Froth & Froth - [2007] FamCA 1608

FAMILY COURT OF AUSTRALIA

FROTH & FROTH

[2007] FamCA 1608

FAMILY LAW – PROPERTY – Settlement in relation to marriage

Family Law Act 1975 (Cth)

APPLICANT:

Ms Froth

RESPONDENT:

Mr Froth

FILE NUMBER:

SYF

3354

2005

DATE DELIVERED:

21 December 2007

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

Watts J

HEARING DATE:

9 - 12 July 2007 (consent orders about chattels received 4.12.07)

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Lloyd

SOLICITOR FOR THE APPLICANT:

Newnhams Solicitors

COUNSEL FOR THE RESPONDENT:

Mr Lethbridge SC

SOLICITOR FOR THE RESPONDENT:

Everingham Solomons Solicitors

Orders

Pursuant to s.79 an order be made in accordance with paragraphs 2 – 16 hereof:
The wife be declared the beneficial and legal owner of and the parties within two months from the date of these orders do all things and sign all documents necessary to transfer to the wife any right, title and interest the husband has in the following:-
2.1.Property located at …, N;
2.2.Funds at Bank;
2.3.Her shareholdings in public companies;
2.4.Her interest in the L Ski Lodge;
2.5.Her interest in the Ms Froth Superannuation Fund;
2.6.Her interest in the First State Superannuation Fund;
2.7.Her interest in her late father’s estate.
The husband be declared the beneficial legal owner of and the parties within two months from the date of these orders do all things and sign all documents necessary to transfer to the husband any right, title and interest that the wife has in the following:-
3.1.“[D] Plains”, …;
3.2.D Homestead;
3.3.Irrigation licence;
3.4.The husband’s farming business – “[Froth] Enterprises” and “[Froth] Investments”;
3.5.Any plant and equipment located at “[D] Plains” together with the proceeds of sale of the G property cattle;
3.6.The husband’s interest in the D Trust;
3.7.Any loan account in the D Trust;
3.8.Westpac account;
3.9.E Trade ANZ account;
3.10.The husband’s shareholdings in public companies (subject to order 7);
3.11.The husband’s interest in L Ski Lodge;
3.12.The husband’s interest in his self-managed superannuation fund;
3.13.The husband’s interest in Mr & Ms Froth Superannuation Fund;
3.14.The husband’s interest in the property at H.
Within two months from the date of these orders, the husband and wife do all acts and things as are necessary to transfer to the wife the proceeds of sale of the G property being approximately $809,900 currently contained within a Westpac Offset account in the joint names of the parties together with any interest accumulated on that account.
Within two months from the date of these orders, the husband and wife do all things and acts as are necessary to roll-out into a Fund of the wife’s choosing the wife’s interest in the Mr & Ms Froth Superannuation Fund amounting to approximately $159,449.
Within two months from the date of these orders, the wife do all things and execute all documents as are necessary to assign to the husband all her interest in the D Trust assessed to have a value of approximately $71,817.
The husband do all acts and things as are necessary to transfer to the wife within two months from the date of these orders shares held by him in publicly listed companies to the value of $90,111, such shares to be selected by the parties agreeing on which shares the wife takes or in default, the husband preparing four lists of shares each totalling $90,111 or more and the wife choosing the shares in one of those lists.
Within two months from the date of these orders, the wife discharge her indebtedness to the D Trust in the sum of $9,047.
Contemporaneously upon the husband complying with all of his obligations contained herein, the wife transfer to the husband or his nominee her shareholding in C Pty Ltd and upon such transfer the wife tender her resignation as a Director of the said Company and any other position that she might hold within that entity.
The husband forthwith indemnify the wife and keep the wife indemnified from all or any claims including any claims for payment of taxes, liabilities and/or debts of any nature whatsoever and howsoever existing or arising in the past or present from the wife’s position as a Director and/or Officer and/or shareholder of C Pty Ltd and that the husband use his best endeavours to immediately obtain and/or procure a release of the wife’s guarantees given if any.
The husband otherwise indemnify the wife and keep the wife indemnified in relation to any of the borrowings secured against any of the assets referred to in paragraph 3.
The husband do all things and sign all necessary documents to discharge any liability the wife might have and otherwise indemnify the wife in relation to the following liabilities:-
12.1.Westpac commercial bill in the approximate sum of $1,200,000;
12.2.Loan to D Trust in the approximate sum of $492,033;
12.3.Tax payable on the sale of shares transferred into the husband’s superannuation fund in the approximate sum of $49,990;
12.4.Westpac farm management overdraft account in the approximate sum of $464,606.
The wife will make available for collection by the husband from the N property within seven (7) days of the date of these Orders, the following items:
13.1.The Penfolds Grange (valued at $700.00) – Not inherited;
13.2.Hobnail glasses (valued at $30.00) – Not inherited;
13.3.“[…]” painting (valued at $2,000.00) – Inherited;
13.4.… landscape (valued at $350.00) – Inherited;
13.5.“[…]” (valued at $250.00) – Inherited;
13.6.Walnut desk (valued at $350.00) – Inherited;
13.7.… painting (valued at $1,200.00) – Not inherited;
13.8.Jolly Nigger Coin Box (valued at $150.00) – Inherited; and
13.9.Wine filter and decanter, pewter bowl and silver spoon – Not inherited.
The husband will deliver to the wife from the H property within seven (7) days of the date of these Orders, the following items:
14.1.The … painting (valued at $120.00) – Not inherited.
Unless otherwise specified herein each of the parties be declared the beneficial and legal owner of all assets standing to their name, credit or possession.
All previous orders made be discharged.
That if either party refuses or neglects to sign (within fourteen (14) days of a written request to do so) any documents necessary to effect the terms of these Orders, the Registrar of the Sydney Registry of the Family Court of Australia is hereby appointed pursuant to the provisions of s.106A of the Family Law Act to execute such documents on behalf of such party.
Each party, on seven (7) days notice to the court and the other party, may seek orders in relation to the implementation of these orders.

NOTATIONS

The parties wish to resolve the issue of furniture, inherited items and personalty from the former matrimonial home located at G by consent.
The former matrimonial home located at G was sold in November 2006.
The parties have used the valuation of items from the former matrimonial home (G) which were prepared by Y Valuers to ascertain the value of:
21.1.inherited items received from the estates of the husband’s late parents ;
21.2.items which were purchased before the marriage;
21.3.items which were purchased during the marriage;
21.4.items which were purchased after separation.
At the time that Y Valuers prepared their valuations the value of items held at the G property was $77,408.00. Such valuation included the sum of $9,280.00 of items inherited by the husband from his late grandparents’, mother’s and father’s estates.
It should be noted that some of the items that were valued by Y Valuers from the former matrimonial home located at G have since been sold. The value of such items according to Y Valuers was the sum of $3,183.00. The parties only received the sum of $1,997.00 from the proceeds of such sale of items. These proceeds have been deposited into a controlled moneys account with Westpac, being account number …5.
The husband acknowledges that in order to settle the issue of the distribution of furniture and personality that inherited items and purchased items will need to be accounted for separately.
It is proposed that the husband will have returned to him items, from the former matrimonial home located at G, which were inherited by him from his parents’ estates and which are currently not in his possession, to the value of $3,100.00.
It is proposed that the husband will have returned to him items, from the former matrimonial home located at G, which are not inherited items and which are currently not in his possession, to the value of $1,930.00.
It is proposed that the husband will retain items from the former matrimonial home located at G, which were inherited by him from his late parents’ estates and which are currently in his possession, to the value of $2,100.00.
It is proposed that the husband will retain non-inherited items from the former matrimonial home located at G, which are currently in his possession, to the value of $5,260.00.
It is proposed that the wife will retain non-inherited items from the former matrimonial home located at G, which are currently in her possession, to the value of $55,278.00.
It is proposed that the wife will have returned to her items, from the former matrimonial home located at G, which were not inherited from the husband’s parents’ estates and which are currently not in her possession, to the value of $120.00.
It is proposed that the wife will retain in her possession certain items which the husband asserts were inherited by the husband and his sister, as to 50% each, from their late mother’s estate, these being:
Dining room table:      $1,700.00
Sideboard:                    $2,200.00
Fold over card table:      $180.00
A total value of            $4,080.00
The parties agree that for the purposes of the Court’s Judgment the value of the items in paragraph 13 is $5,030.00 and that amount should be adjusted in the husband’s favour upon Judgment being delivered in these proceedings.
The parties agree that for the purposes of the Court’s Judgment the value of the item in paragraph 14 is $120.00 and that amount should be adjusted in the wife’s favor upon Judgment being delivered in these proceedings.
The parties agree that for the purposes of the Court’s Judgment the wife will have in her possession from the former matrimonial home located at G, furniture, paintings, cars and items to the value of $59,478.00.
The parties agree that for the purposes of the Court’s Judgment the husband will have in his possession from the former matrimonial, items to the value of $12,390.
The parties agree that for the purposes of the Court’s Judgment and in addition to paragraph 37 the husband currently has in his possession at H furniture, cars and items to the value of $39,125.00 as per Y’s valuation.

