Fisher and Fisher
[2009] FMCAfam 826
•6 August 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FISHER & FISHER | [2009] FMCAfam 826 |
| FAMILY LAW – Property settlement – purchase of land and timber rights by husband – valuation of the timber – husband alleges misappropriation of funds by the wife – notional pool of assets – initial contributions of the husband – health issues of the husband – just and equitable order. |
| Family Law Act 1975, ss.75(2), 79 |
| C & C (1998) FamCA 143 Re NHC and RCH (2004) FLC 93-204 Farnell (1996) FLC 92-681 Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 In the Marriage of Phillips (2002) 29 FAMLR 128 In the Marriage of RH and JW Smith (1991) 15 FAMLR 206 Kowaliw (1981) FLC 92-092 Little (1990) 14 FAMLR 118 Malpass & Mayson (2000) FamCA 1253 Mandelbaum [2009] FamCAFC 138 Marker (1998) FamCA 42 AJO v GRO (2005) FLC 93-218 Pierce (1999) FLC 92-844 Townsend (1995) FLC 92-569 |
| Applicant: | MR FISHER |
| Respondent: | MS FISHER |
| File Number: | BRC1243 of 2007 |
| Judgment of: | Baumann FM |
| Hearing dates: | 8 & 9 December 2008 |
| Date of Last Submission: | 12 February 2009 |
| Delivered at: | Brisbane |
| Delivered on: | 6 August 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr Balzamo |
| Solicitors for the Applicant: |
| Counsel for the Respondent: | Mr Fleetwood |
| Solicitors for the Respondent: | Reaburn Solicitors |
ORDERS
That the Applicant pay $330,000.00 to the Respondent as follows:
(a)$15,000.00 by 3 September 2009;
(b)$142,500.00 by 2 October 2009;
(c)$142,500.00 by 2 November 2009;
(d)$30,000.00 by 14 January 2010.
That in the event that the Applicant defaults in the payment of any of the sums referred to in Order 1 the following shall occur:
(a)The total balance then outstanding shall be payable immediately;
(b)Interest shall be payable at a rate of 8% per annum on the total balance then outstanding from the date of these Orders to the date of payment.
That on or before 2 October 2009 the Wife shall do all such things and sign all such documents as are necessary to:
(a)Transfer her shares in [F] Pty Ltd by a Share Transfer submitted for execution by the Husband thereby transferring her shares to the Husband or whomsoever the Husband shall direct in writing;
(b)Resign as a Trustee and/or member of the [C] Superannuation Fund;
(c)Relinquish any claim to any entitlement to the [C] Superannuation Fund;
(d)Sign such documents as may be required to consent to enable the Husband to borrow funds to comply with Order (1).
That upon the Wife signing the documents in Order 3 the Husband shall indemnify the Wife against any actions claims or demands against her arising out of her involvement with [F] Pty Ltd, [C] Pty Ltd, [C] or The [C] Superannuation Fund excluding any liability established and proven by the Australian Taxation Office.
That the Husband shall sign all such documents and do all such things as are necessary to enable the Wife to lodge Caveats over any properties being offered by the Husband as security for the payments referred to in Order (1).
That upon the payment referred to in Orders 1(c) and (1)(d) the Wife shall sign all such documents and do all such things as are necessary to enable the Husband to withdraw the Caveats referred to in Order 5.
That both the Husband and the Wife relinquish any claim, one against the other, to any other interest in any property not otherwise herein specifically referred to including but not limited to motor vehicles, bank and building society accounts, superannuation funds or schemes, shares (public and private), jewellery, furniture, appliances, debtors, chooses in action and any other property, whether realty or personalty, wheresoever situate and/of whatsoever kind presently in the possession of or registered in the name of the other party.
That the Order for spousal maintenance of $200.00 per week be discharged immediately.
That there be no Order as to costs.
IT IS NOTED that publication of this judgment under the pseudonym Fisher & Fisher is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRC1243 of 2007
| MR FISHER |
Applicant
And
| MS FISHER |
Respondent
REASONS FOR JUDGMENT
Introduction
After a marriage of over 17 years which bore two children and finally ended in November 2006. The Applicant husband Mr Fisher and the Respondent wife Ms Fisher come to the Court because they are unable to agree on what constitutes the pool of assets available for division or how it ought be distributed so as to achieve a just and equitable order for both of them.
As these reasons seek to explain to the parties, this is one of those cases where the Court would not be critical of their inability to reach a commercial or sensible compromise. Even though, as it is often the case, the perspectives and positions taken by the parties is shaped by their own feelings of unfair behaviour by the other party, the facts of this case cause the Court to consider a combination of more complex legal issues which do not arise in all property cases – and rarely, as in this case, do they arise for determination in the one case.
After providing a hopefully fairly non-controversial background or history to this dispute, it is necessary to deal with some discrete legal issues which shape the ultimate conclusions. After dealing with those discrete issues of major importance to the parties I will undertake the well known path of analysis to be adopted in a property proceeding under the Family Law Act 1975.
Background
Both parties were born in 1959 and are now aged 50 years.
The parties commenced a relationship before cohabitation commenced in November 1988 according to the wife. The husband says cohabitation commenced in November 1989. In the end nothing significantly turns on this issue. The husband, who had purchased the property at Property T in 1983 for $86,000 had extinguished the mortgage on that property by 1987.
The wife owned a property at Property G which was heavily mortgaged when the parties met, however the husband had discharged a mortgage of $28,000 from his own funds on the basis that the wife would reimburse him, with interest, when she sold the property. In December 1991 the wife sold the Property G property for $92,000 and, as agreed, the wife paid to the husband the sum of $30,800, even though the parties had married in March 1990.
The wife was the primary carer of her daughter [X] – who was seven years old at the time of cohabitation having been born in 1982. The parties have two children of their relationship, [Y] (born in 1990 – now aged nearly 19 years) and [Z] (born in 1992 – now aged 17 years).
Registration of the business name [C] took place on 3 April 1989, prior to the parties’ marriage. The date of registration of this business name supports cohabitation in 1988. It makes no sense to find these parties registered a joint business name before they cohabitated.
Although the husband was the qualified [tradesman], this apparently equal partnership continued until 18 March 1996 when the parties, sole directors and shareholders incorporated (through a shelf company), [C] Pty Ltd (“the company”). I infer that the company took over the assets, goodwill and possibly some of the liabilities of the former partnership. The wife resigned as a director and secretary (without notice to the husband) effective 24 June 2005. Both parties remain as holding one ordinary share in this company. On 22 December 2006 [C] Pty Ltd changed its name to [F] Pty Ltd. On the same day a new company [C] Pty Ltd was incorporated in Queensland with the husband as the sole director and shareholder.
