EATON & EATON
[2012] FMCAfam 9
•17 January 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| EATON & EATON | [2012] FMCAfam 9 |
| CHILD SUPPORT – Application for departure order – no special circumstances identified – departure not just and equitable. FAMILY LAW – Property adjustment – valuation of minority shareholding – assessment of contributions. |
| Family Law Act 1975, ss.75(2), 79(4) Child Support (Assessment) Act 1989, ss.116(1)(b)(i) and (ii), 117(2)(c) |
| In the Marriage of Lee Steere and Lee Steere (1985) FLC 91-626 Norbis and Norbis (1986) 161 CLR 513 Gyselman (1992) FLC 92-279 In the Marriage of Ferraro (1993) FLC 92-335 Kessey v Kessey (1994) 18 Fam LR 149 In the Marriage of Clauson (1995) FLC 92-595 Georgeson and Georgeson (1995) FLC 92-618 Harrison v Harrison (1996) FLC ¶92-682 Ramsay and Ramsay (1997) FLC ¶92-742 Russell v Russell (1999) FLC 92-877 AJW v JMW (2002) FLC ¶93-103 AB and ZB [2002] Fam CA 1178 In the Marriage of Hickey (2003) 30 Fam LR 355 C v C (2005) FLC 13-220 Yates & Allen [2008] FamCAFC 190 Rickwood & Rickwood [2009] FamCA 264 Sanford v Wever [2010] FamCA 87 IABH & HRBH [2010] FamCA 110 |
| Applicant: | MS EATON |
| Respondent: | MR EATON |
| File Number: | BRC 5228 of 2009 |
| Judgment of: | Jarrett FM |
| Hearing dates: | 28, 29 October, 2010; 3, 4 February 2011 |
| Date of Last Submission: | 20 May 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 17 January 2012 |
REPRESENTATION
| Counsel for the Applicant: | Ms Anderson |
| Solicitors for the Applicant: | Hopgood Ganim Lawyers |
| Counsel for the Respondent: | Mr Forest (on 28, 29 October, 2010) Mr Laurie (on 3, 4 February, 2011) |
| Solicitors for the Respondent: | Walker Lawyers |
ORDERS
The wife retain as her absolute property and the husband transfer to the wife all right, title and interest in and to the following property and financial resources:
(a)Property M in the State of Queensland registered in the name of [Ms Eaton], more particularly described as Lot [omitted] (the Property M);
(b)Her superannuation interest in [A];
(c)Her superannuation interest with [Q];
(d)The furniture and chattels in her possession save for the items referred to in 5(n)
The wife do all acts and things to transfer to the husband, the property situate at Property O in the State of Queensland registered in the name of [Ms Eaton], more particularly described as Lot [omitted] (the Property O).
Contemporaneously with the transfer of the Property O property, the husband and wife shall do all acts and things and sign all documents necessary for the husband to discharge, or refinance into his sole name, the mortgage to the Bank of Queensland registered over the Property O and any liability alleged to be owing to the Mr G Eaton Trust, so as to release the wife from all liability in relation thereto, and pending that release, the husband indemnify and keep indemnified the wife in respect of same.
Contemporaneously with the transfer of the Property O, the wife relinquish all right, claim and interest to all and any rental income received or received after that date from any source in relation to the Property O property, excluding arrears of rental income accrued to that date but receive subsequently, which shall remain the property of the wife.
The husband have sole right, title and interest in and to the following property and financial resources:
(a)His shareholding in [P2] Company Pty Ltd;
(b)His shareholding in [P1] Company Pty Ltd;
(c)His shareholding in [Eaton] Nominees Pty Ltd;
(d)His shareholding in [H] Pty Ltd;
(e)His shareholdings in Westpac Banking Corporation;
(f)any other shares held by him;
(g)1993 Mazda Utility motor vehicle registration number [omitted];
(h)2006 Honda motor vehicle registration number [omitted];
(i)AXA policy;
(j)His Superannuation interest with [A] Superannuation;
(k)The furniture in his possession and:
I.Cedar dining table and five chairs;
II.4 dining chairs;
III.Walnut clock;
IV.Silky oak glory box and seat lid;
V.Filing cabinet and papers;
VI.“d” cupboard;
VII.Tools;
VIII.Some clothes belonging to the husband;
IX.Timber shelving;
X.BBQ; and
XI.A piano stool
With such items to be made available by the wife for the husband’s collection contemporaneously with and conditional upon the cash payment referred to in order 7 hereof.
The husband and wife sign all documents and do all acts necessary to do the following with respect to [Eaton] Nominees Pty Ltd:
(a)That the wife transfer, assign and novate to the husband or to his nominee any loan account in the name of the wife (whether solely or jointly with others) standing with a credit balance in the books of account of [Eaton] Nominees Pty Ltd and to give effect to same the wife deliver or cause to be delivered to the solicitors for the husband Contemporaneously with the transfer of the Property O an executed Deed of Assignment relating to the transfer and assignment of the said loan accounts;
(b)That the husband forthwith be responsible for and meet payment when due of any loan accounts in the name of the wife (whether solely or jointly with others) standing with a debit balance in the books of account of [Eaton] Nominees Pty Ltd and the husband indemnify and keep indemnified the wife from all liability howsoever arising therein;
(c)That the husband forthwith be responsible for and meet payment when due, of any loan in the name of the husband (whether solely or jointly with others) standing with a debit balance in the books of account of [Eaton] Nominees Pty Ltd and the husband indemnify and keep indemnified the wife from all liability howsoever arising therein;
(d)The wife relinquish all claim to the assets and income of [Eaton] Nominees Pty Ltd.
The husband pay to the wife the sum of $368,700.
The payment refereed in order 7 be paid within thirty (30) days of the date of these orders and contemporaneously with the transfer of the Property O in paragraph 2 and failing payment, interest accrue at the rate prescribed in the Federal Magistrates Courts Rules 2001.
The husband cause [Eaton] Nominees Pty Ltd to do all acts and sign all documents necessary to release caveat number [omitted] registered over the Property M within fourteen (14) days of the date of these orders.
Except as otherwise provided in these orders, the wife shall be responsible for any credit card or personal liability in the wife’s name and indemnify the husband in respect of same, including the Bank of Queensland line of credit secured against the Property M.
Except as otherwise provided in these orders, the husband shall be responsible for any credit card or personal liability in the husband’s name and indemnify the wife in respect of same, including, but not limited to:
(a)The loan, if any, owing by the parties to Ms H;
(b)Any loans owing to [Eaton] Nominees Pty Ltd including any loans allegedly owing by the wife to [Eaton] Nominees Pty Ltd whether in her sole name or jointly with the husband or any other person;
(c)The loan form [L];
(d)Any costs paid in respect of preparation of the family report by Ms D;
(e)Any child support agency arrears.
Each party do and procure the doing of all things and sign and procure the signing of all documents whether in their personal capacity or in their capacity as director, shareholder or other office holder necessary to give full force and effect to the provision of these orders and in default, a Deputy Registrar of this Court is appointed to sign such documents and do such acts necessary in lieu of the defaulting party whether in their personal capacity of in their capacity as director, shareholder or other office holder.
The transferee spouse prepare the documentation necessary to give effect to the provision of these orders at their cost and further be responsible for the payment of registration fees in relation to the transfer of the property to the name.
Any duty levied pursuant to Duties Act 2001 (QLD) payable on transactions arising from these orders or any document executed pursuant to these orders be paid by the transferee spouse of the spouse receiving the benefit of same.
The parties promptly comply with the requirement of the Duties act and associated legislation and all requisitions issued by the Office of State Revenue in relation to any document executed or transaction pursuant to or putting into effect the terms and conditions of this order.
The husbands’ application for a child support departure order be dismissed.
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 BRISBANE |
BRC 5228 of 2009
| MS EATON |
Applicant
And
| MR EATON |
Respondent
REASONS FOR JUDGMENT
This is an application for property adjustment and child support departure orders.
Ms Eaton and Mr Eaton commenced their relationship as early as November 1979. They married in November, 1981. They have four children presently aged 24, 22, 18 and 16. They finally separated in August, 2008.
Thus, their relationship had a total duration of approximately 29 years and their marriage a duration of some 27 years.
The parties cannot agree on how their property ought to be divided between them now that their marriage relationship has come to an end. The issues largely concern the valuation of Mr Eaton’s share holding in a private company, whether some amounts spent by the parties following separation should be credited to them in these proceedings and the weight to be prescribed to their various contributions to the conservation, acquisition and improvement of their property up to the point of trial. The parties cannot agree upon any adjustment to their contribution based entitlements to take account of future matters.
Ms Eaton argues that she ought to receive 70% of the net property pool contended for by her and Mr Eaton 30%. Mr Eaton’s contentions mirror those of Ms Eaton. He argues that he ought receive 70% of the parties’ assets and Ms Eaton 30%. In addition, Mr Eaton seeks certain child support departure orders.
When these proceedings were commenced, they also included claims for parenting orders under Part 7 of the Family Law Act1975. Those proceedings have been resolved between the parties.
The Law - Property
The law in relation to property adjustment is relatively settled insofar as married couples are concerned. The approach to the determination of an application under s.79 of the Act is well established by authorities such as In the Marriage of Lee Steere and Lee Steere (1985) FLC 91-626; In the Marriage of Ferraro (1993) FLC 92-335; In the Marriage of Clauson (1995) FLC 92-595; In the Marriage of Hickey (2003) 30 Fam LR 355 and C v C (2005) Fam LR 414. Generally speaking there are four stages to the proper consideration of an application for property adjustment.
