and even though Mr H had had a number of other job offers since early in 2006, the husband had been adamant that things would get better, that he should remain and that they would work their way through.
Such statements made in the course of the operation of the business to a trusted and perhaps most important employee, were not the statements made by a man with an intent to run the business down.
Mr H, in fact, indicated that he only finally left the employment and took work as a supervisor at the [B] after November 2006, when his pay had not been paid in, at the appropriate time.
He acknowledged, of course, that he received his appropriate pay a little later but it perhaps became evident then that the operation of the business was in trouble and that there were difficulties. It was not specifically raised by either of the parties or their legal representatives, but the interesting fact that arises from that, is that the responsibility for the payment of pays was a matter within the control of the wife, not of the husband.
The loss, if it can be described that way, of the most significant employee of the business appears clearly to have been, therefore, as a result of that difficulty in relation to payment, rather than any action attributable to the husband.
Mr H was also asked about other communications and discussions with the husband, particularly in light of the concerns expressed by the wife, as to whether in fact the husband intended to re-enliven the business, once property settlement had been effected. He was asked whether the husband had ever suggested that he would open a new business and
Mr H was adamant, that in communications and discussions with the husband, that had not arisen.
Mr H, in fact, indicated that the husband had on occasions suggested that he come to Gladstone and that there was plenty of work there, particularly where the husband was working. Again, it was clear that the husband had not at any stage suggested that it would be a new business operated by him, but rather that there was plenty of work in the locality and that a competent operator, such as Mr H, would be able to obtain well remunerated pay within the area.
Following this series of questions, it was again asked whether the husband had mentioned that he might open a new business in the Gladstone area and Mr H was again adamant, that the husband had not suggested that that would be the case but rather that it was just a general statement as to the amount of work within the Gladstone area and that there was no suggestion that the husband would be looking to operate another business, organised by himself.
Mr H also confirmed, as did the husband, that whilst the husband had a good reputation as a plant and equipment operator in the L area, it appears that he did not have the business connections that went wider than that and that therefore, he would not be in a position to certainly walk into significant work outside of L. It was noteworthy, in particular, that the husband had given evidence that he had no wish or intent to return to the L area, because he considered that his character and reputation had been sullied, perhaps as a result of the breakdown in the relationship between he and the wife and that that needed to be considered.
It was clear that in the discussions between the husband and Mr H, there was a real intent on the part of the husband to move forward with his life and not to continue to operate a business or to be involved in a business, in the same locality.
I gained the distinct impression that Mr H' evidence, given clearly, honestly and openly was his own evidence, in no way influenced by considerations favourable to either the husband or the wife and that that evidence strongly supported the husband's position in relation to this matter. It was simply a situation of the business having deteriorated to an extent where its operation and the exchanges between he and the wife, were unpleasant and uncomfortable and that, therefore, there was a need for the husband to move on.
Just in relation to that issue also, I note that there was clearly some discussions between the husband and the wife with regard to the possible sale of the business. The wife says that the husband did not take steps to more widely circulate possibilities as to sale, other than to other operators within the L area. The husband, however, says that it was to be the task of the wife if the business was to be sold outside that area or to persons other than those who had been directly approached, to place the business on the market.
The wife appears to acknowledge that there were some discussions in that regard and that no-one took any steps in that respect. As is evident, both parties are now reaping the unfortunate consequences of the lack of more appropriate action taken by both, to effect the sale of the property.
I turn now, as I must, to a consideration of the issues of both the law and the application in relation to this matter.
As I said, there are two issues to be considered in relation to this matter. I need, obviously, to look at the law in respect of financial determinations between husband and wife and, in that regard, the relevant law is as follows. Section 79 of the Family Law Act defines the court’s powers in determining applications for property settlement. Subsection (2) of section 79 provides that:
“The court shall not make an order under this section unless it is satisfied that in all the circumstances, it is just and equitable to make the order”
Section 79(4) sets out the matters the court must take into account when considering what orders should be made for the alteration of the interest of the parties in property. Those matters include:
a) the financial and non-financial contributions made directly or indirectly by or on behalf of each party or by a child to the acquisition, conservation or improvement of any property of the parties;
b) the contribution made by a party to the welfare of the family including any contribution made in the capacity of home maker or parent;
c) the effect of any proposed order upon the earning capacity of either party;
d) the matters referred to in subsection 75(2) as far as they are relevant;
e) any other order made under the Family Law Act affecting a party to the marriage or a child of the marriage; and
f) any child support payable.