Although matters of great controversy arise from the purchase by the husband of land and timber rights in Northern New South Wales (as I deal with below), the actual details of the purchase are not in dispute and arise from a combination of Exhibit 2 and the husband’s own unchallenged testimony. The details are:-
a)On 24 June 2005 the husband purchased from [L] Pty Ltd “all timber growing on …[1] Property C” for $10,000 payable on execution of the Agreement (Clause 3.1).
b)On 24 June 2005 the husband purchased from Mr F “all timber growing on …[2] Property C” for $488,000 payable as to $210,000 on execution of the agreement with the balance within 30 days.
c)By contract dated 20 October 2005 the husband purchased [2] Property C for $103,500 with settlement due within 30 days.
d)By contract dated 20 October 2005 [C] Pty Ltd as trustee for the [C] Superannuation Fund purchased [1] Property C for $103,500 with settlement due within 30 days.
It is not clear when the superannuation fund was created. The deed for the superannuation was not in evidence although financial statements annexed to the husband’s affidavit filed 8 September 2008 suggest it was in existence prior to 30 June 2000 (when at that date it had net assets of $44,311).
Beginning at paragraph 31 of the husband’s affidavit filed 17 January 2008 the husband relevantly says:-
“31.I obtained a line of credit from Bendigo Bank in the total sum of $460,000. Initially I drew down:-
(a) $13,700 for the solicitor fees;
(b) $10,000 for stamp duty;
(c) $207,000 for the blocks of land.
32. Therefore the initial drawn down was approximately $230,700.”
I raise later in these reasons some concerns arising from how the total acquisition costs and purchase monies – totalling $719,700 as set out above, was sourced.
In late September 2006 the wife attempted to open an account with the Commonwealth Bank in the name of the company and without the husband’s consent or knowledge. The husband said this caused him to have concerns about the wife’s management of company financial matters, and he contacted the company accountants and was informed the wife had resigned as a director in June 2005.
The husband caused his company accountants and subsequently an independent forensic account Mr M to conduct an examination of records of the business. Two reports were prepared and extensive source documents supporting the analysis undertaken were filed. The wife conceded the total of what were described as “unauthorised payments” was $91,234 for the nine year period to 30 June 2005, and claims she used these funds for household expenses. The husband says these funds should be “added back” notionally to the pool.
Separation occurred shortly after these issues became known to the husband. The husband remained living in the home at Property T and the wife moved in to rented accommodation. Initially [Z] remained primarily in the care of the wife and spent time with the husband, but since January 2008 [Z] chose to live substantially with the husband.
To provide some further context to the procedural history of these proceedings, I make the following observations:-
a)In February 2007 the husband commenced parenting proceedings in this Court and by her Response filed 6 March 2007, the wife included financial issues in dispute.
b)On the first Court date of 12 March 2007, consent orders were made in respect of [Z] (on an interim basis) that he live with his mother and spend time as agreed with the father. The husband agreed to pay the wife interim spouse maintenance of $200 a week, although the husband now says he was pressured into doing so by his solicitors. Shortly thereafter his solicitors on the record withdrew.
c)On 13 June 2007 two Court experts were appointed to:-
i)Prepare a family report in respect of [Z]; and
ii)To prepare a valuation of the husband’s properties at Property T and Property C.
Further discovery was also ordered.
d)On 24 September 2007, in circumstances where the then unrepresented husband and the solicitors for the wife had been unable to agree on who would value the real properties, further orders were made; further discovery required and a conciliation conference date set. Conciliation did not resolve this matter.
e)At around this time, the solicitors for the wife informed the Court that they were experiencing difficulties in procuring a valuer of the timber on the Property C land. This issue presented as the major issue in dispute, with the husband contending the timber rights now had minimal value.
f)The matter was listed for hearing for 7 February 2008, however because of a combination of reasons (which I chose not to explore further in these reasons at this time), the trial was adjourned on a number of occasions either because critical valuation evidence was not available or when the husband raised new allegations of, effectively, misappropriation of funds by the wife. During most of 2008, the husband having retained again his initial solicitors, then (from May 2008) began acting on his own behalf. I chose not to deal further with these issues about the reasons for the delay (which are disputed) as questions of costs may ultimately need to be determined.
g)An attempt to commence a hearing on 11 August 2008 was again thwarted. The father was unrepresented and had just recently filed Mr M’s extensive affidavit. The husband had not provided financial statements for his entities and I regarded it as necessary for the experts (on the timber value issue) to file a Statement of Experts (as I had directed on 24 June 2008).
h)On 6 October 2008 the wife was given leave to file a further affidavit. Mr Page QC appeared for the husband (instructed by a new firm of solicitors), and directions permitting the husband to file an affidavit in response were made. This order was made after the parties had negotiated for over a day (with Counsel for both parties) in an endeavour to resolve the matter.
i)The matter finally proceeded to hearing over two days commencing 8 December 2008 and directions were made for the parties to file written submissions. All submissions were filed by 12 February 2009. I have considered carefully those submissions and the fact that I have not, in these reasons, referred to every point does not mean I have ignored the point.
For completeness, I should record, that the parties, because of [Z]’s age, agreed not to seek any orders in relation to his parenting arrangements.
I also record my apologies to the parties for my delay in delivering these reasons.
Principles
The preferred or usual approach to determining property proceedings under s.79 of the Act was the subject of a succinct summary by the Full Court in Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143) at [39] where the Court said:-
“39. The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions for the parties within the meaning of ss79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s79(4)(e), the matters referred to in s75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case: Lee Steere and Lee Steere (1085) FLC 92-626; Ferraro and Ferraro (1993) FLC 92-335; Davut and Raif (1994) FLC 92-503; Prpic and Prpic (1995) FLC 92-574; Clauson and Clauson (1995) FLC 92-595; Townsend and Townsend (1995) FLC 92-569; Biltoft and Biltoft (1995) FLC 92-614; McLay and McLay (1996) FLC 92-667; JEL and DDR (2001) FLC 92-075 and Phillips and Phillips (2002) FLC 9.-104.”
Before commencing my analysis as mandated by authority, it is appropriate to deal with three discrete yet critically important issues, which I identify as:-
a)The valuation of the timber.
b)The extent to which any loss of value is attributable to any conduct of the husband.
c)How should the funds withdrawn from the company of $91,234 be treated.
Clearly, as the wife admits (albeit belatedly) she was less than honest with her husband during the relationship in at least:-
-the withdrawal and use of the funds from the company account;
-her resignation as a director.
In the husband’s eyes, perhaps unsurprisingly, he felt betrayed, angry and, to a degree sought financial restitution. I had the advantage of seeing the wife give her evidence, and whilst it was grossly inappropriate for her to conceal her actions in “skimming off” monies as she did, I regarded her concessions as genuine and did regard her evidence, under oath, as believable. It seemed clear to me that the husband’s focus on money matters was intense and that his attitude to these issues affected the interpersonal relationship.
Again, although the husband presented in every sense as embittered, I did not regard him as untruthful – rather his obsession with proving the dishonesty of the wife (as he saw it) coloured some of his perceptions as I explore below however, I was left with the impression he has not made full financial disclosure. I also take into consideration that for much of these proceedings he was unrepresented and was preparing his own affidavits. At the same time he was operating the business and meeting a substantial liability which he created by the purchase of the Property C properties. He at times was tired, frustrated and, I sense, disappointed with the costs of litigation and the delays experienced.