Firstly, I must identify the property, liabilities, and financial resources of the parties at the time of the hearing. Secondly, I must evaluate the parties’ contributions as defined by s.79(4) of the Act with particular reference to those matters listed in s.79(4)(a), (b) and (c). Thirdly, I must evaluate the matters to which my attention is directed by s.79(4)(d) to s.79(4)(g), and in particular, s.75(2) of the Act insofar as any of those matters are relevant. Finally, I must be satisfied in all the circumstances that it is just and equitable to make the order that I propose to make. It is the justice and equity of the actual orders proposed to be made that I must consider: Russell v Russell (1999) FLC 92-877.
The preferred approach is to deal with the superannuation assets and the non-superannuation assets separately and to apply the four step process set out above to each class of assets. Neither party suggested in this case, however, that it was appropriate to treat the superannuation and non-superannuation assets separately. Both parties were content for the Court to approach the matter on the basis that there was one pool of assets which included both superannuation and non-superannuation assets.
The Assets and Liabilities
Each party delivered two sets of extensive written submissions for which, in the main, I am grateful. However, a comparison of the submissions reveals that there is little commonality between the parties as to agreement and disagreement on the asset and liabilities to be brought to account. Whilst there is agreement about some of the assets, one party perceives a dispute in respect of some assets and their values, while the other perceives no dispute.
Be that as it may, I find that the assets and liabilities available for distribution between the parties are as follows:
| Assets: | ||
| Property M | $585,000.00 | |
| Property O | $670,000.00 | |
| Husband's share portfolio | $114,952.00 | |
| Husband's [P2] Company Shares Pty Ltd | $782,364.80 | |
| Husband's [P1]Company Pty Ltd shares | $3,000.00 | |
| Husband's [H] Pty Ltd shares | $19,200.00 | |
| Husband's Mazda Utility | $1,500.00 | |
| Honda Odessy | $22,100.00 | |
| AXA policy (H) | $11,438.00 | |
| H's rental bond | $1,800.00 | |
| Wife's furniture chattels and jewellery | $7,000.00 | |
| Husband's furniture, chattels and jewellery | $8,000.00 | $2,226,354.80 |
| Less: | BoQ Line of Credit (W) | $347,565.00 |
| BoQ Line of Credit (W) | $28,412.00 | |
| Debts to [Eaton] Nominees Pty Ltd as trustee for The Mr G Eaton Family Trust | $292,610.00 | |
| Loan from Ms H | $10,000.00 | |
| [L] loan | $17,774.00 | $696,361.00 |
| Superannuation: | [A] Superannuation (H) | $181,746.00 |
| [A] Superannuation (W) | $13,241.00 | |
| [Q] Superannuation (W) | $7,203.00 | $202,190.00 |
| Net Assets including Superannuation | $1,732,183.80 | |
Save for the matters the subject of comment below, the assets, liabilities and their values that appear in the above table are agreed. In respect of the issues concerning the identification and valuation of those matters not agreed, I make the following observations and findings.
The shares in [P2] Company
Mr Eaton owns shares in [P2] Company Pty. Ltd. That company carries on a business. The business currently operated by the company commenced in 1948. Those business activities were transferred to it upon its incorporation in 1954. Three families, one of which was the Eaton family, had interests in the company at its inception. Each of the three families maintains their interests in [P2] Company.
The company’s business activities [omitted]. The company’s business operates from a single location in Brisbane and employs approximately 10 staff, including Mr Eaton as manager. Ms Eaton has worked for the company in the past.
The issued share capital of [P2] Company comprises 7403 ordinary $2 shares. Mr Eaton holds 3392 ordinary shares representing 45.82% of the overall shareholding whilst [Eaton] Nominees Pty Ltd as trustee for the Mr G Eaton Family Trust holds 100 ordinary shares representing 1.35% of the share holding (a combined holding of 47.17%). There are nine other shareholders spread generally between three other family groups, although Mr Eaton’s mother, Ms H, holds some shares as well.
[P2] Company has three permanent directors, two of whom have no filial relationship with the Eaton family. They each represent their family’s interests. The current directors are descendants of the original directors of the company, as provided for in the company’s Articles of Association.
The company’s structure and the rights of its members are tightly regulated by its Articles of Association. The Articles make particular provision about the governance of the company and transfer of its shares in terms that are different to the provisions found in model articles of association. In particular:
a)Articles 37.1, 37.2 and 37.3 provide for certain restrictions on the sale or transfer of shares;
b)Article 38 provides that the directors can refuse to register a share transfer without reason;
c)Article 76(b) provides for a “cap” on voting rights on a poll;
d)Article 85 provides for the suspension of the operation of the Articles pertaining to the appointment of company directors and appointment of permanent directors;
e)Article 88 prescribes the minimum shareholding for a director as 601 shares;
f)Article 99(a) requires all board resolutions to be unanimous; and
g)Article 111 prescribes that shareholders cannot resolve the payment of a dividend in a greater amount than that unanimously proposed by the directors.
Given the level of his shareholding (either in his own right or together with the [Eaton] Nominees’ shareholding), it is clear that Mr Eaton cannot exercise legal control over other shareholders or the other directors. At a poll Mr Eaton’s shares hold 21% of the voting rights and by adding the holding of [Eaton] Nominees, would total 25.38%. Neither Mr Eaton’s holding in his own right nor when combined with [Eaton] Nominees’ shares result in his securing sufficient votes (50%) to be able to pass an ordinary resolution.
There is no suggestion in the evidence that Mr Eaton is likely to become a majority shareholder in [P2] Company or to in some way gain control of the board of directors. It is suggested that he has the ability to influence other shareholders or the other directors because he is not simply a member and director of the company – he is also the general manager. However, I accept Mr Eaton’s evidence that whilst from time to time the directors have acted upon his advice, at other times they have not. In her submissions, Ms Eaton speculates about the level of authority and control exerted by Mr Eaton over the other directors and members of the company, but in my view, there is no evidence to support her speculation.
I am satisfied that Mr Eaton does not have a controlling shareholding in the company. I am not satisfied that he exerts any particular control over the other directors of the company or the other members of the company. Whilst he is the largest shareholder, his shareholding is insufficient to, of itself, permit him to control [P2] Company.
The task is to ascribe a value to Mr Eaton’s shareholding in [P2] Company (and the shareholding of [Eaton] Nominees in [P2] Company). That involves valuing the assets of [P2] Company, including the business that it undertakes. There is a significant dispute between the parties as to the value to be ascribed to the shares.
I am assisted in the valuation exercise by evidence from Mr M, Chartered Accountant, called by Ms Eaton, and Mr P, Chartered Accountant, called by Mr Eaton. The experts have made a joint statement concerning the value to be ascribed to the shares. Two issues arise from that joint statement, one relatively minor and the other significant. Otherwise, the experts are in agreement, including agreement as to the method to be used to calculate the basic, or face value of the shares.
The minor area of disagreement is really no disagreement at all. The experts agree on the net assets of the company save for the value of the company’s real estate holdings. In that respect they each agree that the valuation of those assets is a matter for others with expertise in that regard. The only expert evidence before me as to the value of the real property held by [P2] Company is contained in the affidavit of Mr S filed on 12 April, 2010. Mr S, whose evidence was not the subject of challenge, valued that real property at $1,672,500.
I accept Mr S’s evidence and find that the net assets of [P2] Company at the date of trial were $2,626,905. Given that there are 7,403 issued shares in [P2] Company, each share has a value of $354.84. It was not suggested that any of the issued shares had different values by reason of any restriction upon or other characteristics of those shares.
Accordingly, and at face value, Mr Eaton’s shareholding in [P2] Company has a value of $1,203,617.28 and the shareholding of [Eaton] Nominees is worth $35,484.00.
The significant dispute between the parties and their respective experts is about the “discount” that should be applied to the value of the shares to account for Mr Eaton’s minority shareholding. Both experts, however, recognise that the appropriateness and level of any “discount” is a matter to be determined by the Court.
The object of the valuation exercise is to determine the value of the shares to Mr Eaton: Harrison v Harrison (1996) FLC ¶92-682 at 83,087; AJW v JMW (2002) FLC ¶93-103 at [14].
In Ramsay and Ramsay (1997) FLC ¶92-742, Warnick J had to grapple with a similar problem. In that case, his Honour said, at 83,999:
I proffer the following observations:
(a) a question to be answered in each case, and as to which expert evidence may be admissible, is whether there is a market for the shareholding;
(b) if there is a market, evidence of the market value is highly likely to be relevant, even if there is no intention to sell;
(c) it is however, unhelpful for valuations to focus on the lack of a market in establishing a value to the shareholder. Any allowance for lack of realisable value is best made by the Court, in all the circumstances of the case, particularly the presence or absence of other assets which are disposable;
(d) in cases where there are no realisable assets, the lack of market value of the shareholding will usually be critical, not only to the ‘division’ of property, but perhaps even more so, to the orders made;
(e) if, on the facts of the case, there is any prospect of the minority shareholding party gaining control of the company, the question of the probabilities of that event is likely a question for the Court. If that is so, all that the valuers ought be concerned with is the value to the party if he/she gains control, as well of course as the value if the party remains a minority shareholder;
(f) similarly, if there is any issue about them, questions of the probabilities of particular benefits being received by a shareholding party in the future, are likely best left to the Court, but again valuers ought assess the value of the shareholding, both on the basis that the benefit is received and that it is not.