IT IS NOTED that publication of this judgment under the pseudonym Froth & Froth is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 3354 of 2005

MS FROTH

Applicant

And

MR FROTH

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

This case is about what alteration should be made in relation to the assets of Mr and Ms Froth who, at the date of separation, were married 24 years and 8 months.
A central issue in this case is how I should take into account the imbalance in the contributions the parties made initially (nearly 25 years before the breakdown of their marriage) and the inheritances received by the husband from the estates of his father and mother late in the marriage.

APPLICATIONS

Wife

The orders sought by the wife at trial were as follows:-
1.That the wife be declared the beneficial and legal owner of the following:-
(a)Motor vehicle, namely a 1999 Mercedes Benz, …;
(b)Contents contained within the G property;
(c)Property located at …, N;
(d)Funds at Bank;
(e)Her shares held in publicly listed companies;
(f)Her interest in the L Ski Lodge;
(g)Her interest in the Ms Froth Superannuation Fund;
(i)Her interest in the 1^st State Superannuation Fund;
(j)The proceeds of sale of the “[G]” property being approximately $807,853.00 currently contained within a Westpac Offset account in the joint names of the parties.
2.That the husband and wife do all things and acts as are necessary to roll-out into a Fund of the wife’s choosing the wife’s interest in the Mr & Ms Froth Superannuation Fund amounting to approximately $131,347.00.
3.That the wife do all things and execute all documents as are necessary to assign to the husband all her interest in the D Trust assessed to have a value of approximately $46,000.00.
4.That the husband do all things and acts as are necessary to pay or cause to be paid to the wife within two months the sum of $1,800,000.00 and that upon such payment being made the wife discharge her indebtedness to the D Trust in the sum of $87,700.00.
5.Upon the husband complying with all of his obligations contained herein, the wife transfer to the husband or his nominee her shareholding in C Pty Ltd and upon such transfer the wife tender her resignation as a Director of the said Company and any other position that she might hold within that entity.
6.That the husband forthwith indemnify and keep indemnified the wife from all or any claims including any claims for payment of taxes, liabilities and/or debts of any nature whatsoever and howsoever existing or arising in the past or present from the wife’s position as a Director and/or Officer and/or shareholder of C Pty Ltd and that the husband use his best endeavours to immediately obtain and/or procure a release of the wife’s guarantees given if any.
7.That the husband otherwise indemnify and keep indemnified the wife in relation to any of the borrowings secured over the parties’ properties located at “[G]”, “[D] Plains”, or elsewhere.
8.That unless otherwise specified herein each of the parties be declared the beneficial and legal owner of all assets standing to their name, credit or possession.
9.That the wife assign to the husband her interest in the plant and equipment located at “[D] Plains” together with the proceeds of sale of the G cattle.
10.That the husband pay the wife’s costs of and incidental to the proceedings.

Husband

The orders the husband originally sought were in his further amended response filed 7 March 2007.
In the respondent’s case outline and outline of argument document the husband sought orders as set out in his further amended response filed 7 March 2007, subject to the reduction of the amounts referred to in proposed orders 2 and 3 in that document from $1,600,000 in each case to $600,000 in each case.
The orders sought by the husband were:
1.That orders made on 10 August 2005 and 20 September 2005 be hereby discharged.
2.The husband and wife do all acts and things and execute all documents, instruments and writings necessary to transfer to the wife from the parties joint bank account (which holds the moneys from the sale of the G property) the sum of six hundred thousand dollars ($600,000).
3.The wife do all acts and things and execute all documents, instruments and writings necessary to transfer to the husband from the parties joint bank account (which holds the moneys from the sale of the G property) any residue moneys after the sum of six hundred thousand dollars ($600,000) has been transferred to the wife.
4.The wife be declared the sole beneficial owner of the property known as …, N and being the whole of the land comprised in Folio Identifier …, unencumbered.
5.The wife will transfer to the husband all her right title and interest in the D Family Trust.
6.The wife do all acts and things and execute all deeds, documents, instruments and writings necessary to procure to transfer to the husband her shareholding in C Pty Limited.
7.That the husband indemnify and keep indemnified the wife from all or any claims including any claims for payments of taxes, liabilities and or debts or any nature whatsoever and howsoever existing or arising in the past or present from the wife’s position as director and/or shareholder of C Pty Ltd and shall forthwith procure the wife’s release from any personal guarantee given by the wife.
8.Subject to these orders that as between the parties the husband be declared to have the sole right, title and interest in:
a.Any real property, chattel, goods, furnishings and other property which are at the date hereof in his possession;
b.All items listed in annexure 1 to this amended response;
c.Any moneys, shares, or other investments which stand alone in his name;
d.Any livestock in his own name;
e.Any motor vehicle, plant or equipment in his name;
f.Any superannuation held in his name.
9.Subject to these orders that as between the parties the wife be declared to have the sole right, title and interest in:
a.Any real property, chattels, goods, furnishings and other property which are at the date hereof in her possession;
b.Any moneys or other investments which stand alone in her name;
c.Any motor vehicle, plant or equipment in her name;
d.Any superannuation held in her name.
10.That if either party refuses to or neglects to execute a Deed or instrument (“the documents”) necessary to give full force and effect to the terms of these orders within five (5) days of notice in writing being given by the other party or his/her solicitor, then the Registrar of Sydney Registry of the Family Court of Australia is hereby appointed pursuant to the Provisions of Section 106A of the Family Law Act to execute such documents and do all acts and things necessary to give validity and operation to the documents.
11.These are not orders to which Section 77A applies but both parties regard these orders as full and final satisfaction in all financial matters between them and neither intends to make any further claim against the other for spousal maintenance or property settlement.
12.That the applicant wife pay the respondent husband’s cost.

SHORT HISTORY

The husband was born in March 1951.
The wife was born in August 1951.
The parties were married in April 1980.
The first child of the marriage, W, was born in September 1981.
The second child of the marriage, J, was born in January 1983.
The parties separated in December 2004, after a period of cohabitation of 24 years, 8 months.
A decree nisi was pronounced on 4 March 2006.

CREDIT

There are only a few issues which turn on the credit of either of the parties. The husband accused the wife of giving false evidence in relation to her picking up a branding iron. I found the way she gave evidence about that matter more convincing than the way the husband gave evidence about that matter. I also found the wife’s evidence about the relationship between the parties in terms of managing and running the farm properties and the wife’s involvement in the development of irrigation more credible than the husband’s version. Whilst he was the one who had the formal technical experience and training, the wife was not inexperienced on country properties. She grew up on a farm. She clearly is an intelligent woman and there is evidence (for example in relation to the irrigation) that she initiated suggestions that were then considered by the husband and accepted by him. I find that the husband attempted to downplay the valuable role that the wife played in that regard.

The husband also had a duty to disclose details of his financial relationship with Ms S. Not only did he fail to do this, I formed the view that he was less than candid when giving evidence about that issue. The evidence in relation to the husband’s financial relationship with Ms S is explored in more detail later.
On any issue where I am not able to rely on any other objective evidence and I only have the conflicting evidence of the parties then I prefer the evidence given by the wife.