The approach to the determination of an application under section 79 is well established by authority (see, for example Pastrikos and Pastrikos; In the Marriage of Lee Steere and Lee Streere; In the Marriage of Ferraro; In the Marriage of Clauson and In the marriage of Whitely and Whitely) the process ordinarily involves a multiple part procedure.
The court must first identify the assets, liabilities and financial resources of the parties and attribute a value to all assets, usually at the time of the hearing. Thereafter it must evaluate the contributions made by each of the parties as defined in section 79(4)(a) to (c). Finally, the court must consider the financial resources, means and needs of the parties, and other matters set out in section 75(2) in so far as they are relevant. An adjustment of the amount due to each party by way of contribution is then made by reference to the section 75(2) factors. It is not essential, however, that such an adjustment be made. Generally speaking, an adjustment is made because one party has greater needs and the other has stronger means. Section 75(2) is concerned with the process of arriving at a just and equitable result.
In determining what order the court should make under section 79, the court must be satisfied, in all the circumstances of the case, that the order to be made is just and equitable – not simply that the underlying percentage division of the net value of the parties is appropriate. In other words, in consideration of whether the overall result of the order in the property settlement proceedings, is just and equitable [see section 79(2)]. It is the justice and equity of the actual orders that the court must consider Russell v Russell.
Section 75(2) of the Family Law Act sets out the matters which must be taken into account by the court when determining applications with respect to maintenance. This is the prospective element of the determination of the application for property settlement. The assessment of contributions during the marriage is the retrospective element.
In the Marriage of Ferraro (supra) the Full Court said:
“A now well established line of authority in this court indicates the new approach normally to be taken in the exercise of the discretion in section 79 proceedings. That approach is firstly to ascertain the property of the parties at the time of the hearing, then to consider ‘contributions’ of the parties within paragraphs (a) – (c) of section 79(4) and then consider the matters in paragraphs (d) – (g), more especially paragraph (e) which takes up by reference the provisions of section 75(2) which are generally referred to as the ‘Section 75 Factors’”.
There is, however, another issue that needs to be considered before one looks at the distribution of matrimonial assets. The reason that it needs to be considered first, is that it is an argument in relation to the possible wastage or improper expenditure of the matrimonial property, as the wife alleges, by the husband. If the wife is successful in that argument, then there would be a considerable change in the assets and, more specifically, significant alteration to any distribution.
Argument was put on the part of both the husband and the wife and I was referred, particularly, to the decision of his Honour, Baker J in Kowaliw and Kowaliw (1981) FLC 91-092, where his Honour specifically turned his mind to issues in relation to the position with regard to the possible wastage of matrimonial assets and, if found to be the case, responsibility in respect of same.
Baker J said, at page 76,644 of the decision in Kowaliw, the following:
As a statement of general principle, I am firmly of the view that financial losses incurred by parties, or either of them in the course of the marriage, whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally), except in the following circumstances:
(a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
In that particular case, his Honour examined, at length, the position with regard to the facts as they existed in relation to Kowaliw and, in fact, made a comment which I think is apposite in relation to these proceedings. He said:
I have no doubt that the husband's involvement in the company was an attempt by him, not only to produce income for the family but also to acquire assets of a business nature, with the whole object of improving the parties' overall financial position.
I would think that such comments are appropriate in relation to the husband in these proceedings.
More recently, Federal Magistrate Ryan, as she then was, in AB & GB (No. 2) 2005 FMCAfam 402 considered a number of previous decisions of the Full Court, including the more recent decision of the Full Court of the Family Court in NHC & RCH (2004) FLC 93-204 and drew additionally on the ex judicial writings of Justice Boland of the Appeal Court to distill a more comprehensive set of principles. Those principles were as follows:
(i)“The principles in Kowaliw is not a fixed code.
(ii)Kowaliw is a useful guideline for dealing with cases involving lost assets or income.