If these observations have validity they will not remove the necessity for accountancy evidence in these cases, but they ought greatly reduce the contention, and therefore the time and costs involved in the receipt of such evidence.
Other authorities make it clear that the first step in the valuation process in a case where minority interests in a company are to be valued is to decide upon a valuation methodology. There is no fixed rule as to the proper methodology to be adopted although in some circumstances a particular methodology may be preferable. In Georgeson and Georgeson (1995) FLC 92-618 at 82-218 the Full Court emphasised:
There is no fixed rule as to the proper method of valuation of shares in Family Court proceedings although in some circumstances a particular methodology may be preferable; see Mallet v. Mallet (1984) FLC ¶91-507; (1984) 156 CLR 605. Expert evidence may be adduced as to the proper method to be adopted, in the circumstances of a particular case, to assist the Court in forming an independent judgment on the issue of valuation by the application of the appropriate principles. Whilst an expert may thus suggest an approach as being appropriate in a particular case, before accepting it, the Court must come to its own conclusions as to whether that approach is appropriate in the circumstances.
A net asset valuation approach may be found to be appropriate. Where a net asset valuation approach is undertaken, the Court must fix upon a discount factor, if any, to take account of the minority nature of the shareholding and all that entails. This is the approach adopted by
Mr M in this case. He suggests a range of discount from 10 – 30% on the net asset based value of the shares.
Mr P approached the matter somewhat differently. He relied upon some historical sales of shares in the company and concluded that a value of $187.00 per share was appropriate. He cross checked his value against the discount his valuation represented on the face value of the shares. That reflected a 52.06% discount (stated in the expert’s joint statement as 47.91%), on the net asset based value of the shares (using the real property value adopted by Mr P) which he decided was acceptable. Cross examination revealed that Mr P operated under a misconception as to the meaning of some of the Articles of Association and the effect those Articles had on shareholder’s rights (specifically Article 85(c)), but he denied that his misunderstanding had any real impact upon his opinion.
There is no direct evidence before me about a market for these shares, although both experts have proceeded on the basis that if there is a market, it is extremely limited. Both experts gave evidence of the three most recent share sales in [P2] Company’s history which took place on 14 June 2005, 23 March 2007 and 23 November 2009. Each sale was to an existing shareholder. The earlier two sales were at $75.00 per share and each sale was to Mr Eaton. The last sale was made at $187.00 per share. In that case, a parcel of 280 shares was offered for sale but only 183 were sold. The selling shareholder retained, and at the date of trial continued to retain, the unsold balance of 97 shares.
Having regard to that evidence I am not satisfied that there is a market for the shares in the sense described by Warnick J in Ramsay (above). Evidence of past sales is only of interest to the extent that it establishes that there really is no market for the shares beyond existing shareholders. In my view the appropriate methodology is to fix a price per share according to the net assets of the company and to determine if the result should be the subject of a discount to take account of the nature of the shareholding. I have set out my findings about the net asset value of the company above. I have set out the price of each share, based upon that value, and without any discount, above.
Mr Eaton argues that Mr P's valuation should be accepted because:
a)Mr P determined that the Husband could sell his shares in very limited circumstances only, that the market (if any) from time to time was unduly restricted having regard to the restricted category of third parties entitled to acquire the shares and the directors overriding power to decline to consent to the transfer of the shares;
b)Mr P considered the range of values of the [P2] Company shares to be between $75 and $187 a share, giving a range of the value to the Husband's parcel between $254,400 and $634,304 Mr P adopted the value of $187 a share giving a total share parcel value of $634,304 whilst acknowledging that the price may reflect the payment of a premium by the Buyer so as to achieve the minimum share holding required for appointment as a director. There is no evidence as to the Buyer's state of mind in this regard.
c)Mr P determined the share value at $187 per share and that a discount of about 46% of the equitable value of the shares was reasonable having regard to the restrictive provisions the articles impose and from his knowledge of discounts in a range of 15% to 40% in companies with similar but not as restrictive circumstances.
The circumstances in which Mr Eaton’s [P2] Company shares might be sold are limited. It is not the case however, that they can only be sold to other shareholders, or other members of the relevant family groups. Clearly, however, the Articles of the company are designed to ensure that every possible opportunity is available to ensure that the members of the company are restricted to family members, or those who are approved by the board.
Moreover, Mr Eaton’s parcel of shares is not a controlling shareholding, although they could be added to another shareholding to increase a shareholder’s voting power. However, even if a shareholder obtains a majority shareholding, the maximum number of votes on a poll is limited to 96 - the number ascertained according to Article 76(b). Any shareholding beyond 25% of the company’s shares does not carry any voting rights. Although a controlling interest might be possible, given the current shareholding in the company, that seems unlikely.
Originally in his report Mr M suggested that an appropriate discount might range between 0% and 30%. However, by the time of the joint statement of experts was prepared he had revised his opinion so that he thought that an appropriate discount rate was between 10% and 30%, to take account of the restrictive nature of the company’s articles of association.
Cross-examination revealed that underpinning Mr M’s assessment of a discount factor is the notion that Mr Eaton might well be able to influence the other directors and shareholders to cease trading and to realise the asset value of the shares. He said:
“ …Because we say the way to maximize the ability to get - or to maximize the value, is for the company to in effect cease trading. It’s not - it doesn't earn sufficient income to warrant its return on the investment that it has. It would be better off to stop trading. It’s got more valuable assets and it’s not getting the return on those assets. So it’s not the ability for that particular shareholder to control the company then to influence the direction of it in that way. It’s a matter of what ability do they have. And what you generally see is the discount range varies depending on the amount of control, or effective control, that the shareholder has. "
Mr M explained that if Mr Eaton decided to resign his position and propose to the shareholders that the assets of the company be sold, the shareholders would be in a better position if they accepted that proposal because they would receive 100% of the value of their shares. However, if the shareholders were to sell their shares to someone else they would only receive 45-50% of the actual net tangible value of the assets.
As I found above, I am not satisfied that Mr Eaton controls or influences heavily the decisions made by the board of the company. Whilst Mr Eaton is the general manager and has performed some of the financial accounting functions for the company, there is no evidence that the other directors follow his suggestions without demur.
Ms Eaton submits that it is open to the court to find that the shareholders of [P2] Company would make commercial decisions about the sale of the assets of the company and the potential return on investment if winding up were proposed by Mr Eaton. However, I decline to make that finding mostly because, if that were the case, why hasn’t it already happened? This is a business and a company that has been in existence for more than 60 years. Whilst all good things must come to an end (as the saying goes), there is no evidence that any of the people involved with this company as a director or a shareholder have ever contemplated liquidating the company. Whilst the economic rationalists might see the continued operation of the company as an inefficient use of capital, the fact seems to be that the company is not insolvent nor trading whilst insolvent. The task of the court is to deal with the facts as they are, not as one of the parties would like them to be.
In my view, the factors which impact upon the discount to be applied to the asset derived value of the shares are:
a)that Mr Eaton does not hold a controlling number of shares, either directly or indirectly;
b)that Mr Eaton’s single or combined shareholding on an ordinary vote or poll does not provide him with authority to pass an ordinary resolution of the company, or authority to pass a special resolution;
c)that Mr Eaton has no authority or power to overrule any decisions of the directors (of which he is but one of three) relating to share transfers, dividend declarations or any other matters;
d)the company is controlled by its three permanent directors who cannot be removed by an ordinary vote of shareholders. Even a special resolution comprising 75% or more of the shares of members present or by proxy cannot remove the permanent directors;
e)the board of directors cooperate in the making of resolutions, the company being run for the benefit of the three families and their descendants; and
f)that no dividends have been declared by the company for the past three years at least and have only been declared infrequently prior to that.
I conclude that the higher end of the range of discount contended for by Mr M is too little. It does not properly reflect the factors set out above. Nor do I think that the figure arrived at by Mr P is sound. I think that his opinion was influenced by the misunderstanding that he operated under concerning Article 85(c). His view, essentially, was that control of the company was vested in the directors and all shareholders rights were in abeyance whilst soever the permanent directors remained in office. That view was clearly erroneous.
In my view an appropriate discount to reflect the matters discussed above is 35% of the asset based value of the shares. That means that Mr Eaton’s shares should be seen as having a value of $230.65 per share – a total asset value of $782,364.80. I find accordingly.
The parties’ alleged debt to [Eaton] Nominees
The next significant issue is what amount, if any is owing by the parties to The Mr G Eaton Family Trust.
First some background. [Eaton] Nominees Pty. Ltd. is the trustee of The Mr G Eaton Family Trust. Mr Eaton is one of two directors and two shareholders in that company. He controls the shareholding by having 4 shares. The other director is Mr N. The other shareholder is Ms H, who holds one share.
The trust is a discretionary trust established by Mr Eaton’s father,
Mr G Eaton. The classes of beneficiary are defined by reference to
Mr G Eaton and include both Mr and Ms Eaton.
Mr Eaton controls the trust and its activities on a day to day basis. The evidence reveals, I am satisfied, that he can draw upon the Trust’s resources to assist him and his family when needed. Historically that is what has occurred and that is the source of the disagreement between the parties in respect of this issue.
Ms Eaton does not contend that the Trust is the alter ego of Mr Eaton, nor that he can use the Trust for his own purposes to the exclusion of the rest of the family. Historically the Trust has provided benefits (either by way of advances, capital or income distributions) to other members of the wider Eaton family.