LONG HISTORY

In July 1974 the husband purchased the property “[D] Plains” from his mother for a purchase price of $196,000. The purchase was funded by a payment of $50,000 in cash which the husband had received from his maternal grandfather’s estate. The balance was provided by an interest-free loan ($146,000) from the husband’s mother to him requiring re-payment of $4,000 per annum. The subject land was grazing land with some farming land with no significant improvements other than two or three windmills, fencing and some cattle yards. Adjacent to “[D] Plains” there was the mother’s property known as “[D] Homestead” which had a homestead block on it, workman’s cottage, sheds and a grain silo complex.
From July 1974 the husband managed the properties “[D] Homestead” and “[D] Plains” under a share farming agreement entered into with his father. Part of the effect of this arrangement was that the husband’s father rented D Plains from the husband for $4,500 per annum. This amount was sufficient to cover the regular amount needed by the husband to repay his mother for D Plains.
In April 1977 the husband was gifted 1 percent of his maternal grandmother’s interest in a company, M Company.
In late 1977 or early 1978 the husband was paid $80,000 for his M Company shares. Using those funds, the husband made a lump sum repayment in the amount of $50,000 to his mother in respect of the loan for D Plains and acquired for $30,000 a new tractor.
In December 1978 the wife purchased the property at T for $35,000.00 with the assistance of a $28,000.00 mortgage from St. George Building Society. The wife also had a Holden Torana motor vehicle worth approximately $4,000.00, cash at Bank of $10,000.00, superannuation, furniture and household items. The wife was working on a full-time basis at T Hospital.
In 1979 the original share farming agreement between the husband and his father ended. A further arrangement between the husband and his father was entered into whereby the husband and his father continued their share farming agreement in respect of the property known as D Homestead (which was owned by the husband’s mother).
In December 1979 the husband acquired, by way of gift from his father, farming plant and equipment to the value of $100,000.
The parties married in April 1980 and then occupied part of the homestead located on D Homestead. It was by that time divided into two flats with the husband and wife occupying the larger of the two. The smaller of the two flats was used by the husband’s parents when they visited from Sydney about twice a year. From the parties’ commencement of occupation of the homestead on D Homestead the wife undertook the responsibility for keeping the whole residence clean and attending to all domestic chores.
The wife bought and hung curtains in the homestead, acquired furniture and acquired other contents at her own expense.
The wife became involved in the farming activities.
The drought in 1980 affected the North West NSW area for about two years. The parties travelled around far North/West NSW looking for areas to adjust their cattle, trucking them ultimately to B in far Northern NSW. Most of the cattle were sold because it was not economically viable to retain them.
The husband operated an overdraft facility with the Bank of NSW (as it then was) with a limit of $160,000.00, but I am unable to make a finding as to what the balance of that account was at the date the parties commenced cohabitation.
At the date of cohabitation there was little irrigation infrastructure on D Plains.
The parties had discussions about installing irrigation.
In 1981 an application was made in the husband’s name to the Government for a low interest rate loan for irrigation purposes. An application was made for a “water access bore licence” to pump bore water. A licence was granted which was for 900 megalitres to be pumped and a 300 hectare irrigation system was developed on D Plains. The amount borrowed overall totalled $100,000 which was repaid by 1996.
The wife commenced cultivating and planting a garden, orchard and vegetable patch.
The wife continued her employment at the T Hospital until August 1981 shortly prior to the birth of the parties’ first child W. In July 1981 the wife ceased work shortly prior to the birth of the parties’ elder child, W.
In September 1981 the parties’ first child W was born.
The wife took up the role of full-time carer for the parties’ child W whilst providing some assistance to the husband in the day to day running of the farm depending upon the requirements of the child.
In 1982/1983 the State Bank of NSW lodged caveats over D Plains as a result of funds borrowed by the husband and the wife for irrigation development. The caveats were based on a Deed of Charge which secured borrowings made by the parties under the Farm Order Supply Act 1946.
I find the parties subsequently had Engineers draw up plans for an irrigation system to cover 800 to 1,000 acres. Initially the parties had a tractor engine to pump the water subsequently replacing it with a large Volvo diesel motor.
In 1983 the irrigation system on D Plains was sufficiently completed to commence providing water to the land. The level of production of wheat, sorghum, corn and bean crops was increased.
In January 1983 the parties’ second child, J, was born.
The wife was occupied almost full-time in domestic duties and caring for the parties’ two children.
In 1984 the wife received an inheritance from her maternal grandfather. There is a dispute between the parties as to how much was received by way of inheritance.
In January 1984 the wife disposed of her property at T for $50,000.00 netting approximately $30,000.00. Up until the date of sale the property had been leased with the rental income being utilised to fund the mortgage and other outgoings.
In May 1984 the wife acquired a property at R (“[the R property]”) for $96,000.00. This property was funded utilising the proceeds of sale of the T property together with her inheritance plus a mortgage from Westpac of $46,000.00. The acquisition was to provide accommodation for the family as the accommodation at D Plains was becoming inadequate for the parties and the two children.
In October 1985 the wife re-commenced her employment at the T Hospital working between sixteen to thirty hours per week. The wife continued in this employment until mid September, 1988. During this period the wife also provided what assistance she could to the husband in and about the properties.
The wife’s routine was that prior to commencing work she would prepare the evening meal and organise the children’s needs for the morning, take the children to their neighbour who would then baby sit them allowing the wife to travel to work her 8.5 hour shift. I accept that all of the funds from her labours in this regard were utilised by the family.
In 1986 W commenced school. The wife became actively involved in his school life being Secretary of the P&C as well as working in the Canteen, attending reading classes and assisting with fundraising.
Following the acquisition of the R property, the husband borrowed funds to repay the balance of the debt outstanding to his mother. The husband gave conflicting evidence as to how much remained outstanding to his mother at that time. I deal with that issue later. The husband borrowed additional funds to use in connection with the farming operations conducted on both the D properties. In all, $350,000 was secured by way of mortgage over the D Plains property.
The parties subsequently agreed to a proposal put forward by the husband’s father that he would construct a new home on D Homestead for the family. The husband’s mother, using, in part, the funds repaid to her by the husband, built the new home on the D Homestead property. The construction cost was approximately $170,000.
In 1987 the parties moved into the newly constructed property on D Homestead. Both the husband and wife fully participated in the assistance concerning the construction of the home, organising builders and tradesmen with the wife selecting the tiles, paint, colour and the like. The wife undertook the creation of a garden surrounding the newly constructed home on D Homestead.
In August 1988 the property at R was sold for $125,000.00. The wife received $80,000.00 being the net proceeds of sale. The proceeds were then placed on deposit with the interest being used by the parties for their family income. The wife subsequently commenced to acquire shares with some of the proceeds of the R property utilising the services of a Stockbroker.
In September 1988 the wife ceased part time work at T Hospital.
On 4 April 1989 the wife commenced casual work at the local Hospitals working between one and three days per week on average. The wife remained in this employment until April 1991.
In early 1990 the parties commenced discussions concerning the structuring of the farm property and business and to provide for a more financially beneficial outcome.
In 1991 the child W was successful in obtaining a full academic scholarship to attend boarding school in Sydney and in January 1993 W commenced his boarding in Year 6.
The parties set up a superannuation fund. Contributions were subsequently made to that fund including the wife’s earlier accumulated superannuation of $25,000.00 received as a consequence of her outside employment to that date.
On 1 December 1991 the wife commenced permanent part-time employment at a local Private Hospital working two days per week, remaining in that employment until 12 February, 1996.
In 1994 the parties engaged Mr E as a Farm Manager. He subsequently left for the purpose of attending College, but resumed his employment in 1996.
In 1995 the child J commenced boarding school in Sydney in Year 7.
In June 1995 the parties acquired a townhouse at L (“[the L property]”) for $273,000.00 in the name of the wife. The property was funded by way of a gift of $150,000.00 from the wife’s father and a mortgage from the Westpac Bank in the sum of $130,000.00. At about the same time the husband gifted 200 tonnes of grain from a D Plains’ harvest to the wife. It was sold for $20,000.00. That amount was used by the wife in relation to the costs associated with the acquisition of the L property. The husband’s recollection is that the grain sold by the wife to assist in her purchase of the property amounted to $24,000 and the mortgage amounted to $100,000. I accept the wife’s version.
The L property was never leased and was used for the family’s benefit only. The mortgage instalments due to Westpac were made from farm income.
In early October 1996 the parties acting on the advice of their accountant, Mr P, acquire the company C Pty Ltd (“[C Pty Ltd]”). The husband and wife are directors and each owns 1 share in the company. The company was acquired for the purpose of becoming trustee of the D Trust.
In November 1996 the D Trust was settled with C Pty Ltd as its trustee. The trust is a discretionary trust and each of the husband and the wife are jointly the holders of the power of appointment under the terms of the trust settlement.
The wife received as a gift from her father of a John Deere tractor. This tractor became part of the farm equipment and was used for farming on the D property.
From the time of the establishment of the D Trust, the farming operations conducted on the properties, D Plains and D Homestead, were undertaken by C Pty Ltd on behalf of the D Trust. The income then generated by the farming activities on the D properties was then declared the income of the Trust. The arrangements the parties had was that the husband would continue to lease D Homestead from his mother for $24,000 per annum rental with the husband then sub-leasing D Homestead back to C Pty Ltd. That then required C Pty Ltd to be responsible for paying all the maintenance and outgoings in respect of the D Homestead . C Pty Ltd did not pay rent directly to the husband. C Pty Ltd did however undertake and service the repayments of the husband’s overdraft and debts with Westpac which by 1996 had amounted to approximately $1.1 million.
After 1996 the farming enterprise conducted in North West NSW on the husband and his mother’s properties experienced severe financial difficulties and as a consequence the debt secured in respect of it gradually increased. Between 1998 and 2000 an increase in Westpac borrowings took place due to the floods which damaged crops and wiped out irrigation earth works. By mid-2001, the debt had increased significantly to around $1.6 to $1.7 million
After 1996 significant renovations, improvements and maintenance were carried out by the parties over the subsequent years.
In July 1998 the husband accepted a 7-year contract as a consultant with a research company. As a consequence of this employment, the husband was paid a consulting salary until 30 June 2005 in the amount of approximately $26,000 per annum. As part of this job the husband was frequently required to travel interstate. I accept the wife’s contention that this meant that the husband spent less time involved in the farming enterprise conducted at D. The parties re-employed Mr E as a Farm Manager. I accept that the parties felt comfortable with Mr E running and undertaking the large part of the management of the farm.
In 2000 the parties went on a skiing holiday. The husband fell and damaged his shoulder and subsequently had corrective surgery in August 2000. For the period from August 2000 until June 2001, the husband was unable to undertake any heavy farming work. The husband subsequently relocated to the New England region where he became involved in a computer company. He was employed between August 2000 until December 2000. The husband would return to the “[D]” property on weekends only.
The wife became involved in a business assisting farmers known as ‘[V Company]’.
The husband entered into a business venture which the wife says resulted in a loss of about $170,000.00. It is not part of the wife’s case that there should be any accounting by the husband for this loss.
The wife says, and I accept, that she became more involved in discussions with the Manager concerning the running of the properties.
The wife says, and I accept, that she asked the husband to retire his position as a consultant and to return to fully participate in the management of the property but the husband did not.
In February 2001 the husband sold a parcel of BHP shares for $68,058.00 applying those funds to the reduction of debt. I assume the source of these shares are those the husband had at the commencement of the cohabitation.
In 2001 a mortgage was obtained from the Rural Assistance Authority in the sum of $100,000.00 as part of a flood relief package from the Federal Government. The mortgage was secured against the L property and was used to purchase shares on the Stock Exchange.
In June 2001 the wife travelled to the United Kingdom to visit the parties’ son, J.
On her return to Australia in or around July 2001 the wife moved to L taking up employment at the O Hospital.
During 2002 the husband continued to work as a consultant. The farm manager continued to be employed at D Homestead. The husband’s evidence is that the wife would visit approximately 1 weekend a month.
In January 2002 the husband’s father, Mr Froth Snr, passed away. The husband received a distribution from his estate of about $478,000.
In 2002 the wife received from her father the amount of $22,000. This payment was associated with the transfer to the wife’s father of a John Deere tractor.
In 2002 the wife sold the L property for $540,000. Using part of the sale proceeds the wife acquired a property at N (“[the N property]”) for the amount of $340,000. A mortgage for monies borrowed from the Rural Assistance Authority (about $100,000 with which the wife had previously purchased shares) was transferred from the L property to the N property.
On completion of the purchase of the N property, the wife set about undertaking renovations to the premises. In October 2002 the plans for the N property were lodged with the Council and subsequently approved.
In January 2003 the wife attended and completed an Owner Builders Course in anticipation of renovating and reconstructing the N property. In May 2003 Z Constructions commenced work on the renovation and reconstruction of the N property. In December 2003 all work associated with the N property renovation and reconstruction was completed with the wife attending the site each day, cleaning up after builders, organising some tradesmen and sourcing and purchasing fittings. The renovations cost approximately $300,000 on the wife’s evidence. In order to assist with the payment for the cost of renovations, the husband in or about December 2003 paid an amount of about $50,000 to her from the D Trust. Otherwise, the cost of renovations was funded from the balance proceeds of sale of the L property assets under the control of the wife and her income. The N property replaced the L property as the family’s home on the Central Coast. On completion of the purchase of the N property, the wife occupied it as her home until the completion of the purchase of the property at G (that is, the wife lived at the N property from December 2003 to August 2003).
In 2002 the wife became aware that the husband was making enquiries to sell both the D properties and was approaching real estate agents for that purpose.
On 26 September 2002 the husband’s father’s home at A was sold at public auction for the sum of $4 million. Pursuant to the terms of the husband’s father’s will, the husband’s sister had a right to elect to acquire the home. However, she decided not to do so and as a consequence the amount subsequently received by the husband from his mother’s estate (the mother being the primary beneficiary of her husband’s estate) increased by approximately $1.6 million.
In 2002/2003 the parties agree upon a mission statement in terms of the future running of the farm and their assets.
In 2002/2004 the Department of Land and Water Conservation and Department of Infrastructure Planning and Natural Resources modified the volume of water the parties can take from the irrigation process.
In 2003 the husband and the wife enter into a contract to purchase the property at G (“[the G property]”) for a purchase price of $1,387,000. The total cost of purchase including legal costs and stamp duty amounted to $1,447,000 which was paid in the following manner:
87.1.Each of the husband’s and wife’s sons lent the parties $175,000 from the proceeds of their paternal grandfather’s estate;
87.2.The husband contributed the cash in the amount of approximately $386,000 received by him from his father’s estate;
87.3.The husband sold his life assurance policy with the MLC being the policy received from his maternal grandfather for a sale price of $97,284;
87.4.The D Trust disposed of shares to the value of $64,849;
87.5.The wife sold shares acquired with her Rural Assistance Authority loan for a sale price of $93,336 and contributed those proceeds. The original loan was a joint borrowing;
87.6.The balance was provided by way of a further borrowing from Westpac Bank in the amount of $380,000 secured against the property D Plains.
The wife subsequently moved into the G property and leased the N property to tenants.
Forty eight cows with calves were purchased for the G property by C Pty Ltd. Each year thereafter the calves were weaned and sent for sale.