(iii)In cases involving waste there must be a proper reason for adopting a non Kowaliw approach.
(iv)If the losses occurred in the course of the pursuit of the objectives of the marriage then such losses should be shared by the parties although not necessarily equally.
(v)The economic consequences of waste must be dealt with in a just and equitable manner.
(vi)The economic consequences (loss) may be treated as a premature distribution of the asset pool and notionally added back as the asset of the party who had its sole benefit.
(vii)Taking the premature distribution into account in a general way pursuant to s.75(2)(o) and applying the cumulative outcome of the s.79(4) and s.75(2) findings to the smaller depleted asset pool may offend s.79(2) notions of justice and equity.
(viii)Where the asset pool had been seriously depleted it may be that only by giving the premature distribution is full dollar value that justice can be given.
(ix)The premature distribution concept is not restricted to post separation transactions.
(x)Where the monies have been shown to have been reasonably disposed of the notional add back approach should be the exception and not the rule.
(xi)Notional adjustments are not limited to wasted assets but may also include property that has been bona fide disposed of.
(xii)The source of the funds is relevant.
(xiii)Notionally included assets may include unascertained assets, even if the precise value is not known.
(xiv)Even if it does not involve waste, the economic consequences of a significant reduction in the asset pool must be considered”.
The set of principles outlined by Federal Magistrate Ryan, address comprehensively those matters which were raised by Justice Baker in Kowaliw (supra), over 20 years ago. In particular the fourth point detailed in AB & GB (No. 2) (supra) is worth further consideration. One of the factors to be considered is whether the losses occurred in the course of the pursuit of the objectives of the marriage. If it is found that such is the case, then such losses should be shared by the parties, though as Justice Baker indicated, it may not be on an equal basis.
As Federal Magistrate Ryan appropriately noted in the fourteenth point of the set of principles:
“Even if it does not involve waste, the economic consequences of a significant reduction in the asset pool must be considered”.
Each party has clearly sustained reduction in the position that they were in, prior to the relationship. It is unfortunate that that is the case, as the general experience of all persons before the Court and certainly of practitioners, is that the division of the “matrimonial pie”, no matter how big that might be, results in concerns expressed by parties to proceedings, as to whether they are or are not, receiving their proper entitlements. When the matrimonial pool is significantly reduced, be that as a result of the action of one party intentionally or because of an unfortunate set of circumstances leading to loss, the concern expressed by each party, as is obvious in this particular matter, is significantly increased.
I have no doubt, that the husband's involvement in the business, was an attempt to produce income and to provide for the needs of he, the wife and the children. There could be no suggestion that the husband had, in any way, acted in a way which was, as stated in general principles from Kowaliw (supra), a course of conduct designed to reduce or minimise the effective value, or worth, of the matrimonial assets.
What also needs to be looked at, however, is whether he had acted in a manner that was reckless, negligent or wanton with regard to the matrimonial assets, and that the overall effect of those actions, was to reduce or minimise their value. It is clear, however, that there needs to be a finding of some direct intent, on the part of the husband, with regard to the disposition of the assets, to the detriment of the parties.
The position taken by the wife is that the diminution in value of the matrimonial assets, specifically being the business, resulted because the actions were reckless, negligent or wanton. I am mindful however of the decision in Brigginshaw and Brigginshaw (1938) 60 CLR 333 at 362 where Justice Dixon said:
“The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters “reasonable satisfaction” should not be produced by inexact proofs, indefinite testimony, or indirect inferences.”
I struggle, on the evidence that is presented, to find that there is cogent evidence of reckless, negligent or wanton action, on behalf of the husband. Justice Carmody in D & D (2005) FAMCA 356 noted that when considering such an argument the following:
“…the more serious the allegation, the more cogent the evidence required to overcome the unlikelihood of what is alleged and thus to prove it.”
The onus in such a situation falls squarely upon the shoulders of the party alleging the waste. The obligation for proving same is significant and the obvious consequences of such a finding are so grave that significant evidence must be produced to satisfy the Court of such actions. I am not satisfied that that has occurred.