Ms Eaton does not cavil with the proposition that from time to time the Trust advanced she and Mr Eaton funds and they advanced the Trust funds. The kernel of this particular dispute is whether the amount of Ms Eaton’s recorded liability to the Trust should be adjusted by $405,139.00, being money allegedly advanced by the Trust to her to assist her to purchase the property at Property M.
In November, 2004 Ms Eaton signed a contract for the purchase of the Property M property for $425,000. She paid a deposit of $20,000. Her evidence in cross-examination was that she had no clear understanding of where the balance of the purchase price was sourced. That is not surprising given her evidence that Mr Eaton told her that he would organise it, that he looked after the family finances and she generally did not question his judgment about such matters. I accept her evidence about those matters.
I accept Mr Eaton’s evidence that the purchase price of the property was supplied to Ms Eaton from funds held by [Eaton] Nominees Pty. Ltd. as trustee for the Eaton Family Trust. The issue is whether the funds so provided were funds (or at least partly funds) to which the parties were otherwise entitled or whether they were advanced as a loan.
The net worth of the Eaton Family Trust was assessed by Mr H for
Mr Eaton and Mr M for Ms Eaton. I have before me a joint statement by those experts. Subject to the value of the shares in [P2] Company held by [Eaton] Nominees being fixed (as I have now done), the experts agree on the net worth of the Trust. Included in their statement of net worth is a recitation of the amounts owing by the Trust to Mr and Ms Eaton and the amounts owing by them to the Trust. The particulars are:
Amounts owed to the Trust:
Ms Eaton (for Property O) $48,615.00
Ms Eaton (for Property M) $405,139.00
Ms Eaton (for interest on Property O) $21,834.00
Mr Eaton (for shares) $129,660.00 $605,248.00
Amounts owed by the Trust:
Mr Eaton (for Property O) $8,907.00
Mr & Ms Eaton (for Property S) $240,000.00
Ms Eaton $63,731.00 $312,638.00
Net amount owing to Trust $292,610.00
In my view, the written submissions for Mr Eaton accurately summarise the evidence about the accounts of the Trust:
69. The wife and her material and in her response set out on the statement of assets, liability and financial resources and in the considerable cross examination on the issue by her counsel of the Husband, appears to challenge the existence or veracity of the loan for $405,139 from the trust to purchase the Property M property.
…
71. It is apparent from the evidence from the husband, particularly in re-examination that the beneficiary loan accounts (be they loans from or to the trust) are recorded separately for each beneficiary according to the purpose of the loan or advance. The position is analogous to a standard banking institution which may lend money to purchase a home, accept money from a customer into a term deposit, accept money from a customer into a savings and/cheque account, lend money on a line of credit to operate a business and lend money to purchase a motor vehicle. Whilst in reality a single amount is either owing to or from the bank by the customer the individual accounts are kept separate in the records of the bank and different terms and conditions (such as interest) applied to each separately.
72. In the present case the trust recorded monies being deposited by the wife, by the husband, in various amounts. These transactions resulted in a crediting of accounts kept in the names of the wife and the husband respectively. These were accounting entries, the husband's evidence being that the Trustee had a single bank account.
73. The trust then used the funds which had been deposited into it (much in the way a bank uses monies deposited to it by its customers) as a source of funds to lend $405,139 to the wife. A cheque in about that sum was generated, payable to the vendor of the Property M property and a corresponding entry was made to the records of the trust reflecting that loan (Court Ex 25).
74. The wife's position appeared to be that because monies had been deposited into the trust and the $405,139 then withdrawn, in reality the trust had only lent the balance to her not the whole $405,139. While such position has a simplistic attraction, it overlooks the fact that whilst $405,139 is recorded as a loan, the corresponding deposits referred to by the wife are also recorded as credits to the benefit of the wife and the husband. They are only relevant in determining the net amount owing by or to the Trust.
Whilst Mrs Eaton disputes the existence of a loan from the Trust to the extent claimed she gives no evidence as to the possible alternative source of the funds required to pay for the Property M property. Indeed, Mr M, Ms Eaton’s own expert has examined the trust financial accounts and records and reported on the net loan position. No challenge was raised to the accounts by Mr M (for Ms Eaton) by suggesting that any deposits that preceded the drawing of the funds for the Property M property had not been properly or accurately accounted for in the loan accounts of the Trust.
I accept the amounts owing between the Trust and Mr Eaton and
Ms Eaton as set out by the experts in their joint statement. The balance of accounts indicates that the parties owe [Eaton] Nominees $292,610.00.
Mr Eaton’s share portfolio
Mr Eaton has a share portfolio. He submits that that the value of the share portfolio is $30,709.00. His previous financial statement filed in these proceedings on 13 October, 2009 disclosed a share portfolio worth $137,052.00. The liability recorded in the books of the Trust of $129,660 for Mr Eaton relates to the purchase of these shares.
Mr Eaton gave evidence that he had sold many of the shares reducing the value to $30,709.00 and applied the funds to pay bills such as rent, school fees, expenses for he and the wife and child support. There is no particularity as to how much was applied to his child support debt and how much was applied to other matters. Ms Eaton argues that he has not properly explained or accounted for either the shares or their proceeds of sale, if they have in fact been sold. She argues that the shares should be included in the pool and to the extent that the shares, or their proceeds no longer exist, they should be included on a notional basis.
In Rickwood & Rickwood [2009] FamCA 264, Murphy J summarised the law in relation to so called “add-backs” as follows:
27. The Court has a discretion, by virtue of the s 79 process, to add back moneys spent, or the value of property disposed of, by parties to a dispute. The exercise of that discretion is, however, governed by the principles of justice and equity. The general rule, enunciated by Baker J in In The Marriage of Kowaliw (1981) FLC 90-092 at 76, 643 - 76, 644, is that financial losses incurred by the parties throughout the course of a marriage, whether jointly or otherwise, should be shared by them, though not necessarily equally.
28. Adding back is the exception, not the rule; the general principle being that the Court takes the property of the parties as it stands at the date of trial. (see C & C (1998) FamCA 143 at para. 46).
29. The exception arises where a party, or both, has, by a “…deliberate act or by economic recklessness reduced the value of assets available for distribution” (see Kowaliw at 76,645). Baker J held:
“…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:
(a) where one of the parties has embarked upon a course of conduct designed to mise 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.” (Kowaliw at 76 – 644).
30. The Full Court in AJO v GRO (2005) FLC 93-218 accepted Baker J’s analysis, and, in addition (and relevant to the case at hand), noted that the Court’s discretion to add back necessarily extends to instances where there has been a premature, though not always ‘wanton or negligent’, distribution of marital assets.
31. However, the Full Court went on to reject the notion that “…the mere fact that a party has expended money realised from the disposition of assets that existed as at the date of separation, will result in that expenditure being added back…” as being “…unduly simplistic” (at 79-619). Indeed an analysis and assessment of the reasonableness of any such expenditure is crucial in making findings with respect to adding back.
Ms Eaton has demonstrated that the capital fund represented by the share portfolio existed at the time of separation. So much is not in dispute. The fund has since been significantly reduced and the reduction is not well explained by Mr Eaton. The only evidence in
Mr Eaton’s affidavits is that he purchased a car for $22,100 for
Ms Eaton using those funds and that car is included in the agreed pool of assets. He said in cross-examination that he spent the rest of the funds on other bills, living expenses and child support.In my view, there is an evidential onus on he who asserts a fact to prove it to the requisite standard. In a case involving post separation expenditure, the there is an onus on the person expending the funds to explain that expenditure: IABH & HRBH [2010] FamCA 110 at [115].
Save for the purchase of the vehicle (which is otherwise in the pool) I am not satisfied on the evidence that the expenditure of the funds liberated by the shares sold by Mr Eaton was reasonable. Some of the expenditure may have been reasonable – such as the payment of school fees, but I am unable to tease out those reasonable payments for the others. To the extent that the sum is not otherwise represented in the asset pool it was, in my view a premature distribution of property to
Mr Eaton which he used, at least in part, to discharge expenses for which he was solely responsible, and in particular child support. I accept Ms Eaton’s submissions that it would be inappropriate for the Court not to include the amount claimed as this would result in
Ms Eaton bearing some of the costs of child support payments made by the husband to her for which he was solely responsible.Save for the amount spent on the vehicle, I have included the value of the shares as claimed by Mrs Eaton.
Ms Eaton’s shares held in trust
Ms Eaton holds 913 shares in BHP and 1,907 shares in QANTAS. She says that those shares are held by her upon trust for the parties’ children. She describes her holdings in her Financial Statement filed on 21 October, 2010 at Part O. She describes her holdings as “Ms Eaton ATF [Z] and [Y]” and “Ms Eaton ATF [X] and [W]”. I assume the letters ATF stand for “as trustee for”.
In Mr Eaton’s affidavit filed on 15 October, 2010 he suggests that the relevant shares were purchased in Ms Eaton’s name “with the interests of our children… noted”. That, of course, begs the question as to the nature of the interest “noted”. I infer that the interest was a beneficial interest in the shares as Ms Eaton contends.
Mr Eaton argues that some of the children are now over 18 and yet the shares remain in Ms Eaton’s name. But there is nothing remarkable about that. Adults are often the beneficiaries of trusts. No doubt as trustee of the shares she was entitled to receive the income from the shares and to deal with them by selling them as Mr Eaton suggests. None of those matters are inconsistent with the existence of a trust as alleged by Ms Eaton.
In the circumstances I conclude that the shares are held upon a bare trust by Ms Eaton for the children in accordance with the authorities and principles set out in Principles of the Law of Trusts, Ford and Lee, loose-leaf edition, Law Book Company at [8085]. I have not included the shares in the property pool.