In January 2003 the wife sustained a back injury at work, subsequently being placed under the care of Dr. H.
In 2004 the wife developed a painful left heel and was referred by Dr. H to an orthopaedic surgeon Dr. U.
A gas company announced that they would be moving into the area as they had gas exploration rights in the area. The wife became part of a committee known as the “[…]” to fund an aggressive campaign to have the drilling operation stopped. The wife agitated in her capacity as a committee member to have the drilling stopped which was ultimately successful.
The husband’s mother passed away in March 2004 and the husband received about $2,860,000 from his mother’s estate. This included real estate, cash, shares and chattels.
Counsel for the wife accepted that overall the husband received about $3.3 million (it is more precisely $3,347,734) by way of inheritances from the estates of his father and mother between January 2002 and June 2005.
The wife received a bequest from the husband’s mother in the amount of $5,000.
Following the completion of the estate of the husband’s late mother the husband leased D Homestead to C Pty Ltd.
In 2003/2004, using some of the cash from the proceeds of his mother’s estate, the husband made the following payments:
97.1.On 7 July 2004, the husband paid $370,000 to Westpac Bank to discharge the mortgage over the G property (paragraph 119(a) husband’s affidavit);
97.2.On 18 June 2004, the husband purchased for the wife’s use a Mercedes Benz motor vehicle for a purchase price of $67,700 (paragraph 119(b) husband’s affidavit);
97.3.On 1 December 2004, the husband re-paid his son W the amount of $175,000 which had been borrowed to acquire the G property (paragraph 119(c) husband’s affidavit);
97.4.The husband spent a further $52,000 on renovations to the property at G (paragraph 119(d) husband’s affidavit).
In December 2004 the parties separated. Following the parties’ separation, the wife remained in occupation of their property at G and the husband moved to rented premises in the New England region.
Since Christmas 2004/New Year 2005 the wife has been responsible for the maintenance and upkeep of the G property including the mending of fences, maintaining of pastures, weed control and tending to the cattle.
On 7 April 2005, the husband terminated the trustee of the D Trust’s sub-lease of the properties, D Plains and D Homestead. The husband gave notice that as from the 1^st July, 2005 he and “[Froth] Investments” intended to undertake the former farming and grazing operations conducted by the D Trust through two businesses trading as “[Froth] Enterprises” and “[Froth] Investments”. The wife contends that the husband’s decision to do so was unreasonable whereas the husband contends that it was necessary having regard to the wife’s unreasonable interference in the day-to-day management and conduct of the D Trust. The husband would contend that this is particularly so in circumstances where it has been the husband who has primarily managed and conducted the farming and grazing affairs not only since the inception of the D Trust but since the date of the parties’ marriage. There was no notification provided to the wife as to the transfer of any stock, plant or equipment to those entities.
The wife organised a sale herself of some of the weaners receiving $13,642.83. The husband transferred stock to his own business “[Froth] Enterprises”.
From 30 June 2005 up to the date of the hearing before me, C Pty Ltd as Trustee of the “[D] Trust” operated the farming business conducted on both D Plains and D Homestead.
On 29 July 2005 the husband arranged for the transfer from Froth Enterprises the sum of $304,565.91 into a commercial bill facility.
On 10 August 2005 the husband consented to orders which restrained him from doing any act or thing which would cause or tend to cause any part of the business of the Trust to be assigned to any other entity without the wife’s consent and/or leasing or otherwise dealing with any of the assets of C Pty Ltd in particular plant, stock and equipment without the consent of the wife.
On 19 August 2005, the husband gave notification to the wife, via the husband’s Solicitor, that the husband wanted the wife’s consent to sell some of the plant and equipment of C Pty Ltd.
On 25 August 2005 the husband announced that C Pty Ltd as Trustee for the “[D] Trust” will cease trading as of the 30^th June, 2005.
In September 2005 the husband renewed his acquaintance with his present partner, Ms S. Subsequently, Ms S relocated to the New England area.
On 20 September 2005 the husband consented to an injunction being made against him in the following terms:-
“That pending further order the husband is restrained from further encumbering or disposing of any real estate in which he has an interest”.
On 21 September 2005 the wife gave notification to the husband that she had discovered that $353,000.00 was transferred from the C Pty Ltd account to the account of Froth Enterprises such transfer/transfers being conducted without her consent and that further transfers of $13,000.00 and $60,000.00 came from the account of C Pty Ltd to the bank account of Froth Enterprises. In October 2005 W moved out of the G property and into rental accommodation. J moved out of the G property in 2006.
In January 2006 Ms S purchased the property “[X]” in H for a purchase price of $860,000. The purchase price is entirely funded by a loan from Westpac Bank in the amount of $900,000. The husband has guaranteed Ms S’ performance under the terms of that mortgage by way of a personal guarantee. Additionally, the husband now and has since completion of the purchase, resided in the property paying the interest from month to month due on the mortgage. The interest amounts to $5,000 per month.
On 21 March 2005 the husband caused the repayment of Rural Assistance Loan from the “[D] Trust” in the sum of $83,415.13.
In August 2006 the wife’s father passed away.
On 1 September 2006 the parties agree to sell the G property for not less than $1.85 million.
In November 2006 the parties having sold the property at G, receive the net amount of $1,727,612.
In 2006 the husband seeks to have property which formed part of his mother’s and father’s estate but which was located at G provided to him. However, in response the wife’s solicitors write in the following terms:
“So that there is no misapprehension on your client’s part, whatever items your client claims to be part of the inherited property (and this is not admitted) still form part of the matrimonial pool of assets which will be divided by court order in the absence of agreement between the parties.”
As a consequence, the wife retains, apparently in storage, items which were bequeathed to the husband as a consequence of the death of his father in 2002 and, more recently, the death of his mother in 2004.
The parties have now reached agreement in relation to the division of chattels and the monetary adjustment arising from that division.
On 19 April 2007 orders were made providing for $1.0 million of the proceeds of the G property sale to be contributed to the wife’s Superannuation Fund.