Rather than make any general credit findings, I choose to deal with the evidence on significant fact disputes individually, and where I have preferred one persons’ version over another, I explain why that is the case.
Valuation of Timber
The terms of the purchase of the timber rights is set out at paragraph 10 of these reasons.
The parties with the benefit of a court expert Vaughan Bell agreed that the market value of [2] and [1] Property C, New South Wales as a combined holding of 1008.1 ha, was $250,000. Because the properties were purchased for the same price ($103,500 each), I infer that each parcel of land is valued at $125,000. This is necessary as the husband owns personally one parcel and the superannuation fund owns the other parcel. The form of valuation states that:-
“The valuation excludes any millable timber on the land.”
The expert evidence, as to the possible value of timber, offered to the Court came from the following resources:-
a)The wife relied on the report and affidavit filed 20 May 2008 by Mr C. He is a certified Forest Resource Manager employed by [K] Products and has been engaged in the timber and forestry industry for over 28 years. On the 31 January 2008 and 11 February 2008 he attended and inspected the timber situated on the subject properties. His extensive report, dated 14 March 2008, for the reasons and adopting the methodology he identified concluded as follows:-
“There is a significant volume of assessed merchantable timber on the property with a raw assessed value of $357,000. After consideration of the representative value of the assessment data the informed adjusted estimate is $310,000.
The net harvest area is only 32% of the gross property area and all non-commercial areas and “ecologically sensitive” areas likely to be prohibited from harvest under a PNF-PVP and the COP as far as these are known have been removed from yield calculations.
There is uncertainty about DECC issue of consent to conduct forest operations on the property and the impact of recorded threatened species on forest operations until the application process is commenced. Consequently any timber valuation must be heavily qualified.
Where consent to harvest the net harvest area as assessed is approved by issue of a PNF-PVP costs to access timber are projected to be hellishly high (road gravelling and drainage line works) and must be deducted from estimated gross royalty. These costs are estimated at $50,000-$100,000 but could easily be higher. The net gain (gross royalty less costs) to the landowner is estimated to be $200-$250,000.
It may not be possible or prudent to harvest all the merchantable timber in the short term. The impact of seasonal logging conditions, practice of sustainable forest harvest and tax implications if royalty income is earned within a single financial year may make delayed harvest a practical management option. The costs of any road infrastructure etc must be carried from the first year and earnings in subsequent years discounted. The timing of operations can have an impact on the net gain.
There is significant value in the standing timber, risk to access the timber to be determined under application to DECC for consent to harvest and considerable costs likely to access any timber. Uncertainties in the equation make definitive estimation difficult.”
For clarification, I record that Mr C’s employer [K] Products Pty Ltd claims to be “the largest supplier of poles for overhead lines installed by electricity and telecommunication companies.”
b)
The husband primarily relied upon the report and affidavit of
Mr L filed 23 June 2008. He is a Consulting Forestor who has been engaged in the forestry and environmental sector for
12 years. The husband asked him to “assess and comment on the timber valuation estimation prepared by Mr C”. He did not inspect the property but relied on the reports of Mr C as well as reports by [B] Conservation Services and [P] Pty Ltd in essentially critiquing the report by Mr C. Again he provided a detailed report in which he claimed that [S] Consulting (of which he is a partner) is “a forestry and environmental education consultancy” which has expertise “in the planning, implementation and supervision of Private Native Forest (PNF) harvesting operations in New South Wales operating under the PNF Code of Practice (COP) for northern New South Wales.”
Mr L came to the following conclusions:-
· “[S] Consulting considers that it is highly unlikely that approval would be granted to conduct a harvesting operation under the NSW PNR COP on the property Property C given the results of the ecological assessment carried out by [B] Conservation Service.
· If in the unlikely even approval was granted for an ecological harvesting operation the volume of timber that is likely to be available for harvesting is likely to be severely reduced from that considered by [K] Products and any additional environmental prescription would make the operation unviable.
· [S] Consulting believes that the costs associated with roading as inferred by KWP in their report are severely understated. Property C is dominated by alluvial clays and other fine grained sediments and as such is poorly drained and will require considerable investment in roading infrastructure to ensure that any harvesting operation meets the requirements of the PNF COP, especially the requirement that any roads must be maintained to ensure that road surfaces remain stable and drainage systems and sediment control remain functional for the life of the PVP.
· [S] Consulting considers that the costs associated with the rehabilitation of snig tracks and snig track drainage feature crossings has been severely under estimated by KWP and that compliance costs associated with the PNF COP are much greater especially in environmental sensitive areas.
· The costs associated with the implementation of a post harvest burn and post harvest regeneration assessment have not been considered by KWP. These costs are also likely to be significant.
· [S] Consulting considers that given the environmental nature of the property and its current environmental condition that a harvesting operation carried out on Property C would be economically unviable taking into account the gross value of the timber as assessed by KWP and the expected costs associated with the harvesting operation as outlined I this document.”
c)As can be seen, Mr L relied upon two reports, one by Mr G of [B] Conservation Services dated June 2008. Mr G swore an affidavit, attaching his report which was filed on 20 June 2008 and relied upon by the husband. Mr G is an ecologist which has been self-employed for eight years and said he had “over 12 years experience assessing Endangered Ecological Communities and Threatened Species habitats in northern New South Wales.” He extensively inspected the property on two separate occasions in March 2008. He concludes that:-
“[Property C] (The study area) consists of two separate allotments totalling 1008 hectares (Figure 1) almost entirely covered in Endangered Ecological Community, High Conservation Value native vegetation and Threatened Species habitats protected under NSW and Commonwealth legislation (NSW Threatened Species Conservation Act, 1995, Commonwealth Environment Protection and Biodiversity Conservation Act, 1999 and NSW Native Vegetation Act, 2003). The Study area is bordered to the east by the [N] and [M] State Forest and by private property in all other directions.
THE HARVESTING OF TIMBER FROM THE EXTENSIVE AREAS OF ENDANGERED ECOLOGICAL COMMUNITY AND THREATENED SPECIES HABITAT ON [PROPERTY C] IS PROHIBTED UNDER NSW LEGISLATION. LESS THAN 5% OF THE STUDY AREA IS NOT ENDANGERED ECOLOGICAL COMMUNITY OR THREATENED SPECIES HABITAT, CONSISTING PRIMARILY OF THE CLEARED HOUSE SITE AND SMALL AREAS LARGELY CLEAR OF THE NATIVE VEGETATION.
The Study Area is located in the mid-upper catchment of [M] south of [R], it is an important component of the [B] Wetlands, an area recognised as a national wetland conservation priority area. The property is located upon a large floodplain supporting extensive wetland communities, floodwaters of a 1:100 flood event cover the majority of the site and indicate existence of floodplain Endangered Ecological Communities (EECs) protected by both State and Commonwealth legislation.