I have also considered the Full Court decision of Browne & Green (1999) FLC 92-873, where further consideration was given of the operation of businesses. In that particular case, there was an examination of the specific operation of the matrimonial business and, in fact, in the first instance, the Judge hearing the matter, had noted that there was a contention by the wife, that the business project had failed, at least in part, due to the husband's mismanagement and according to the submissions at trial, on her behalf, to the effect that the case came within the principles of the decision of Baker J, in Kowaliw & Kowaliw (supra).
The Full Court of the Family Court, specifically turned its mind to those issues in relation to the matter and, in paragraph 39 of the decision, said the following:
We would say, at the outset of our discussion of her Honour's assessment of the parties' contributions, that we agree with her conclusion that "contributions by a party do not necessarily have to produce a positive result for that party's contributions which fall within paragraph 79(4)(a) and (b) of the Family Law Act to be taken into account”. In other words, the result of the business enterprise, is not determinative of the consideration of weight to be given to contribution. There needs to be consideration of intent in relation to the proceedings.
I am mindful, again, of the statement of Baker J in Kowaliw & Kowaliw (supra) at pages 76,643 to 76, 644 which were quoted, with support, by the Full Court.
Marriage is, for most couples, an economic partnership. Married couples live together and work together with the ultimate object of purchasing a home, paying it off, acquiring other assets with the overall object of attaining a higher standard of living. The reported decisions in respect of applications for settlement of property under section 79 of the act, are unanimous that both parties should share the economic fruits of a marriage, having regard to the provisions of section 79(4) and section 75(2) although not necessarily equally.
Baker J then goes on to say:
Is not, however, the converse equally sustainable? In other words, should not financial losses incurred by parties to a marriage, or either of them, whether incurred jointly or severally, be shared by them in the same manner as the financial gains?
As a statement of general principle, I am firmly of the view that financial losses incurred by parties, or either of them, in the course of a marriage, whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances.
His Honour then went on to quote the circumstances to which I have already referred.
It is clear that there needs to be some consideration of the actions of the party, it not being a case, certainly in this instance, where the course of conduct was specifically designed to reduce or minimise the value of the matrimonial assets, but as to whether the actions were reckless, negligent or wanton.
As is obvious from the comments made in relation to the evidence, I am not satisfied, therefore, that it is a situation where there could be a finding that the actions of the husband have been wanton, reckless or negligent and accordingly I am not satisfied that he should bear, as was submitted by the wife, the whole of the responsibility in relation to the loss.
However, there is, if you like, another consideration. Obviously, the matter must be looked at in terms of the distribution of assets between husband and wife, and consideration must be followed through of the process of determining the assets of the parties, the contributions, both direct and indirect and financial, as well as to consider the factors detailed in section 75(2) of the Act.
As was stressed on a number of occasions, however, by both the Full Court and by Baker J in Kowaliw (supra), there is a consideration that arises in relation to the operation of the business which needs to be looked at, with regard to the sharing of responsibility. As Baker J said in his judgment:
Although not necessarily equally
I will deal with that particular aspect of the matter during the reasons to be given with regard to the assets of the parties.
The position then in relation to this matter is to firstly determine what are the assets of the parties. The parties agree as to the asset base other than what inclusion should be made with regard to the value of the business "[L] Excavator Hire" and or plant and equipment.
ASSETS
Property T $295,000.00
Property L $315,000.00
Campervan $6,000.00
Trail Bikes $2,500.00
1977 Harley Davidson GT520 $10,000.00
Sundry motorcycles $2,500.00
Boat $1,500.00
Furniture in husband’s possession $1,500.00
Furniture in wife’s possession $2,680.00
AMP shares (22) $1,896.30
2006 Toyota Trayback $50,000.00
Motor vehicle in wife’s possession $39,500.00
ANZ Access Advantage Account Ac.
No. [1] $7,231.60
Progress Saver Account No. [2] $15,649.38
Access Cheque Account No. [3] $1,399.65
ANZ Access Advantage Ac. [4]
as at 20.03.08 $784.41
ANZ Access Advantage Ac. [3]
as at 31.03.08 $277.64
ANZ V2 Plus Account No. [5]
as at 1 April 2008 $156,596.35
ANZ Premium Cash Management Ac. No.