GLOBAL OR ASSET BY ASSET APPROACH

Counsel for the wife argued that the matter should be approached by looking at the net assets globally. Counsel for the husband suggested a modified asset by asset approach. He initially indicated that there should be three pools. The first pool would be referrable to net assets the husband had at the commencement of the marriage. The second pool would be net assets referrable to the husband’s inheritances towards the end of the marriage. The third pool would be the balance of the net assets. He did not however attempt to specifically quantify how much of the assets should be in each of the pools.
Both counsel agreed that superannuation should be included in the general pool of non superannuation assets.
It is my view, in the circumstances of this case involving, as it does, a marriage, of nearly 25 years, it would be appropriate to adopt a global approach and in my view the matters referred to by the husband in submissions do not persuade me that it is important to approach the matter by dividing the assets into three pools (see Norbis & Norbis (1986) FLC 91-712; Lenehan & Lenehan (1987) FLC 91-814; Zyk & Zyk (1995) FLC 92-644).

LEGAL PRINCIPLES

The approach taken in these Reasons for Judgment

In this matter my task is to:
122.1.Identify and value the property, assets, financial resources and liabilities of the parties;
122.2.Identify relevant contributions and assess them;
122.3.Consider relevant matters referred to in Section 79(4)(d) – (g) FLA;
122.4.Ensure my order adjusting the property assets and liabilities of the parties is just and equitable.