The majority of the [M] floodplain occurs upon alluvial clay and other fine grained sediments, whilst limited areas of sandy substrate occur in the northern portions of the property. Those areas of substrate dominated by sand are not considered to represent EECs, but have high value as habitat for over 25 threatened fauna species known from the area.”
As a result of the clear difference of opinion between Mr C and Mr L, the Court directed that the experts confer and provide a statement of where they agreed and disagreed. The document they each signed was brief and regrettably contained no detail. Although the conference occurred on 6 June 2008, final execution of the document which is Exhibit 1, did not occur until shortly before the trial commenced in December 2008. The Points of Agreement and Points of Disagreement were recorded as follows:-
“Points of Agreement
a) Inventory methodology – standard OK.
b) Gross volume estimates contained in [K] timber assessment.
c) Gross log value estimates contained in [K] timber assessment.
d) Consent to harvest and conditions to apply on [Property C] will be determine by the Department of Environment and Climate Change (DECC) through the Private Native Forest Property Vegetation Planning process.
Points of Disagreement
a) Estimated costs associated with timber harvesting and roading.
b) Extent of Endangered Ecological Communities.
c) Property Owner Supervision Costs.
d) Net timber value.”
Messrs C, L and G were cross examined, but did not resile significantly from their expert opinions offered in their reports. As is clear both the opinion of Mr C and Mr L were highly qualified.
The most glaring qualification was, of course, the need for an application to be made to the New South Wales Department of Environment and Climate Change. Without any evidence offered to the Court from State or Federal government authorities about their attitude to any application for harvesting and their assessment of the likely effect on endangered ecological communities (which Mr L says would require the Council to have a recovery plan produced before an approval could be contemplated) there is, in my view a grave uncertainty of the ability to and viability of harvesting/milling the timber.
That is even before we add to the equation the costs of harvesting, milling and roading. The evidence of [P] relied upon was not able to be tested. I would not regard Mr C’s expertise and qualifications as extending to road works.
The submissions of both Counsel assert I should accept the evidence of their expert as opposed to the other, however I have regrettably come to the conclusion that I do not have the requisite confidence in accepting either. I note at this point of the discussion that the wife contends for a value of $310,000. Even on Mr C’s estimation that is the highest amount and does not take into account his estimated road costs of $50,000 - $100,000. The husband, through his expert opines the road costs estimated by Mr C are underestimated.
The husband contends that the timber rights he paid $498,000 for in June 2005 now has no value at all.
Obviously the dilemma confronting the Court is what value, if at all the Court should attribute to this interest in the timber.
Where “the state of the evidence makes the process of valuation hazardous or uncertain, or where there are wide differences between legitimate valuations because of a volatile market on peculiarities relating to the specific property or otherwise, the ascertainment of value by judicial process may become too uncertain and the preferable course is to order the sale of the property so that its real value can be revealed by market forces. The proceeds of sale are then divided in appropriate proportions between the parties” (In the Marriage of RH and JW Smith (1991) 15 FAMLR 206).
The Full Court, in making this observation relied upon the Full Court decision of Little (1990) 14 FAMLR 118 where at paragraph 123 the Court emphasised that:-
“Whilst a trial judge should determine a disputed issue of valuation where the evidence enables him to do so, we do not accept that there is an obligation cast upon him to determine such a disputed issue irrespective of the state of the evidence. It may be such that a determination is not possible. In such a case, as in a case where there is a very considerable disparity in the valuation evidence and other evidence indicates that the actual ascertainment of the true value is difficult and complex, the proper solution as between the parties may be to order a sale” (see also In the Marriage of Phillips (2002) 29 FAMLR 128).
So other than, in these circumstances, to order a sale would expose both parties to a “lottery” effect. I do not, for a moment, underestimate the difficulty in effecting a sale. I have no evidence, for example, of by whom or on what terms the property could be offered for sale. Perhaps a little curiously, no real estate agent was apparently involved when the husband purchased the timber rights and then the land from Mr F and a company associated with him.
I also accept that it is likely that the land and timber rights (such as they may be assessed by an arm’s length purchaser to be), should probably be sold together. Furthermore, one of the parcels of land is owned by the superannuation fund. Overarching all of these complications is the position of the husband, who sees the property as “his dream’ and does not wish to sell. Perhaps when these reasons are published and, as is necessary, I allow some time for the parties to make further submissions on how to sell the property and the order I should make to facilitate a timely sale, the parties can come to a compromise on the value.
Assertion by the Wife that the “Loss of Value” in the Timber Rights Amounts to Waste
The wife’s submissions at paragraphs 183 to 233 extensively deal with the evidence and assert that in respect of the loss in value of timber rights “this is a case where the loss occasioned by the decline in value of the asset should be borne entirely by Mr Fisher.”
In reply, the husband’s submissions at paragraphs 38 to 46 take issue with this contention, considering that:-
“…the evidence before the Court is not sufficient to support a determination that the husband acted in a reckless, negligent or wanton manner in entering into this investment. The husband made reasonable enquiries; had a reasonable belief in the existence of buyers; and therefore had a reasonable belief in the profitability of the enterprise.”
Both submissions properly direct me to the well know, and oft quoted and supported, comments of Baker J in Kowaliw (1981) FLC 92-092 where at pages 76,644-5 His Honour said:-
“What the Full Court is saying in effect is that it was not appropriate, having regard to the facts before it, for a consideration of a negative contribution pursuant to para. (a) or (b) of sec.79(4) to be taken into account. That is not to say, however, that conduct which amounts either to a deliberate diminution of the value of assets or to economic recklessness can never be taken into account in altering property interests. The reason for the Court concluding as it did in Antmann and Antmann (spura) as stated at the top of the second column on p.75,744 was that there was no evidence in that case that the wife has lost anything in consequence of her husband’s action.
It does seem to me, however, that if a party has either by deliberate act or by economic recklessness reduced the value of assets available for distribution then the economic consequences which flow therefrom including the resultant burden to the other party are directly relevant to a consideration of the respective contributions of the parties contemplated by sec.79(4).”
If, on the other hand, the decision of the Full Court in Antmann and Antmann (supra) is to be interpreted both literally and restrictively as precluding the Court from a consideration of a negative contribution in relation to para.(a) or (b) of sec.79(4) then I am nevertheless of the opinion that evidence of wantonness or recklessness having economic consequences is clearly a matter which the Court may take into account pursuant to the provisions of sec.75(2)(o).
If a party has acted in the manner to which I have referred earlier either by:
(a)embarking upon a course of conduct designed to reduce or minimise the effective value of worth of matrimonial assets, or
(b)acting recklessly, negligently or wantonly with matrimonial assets the overall effect of which has reduced or minimised their value,
then such conduct in my view and the economic consequences which flow therefrom are clearly matters to which the Court may have regards pursuant to the provisions of sec.75(2)(o).
if, on the other hand, losses of a financial kind have been suffered by the parties to a marriage in the course of the pursuit of matrimonial objectives, such as the gaining of income or the acquisition of assets whether the liability for such losses be joint or several then, in my view, such losses should be shared by the parties (although not necessarily equally) and taken into account when altering property interests.”