[6] as at 3.03.08 $176.68
ANZ Business Classic Statement “GST”
[7] as at 5.03.08 $92.89
ANZ Term Deposit Ac. No. [8] $84,234.21
Subtotal $994,619.10
For the reasons that I have previously given, I intend to include the value of the business “[L] Excavator Hire” as the value of the plant and equipment of the business and therefore in the sum of $285,500.00.
[L] Excavator Hire – Plant & Equip $285,500.00
The value of the realisable assets therefore, is $1,280,019.10
SUPERANNUATION ASSETS
AMP Superannuation (Wife) $29,347.62
Q Super (Wife) $5,224.28
NPT (Wife) $73.68
HOSTPLUS Super (Wife) $1,016.92
AMP (Husband) as at 11 June 2008 $30,673.18
Sun Super (Husband) as at 11 Feb 2008 $2,760.92
Subtotal $69,096.60
TOTAL OF ALL ASSETS $1,349,115.70
LIABILITIES
Residential Investment Loan ANZ Bank Ac
No. [10] as at 14.03.08 $114,620.05
Esanda Car Loan $41,000.00
ANZ – Personal Loan (Motor vehicle) $30,000.00
TOTAL OF LIABILITIES $185,620.05
NET ASSETS TOTAL $1,163,495.65
The second step in relation to an assessment of entitlements in relation to property is an assessment of the contributions of the parties. In this case, each came into the relationship with limited assets. It may be that there was some small distinction which could be drawn as between what the husband brought in and what the wife brought in but over the effluxion of time it is clear that each contributed to the acquisition of the assets of the parties and that at the time of separation the contributions would have been equal but different.
In that regard, however, some other matters need to be looked at. There was assistance provided through the auspices of the husband's family to the acquisition of assets. The parties purchased a property in 1987 which was in part funded through a gift from the husband's parents. The parties also in 1987 purchased the excavator business from the husband's parents, in partnership with the husband's sister and brother-in-law, Mr and Mrs G, and it appears acknowledged that that purchase was at a somewhat reduced price, so as to enable the husband's parents to get out of the business and to enable the husband and his sister and their respective partners to continue the operation of the business.
That is a significant contribution which has come in, but as I say, with the effluxion of time, it seems to me that it was significantly eroded, such that in the end, the parties during the relationship contributed equally but in different means to the family, the operation of the business and the acquisition of assets. I would therefore assess the contribution of each party, both financially and non-financially at 50/50.
The third stage, of course, in relation to any assessment of what should be considered in relation to the distribution of property between parties is, after consideration of contribution, to look at what adjustments might be affected pursuant to the provisions of section 75(2) of the Family Law Act.
There are factors that weigh in favour of the wife. In the particular, the fact is that the parties have two children, [J] born in 1987 and [K], born in 1990. Both children are now over the age of 18 years but both also have had assistance provided by their parents, and it would appear, whilst living with the mother, had considerably greater assistance provided by her. I accept that the father had interaction and spent time with the children but just as clearly the mother took on the greater responsibility in relation to the children and, therefore, incurred greater obligations both financial and emotional in the rearing of the children. It is a factor which has some influence in relation to the matter. The wife also says and emphasises strongly in submissions made, that the husband's alcohol use, placed a greater obligation upon her in relation to the operation of the business but, of course, also a greater obligation and responsibility upon her in respect of being a homemaker and parent.
There was certainly conflicting evidence in that regard given by the husband. In his trial affidavit. he indicated that he would have a beer or two in the afternoon after work with his employees and acknowledged that that would be virtually each day after work. In cross-examination, the beer or two increased to six or eight Fourex Gold stubbies each afternoon and the evidence of Mr H was certainly to the effect that the husband would have, each afternoon, eight or more Fourex Gold stubbies each day. It is clear, therefore, that the husband had, at least to some extent, downplayed his alcohol use.
The wife says that alcohol affected the business but I must say that I struggle with that particular assessment in relation to the matter, in that the wife says that it was the normal practice of the husband every day to consume such alcohol and yet the figures which were produced in relation to the operation of the business showed that the work was being performed and that the husband was, obviously, contributing in that regard.