Initial contributions and inheritances

It is appropriate, given the arguments raised in this matter and particularly the reference to and discussion of Williams & Williams [2007] FamCA 313, to refer to some of the statements of principle made by previous courts, relating to initial contributions and inheritances.
The Full Court (Asche SJ, Fogarty and Murray JJ) in Crawford & Crawford (1979) FLC 90-647 at 78,411 – 78,412 said the following:-
“In short, Counsel argued that the amount of the husband’s original contribution of capital should be extrapolated proportionately to the inflationary growth of the real estate. This may be a persuasive argument if the marriage has been of short duration. However, it was of a comparatively long duration – something in excess of 19 years. In our view the longer the duration of the period of the cohabitation the less weight need be given to the initial contribution of capital by either spouse at the beginning of the marriage. It becomes, in our view, increasingly difficult as the period of cohabitation lengthens, to justify placing a special value on a single item such as an initial cash contribution made many years before and treating it mathematically, when indeed there are so many other facets of marital contribution which become equally, if not more, deserving of attention. The contribution of assets by each party to the marriage is always, of course, a factor to be taken into account, but we see the significance of the initial contribution gradually diminishing with the passing of the years. The rate of diminution and, for that matter, the significance of the initial contribution, are matters which will vary according to the circumstances of each case”.
In White & White (1982) FLC 91-246 the Full Court (Evatt CJ, Marshall SJ and Strauss J) was dealing with the treatment of a block of land that had been brought into an eight year marriage. The trial judge had discounted carrying it forward as a mathematical proportion. The Full Court said (at pages 77,365 – 77,366):-
“The ‘principle’ of that case (Crawford) is that an original contribution should not be carried forward as a mathematical proportion and that such contribution is but one of a number of factors to be considered. The longer the marriage the more likely that there will be other supervening factors of significance….In the circumstances of the case, we are unable to agree with the conclusion of the learned trial judge that the principle in Crawford’s case ‘would severely reduce its impact’.”
The case which gave the so called “erosion principle” its name was Lee Steere & Lee Steere (1985) FLC 91-626 where the Full Court (Fogarty, Maxwell and Nygh JJ) said at page 80,078:-
“The longer the duration of the marriage, depending on the quality and extent of her contribution, the more the proportionality of the original contribution is reduced. Although the decision of the Full Court in Crawford and Crawford (1979) FLC 90-647; (1979) 25 A.L.R. 82 can no longer stand in the light of the High Court’s decision in Mallet v Mallet (supra), since that case was clearly based on the assumption that adjustment should be made from a 50/50 median, the proposition that the strength of a contribution made at the inception of a marriage is eroded, not by the passage of time but by the off-setting contribution of the other spouse, still holds true.”
The debate about principle reached its sharpest point when two senior judges of the Full Court took opposing views in Money & Money (1994) FLC 92-485. In that case Lindemayer J (at page 81,060) said that the:-
“The husband’s initial contribution could only be eroded by some imbalance of subsequent contributions favourable to the wife.”
On the other hand, Fogarty J said (at page 81,054):-
“In an appropriate case, in my view, a initial substantial contribution by one party may be eroded to a greater or lesser extent by the later contribution of the other party even though those later contributions do not necessarily at any particular point outstrip those of the other party…..the respective contributions of the parties over a long period of marriage may ‘offset’ the significance which might otherwise be attached to a greater initial contribution by one party.…ultimately, when it comes to the trial such a contribution is one of a number of factors to be considered. The longer the marriage the more likely it is that there will be latter factors of significance and in the ultimate the exercise is to weigh the original contribution with all other, later, factors and those later factors, whether equal or not, may in the circumstances of the individual case reduce the significance of the original contribution”
Holden J, whilst pointing out these passages were obiter, was attracted to the reasoning of Fogarty J and could not agree with the statement of Lindenmayer J.
The debate was resolved in Bremner & Bremner (1995) FLC 92-560 where the Full Court (Nicholson CJ, Baker and Tolcon JJ) indicated that the approach taken by Fogarty J in Money was the preferred approach. The Full Court did not agree with the approach taken by Lindemayer J.
In Bremner & Bremner (supra) Nicholson CJ added (at page 81,589):-
“I would adopt the approach taken by Fogarty and Holden JJ in Money & Money as correctly representing the law. I would also add that when one considers cases of this sort, it should be remembered that they are not decided upon a pure mathematical basis, and looked at from the point of view abstract Justice. It would appear to me that in a case where the assets of the parties are a comparatively modest $360,000 and there has been a 20 year marriage and two children, where both parties have worked as these people have, it is difficult to argue with a judgment which divides those assets equally.”
The Full Court (Barblett DCJ, Finn and Butler JJ) in Way & Way (1996) FLC 92-702 again affirmed the approach taken by Fogarty J in Money.
The Full Court (Barblett DCJ, Fogarty and Mushin JJ) in Clauson & Clauson (1995) FLC 92-595 dealt with an argument by counsel for the husband very similar to the argument run in Crawford dealing with the mathematical approach. The Full Court said, at page 81,090 – 81,910:-
“It is neither practical nor desirable to approach cases in such a pseudo mathematical way but nevertheless it does provide a rough initial point of reference….
The circumstances that the significance of the initial contributions may be eroded over the passage of time because of the other contributions which the parties make over the duration of the marriage is, we think, not a matter of controversy (the Full Court then referred to Money, White, Crawford and Bremner).”
The Full Court (Ellis, Baker and O’Ryan JJ) in Pierce (1999) FLC 92-844 attempted to add a gloss to the erosion principle in the following way, at page 85,881:-
“In our opinion it is not so much a question of erosion of contributions but a question of what weight is to be attached, in all the circumstances, to the initial contributions. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.”
The recent Full Court decision of Williams & Williams [2007] FamCA 313 (Kay, Coleman and Stevenson JJ) was discussed in submissions.
The Full Court in that case revisited the question of the weight to be placed upon the value of initial contributions and the erosion principal.
The Full Court quoted with apparent approval passages from competing decisions of the Court of Appeal of the Supreme Court of New South Wales made under the Property (Relationships) Act NSW 1984, Kardos & Sarbutt (2006) 34 Fam LR 550 (Basten JA, Hunt AJA and Breteton J) and Bilous & Mudaliar (2006) 35 Fam LR 55 (Ipp JA, Giles and McCall AJA).
Paragraphs 23 – 27 of Williams & Williams are as follows:
23.In Kardos & Sarbutt (2006) 34 Fam LR 550 the parties had lived together for three years. There were no children of their relationship. At the commencement of the relationship the appellant owned real estate worth $290,000 which at the time of trial was worth $683,500. The respondent owned real estate at the commencement of the relationship worth $241,000 which at the time of the hearing was worth $405,400. During the course of the relationship the appellant had earned $190,000 while the respondent had earned $110,000. At the trial each received a return of their initial capital and otherwise shared equally in the combined capital growth, subject to a minor allowance for the fact that one of the parties had provided the use of her house as the parties’ joint residence.
24.The Court of Appeal (Basten JA, Hunt AJA and Brereton J) allowed an appeal by Ms Kardos and reduced the amount payable by her from $100,000 to $36,000. In so doing the court said that to give due weight to the relative contributions of the parties it was appropriate to recognise that capital gains are often the product of the initial introduction of property rather than of ongoing contributions. It was said that increments in capital value of an asset held at the outside [sic] of a relationship were not part of the fruits of the relationship but arose as a result of the asset having been held by one of the parties at the commencement of the relationship and not the result of the joint efforts of wage earning, homemaking and parenting and mutual support. Brereton J said at [61]:
If one party has a house worth $250,000 at the outset and it appreciates during the relationship to be worth $750,000, the contribution is of a house which at separation is worth $750,000 – not of money worth $250,000.
25.In a later decision a differently constituted Court of Appeal in Bilous & Mudaliar (2006) 35 Fam LR 55 Ipp JA with whom Giles and McColl JJA agreed was careful to limit the effect of what had been said by Brereton J in Kardos & Sarbutt. Bilous & Mudaliar was a case that involved claims arising out of an 11 year relationship. The pool of assets was $1.7million. The trial judge had awarded the male partner 20 per cent of the available pool of assets. The Court of Appeal increased his share by a further $200,000. When commenting of the views of Brereton J in Kardos, Ipp JA said at [62] – [63]:
… His Honour appears to have stated a rule to the effect that, for the purposes of determining what order should be made under s 20(1) of the Property Relationships Act, any increase in value in assets initially contributed should be regarded, in all circumstances, as entirely a contribution by the party who contributed those assets. If that’s what his Honour intended, I do not agree.
Determinations as to what order should be made under s 20 are to be made solely on the grounds of the justice and equity of the case. The justice and equity of the case may derive from the fact that the party who owns the family home or other party was able to retain that property, while the market value increased, because “of joint efforts of wage earning, homemaking and parenting, and mutual support”. In some instances the non-financial contributions of one party may result in property of the kind in question not having to be sold. In other instances, the non-financial contributions of one partner may allow the other to advance his or her career and earn a high income that enables the property in question to be maintained and retained. Thus, an increment in capital value may well result, indirectly, from joint efforts of wage earning, homemaking and parenting and mutual support.
26.We think that there is force in the proposition that a reference to the value of an item as at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution towards the parties. Thus where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing or the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in so doing it is equally as important to give recognition to the myriad of other contributions that each of the parties has made during the course of their relationship.
27.In Pierce & Pierce when speaking of the relevance to be paid to initial contributions the Full Court (Ellis, Baker and O’Ryan JJ) referred to Fogarty J in Money & Money (1994) FLC 92-485 at 81,054; (1994) 17 Fam LR 814 at 816:
…respective contributions of the parties over a long period of marriage “offset” the significance which might otherwise be attached to a greater initial contribution by one party…ultimately, when it comes to the trial such a contribution is one of a number of factors to be considered. The longer the marriage the more likely it is that there will be latter factors of significance and in the ultimate the exercise is to weigh the original contribution with all other, later, factors and those later factors, whether equal or not, may in the circumstances of the individual case reduce the significance of the original contribution.

What does all this mean?