It must of course be immediately observed that I cannot calculate the “loss” which might occur until a sale of the timber rights and underlying real property are determine by a sale. However the extent of the loss (if any) does not in my view of itself determine the issue. It could not be said in this area of judicial discretion that “the matter speaks for itself”. The application of the general principle enunciated by Justice Baker requires an examination of the conduct and actions of, in this case, the husband, and on the evidence I make the following findings:-
a)Whilst I agree that the total funds required to purchase the land and timber rights amounted to $728,700, of that sum approximately $103,500 and half the legal expenses of $11,850 (total $115,350) was funded by the superannuation fund. The assets of the fund at 30 June 2005 comprised “cash” of $128,395.83 after allowance for “debtors” of $70,137.75 which seems to comprise a deducted contribution of $70,000 made during that financial year. The evidence does not assist me in determining where the contribution of $70,000 came from, and in particular whether it formed part of the line of credit borrowings by the husband. I am also unable to reconcile the purchase price (and some share of legal expenses) for the land with the freehold land entry in the balance sheet for the following year of $122,725.
b)If I assume that the husband paid the $70,000 contribution to the superannuation fund from other than borrowed funds, then the amount he had to provide to complete the purchase of the timber rights and land (between 24 June 2005 and 19 November 2005 being 30 days after the land contracts were made), was as follows:-
Timber rights
$10,000
Timber rights
$488,000
Purchase of [2] Property C
$103,500
50% of legals
$11,850
Total
$613,350
c)The husband says in his affidavit filed 17 January 2008 that:-
i)He obtained a line of credit for $460,000 and initially drew down $230,700.
ii)As of 1 December 2006 the line of credit was at $295,467.91.
In cross examination the husband says at the time of the purchases (again June 2008 to November 2005), there were funds available of $232,000 which had accumulated from trading activities of the company – the only source of income for this family. The husband was unconvincing when he gave this evidence. He offered no corroboration of the existence of these funds, and the evidence is further plunged into doubt, in my view, because:-
-The husband would not have been required to “draw down” the line of credit until the time to settle the land contracts in November 2005 had arrived. This was the purpose for the drawdown according to paragraph 31 and 32 of his Affidavit.
-Even if he had control of the funds saved of $232,000 as he claims – where did the other $266,000 to settle the timber contracts come from?
-The financial statements of the trading company to 30 June 2005 show an operating loss of $6,967 (after a superannuation contribution of $70,000); at 30 June 2005 no substantial funds in the company bank accounts; and surprisingly the timber rights (at a value of only $289,680) are shown as a non-current asset of the business. This all suggests that in the 2004/2005 year the company was unlikely to have accumulated savings of $180,000 as he swore under cross examination. That is unless the savings remained as an asset “at this level however hard I worked” as the husband claimed. An examination of the financial statements for the 2003/2004 year reveal an operating loss of $2,495; and net assets at 30 June 2004 of $82,142 although there was a CBA account of $106,004. It is possible that some of those funds did comprise savings said to still be available at around 24 June 2005 when the timber rights contracts were signed and, under their terms, $220,000 was immediately payable.
d)Without further speculating, the husband who I find to be particularly money conscious (even frugal) used all available resources; significant borrowings; and other seemingly unidentified resources to commit to these transactions. I accept the evidence of the wife that, although she signed documents for the Bendigo Bank and inspected the properties, she did not support the purchase. It must be said she took no active steps to seek to prevent it at that time, other than advising against it.
e)The husband, in his affidavit in reply filed 23 October 2008 deposes to the steps he took to investigate the viability of the timber harvesting project. I accept his evidence at paragraph 15, 16 and 17 of his affidavit. Although I accept his evidence at paragraph 20, those events occurred after the purchase.
f)The husband made investigations with [K]. Exhibit 4, being an email from [K] to the husband of 6 may 2005 confirms some pre-purchase investigations and contains the following caution:-
“As mentioned above [K] are unable to guarantee the quantity or quality of the saleable timber on the property and until negotiations are finalised are unable to guarantee the amount of timber likely to be purchased [K]…. You should make your own enquiries, investigations and assessment of the likely resources and revenue to be derived from the property prior to purchasing the same.”
The husband says he made those further enquiries including other companies identified at paragraph 66 of his affidavit filed
29 July2008, but these appear to be subsequent to the purchase decision having been made.
g)The timber rights contracts were not conditional upon any further investigations being made by the husband.
h)On the basis of the evidence of both Mr C and Mr L, I accept that significant changes to the sustainable harvesting of timber in areas like the subject property where adverse effects on endangered ecologies could occur, were being discussed in the wider industry in late 2005. The evidence however is not sufficient to find that other enquiries (other than those undertaken by Mr Fisher) could have uncovered this possible “changes in the wind”. Certainly the husband is well aware of them now and the Regulations which have seriously challenged the usability of the land. He says he made a public submission in 2006, after he became an owner.
My conclusion on this issue is shaped by the whole of the evidence including the almost obsessive focus on money at times by the husband. I am satisfied that he though at the time of the purchase the project was viable. In hindsight, on his case, he was wrong by not allowing for the impact of future government intervention – but I am not satisfied any further enquiries at the time would have alerted him to these future changes at the critical time prior to the purchase.
It is absolutely contrary to the history of financial dealings by the husband that he would deliberately throw almost $500,000 away. I am not satisfied that he acted recklessly or negligently. In the circumstances this is not a case where the principles of Kowaliw apply – even if I could determine the amount of the “loss” which, for reasons already given, I cannot.
Wife’s Use of Funds of $91,234
Apart from how the funds were used, there is no dispute that between
1 July 1995 and 30 June 2005 the sum of $91,234 was withdrawn by the wife from the bank account of [C]. The withdrawals and subsequent deposits to the wife’s keycard savings account were all traceable. That is, the monies (presumably representing trading income) were in the company account and have been withdrawn into another account. Although I accept the husband, as the company co-director was not aware of these withdrawals and was quite understandably upset when he found out, to understand the evidence of the wife as to the use of the funds, it is appropriate to set out and examine what in effect the funds represented as a weekly amount – not as an average over the ten year period – but on a yearly basis. In so doing, upon closer examination, it seems the expert Mr M, when making his conclusions has asserted two different amounts for the 2002 financial year. In the first report, at Table 1, a sum of $2,401 is alleged. In the second report, at Table 1, a sum of $8,882 is alleged. As the wife concedes, after she examined all the source data, that the total amount is $91,234, I intend to adopt a combined total of $11,283 for the 2002 year. On this basis the withdrawals were as follows:-
Year
Total
Weekly
1996
$2,850
$54.81
1997
$6,050
$116.35
1998
$9,154
$176.04
1999
$6,266
$120.50
2000
$2,648
$50.92
2001
$9,905
$190.48
2002
$11,283
$216.98
2003
$16,406
$315.50
2004
13,999
$269.21
2005
$12,672
$243.69
The withdrawals ceased when the wife chose (secretly other than to the company accountant) to resign as a director.