The Child Support Debt
Mr Eaton argues that an amount that has accrued as a child support debt owed by him to either Ms Eaton or the Commonwealth (it is not clear which) ought to be included in the assets and liabilities for division between the parties in this case. I disagree.
The child support debt ($30,863.00 as at September, 2010 and $38,651.87 as at 21 February, 2011) is a debt owed by Mr Eaton to
Ms Eaton, or perhaps the Commonwealth. It is not, as Mr Eaton submits in his written submissions in reply, a “liability [that] represents monies that will be applied for the benefit of the children which is a joint obligation of the parties”. It is a liability owed by Mr Eaton pursuant to the provisions of the Child Support (Assessment) Act 1989 and the Child Support (Registration and Collection) Act 1988. Part of the sum includes penalties and interest owed to the Commonwealth.
In my view it is inappropriate to include it in the property pool as a liability.
Legal Costs and Ms Eaton’s line of credit
Since separation and without reference to Mr Eaton, Ms Eaton raised a line of credit with the Bank of Queensland secured over the Property M property. The limit on the line of credit is $120,000 and by the time of trial the line of credit was almost fully drawn.
Ms Eaton’s evidence was that $89,600 of that was spent on legal costs. The balance of about $30,000 was spent by her on living expenses and costs for the children.
In addition to the amount used from the line of credit, Ms Eaton also borrowed $50,248.00 from her brother which sum has been fully applied to legal costs.
Neither the line of credit to the extent of the payment of legal expenses nor the loan from Ms Eaton’s should be brought to account in these proceedings. They are post separation loans raised by her to fund her legal expenses. I do not propose to include them as liabilities or the amounts raised by those loans as assets.
To the extent that the line of credit has been used to fund Ms Eaton’s living expenses, I shall include the liability in accordance with the principles set out above. Given her lack of regular income since separation, I am satisfied that her expenditure as claimed was reasonable.
Mr Eaton has also incurred legal costs. The evidence reveals that he has paid about $120,000 and he has funded that expenditure from his income, advances on his credit cards and a loan from his sister. The amount should not be included as an “add-back” as contended by
Ms Eaton.
Miscellaneous debts of the wife
Ms Eaton claims that I should include as liabilities for these proceedings miscellaneous debts incurred by her which appear to be unpaid living expenses. They are set out in her Financial Statement filed on 21 October, 2010 although there is no evidence about that expenditure beyond the bare claims in that document. Mr Eaton raises concerns about health care funds rebates and the like that might apply to some of the expenditure. In the circumstances I am not prepared to take these amounts into account.
Sale of Ms Eaton’s shares
Ms Eaton feels justifiably aggrieved that in September, 2008 and after separation Mr Eaton sold shares standing in her name, without her consent and without any reference to her. She claims that the shares were sold recklessly and incurred a significant loss of $46,317.04. She asks that the sum of $46,317.04 be added back to the pool.
I decline to make that order, however. Mr Eaton gave evidence that the sales were conducted upon the advice of his share broker and that the sale proceeds were credited against money owed by Ms Eaton for the purchase of the shares. I am not satisfied on the scant evidence before me that the actions of Mr Eaton were reckless, even if they were morally reprehensible.
Bank Accounts
I have excluded the arties’ bank accounts from consideration because neither have anything beyond a nominal value as at the date of the trial.
Credit cards
Both parties argue that their credit card balances should be included as liabilities in the asset pool. Ms Eaton, however, does not agree that
Mr Eaton’s credit card balances should be included. Ms Eaton’s liability is $10,334, which appears to have been accumulated post separation. Mr Eaton’s credit card liabilities total $11,349. There is about $1,000 difference in the respective liabilities of the parties. In the circumstances, given that they have accrued post separation and there is little evidence to explain the expenditure, I do not intend to include them in the liabilities to be taken into account.
Unexplained loan advance to Mr Eaton
In what can be described as a throw away line in Ms Eaton’s written submissions, she asks that the “Loan to the Trust in the name of
Mr Eaton (drawn down and unaccounted for of some $90,000)” be added back to the pool of assets and credited to Mr Eaton. It is difficult to understand to what it is that this claim relates.
In his report about the value of the Mr G Eaton Family Trust Mr M notes that in “the period to 31 March, 2010” Mr Eaton was repaid the sum of $90,000 from the Trust. Details of the expenditure of that sum appear in Appendix F to Mr M’s report. Ms Eaton argues:
96. The wife says that the money spent by the husband from the Loan and the sale of shares was extravagant and should be added back to the pool. The onus is on the husband to explain the uses to which he put this money. His financial statement indicates that his expenditure is more than he says that he earned while married or now.
It seems to me that the explanation for the relevant expenditure is set out in Appendix F to Mr M’s report. In the absence of anything further, it is difficult to see why I should characterise that expenditure as “extravagant”. I see no basis to add it back to the pool.
Contributions – a preliminary matter: One pool or two?
Mr Eaton argued that I should adopt a “two pools “ approach when undertaking at least the second and third steps of the four step process set out above. He argued that was in conformity with the preferred approach set out by the Full Court in C v C (2005) FLC 13-220.
In C v C, the Full Court adopted a two pools approach on the basis that the superannuation interest in that case was a distinctly different type of property to the tangible assets and constituted a significant proportion of the overall property pool. The Court observed that the interest could not be liquidated to provide a fund to purchase a house and, inter alia, could not be used as security to raise capital.
Mr Eaton argues that his shares in [P2] Company (and those held by [Eaton] Nominees) have similar characteristics – so much so that the “two pools” approach should be adopted and the [P2] Company shares placed in one pool and all other property (including the parties’ superannuation) in another pool.
To justify that approach, Mr Eaton points out that there is little or no market for the shares. They may only be sold pursuant to the process set out in the company's Articles of Association (adopted unchanged from 1954), namely the setting of the price by the owner, offering them to the existing shareholders pari passu; if no offer for all the shares is made then a proposed sale to a third party at not less than the originally nominated share value; and finally (and relevantly) the unanimous approval of the Board which constitutes three permanent directors, who cannot be removed by shareholders. Further, he points out that on any view of the value of the shares they constitute a very significant proportion of the overall asset pool. Finally he points out that the circumstances concerning the acquisition of the [P2] Company shares are also markedly different as they came about substantially as a contribution from his family whereas the remaining tangible assets and liabilities were accumulated during the course of the marriage.
However, C v C was concerned with superannuation interests following the amendments to the Family Law Act in 2001 in respect of superannuation interests. As Warnick J pointed out in his judgment in that case:
115. There seems in the view of the majority to be a concern that treatment of superannuation interests as property introduces an undesirable rigidity into s 79 proceedings. If this is the view of the majority, I disagree with it. It has always been the case that the court was required to acknowledge and reflect tensions between market value, value to the owner and lack of marketability of particular types of property and interests, such as minority shares in a private corporation and, of particular pertinence when considering superannuation interests, property such as annuities. The terms of s 79 have proved adequate for that task, whether use is made of an "asset by asset", "two pools" approach, or ''global'' approach.
Those remarks have particular resonance in the instant case. I think the reliance by Mr Eaton upon C v C is misplaced. In truth his submission must be that I should adopt and asset by asset type approach in respect of the [P2] Company share on the one hand, and all other assets on the other, an approach which is entirely permissible: Norbis and Norbis (1986) 161 CLR 513.
That such an approach is available, however, does not mean that it is desirable. In this case the parties’ relationship and marriage was of considerable length. Their contributions to the conservation, acquisition and improvement of the property found by me are such that no particular asset should be quarantined, as it were, in a separate pool. For the reasons set out below, I do not accept Mr Eaton’s submissions that neither he nor Ms Eaton made any contributions to the [P2] Company shares. In my view they both did. To treat that asset in a separate “pool” as contended for by Mr Eaton runs the risk that the contributions made by the parties to it, in the context of their relationship, and the significance of the asset as part of the overall assets of the parties might be marginalised.
Section 79(4)(a) – 79(4)(c)
The parties’ initial direct financial contributions were minor and, I am satisfied, equal. Neither party had any assets of any significance.
Mr Eaton did not have any shares in [P2] Company at that time, although he no doubt bought with him the potential to acquire those shares as a member of the Eaton family. He also bought with him the potential to receive benefits via the Mr G Eaton Family Trust as a member of a class of beneficiaries under that trust. Upon marriage,
Ms Eaton qualified as a member of a class of beneficiaries under the Trust.I accept that each of the parties worked hard in their respective capacities. For the most part Mr Eaton’s primary role was that of income earner and Ms Eaton’s role was that of homemaker and parent. That is not to say that they carried out those roles to the exclusion of the other – their roles overlapped from time to time. Prior to the birth of the children Ms Eaton worked full-time and then reverted to part-time or casual work after the children were born. Mr Eaton assisted with homemaking and child rearing responsibilities. After the birth of the children Ms Eaton worked for several years for Mr Eaton at [P2] Company. I accept her evidence that some of her work at [P2] Company was unpaid.