The wife, in her own evidence, indicated that on occasions the husband would work 50 or more hours but also somewhat ungraciously suggested that that was not necessarily always the case and that the husband was, on many occasions, able to devote himself to his own pastimes, including drinking and spending time at the hotel. I do not doubt that the husband consumed significant amounts of alcohol but I also do not doubt that the husband continued to contribute equally and appropriately, in relation to the operation of the business.
I do not in any way think that the husband's alcohol consumption, significant though it obviously was, in any way affected the operation of the business or was in any way responsible for the deterioration and decline in the business, subsequent to separation. I am far more inclined to the view that the husband was, as was submitted by counsel appearing for the husband, a man who worked hard and, therefore, developed a practice following work to consume alcohol with his workmates.
I do not, however, assess that there could or should be an adjustment in relation to the wife's contribution either as a homemaker or parent or in the joint operation of the business as a result of such matters.
It was not a case, I would think, of the wife's homemaking contributions being more difficult than would normally have been the case but rather simply a delineation of the contribution that each made, in different respects. The wife through homemaking, parenting and administration of the business; the husband through the more physical activities associated with the operation of the business.
There is also another factor that was emphasised in relation to this matter and which does need to be considered in light of the issue of waste. As is perhaps obvious from the comments that I have already made, I am not at all enamoured of the suggestion that the husband had, to use the terminology outlined by Baker J in Kowaliw, embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets or had acted recklessly, negligently or wantonly with matrimonial assets.
But the husband had foolishly not taken any steps in relation to the rectification work necessary in relation to the operation of the Hitachi excavator and, therefore, as a result of that had certainly given rise to a situation where, even what was referred to in the business as "dry hire", was not able to be utilised, in relation to the Hitachi excavator. The husband gave evidence that in “dry hire”, the equipment could have returned somewhere between $1500 and $2000 per week.
Just as clearly, counsel for the husband insisted that there was no evidence as to what might have been the actual return because, of course, whilst the equipment could be rented out on an hourly basis it might, on some occasions, be not utilised at all and therefore return no income and on other occasions on a “dry hire” basis, for significant periods and therefore return significant sums.
Counsel for the husband, therefore, stressed that it was impossible to calculate what might or might not have been received through the “dry hire” of the Hitachi equipment. I accept that there is that inherent difficulty in relation to the matter, but the husband's own evidence was that dry hire was, in relation to some pieces of equipment, already producing some sources of funds for him at this time and that if a further small amount was spent, in relation to the repairs necessary for the Hitachi excavator, then additional monies would have been able to be received.
I am certainly satisfied that there has been a reduction in what might have been available to the household pool if the work had been done and if the necessary communication had occurred. What that leads me to consider is whether there needs to be or should appropriately be any division other than the equal division which arises as a result of the consideration of contributions.
In this matter, I am of the view that factors I have already commented upon, in particular, the wife's responsibility in relation to the children and the failure by the husband to appreciate that a small amount of work by him and a small outlay which could have and should have been effected, would have resulted in income being brought into the household means that a further adjustment in favour of the wife is necessary. In the end, I am satisfied that there should be, when one considers the matters set out in section 75(2) of the Family Law Act, an adjustment in favour of the wife and that the appropriate adjustment is five per cent.
Upon that basis, I therefore consider that the distribution that should be effected between the parties on the assets is a 55/45 distribution, in favour of the wife. That would result in the wife receiving $639,922.60 and the husband receiving $523,573.05 of the net assets.
I turn also, as I must, to the final step in relation to property distribution which is to the effect of whether it is, in all the circumstances, just and equitable. There are concerns in relation to this matter. Both parties, however, also are able to move on with their life. Both have current employment or capacity for current employment. Both have the opportunity to move forward, once a distribution of assets has been effected between them.
The husband, perhaps, does have a greater capacity to earn than the wife and when one looks at a distribution of 55/45 as between the husband and the wife of the assets as determined by me, it is in all the circumstances, a just and equitable distribution and one that enables each party to move forward with their life from here.
Accordingly the orders that I intend to make in relation to this matter are as follows:
I certify that the preceding one hundred and twenty-nine (129) paragraphs are a true copy of the reasons for judgment of Coker FM
Associate: C Herbst
Date: 29 August 2008
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