The wife conceded she may have removed funds in this way prior to
1 July 1995 but cannot estimate how much was involved.
Counsel for the husband at paragraphs 47 to 60 of the submissions contends “it is proper to add back the property misappropriated by the wife during the course of the marriage”. The wife’s submissions at paragraphs 91 to 154 deal extensively with the evidence and the reasons why it is contended no add back should occur.
In property cases under the Family Law Act, submissions are often made to notionally “add back” funds for a variety of reasons. Later in this judgment I am asked, by both parties, but in differing sums, to add back monies utilised by the husband post separation to meet his legal expenses – and I will do so.
However, to “add back” funds is more the exception than the rule (see C & C (1998) FamCA 143 at [46]). Generally arguments about “add backs’ arise from post separation conduct – for example as a premature distribution within the Townsend principles (see Townsend (1995) FLC 92-569). In this case, importantly in my view, all these transactions occurred whilst the parties were married and whilst they were co-directors of a small company.
In AJO v GRO (2005) FLC 92-218 the Full Court identified the following circumstances in which it is appropriate to notionally add back assets to the pool at 79,617:-
“(a) Where the parties have expended money on legal fees.
…
(b)Where there has been a premature distribution of matrimonial assets.
…
(c)In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644:
‘As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec 75(2)(o) to applications for settlement of property instituted under the provisions of sec 79.’”
Considering when the funds were removed and the period of time over which they were removed, I would not regard the withdrawals as a “premature distribution” – save arguably for the last couple of years during which time the relationship was deteriorating.
Furthermore, I am not satisfied that the wife’s actions (although clearly deliberate and calculated) were either :-
-“designed to reduce or minimise the effect value or worth of matrimonial assets”; or
-had the “overall effect” of reducing or minimising the value of the company.
In my view the husband’s actions in buying and borrowing for the timber project has had a significantly worse effect on the pool of assets.
Even if I am wrong about whether the withdrawals fall within a category identified by the Court in AJO v GRO, in the exercise of my discretion I would not add the funds back. This is because, on the whole of the evidence I accept the wife’s claim that:-
a)At the commencement of the relationship in about 1989 the parties agreed the business would provide the wife (as the home manager) with a cash draw of $300 a week. This sum was not increased over the 17 years to separation – although I accept, as the husband asserts, the company account paid for a lot of fixed expenses and also, at times for groceries.
b)The wife did not keep the $300 – but paid then to the husband $100 a week for his own needs. The wife says in her affidavit of 13 November 2008 that the husband did not seek additional funds. She infers “he had access to cash payments from the business”. The evidence does not enable the Court to be satisfied that there was large unaccounted cash available to the business or the husband – save as already identified, the unsatisfactory nature of the evidence in determining the source of funds for the purchase of the timber rights and land.
c)The husband, for the reasons set out in the wife’s submissions, was extremely money conscious. I accept, in preference to the husband’s denial, that the wife did not raise with the husband the need for more funds to run the household but that he refused.
d)It is patently obvious that as the family expanded with the birth of [Y] in 1990 and [Z] in 1992 as well as their developing needs, that $150 a week (if appropriate in 1989) was simply inadequate, as time moved on. I note the evidence of the external company accountant Mr T at paragraph six of his affidavit filed 29 July 2008 as follows:-
“6.As the accountant for the company, I can confirm the following amounts were taken by both Mr Fisher and
Ms Fisher as cash or direct payments of personal expenditure from the company. The amounts withdrawn include the weekly amount of $300 which was split $100 to Mr Fisher and $200 to Ms Fisher. The balance of money was taken as direct payments relating to general living costs which included payment of school fees and occupational costs relating to their principal place of residence.
2002 $62,259
2003 $58,861
2004 $60,153
2005 $79,743”
e)I accept the wife’s evidence that the withdrawals, the amounts of which in the circumstances I would not regard as extravagant or unreasonable, were primarily used or living expenses.
The Full Court in Marker (1998) FamCA 42 observed at paragraph 2.11 that:-
“2.11There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support. Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial Judge.”
For these reasons I do not intend to add any of these funds back to the pool.
The submissions of the husband might be construed as contending that the wife was guilty of some “economic misconduct” which of itself enlivens the discretion to notionally add back funds. If that was part of the subtle contention then I would disagree that any such “economic misconduct” by the wife occurred and further would adopt the remarks of Coleman J (sitting as the Full Court) in Mandelbaum [2009] FamCAFC 138, a judgment delivered on 4 August 2009, where at paragraph 41, His Honour says:-
“41. The Court cannot accept that, as a matter of principle, “a finding of economic misconduct” is necessary to enliven the discretion to notionally add back funds disbursed by a party to a marriage prior to trial. Nor can the Court accept that the authorities suggest or support that proposition. A finding of economic misconduct will usually provide a foundation for notionally adding back, but it is not the only situation in which there can be a notional adding-back. Each case depends upon a consideration of all the relevant facts and circumstances. In any event, disbursing the modest assets of a long cohabitation in the absence of the knowledge and consent of the other party to the cohabitation could constitute ‘economic misconduct’ if that be a prerequisite to notionally adding back funds.”
The Pool
Clearly the findings I have already made significantly shape the identity of the pool of assets. Because it will be necessary to sell the timber rights and land, the pool as found by me at best is notional. The assessment of the pool also has some relevance to the manner in which the Court considers contributions and the impact of s.75(2) factors.
Some other issues in respect of the pool were also in dispute, as is identified from the pool contended for by the husband (at paragraph 2 of his submissions) and by the wife (at paragraph 38 of her submissions). I deal with the following additional disputes:-
The Company
Mr T, the company’s external accountant for several years, in his affidavit filed 29 July 2008 opines as follows:-
“3.The business currently operates through a corporate structure. The nature of the business is such that in an open market, no realistic value can be placed on the goodwill of the business.
4.Although the business has been operated for many years, the income earning capacity is solely reliant on Mr Fisher carrying out his duties as the sole professionally qualified employee. The only other employee is an apprentice, who provides merely a support role to Mr Fisher.
5.In my professional opinion, I would place little to no value on goodwill for the purpose of valuing the business. Instead, I would anticipate its worth on an amount approximate to the current market value of any tangible assets.”
Mr T was not required for cross examination. I accept Mr T’s evidence that the business has no goodwill component of value and that the net tangible assets basis is a correct methodology to determine the value to the husband of his business – he being now the sole shareholder and director.
The difficultly that then confronts the Court, is the lack of corroborated current financial data upon which the Court can assess the net tangible assets. At the direction of the Court the husband procured and filed unaudited financial statements for the business [C] Pty Ltd. The last statements produced were to 30 June 2007 showing net assets of $88,443.75. This was a position for the company nearly 18 months before the hearing. The husband, who controls the company, made no attempt to put before the Court any current financial material. He, in my view, had an obligation to do so.