The quote of Brereton J needs to be read in its context. The relationship in Kardos & Sarbutt (supra) was less than three years and in the present case it is useful to refer to another part of that decision.
At paragraphs 66 and 67 Brereton J says:
66.In Howlett & Neilson, Hodgson JA .....observing that there was no clear statement concerning the “erosion principle” in cases under the Property (Relationships) Act, suggested that it was by no means clear that it would apply to the same extent as under the Family Law Act where matters other than contributions can be taken into account and where the relationship involves a public commitment to mutual support for life (Howlett [34]). However, as the Full Family Court pointed out ..... it is really a matter of weighing initial contributions with all other relevant contributions. In a short marriage, the other contributions may be relatively insignificant. In a long marriage, ongoing income contributions and contributions as a homemaker and parent, if they have not resulted in the acquisition of assets sufficient to recognise them, may warrant the “erosion” of initial contributions so that all contributions can be satisfied to some extent, though not in full, out of the available property. There is no reason why this approach would apply to any less extent under the Property (Relationships) Act than under the Family Law Act; it does not involve taking into account matters other than contributions, but is part of the methodology for weighing and balancing the different contributions.
67.Significant factors affecting the application of the “erosion principle” are the length of the relationship and, in particular, the extent to which there have been other or offsetting contributions which also have to be satisfied from the available pool. It is to accommodate those contributions that the initial contributions are “eroded”. [my emphasis added]
The Full Court in Williams & Williams (supra) does not say anything that would erode the “erosion principle” as explained by Fogarty J in Money & Money (and endorsed by the Full Court in both Bremner & Bremner and Pierce & Pierce).
Fogarty J In Money & Money (1994) FLC 92-485 at 81,054 said:
“The longer the marriage the more likely it is that there will be later factors of significance and in the ultimate the exercise is to weigh the original contribution with all other, later, factors and those later factors, whether equal or not, may in the circumstances of the individual case reduce the significance of the original contribution.”
The Full Court in Pierce having specifically, inter alia, quoted the above passage from Money with apparent approval added the gloss I have referred to above but which I again restate:-
28.In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contributions. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of their contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home.”
The effect of these passages might be illustrated by a simple example. At the commencement of a long marriage one party has a painting then worth $250,000. At the date of the hearing it is worth $750,000. Both parties have assiduously contributed to the best of their respective abilities during this long marriage. Due to misfortunate, at the end, the painting is all that is left. Can it be the result that the person who contributed the painting at the beginning is entitled to get it back? The answer must be no. This is because at the end of the long marriage in this example, the sum of the contributions made by each party cannot be satisfied out of the available property.
The statement in Williams & Williams, about giving recognition to the value of introduced assets at the date of hearing has to be read, particularly in a long marriage, in light of the statement by Bereton J at paragraph 66 of Kardos & Sarbutt that “in a long marriage, ongoing income contributions and contributions as a homemaker and parent, if they have not resulted in the acquisition of assets sufficient to recognise that, may warrant the ‘erosion’ of initial contributions so that all contributions can be satisfied to some extent, though not in full, out of the available property”.

The significance of the timing of inheritances received

Some authorities have given late inheritances special treatment.
In an often quoted passage, the Full Court (Nicholson CJ, Nygh and Tolcon JJ) in Bonnici & Bonnici (1992) FLC 92-272, said:-
“The other party cannot be regarded as contributing significantly to an inheritance received very late in the relationship and certainly not after it has terminated, except in very unusual circumstances. Such circumstances might include the care of the testator prior to death by the husband or wife as the case may be or other particular services to protect a property. See James & James (1978) FLC 90-487.””
This statement in Bonnici needs to be read in light of the two paragraphs that precede it:-
“The answer, we consider, must depend upon the circumstances of individual cases. If, for example, in the present case, there had been no other assets than the husband's inheritance, but the wife had, as his Honour found, clearly carried the main financial burden in the support of a family and also performed a more substantial role as a homemaker and parent than the husband, then it would clearly be open and indeed incumbent upon a Court to make a property settlement in her favour from such an inheritance.
A property does not fall into a protected category merely because it is an inheritance. On the other hand, if there are ample funds from which an appropriate property settlement can be made and a just result arrived at, then the fact of a recently acquired inheritance would normally be treated as an entitlement of the party in question.”
In the single instance decision of Burke (1993) FLC 92-356, Fogarty J excluded a late inheritance from the asset pool.
But in Farmer & Bramley (2000) FLC 93-060 Kay J gave the wife 12.5% of a $5 million lottery win that was received by the husband well after separation.
In Farmer & Bramley Finn J said at page 87,948:-

“56. First an issue has arisen in this appeal as to whether an entitlement based on contributions made to the welfare of the family can only be satisfied out of property available to the parties at the time the contribution was made. In my view, there is nothing in s.79(4)(c) or indeed else in the Act, or in the authorities to date, which would justify such a limitation. Again in my view, if such a limitation were to be applied in any particular case, its justification would have to be found in the generally worded limitation in s.79(2) that a court shall not make an order under s.79 “unless it is satisfied that in all the circumstances it is just and equitable to make the order”.

57. Secondly, if it was to be determined that a majority of the community considered that one spouse should, as a general rule, have no entitlement to share in property either by good fortune or good management acquired after separation by the other spouse, then the Act would need to be amended to make this clear. As the Act currently stands, the jurisdiction conferred by s.79(1) to alter the interests of spouses in property extends without limitation to all the property which either spouse is entitled “whether in possession or reversion” (s.4).”

A majority in the Full Court (Baker and Rowlands JJ) in Aleksovski & Aleksovski (1996) FLC 92-705 at page 83,437 said this:
“Whilst weight would and must be given to a contribution which a party makes shortly before the separation, less weight may be given to a contribution made by one of the parties to a marriage early in the cohabitation period of a long marriage, particularly in circumstances where the contribution has gone into the parties’ assets or been used up in the payment of family expenses.”
In the same case Kay J (in the minority), in a passage that has attracted adverse academic comment[1] and has given rise to the phase “Justice Kay’s gold bar”, said:
“It was said in the course of argument that great emphasis needed to be placed on the wife's contribution because it was received in cash late in the marriage. His Honour said in argument (at p 56):
``Now if this had happened at the beginning of the 18 years of marriage then we get into the myths (sic) of time arguments about what may have happened and all the things that have gone with it but this is not the myths (sic) of time, we have not even got the beginnings of a decent fog.''
Mr Smith, on behalf of the husband, replied to that statement:
``I have never been one of those members of Counsel who waste the court's time and to argue stupid arguments. I have got to say, and I say this quite succinctly, that I cannot answer your Honour.''
For reasons discussed later in this judgment, it is my view that Mr Smith could quite comfortably have answered his Honour.
What his Honour had to assess by way of contribution was 18 years where each party provided their labours towards the acquisition, conservation and improvement of assets, and towards the welfare of the marriage generally. Additionally, late in the marriage, the wife received a large capital sum arising out of a motor car accident. In my view whether the capital sum was acquired early in the marriage, in the midst of the marriage or late in the marriage, the same principles apply to it. The Judge must weigh up various areas of contribution. In a short marriage, significant weight might be given to a large capital contribution. In a long marriage, other factors often assume great significance and ought not be left almost unseen by eyes dazzled by the magnitude of recently acquired capital. A party may enter a marriage with a gold bar which sits in a bank vault for the entirety of the marriage. For 20 years the parties each strive for their mutual support and at the end of the 20 year marriage, they have the gold bar. In another scenario they enter the marriage with nothing, they strive for 20 years and on the last day the wife inherits a gold bar. In my view it matters little when the gold bar entered the relationship. What is important is to somehow give a reasonable value to all of the elements that go to making up the entirety of the marriage relationship. Just as early capital contribution is diminished by subsequent events during the marriage, late capital contribution which leads to an accelerated improvement in the value of the assets of the parties may also be given something less than directly proportional weight because of those other elements.”
[1] See Professor Parkinson “Quantifying the Homemaker Contribution in Family Property Law” (2003) 31 Federal Law Review 1-55, particularly at pages 40 – 42 and “Property Division – Developing order out of Chaos” delivered at the 10^th Australian Family Law Conference June 2007 at page 33-35.
The Full Court (Bryan CJ, Finn and Holden JJ) in Schirmer & Sharpe (2005) 32 Fam LR 575 referred to the passage from the judgment of Kay J in Aleksovski without indicating they thought it was incorrect. The Full Court in that case did not refer to the statement made by the majority in Aleksovski.
Williams at paragraph 26 (and particularly the last sentence of that paragraph) is a reaffirmation by the Full Court of Kay J’s statement in Aleksovski.

A metaphor

Without attempting to compete with Kay J’s “gold bar” passage and without wanting to turn “the erosion principle” into “the evaporation principle”, let me illustrate the legal principals referred to above by using a metaphor.
There is a beaker on a flame. One spouse, at the beginning of the marriage, pours an amount of water into the beaker. Over a long time both spouses each pour water into that beaker. The water is of different colours, representing personal exertion, introduced assets and the growth of assets from market forces, dividends and interest. The water bubbles away. Towards the end one spouse adds an inherited amount of water to the beaker. Throughout there is a distillation coil catching the steam. The condensed vapour is collected in a second beaker. At the end of this long marriage the parties have available to them the water left in the beaker on the flame. There is also an amount of water in the second beaker. That water represents the income, the capital and effort spent by the parties during the marriage, to which they no longer have access.
To do justice between the parties what is left in the beaker on the flame needs to be distributed between the parties in a way that acknowledges the water in both beakers.
In shorter marriages there usually won’t be as much water in the second beaker.