Following separation the parties continued in their respective roles – Mr Eaton earning income and Ms Eaton caring for the (now much older) children. However, I accept Ms Eaton evidence that since separation her life has become more difficult because of the way in which Mr Eaton has controlled the family finances. On both cases,
Mr Eaton was always in day to day control of the parties’ financial affairs. He argues that he kept Ms Eaton fully informed of the decision that he was making and how various transactions were funded from time to time. However, I approach his evidence with some circumspection. He is a person clearly attuned to detail and particularity, but I formed the impression from his evidence that he did not freely share the detail of his financial activities with Ms Eaton. Indeed, his conduct since separation in relation to the shares owned by Ms Eaton shows that to be so.Mr Eaton points to the assistance given by the Trust to he and
Ms Eaton over the years and says that they are contributions brought to the relationship by him. He says that the contributions are significant and on his argument, even leaving aside the shares in [P2] Company (which on his argument should be dealt with separately), contributions ought to be assessed in his favour 75% and 25% to Ms Eaton. But I disagree.It is clear that when the parties purchased their first parcel of land in Property S, they were able to do so with the assistance of funds from the Trust. But the money received from the Trust was a loan, which was repaid in one way or another. When that land was subdivided and the Trust purchased one subdivided block, it never paid for it. The money remained with the Trust, for its use and does so to this day according to the accounts of the Trust. Whilst the Trust built a home on the land it purchased from the parties at Property S, the parties rented that home back from the Trust at commercial rates, in that way ensuring that their resources stayed within the broader family arrangements. No doubt that rent contributed to the income the Trust was able to distribute. Later, when the Property O property was purchased it too was purchased with financial accommodation from the Trust, but at commercial rates. The only financial accommodation that does not seem to have been provided at commercial rates was the funds used to purchase the Property M property. Why that was so is not clear from the evidence. To that extent then it might be said that the provision of that funding, interest free was a benefit to the parties, although offset somewhat by the failure of the Trust to pay interest on the purchase price of the Property S block.
Mr Eaton points to the income and capital distributions received by him, Ms Eaton and their children over the years of their relationship and says that they are contributions that ought to be brought to account on his side of the ledger. He argues that those contributions came from the Trust and he introduced the Trust to the relationship.
The income distributions over the period 1981 – 2009 total:
Mr Eaton $64,101
Ms Eaton $314,814
Children $99,275
Total $478,190
The capital distributions over the same period can be summarised as:
Mr Eaton $303,011
($196,435 of which was received post separation)Ms Eaton $31,576
In my view there are some difficulties with Mr Eaton’s argument. Upon marriage, Ms Eaton qualified in her own right as a member of one of the classes of beneficiary to whom the Trustee might make distributions of capital and income (see paragraph 8.1.3 of Mr M’s report annexure “BM-1” to the affidavit of Mr M filed on 14 September, 2010). Thus, as at the time of marriage at least, each had the same expectancy under the Trust and the same expectancy as any of the others who fell within the classes of beneficiary set out in the Trust Deed. The income and capital distributions over the years were not all made to Mr Eaton. Some (the majority of income distributions) were made to Mrs E.
In Kessey v Kessey (1994) 18 Fam LR 149 the Full Court set out the principles concerning how gifts received by parties in the course a relationship ought to be treated for s.79(4) purposes. At 161 the Full Court said:
There is certainly nothing inconsistent, in our view, between the trial judge's approach and the statements of principle made by Fogarty J in Gosper. 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.
(my emphasis)
That principle has been applied in cases that do not involve gifts from parents to children, but other relationships such as sibling relationships: Yates & Allen [2008] FamCAFC 190; and close personal friends of a party: Sanford v Wever [2010] FamCA 87.
In the present case, the distributions of income and capital are no more than gifts decided upon by the Trustee pursuant to the terms of the Trust and have been made to both Mr and Ms Eaton. The distributions to Mr Eaton should be seen as contributions by him and the distributions to Ms Eaton should be seen as contributions by her. No question of an intention on the part of those controlling the trust to only benefit or distribute to Mr Eaton arises because Ms Eaton had her own accounts with the Trust and on Mr Eaton’s case the distributions were made to her.
Accordingly, far from the Trust income and capital distributions being contributions by only Mr Eaton, they are in fact contributions by both. Ms Eaton’s income contributions far outweigh those of Mr Eaton’s by nearly 5:1. Mr Eaton’s capital distributions outweigh those of
Ms Eaton, but less so if the post separation distribution of $196,435 is disregarded.Over the course of this marriage and until her passing, Mr Eaton’s step-mother, Ms B paid the children’s school fees. Mr Eaton says that is a contribution made on his behalf that should be bought to account.
Ms Eaton says that it is not and relies upon observations of Mullane J in AB and ZB [2002] Fam CA 1178 where his Honour said:274. The wife’s parents assisted the parties by minding the children frequently when the wife was working in the office of Macquarie Groupware. But this has not been taken into account under subsec 79(4) as a contribution on behalf of the wife or both parties. The reason is that whereas paragraphs (a) and (b) of the subsection, which deal with contributions to property, specifically include contributions by a person on behalf of one of the parties to the marriage, paragraph (c), which is about contributions to the welfare of members of the family, does not.
275. There was no evidence that if the assistance had not been provided, the parties would have paid to obtain such services from someone else, rather than managed without such assistance or relied upon other grandparents, relatives or friends to provide it free. There was no evidence that the care provided made any contribution to the finances of the parties and in that way the facts are different to those in cases such as Pellegrino v Pellegrino (1997) FLC ~92-789, where the waiver of rent by the wife’s parents was considered to be a contribution to the property of the parties on behalf of the wife, as has the waiver of loan interest by the wife’s parents in this case.
276. Counsel for the wife relied upon the decision of Lindenmayer J in Rickaby and Rickaby (1995) FLC 92-642. At page 82,488 his Honour held:
'The parties lived rent free with the wife's parents from the marriage in 1971 until they moved into their North Haven property in 1978, a period of about 7 years. In the circumstances of this case, I regard that as a significant contribution to the welfare of the family on behalf of the wife: see Gasper and Gasper (1987) FLC 91-818."
277. But in neither Gasper's case nor in Rickaby did the judgment acknowledge the difference in the wording I have referred to between paragraph 79(4)(c) of the Family Law Act in providing for contributions to the welfare of the family, compared with the provisions of paragraphs 79(4)(a) and (b), providing for contributions to property. Accordingly, I do not consider that either case is persuasive authority that contributions to the welfare of the family made by another person on behalf of one or both of the parties to the marriage can be taken into account under paragraph 79(4)(c).
I accept Ms Eaton’s submissions that had Ms B not paid the school fees for the parties’ children they would not have attended the schools that they did. Mr Eaton says at paragraph 101 of his affidavit filed on 15 October, 2010 that the parties could not have paid for their children to attend a private school for their education (without accessing their personal capital reserves) without the gift from his step mother.
I accept Ms Eaton’s submission that I should disregard the payment of school fees for the parties’ children as a contribution by Mr Eaton.
Over the course of the parties’ relationship, and commencing in 1984, Mr Eaton acquired his shares in [P2] Company. Initially he did so, I accept, by using funds borrowed from the Trust. He financed the purchase of tranches of shares in 1984 and 1993 using funds borrowed from the Trust and from his mother, Ms H. Further loans from the trust were used to finance share purchases in 2003, 2005 and 2007. He also used loans from Ms B to finance share purchases.
The loans from Ms B were never repaid. On her death the loans were forgiven and some other gifts were made to Mr Eaton. I accept that those forgiven loans and the other gifts made to Mr Eaton (excluding the school fees) should be seen as a contribution by him that should be accounted for in these proceedings.
Those contributions are important because in large measure they enabled Mr Eaton to purchase the shares that he now holds in [P2] Company, which shares represent one of the more significant assets of the parties. I am satisfied that were it not for those forgiven loans and gifts the shares (or at least some of them) would not be available to the parties now. Given the value of the asset represented by the shares, it is a significant contribution.
However, Mr Eaton submits that neither he nor Ms Eaton contributed to the acquisition, conservation or improvement of shares in [P2] Company. For the reasons given above, I reject this submission.
Further, I accept Ms Eaton submissions that schedule 2 to Mr Eaton’s written submissions (which I accept accurately reflects the evidence) sets out the sources of funds for purchasing the shares. The outstanding balance of loans owed by him (excluding those forgiven by Ms B) appears to be $91,577.00. Given that these loans have not been forgiven, and they appear to be loans from the Trust, the net balance of which is brought to account in these proceedings, it seems to me that both Mr Eaton and Ms Eaton have contributed to the purchase of those shares to that extent. Mr Eaton argues that the financial accommodation provided by the Trust to assist in the purchase of these shares should be seen as a contribution by him. I agree, but given that the net loan balance to the Trust is taken up in these proceedings, they should only be seen as such to the extent of any interest savings compared to borrowing the funds on the open market. There is no evidence about that.
Further, Mr Eaton argues that prior to her death Ms B forgave a loan (that she had accumulated in various ways) owed by the Trust to her in the sum of about $400,000. Mr Eaton argues that the forgiveness of that loan to the Trust should be seen as a contribution made on his behalf to the conservation, acquisition and improvement of the parties’ property because it “permitted the retention of the (about) $400,000 loan monies for the Property O property by the wife”. However, I reject that submission because the evidence does not establish as much. I accept that the loan was forgiven and that the Trust benefitted from that, but it is difficult to understand, in the absence of clear evidence as to the option available to the parties, how that forgiveness contributed to the conservation, acquisition and improvement of the parties’ property.
Section 79(4)(a) – 79(4)(c) – conclusions
Were it not for the contributions made on Mr Eaton’s behalf by the financial accommodation from Ms B and to a lesser extent the Trust, I would conclude that contributions up to the date of the trial ought to be seen as equal. But the shares in [P2] Company reflect a significant proportion of the assets and although some contribution was made to their acquisition by Ms Eaton in that ways explained above, I am comfortably satisfied that Mr Eaton’s contributions in that regard far outweigh her contributions. I have not lost sight of the fact that
Ms Eaton contributions via the income distributions from the Trust were also significant.