There are, on examination of the balance sheet for the company to
30 June 2007 a number of confusing and unexplained entries, including:-
-no funds in the bank and an overdraft of merely $4,324.65 with no debtors.
-The timber rights, owned by the husband, still seem to be shown as a now current asset of the company at a figure of $289,680.
-Unexplained “amortisation” of $84,285 is claimed.
-Entries in the Non-Current Assets of $82,103 (general pool) and $120,450 (long life pool) are included. No explanation at all for what these assets are – using a term with which the Court is unfamiliar – was offered by the husband or his accountant.
-Creditors are shown as an exact figure of $25,000 at 30 June 2007. In a trading entity the exactness of a whole dollar amount seems strange – however no evidence as to how the creditors and company debts now have raised to a level of $101,278 (as the husband asserts) is provided to the Court. I find it difficult to accept that bland assertion. This is particularly so when the financials historically reveal a low level of creditors. This is other for the extraordinary increase for the year ended 30 June 2005 when they stood at $338,000. It might be that this entry has something to do with the purchase of the timber rights in June 2005 – but the Court is not assisted by any of the evidence in that regard.
-Loans to “related parties” have soared. The Court does not know who the “related party’ is but could infer it is the husband personally. Since the 2001 year the related party loan was in the region of $50,000 to $70,000 approximately however in the 2006 financial year it increased, without any explanation to the Court, to $345,114 and stood at 30 June 2007 at a figure of $279,917.
It is not the Court’s role to act as a forensic accountant. Frankly the husband would have been better served in preparing his case to rather than have expended the almost $70,000 to investigate and trace the wife’s withdrawals for living expenses, have his accountant or someone else provide some evidence about these curious transactions and entries and in particular how he funded the purchase of the land and timber rights. He was in control of the data and in my view had the evidentiary onus of establishing what the net tangible assets of the business were. For the Court to merely adopt a figure of $101,278 as an amount for “company current debts” in isolation and without further explanation would be an error.
Whether they be company assets or the husband’s assets (and clearly significant intermingling has occurred), the parties did secure the expert opinion of Mr C as to the current market value of various motor vehicles and equipment.
On the unsatisfactory evidence offered to the Court, the best it can do is to include those assets, at valuation, in the pool.
Add Back for Legal Fees
The wife submits that the husband conceded he used $140,000 of company funds for legal expenses and that this sum should be added back in accordance with authorities like Farnell (1996) FLC 92-681 and Re NHC and RCH (2004) FLC 93-204.
The husband’s submissions at paragraphs 68 to 70 contend that only $50,000 should be added back, being funds “funded by the line of credit”. Shortly I deal with some concerns the Court has about the line of credit, but the issue which determines the amount that ought be added back is associated, in my view, with the sum of $69,272 for forensic accounting fees. I agree that the company seems to have undertaken the exercise for the purpose of determining where its funds went. That may, for taxation purposes, be sufficient for it to be claimed as a business deduction the husband has or intends to do so. The report was also used for the collateral purpose of these proceedings. I have already explained why, in the end, that was a futile and costly endeavour.
Applying the principles referred to on those authorities that bind me, I propose to add back $70,000 – being the sum said to have been paid of $140,000 less the forensic accountant’s fees. In respect of the forensic accountant’s fees, I propose to reduce notionally the line of credit debt by the credit the company will receive (at the company tax rate of 30%) on claiming a deduction for these expenses – which I calculate to be $20,781.
Superannuation
The husband in his submissions claims his AXA superannuation interest to be $61,415 – higher than the wife’s submissions of $52,000. I adopt the husband’s contention.
The self managed fund was not the subject of any current balance sheet. Also it is not at all clear whether the husband is the only member of the fund or whether the wife was also a member. At paragraph 67 of the husband’s submissions he says that the fund “has a current value of $43,238 in addition to the $125,000 already counted for as part of the Property C property”. I agree that where the wife asserts an interest for the husband of $87,000 (relying on this financial statement filed 29 July 2008) an element of “double dipping” might have occurred. Again however, the husband’s evidence is deficient.
It would not have been a difficult task to provide, from the company accountant (and presumably the superfund auditor) an updated balance sheet for the SMSF together with copies of member benefit statements as must be provided annually to comply with superannuation legislative requirements. The last (unaudited) balance sheet offered to the Court is to 30 June 2007, showing net asserts of $186,650.44. This included an allowance for “freehold land” of $122,725.00.
Doing the best I can again on totally inadequate evidence, I adopt that balance sheet, but substitute the figure of $125,000 for the figure of $122,725 – creating a net asset position for the fund of $188,925. In the absence of any information about who are the members, I shall adopt this figure as the husband’s entitlements at the hearing from the [C] Super Fund.
Line of Credit
In final submissions, both parties agree to the line of credit debt of $459,911 being included. For reasons already given I propose to “notionally” reduce that debt by the sum of $20,781 – to a figure of $439,130.
Although the husband’s brief evidence as to how this debt rose from the initial draw down of approximately $230,700 to this level has a lot of gaps, where the wife accepts its inclusion I see no reason to further seek to unravel its use.
Based on the findings so far, I summarise by recording that the notional asset pool I adopt is as follows:-
Property T
$520,000
[2] Property C
$125,000
Timber rights
Unknown
Holden Barina
$10,800
Plant and equipment
$60,340
Add back for legal fees
$70,000
Notional Gross Assets
$786,140
Superannuation
Wife – Sun Super
$6,750
Husband – SMSF
- AXA Super
$188,925
$61,415
$250,340
Notional Total Combined Assets
$1,043,230
Liabilities
Adjusted line of credit
$439,130
Unpaid tax of husband
$1,094
$440,224
Notional Net Pool
$603,006
Contributions
There is no doubt, and the wife concedes, that the husband’s initial contributions in 1989 were superior to those of the wife. I record that initial contributions to be broadly as follows:-
Husband
a)Property T had a value at that time of $155,000.
b)Funds in an investment account. The husband asserts, without corroboration that he held $30,000. I am prepared to accept he had savings, but I am not satisfied, at that time they were as high as $30,000 – particularly bearing in mind that shortly before cohabitation he lent the wife $28,000 to pay out her home mortgage. I do not accept his claims at paragraph 54.
c)As a qualified [tradesman] he had tools of trade and claims to have owned two motor vehicles as well as some furniture, effects and garden equipment. No probative evidence of value or benefits received on disposal was before the Court.
d)The husband swears that he had no liabilities. I accept this evidence.
Wife
The wife was the owner of the then unencumbered house of Property G which she estimated to have a value of $48,000 – however no evidence to support that view was offered to the Court. It is not in dispute that the property was sold in December 1991 for $92,500.
The wife had a car and some furniture of modest value and, of course, owed the husband $28,000 (plus interest).
As the husband’s submissions properly assert, and in accordance with authority such as Pierce (1999) FLC 92-844, the weight to be afforded to the initial contributions is assessed within the considerations of all other contributions made during this relationship – one which spanned over 17 years. I do not ignore that this asset, which was improved by the parties during the marriage, does still exist today – and has been the security for the loans sought by the husband. To that end, it provided not only a family home but also an enduring benefit.