Mr Eaton argues that (excluding the [P2] Company shares in respect of which he says I should find that he made 100% of the contributions) I should assess contributions 75% to him and 25% to Ms Eaton.
Ms Eaton argues that I should find that contributions were equal. However, in my view it is appropriate to assess the parties contribution based entitlement as 60% to Mr Eaton and 40% to Ms Eaton to take account of the matters set out above. Mr Eaton’s contention is misdirected insofar as the alleged contributions from the Trust are concerned. His submissions place too much weight upon the Trust and the financial benefits he says it brought to the family. That is especially so when one disregards the [P2] Company shares. Ms Eaton’s submissions do not pay due regard to the contributions, legitimately claimed by Mr Eaton represented by the assistance from Ms B to the purchase of the [P2] Company shares.
Section 79(4)(d) – 79(4)(g)
Mr Eaton submits that the factors relevant under these subsections are the parties’ health, the care of children, the payment of child support, the respective earning capacities of the parties and the availability of a financial resource. Ms Eaton’s submissions seem to accept these matters as being those of significance.
Ms Eaton is presently 54 years of age. She suffers from Reactive Mixed Anxiety-Depression Disorder (as diagnosed by her General Practitioner) as a direct result of the marital breakdown. This has led to an increase in her suffering migraine headaches needing strong and regular analgesia. Her General Practitioner thinks that a resolution of these proceedings will assist her. I accept that the breakdown of her relationship with Mr Eaton and these proceedings have been stressful.
Her medical difficulties have interfered with her employment. I accept her evidence that her contract with [omitted] was difficult because she could not fulfil the full-time requirements of the role. She needed time off work regularly to cope with her migraines.
Although in the past she has worked as a [omitted] Ms Eaton is no longer registered to do so. I accept her evidence that she maintained her registration as a [omitted] until December, 2010 at Mr Eaton’s insistence, but that she has not taught, even in a relief capacity since 2003. She worked on a casual [omitted] basis between 1998 and 2003. In 2003 she ceased [omitted] to provide assistance to Mr Eaton at [P2] Company.
I accept her evidence that a [occupation omitted] has informed her that she would need retraining to take up a [omitted] position again, although she has not made any enquiries herself of the appropriate authorities. However, Ms Eaton does not want to pursue employment as a [omitted]. She has completed some subjects towards the award of an [qualification omitted], but did that some time ago. There is no suggestion that she intends to complete that qualification.
Ms Eaton’s income post-separation has been between $288.00 and $495.00 per week, although for the period of her contract with [omitted] it was about $882.00 per week for 15 weeks. I find that her income earning capacity is likely to remain at the level of about $495.00 per week for the foreseeable future. That equates to an annual income of about $25,500 per week before tax.
Mr Eaton is also 54 years of age. I accept that he too has suffered from depression and stress related to the breakdown of his relationship with Ms Eaton. He was also the subject of a criminal assault which impacted upon him.
I accept that these matters have impacted upon Mr Eaton’s ability to perform his work with [P2] Company. The husband remains in his pre-separation employment which he has held since the 1980s. He has reduced his hours of work, but he remains employed. He is confident that his condition will improve after these proceedings are completed and he re-establishes his relationship with his two younger children, which has also become considerably strained. I share Mr Eaton’s optimism in this regard.
Mr Eaton’s earning capacity is reflected in his present income of $72,000 per year not including bonuses of about $4,000, although
Ms Eaton argues that it is higher having regard to share and trust income.I am satisfied that Mr Eaton has an earning capacity of about $72,000 per annum and Ms Eaton has an earning capacity of about $25,500 per annum.
The consent orders made by me about parenting matters at the commencement of these proceedings provide that Ms Eaton will continue to have the primary role in the care of [Z] for the next three years. [Z] is 16 years-old. I accept that she is entitled to a similar level of care and attention from her mother as her three older brothers received. Ms Eaton continues to care for [Y] although he is now 18 years old. [X] continues to live with the wife as well. He is able to contribute to the household.
Mr Eaton accepts that Ms Eaton’s care of [Z] will involve both a financial commitment from her and also a non-financial commitment in that the supportive parental role will predominately fall to her.
I accept that Mr Eaton is, and has paid child support in respect of the children from time to time. There are, however, arrears outstanding which accrued upon a successful change of assessment application and objection which Mr Eaton seeks to have overturned in these proceedings. I accept that Mr Eaton is likely to continue whatever child support is assessed of him to pay.
The husband submits that although the Trust is clearly a financial resource that is available to him the distributions from the Trust will be moderate at best in future.
Mr Eaton holds four of the five shares in [Eaton] Nominees and whilst the Trust is not his alter ego he has been able to use the Trust more or less as he has desired. He controls the Trust in a real sense. The remaining assets in the Trust are, however, less than what they were prior to the in specie distribution of shares and capital that occurred in 2009. Having said that, it is not at all clear that the distributions from the trust in future will be moderate at best as submitted by Mr Eaton.
I accept that there is no evidence, nor can there be, of what the actual distributions might be as the income to be earned by the Trust is unknown.Ms Eaton argues that given the submissions that Mr Eaton made about the Trust’s contribution to the family, he is attempting to have it “both ways”. I do not accept that argument given the distributions made in 2009 and the reduction that effected to the capital of the Trust. However, I do accept that the Trust is a substantial financial resource for the beneficiaries in terms of tax minimization for income.
No other matter was identified by the parties as relevant to the present exercise. However, it is necessary to record that each party will have liabilities not taken into account in the assets and liabilities set out above. Ms Eaton has her line of credit to the bank of Queensland secured over the Property M property, and her credit card debt.
Mr Eaton has loans from family for legal fees and his own credit card debts. He has a child support debt. I do not lose sight of those matters. Nor do I lose sight of the fact that after separation, Mr Eaton received distributions totalling about $196,000 from the Trust. What happened with those funds is not satisfactorily explained in my view. I am anxious, however, not to give excessive weight to that matter. The significant matters are clearly those identified by the parties.One final matter needs to be mentioned. Mr Eaton argues that, although there is no evidence before me on the issue, I should take account of the fact that Ms Eaton’s mother has passed away and that Ms Eaton stands to receive a legacy and some furniture under her mother’s will. Moreover, it is suggested that Ms Eaton will have an entitlement to bring a family provision application. Mr Eaton acknowledges that there is no evidence before me about this issue, but postulates his submissions on the basis that there might be an application to re-open the evidence. Such an application was made, albeit some 6 months later and was rejected by me.
Mr Eaton argues that the relevant adjustment should be 5% in favour of Ms Eaton. She argues that it ought to be 20%. Despite the cautions of the Full Court that reliance upon percentages might not properly reflect the appropriate adjustments, that is the way in which the parties have chosen to argue their cases.
On a 60% - 40% division of the assets, Mr Eaton will be entitled to $1,039,310.28 and Ms Eaton $692,873.52. If much of Ms Eaton’s assets will comprise the equity in the Property M home and her superannuation. She will have no cash reserves that she can utilise to generate an income or assist with the children’s (and particularly [Z]’s requirements).
A cash adjustment of $375,000 would, if invested at 6% per annum return a gross income of $22,500 which coupled with her earning capacity as I have found it to be, would provide a modest annual income, still less than that earned by Mr Eaton. That sum is a little more than 5 years gross earnings for Mr Eaton.
In my view, such a sum is an appropriate adjustment to take account of the matters set out above. In deference to the way in which the parties chose to argue their cases, I shall convert that to a percentage adjustment of 15%, which I recognise reduces the sum somewhat. Be that as it may I am satisfied that a 15 % adjustment in favour of
Ms Eaton is appropriate in the circumstances.
Orders
On the basis of the assets and liabilities as found by me and the assessments I have made above, Mr Eaton is entitled to 45% of the net assets or $779,482.71 and Ms Eaton is entitled to 55% of the net assets or $952,701.09.
The minute of order originally tendered by Mr Eaton provided for him to retain all of his shareholding in [P2] Company. Mr Eaton now argues that the [P2] Company shares should be divided between the parties, ensuring that he is left with enough to maintain his position as a director. He argues that it would not be just to require the husband to take what would be an overwhelming majority of his entitlement in shares that he cannot liquidate, cannot borrow against and which provide him little if any income. His position as a director is secure provided he owns 601 shares and presumably his employment as manager with the company is equally secure. He proposes that the shares be divided.
Mr Eaton’s argument, however, runs contrary to the significance that he has historically attached to owning such shares. If they were of no value to him, then one wonders why they were purchased at all (at least those taking his shareholding beyond 601 shares and a seat as a director). They are also contrary to the orders he sought at the outset of the trial.
I do not accept that the shares in [P2] Company are like a superannuation interest that cannot be accessed because of the age of a party for some considerable time or a DFRDB which might have a significant value when calculated pursuant to the SIS regulations but which cannot be sold, borrowed against or significantly assist in the purchase of tangible property.
The wife should retain the former matrimonial home at Property M. She should retain the furniture agreed to by the parties as being in their possession with the exception of the items agreed to be returned and in respect of which I shall make an order.
Mr Eaton seeks the inclusion of the Eaton Family’s christening gown which he alleges in his submissions is in Ms Eaton’s possession but has not been located by her to date. I do not intend to entertain that application, without evidence and made as it is in submissions.
The wife should transfer the Property O property to the husband and the husband assume liability for the as found to the Bank of Queensland and assume liability for the debt owed to [Eaton] Nominees at $292,610 and indemnify the wife in respect of such debt.
The wife should return the car she is currently driving being the Honda Odyssey to Mr Eaton as he sought in the minute of orders he handed up at the commencement of the trial. The Husband should retain the 1993 Mazda utility vehicle he is currently driving,
The parties respective superannuation interests should remain where they are (again as sought by Mr Eaton in the minute of orders sought.).
On that basis, Ms Eaton will retain:
| Property M | $585,000.00 | ||
| [A] Superannuation (W) | $13,241.00 | ||
| [Q] Superannuation (W) | $7,203.00 | ||
| Wife's furniture chattels and jewellery | $7,000.00 | $612,444.00 | |
| Less: | |||
| BoQ Line of Credit (W) | $28,412.00 | $28,412.00 | $584,032.00 |
Mr Eaton will retain:
| Property O | $670,000.00 | ||
| Husband's furniture, chattels and jewellery | $8,000.00 | ||
| Husband's share portfolio | $114,952.00 | ||
| Husband's [P2] Company Shares Pty Ltd | $782,364.80 | ||
| Husband's [P1] Company Pty Ltd shares | $3,000.00 | ||
| Husband's [H] Pty Ltd shares | $19,200.00 | ||
| Husband's Mazda Utility | $1,500.00 | ||
| Honda Odessy | $22,100.00 | ||
| AXA policy | $11,438.00 | ||
| H's rental bond | $1,800.00 | ||
| [A] Superannuation | $181,746.00 | $1,816,100.80 | |
| Less | |||
| BoQ Line of Credit | $347,565.00 | ||
| Debts to [Eaton] Nominees Pty Ltd as trustee for The Mr G Eaton Family Trust | $292,610.00 | ||
| Loan from Ms H | $10,000.00 | ||
| [L] debt | $17,774.00 | $667,949.00 | $1,148,151.80 |
Ms Eaton will require a cash payment of $368,669.09, which I will round to $368,700 to make up her entitlement. It may be that Mr Eaton will need to sell the Property O property to make that payment. It may be that he can call on his other financial resources to assist him to make that payment.
I am satisfied that orders which reflect the above are just and equitable.
Child Support
Mr Eaton seeks an order pursuant to s.117 of the Child Support Assessment Act (1989) departing from an administrative assessment of child support made 16 September, 2009. Mr Eaton submits that the history of the matter is complex., but the following appear to be the basal facts:
a)In January 2009, Ms Eaton made application for assessment of child support.
b)The Child Support Agency processed Ms Eaton’s application and assessed the support payable by Mr Eaton according to the statutory formula using their adjusted taxable incomes.
c)In February 2009, Ms Eaton lodged an objection to the assessment and sought a change of assessment on a number of grounds. Mr Eaton opposed the change of assessment and denied Ms Eaton’s allegations and in particular her assertions that Mr Eaton had greater income and financial resources than were accounted for in his taxable income and that ought to be brought to account.
d)Mr Eaton asserts in his affidavit material that Ms Eaton’s complaint and allegations regarding his conduct and sources of income and financial benefits reported to the Child Support Agency were baseless.
e)Initially the Child Support Agency determined that the change of assessment decision was too complex and should await a determination by this court, however, Ms Eaton lodged an objection to the decision that the change of assessment decision was too complex.
f)The Child Support Agency reviewed the decision and granted a change of assessment on the basis of a number of findings but in particular on the basis of reason 8 whereby Child Support Agency had found that Mr Eaton has access to additional income and financial resources such that it was just and equitable for the change of assessment to be granted. The additional income identified by the Child Support Agency was sourced from
Mr Eaton’s shares in [P2] Company. The objections officer concluded that Mr Eaton was entitled to 47.5% of the profits of [P2] Company based upon his shareholding (which included the shares held by [Eaton] Nominees Pty Ltd).g)The Child Support Agency found that Mr Eaton had an income to which he was entitled by reason of his shareholding of $105,203.00 which sum should be included for the purposes of Mr Eaton’s child support income.
h)Further, the Child Support Agency identified and valued
Mr Eaton’s public company share holdings at $124,435 (including shares distributed in specie to Mr Eaton in February 2009 from the Trust);i)Notwithstanding that Mr Eaton had included the receipt of payment of any dividends paid to him by the public companies as part of his taxable income in his personal tax return for the relevant period, the Child Support Agency deemed the shares attracted a further notional dividend on the Child Support Agency assessed value equivalent to 5% of value, namely $6,222 -and included this sum as income also.
j)The Child Support Agency disregarded Mr Eaton’s declared taxable income of about $64,351 (later amended to approximately $92,952 for the Financial Year 2009).
k)Mr Eaton and his accountant Mr J provided advice to the Child Support Agency that the higher income amount of $92,952 included an amount of $12,000 earned in the previous financial year but paid in the latter and did not reflect his actual annual gross salary of about $71,000. The Child Support Agency disregarded such advice and included the increased sum of $92,952 as Mr Eaton’s annual salary for his work as Manager at [P2] Company.
l)The Child Support Agency assessed Mr Eaton’s his income for the relevant period as $204,377.00.
m)Mr Eaton objected to the decision, but his objection did not succeed and his assessment increased from $920 per month to an amount of $4,449 per month.
The Court has jurisdiction to consider this application for departure pursuant to the provisions of s.116(1)(b)(i) and (ii) of the Child Support (Assessment) Act 1989. Mr Eaton argues that he satisfies s.117 (1)(a) and (b)(i)(ii)(A) and (B).
Mr Eaton argues that:
Most relevantly, S117(2)(c)(i)(ia)(ib) and (ii) provides that the Court should consider if the CSA decision would result in an unjust and unequitable (sic) determination of the level of financial support provided by the liable parent because of:
a) the income, property and financial resource of either parent; or
b) because any payments and any transfer or settlement of property made or to be made (whether under this Act, the Family Law Act or otherwise) by the liable parent to the carer entitled to child support.
c) Section 7A(a) which states the court must have regard to the capacity of the parent to derive income including any assets under their control that do not produce, but are capable of producing, income.
In my view, s.117(2)(c) does not provide as Mr Eaton contends it does. That section is as follows:
(2) For the purposes of subparagraph (1)(b)(i), the grounds for departure are as follows:
…
(c) that, in the special circumstances of the case, application in relation to the child of the provisions of this Act relating to administrative assessment of child support would result in an unjust and inequitable determination of the level of financial support to be provided by the liable parent for the child:
(i) because of the income, earning capacity, property and financial resources of the child; or
(ia) because of the income, property and financial resources of either parent; or
(ib) because of the earning capacity of either parent; or
(ii) because of any payments, and any transfer or settlement of property, made or to be made (whether under this Act, the Family Law Act 1975 or otherwise) by the liable parent to the child, to the carer entitled to child support or to any other person for the benefit of the child.
The authorities make it clear that to succeed on an application for a departure order pursuant to s.117(1) of the Assessment Act the court must be satisfied that one or more of the grounds for departure mentioned in s.117(2) exists. In Gyselman (1992) FLC 92-279 the Full Court determined that a three-step process is called for by s.117(1)(b) of the Assessment Act. The Court pointed out at 79,065:
…section 117(2) sets out the grounds for departure from administrative assessment. Each of those grounds is prefaced by the words, ‘in the special circumstances of the case’.
115. Whilst it is not possible to define with precision the meaning of that term, as a generality it is intended to emphasize that the facts of the case must establish something which is special or out of the ordinary. That is, the intention of the legislature is that the court will not interfere with the administrative formula result in the ordinary run of cases.
Mr Eaton has not expressly identified the circumstances that he identifies as “special” for the purposes of s.117(2)(c). That is probably induced by the way in which s.117(2)(c) has been stated in his submissions.
Nonetheless, he points to the Child Support Agency’s determination that he is entitled to 47.5% of the profits of [P2] Company. That determination is clearly wrong. As a shareholder and absent any particular provision in the company’s articles to the contrary, he has no entitlement to the profits of the company. He has no power to direct the payment of profits, not to control the Board. To the extent that the objections officer decide to the contrary he was clearly wrong. Similarly, there is no warrant to impute a dividend yield to publicly listed shares beyond the actual dividends received from the company concerned. The Child Support Agency’s approach in that regard was also clearly wrong.
But for the purposes of s.117(2)(c) of the Assessment Act, the inquiry is not limited to income. The reviewer must also take into account a party’s financial resources.
The evidence reveals that Mr Eaton received a Trust distribution in early 2009 of about $196,000. Some of that was received as shares. What happened to that distribution has not been explained and is the source of dispute between the parties. The distribution was received in the relevant child support period.
Having regard to that, I am not satisfied that Mr Eaton makes out a ground of departure under s.117(2)(c) of the Act. Whilst he demonstrates error on the part of the reviewer, the receipt by him of a large distribution from the Trust, the disposition of which is not satisfactorily explained means that I am not satisfied that an application in relation to these children of the provisions of the Assessment Act relating to administrative assessment of child support resulted in an unjust and inequitable determination of the level of financial support to be provided by Mr Eaton for the children.
Moreover, having regard to the receipt by him of the large distribution from the Trust, the disposition of which is not satisfactorily explained, I am not satisfied that a departure from the administrative assessment of child support just and equitable as regards the children, Ms Eaton and Mr Eaton.
In the circumstances, the application for a departure order is dismissed.
I certify that the preceding one hundred and sixty-two (162) paragraphs are a true copy of the reasons for judgment of Jarrett FM
Date: 18 January 2012
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