In my view, the proper place to consider the use by the wife of the funds withdrawn from the company and the action by the husband in purchasing the land and timber rights (with substantially borrowed funds), is when considering section 75(2)(o).
From cohabitation until final separation, the parties were not the beneficiaries of any extraordinary financial windfalls. They adopted fairly traditional roles. The husband clearly was a very hard worker and took his “breadwinner” role seriously. Although as already noted I accept he managed funds frugally, still the family unit enjoyed a reasonable lifestyle. I do not say that he did not assist, when he could and was not working, with the children (including [X] who he generously and happily accepted into his family unit). He did but to a less substantial degree than the wife.
The wife contributed the funds she received from the sale of the Property G home, I am satisfied in the manner she swears she did at paragraph 16 of her affidavit. The husband disputes this however I prefer the wife’s evidence. She was the primary carer of the children and homemaking as she alleges.
I accept the wife made a contribution to the business as a bookkeeper and as a partner (initially) and then company director. Her failure to honestly record details before providing them to the accountant diminishes, in my view the weight that can be applied to her contributions to the business.
Post separation the husband has maintained the business and net interest on the substantial debts. I recognise this contribution, but again in circumstances where he chose to expend over $700,000 on a currently non-income producing property (he says it will never be able to produce income), then his additional contributions are to some degree a result of his own unilateral actions. Furthermore, he has not sought to crystalise the losses (such as they may be) by trying to sell the “timber project” now that he says he cannot mill or harvest the timber. Although the husband claims additional contributions to the AXA superannuation , the amount of those contributions is unknown.
The wife post separation initially primarily cared for [Z]. She was in a less secure income position and relied upon a spouse maintenance order – which ultimately found its way, I would infer, into the line of credit debt.
When I weigh all these contributions one against he other I cannot agree with Mr Fleetwood’s submissions on behalf of the wife that the contribution based division is equal. Nor can I agree with
Mr Balzamo’s contention that the husband’s contributions, after such a long marriage, be assessed at 70%.
I do believe however, even after a 17 year relationship that the initial preserved contribution of the Property T property when weighed with the other contributions compels a slight adjustment to the husband, on this modest notional pool of around $600,000 of five percent.
I find therefore the contribution based entitlements to be 55% to the husband and 45% to the wife.
Section 75(2) Factors
Relying upon the evidence of his general practitioner Dr R, the husband suffers from a range of challenges. Certainly the stress of finding the wife had removed funds; most probably the developments of the timber project and the stress of these proceedings (when he was at times acting on his own behalf), contributed to his anxiety disorder and his underlying diagnosed obsessive-compulsive disorder. He suffers from extensive osteoarthritis in the hands and right knee as a result of the motor vehicle accident in 1981, which overall Dr R says collectively:-
“represent a significant burden to Mr Fisher and are a substantial threat to his future earning capacity”
and that these issues “will affect his ability to continue his work commitments. It is unlikely he will be able to maintain his current workload.”
Although the wife enjoys good health, and noting both are aged 50 years, her work skills are less commercially attractive than those possessed by the husband, who is a qualified and experienced [tradesman]. The wife deposes to earning income of around $631 gross per week.
Although the husband claims, mostly as a result of the distraction of these proceedings and the high debt levels, that he now enjoys less income than the wife. Again in the absence of any current financial statements for the business, it is hard to be satisfied that is the case. Historically the husband (and his business) has generated a reasonable income and, he says, allowed it to accumulate substantial savings. Even if his working life is cut short my finding is that his earning capacity exceeds that of the wife.
I think it likely that both parents will be asked, from time to time, to assist financially their adult children (noting that [Z] is currently self supporting and does not turn 18 until next year).
The uncertainty about the sale proceeds obtained for the timber project in Property C makes it difficult to determine what the ultimate effect of the division of property will mean in real terms to these parties. It seems inevitable however that their entitlements will be modest and will also comprise a share of the combined superannuation of $257,000. At their age those superannuation benefits will be non accessible generally at least until aged 55 or perhaps longer.
The s.75(2)(o) considerations are:-
a)An allowance which should be made in the husband’s favour for his support of [X]. Whilst it is perhaps understandable that the husband, as an unrepresented litigant, sought to quantify this assistance in the way he did – that approach is not consistent with authority. The wife acknowledged she received limited financial support from [X]’s biological father.
b)The wife’s conduct in being dishonest with the details given to the external accountant may ultimately cause extra costs and penalties to be paid by the company. I take this into account.
c)Although the husband’s actions in buying the timber rights has been found not to justify an “add back” or adjustment for waste, I still regard his actions as imprudent. His perseverance with the project, in the face of his own evidence that there is no value in the timber, so as to essentially “cut his losses” and reduce his debt are confusing. The debt created and the transaction as a whole has had an adverse effect on the asset pool – if for no other reason that savings at the time or income since then could have been used in a manner which may have resulted in financial benefit.
Weighing all these factors up, I would make no adjustment for s.75(2) factors.
Just and Equitable Order
Pronouncing an order which is likely to create a just and equitable result for both parties on the findings I have made in these reasons, is frankly impossible before I receive further submissions.
I will invite those submissions at a date to be set. However considering the complications which arise in this matter, the parties may well benefit from a short period of reflection and negotiation to see whether it is possible to agree on a form of order which:-
a)If necessary, sets a framework and clear process by which the land and timber rights are sold. I would envisage it will be necessary, in the absence of an agreement, to take evidence from an agent in the region about the steps necessary to be taken.
b)It may be necessary to appoint a trustee for sale to as to ensure the best market price is obtained. It should, in principle subject to further submissions, be open to either the husband or the wife to bid at any auction of the timber rights and land.
c)The rights that exist in the SMSF cannot be ignored and must of course be accommodated.
d)It may be inevitable, as the wife contends, that the Property T property be sold – but as the husband has been associated with that property since 1983, I would try and achieve a just and equitable order that does not require that property to be sold.
I will hear the parties on a date for further submissions that allows them time to read, digest and consider the reasons delivered.
I have not ignored the proper raising by Mr Fleetwood in his submissions of the appropriateness or otherwise of referring some of the evidence in this matter to the Deputy Commissioner of Taxation. Although the submission was mostly directed to the withdrawal by the wife of funds from the company and the need, possibly, of correctly earlier financial statements, as the evidence unfolded, I hold some concerns about the source of funds used by the husband to complete the purchase of the timber rights and land.
I would need to invite further submissions from the husband and wife on this aspect of the matter before I could come to a view about whether in this case a referral of certain issues is made. I am, of course, aware of my power to do so but also the guidance in such matters offered to trial adjudications by the Full Court in Malpass & Mayson (2000) FamCA 1253.
I certify that the preceding one hundred and three (103) paragraphs are a true copy of the reasons for judgment of Baumann FM
Associate: L Parke
Date: 6 August 2009
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