BALANCE SHEET

Whilst there were a large number of items where there was no agreement at the commencement of the hearing, most of them were conceded or agreed during the hearing so that by the time of final submissions only two items (items 6 and 25) remained the subject of controversy. Issues in relation to chattels have now also been resolved by consent.
A determination has been made in relation to contentious items for the reasons set out after the table.
The asset pool, as agreed or determined by me, is as follows:-

Assets
Item no.	Title	Description	H value	W value	Agreed/ Determined	Value
1	H	D Plains	$3,270,000	$3,270,000	Agreed	$3,270,000
2	H	D Homestead	$890,000	$890,000	Agreed	$890,000
3	J	Proceeds of sale of G Property	$809,900	$809,900	Agreed	$809,900
4	J	The N Property	$735,000	$735,000	Agreed	$735,000
5	H	Irrigation licence - D Plains	$972,000	$972,000	Agreed	$972,000
6	H	Husband's farming businesses - "[Froth] Enterprises" and "[Froth] Investments"	$693,794	NK	Determined	$834,907
7	H	D Trust	$71,817	$71,817	Agreed	$71,817
8	W	D Trust	$71,817	$71,817	Agreed	$71,817
9	H	Husband's beneficiary loan account - D Trust	$616,448	$616,448	Agreed	$616,448
10	H	Westpac account	$19,736	$19,736	Agreed	$19,736
11	H	Etrade ANZ account	$2,446	$2,446	Agreed	$2,446
12	W	Wife's fund at bank	$1,039	$1,039	Agreed	$1,039
13	H	Shareholdings in public companies	$431,228	$431,228	Agreed	$431,228
14	W	Shareholdings in public companies	$255,395	$255,395	Agreed	$255,395
15	H	L Ski Lodge	$8,000	$8,000	Agreed	$8,000
16	W	L Ski Lodge	$8,000	$8,000	Agreed	$8,000
17	W	Partial property settlement	$150,000	$150,000	Agreed	$150,000
18	W	Paid legal fees	$164,952	$164,952	Agreed	$164,952
19	H	Paid legal fees	$119,000	$119,000	Agreed	$119,000
20	W	Self managed superannuation fund	$1,002,337	$1,002,337	Agreed	$1,002,337
21	H	Self managed superannuation fund	$1,239,570	$1,239,570	Agreed	$1,239,570
22	H	Mr & Ms Froth Superannuation Fund	$103,101	$103,101	Agreed	$103,101
23	W	Mr & Ms Froth Superannuation Fund	$159,449	$159,449	Agreed	$159,449
24	W	First State Superannuation	$23,199	$23,199	Agreed	$23,199
25	H	Add-back mortgage outgoings on the H property	$0	$90,000	Determined	$90,000
26	W	Wife's interest in her late father's estate	$50,000	$50,000	Agreed	$50,000
27	H	Chattels from the N property	$5,030	$5,030	Agreed	$5,303
28	W	The … painting	$120	$120	Agreed	$120
29	W	Furniture, paintings and cars at the G property	$59,478	$59,478	Agreed	$59,478
30	H	Items from the G property	$12,390	$12,390	Agreed	$12,390
31	H	Furniture, cars and items at the H property	$39,125	$39,125	Agreed	$39,125
Total assets			$12,215,757
Liabilities
Item no.	Title	Description	H value	W value	Agreed/ Determined	Value
32	H	Westpac Commercial Bill	$1,200,000	$1,200,000	Agreed	$1,200,000
33	H	Loan - D Trust	$492,033	$492,033	Agreed	$492,033
34	W	Loan - D Trust	$9,047	$9,047	Agreed	$9,047
35	H	Husband's sale of shares into his superannuation fund where the taxable capital gain was $391,722 - brought to account in the husband's draft income tax return for year ended 2007	$49,990	$49,990	Agreed	$49,990
36	H	Westpac Farm Management overdraft account	$464,606	$464,606	Agreed	$464,606
Total liabilities			$2,215,676
Total net assets			$10,000,081

Item 6 - Husband’s farming business – “[Froth] Enterprises” and “[Froth] Investments”

Mr NG annexes to his affidavit sworn 6 July 2007 a further report by him which is dated 6 July 2007. In the table contained in paragraph 2.3 of that report, Mr NG values “the husband trading as ‘[Froth] Enterprises’ and ‘[Froth] Investments’” in the sum of $693,794. The detail as to how he arrives at that amount is contained in Schedule E on page 15 of his report.
Counsel for the wife suggested to Mr NG that the more appropriate figure for this item should be the figure contained in Mr NG’s first report dated 13 December 2006 (annexed to an affidavit of Mr NG sworn on the same day). The figure in that report was $839,000. When asked about the first report Mr NG said that he would no longer adopt that as an appropriate figure as at December 2006. At paragraph 2.6 of Mr NG’s first report he assumed from the financial statements in respect of the husband’s income activities for the year ended 30 June 2006 that he had a taxable loss of $493,710. He assumed that that would approximately equate to the taxable loss that would be carried forward to the year ended 30 June 2007 and would be available to offset income. Subsequent information he received from the husband’s accountant indicated that assumption was without foundation. Mr NG in oral evidence repudiated the valuation contained in his first report for that reason and in those circumstances it is clear that I am not able to rely upon Mr NG’s original figure.
In the end, the wife makes two challenges to the calculations made by Mr NG in Schedule E.
The first is a deduction made by Mr NG of $92,793 in relation to tax payable the farm management deposit.
The figure of $92,793 has been calculated by the husband’s accountant. Mr NG considered the amount of this calculation to be reasonable. The calculation is at the current top marginal rate of tax of 46.5%.

Should this tax be deducted?

The farm management deposit represents a deposit made to an income equalisation scheme whereby income can be deposited into an account in one year and not be recognised as income until the year in which it is withdrawn. Income tax will only be payable when amounts are withdrawn from the fund.
The husband made a deposit of $200,000 from inherited funds on 30 June 2004. His purpose in doing that was to reduce his taxable income in that year by $200,000 with a consequent tax saving of about $76,000 (see paragraph 250 of the husband’s affidavit).
Mr NG agreed that the amount of tax payable in relation to the $200,000 when it is withdrawn would depend upon whether or not whole or part of it is withdrawn in any tax year and what other taxable income or losses the husband has in the year that the funds are withdrawn.
The husband’s evidence was that he would attempt to be as tax effective as possible in terms of withdrawing amounts from the farm management deposit.

On the whole I accept the version given by the wife in relation to her involvement in the introduction of irrigation and, consistent with the wife’s evidence, I find that the planing for the irrigation of D Plains was a joint effort.

How much did irrigating D Plains increase its value?

Mr Q valued D Plains in April 1980 at $590,000 (986 ha dryland cultivation at $600/ha).
Counsel for the husband referred to a calculation that could be done based on Mr Q’s evidence. At page 37 of Mr Q’s report (attached to his affidavit sworn 19 October 2006) Mr Q breaks down the amount of D Plains which was irrigated. D Plains was a property of 986 hectares (if one excludes a paddock that Mr Q had not taken into account). The part of the property currently under dry land cultivation was 733 hectares and that part of the property has been assessed by Mr Q today at $2,750 per hectare.
If none of the property had been irrigated then the conclusion would be that the value of the property today would be $2,711,500 (986 ha x $2,570). Because some of the land is now irrigated, Mr Q now values D Plains at $3,258,750 (which he rounds to $3,250,000). The calculation can then be done that the irrigating of D Plains has added value of $547,250 in today’s dollars ($3,258,750 - $2,711,500).
This needs to be balanced against the concession by Counsel for the wife that by 1984/85 a debt had been incurred jointly by the parties to the extent of about $300,000 for the purposes of installing irrigation.

Inherited property

As mentioned, the husband’s father passed away in January 2002. As a consequence of the husband’s father’s death, the husband in March 2003 received a distribution in the amount of $385,921.33 and shares to the value of $92,000 (a total of $477,921). The wife for her part received a specific bequest of $5,000 and the parties’ two sons each received substantial bequests in cash and shares to a value exceeding $242,000 each.
As a consequence of the death of the husband’s mother, the husband received:
245.1.The real property comprising D Homestead having a value of $750,000 at or about the date of death (Annexure “NN”);
245.2.Cash in the amount of $1,124,554 (Annexures “PP”, “QQ” and “RR”);
245.3.Shares in public companies and investments having a value at the date of transfer of $985,979 (Annexure “OO”);
245.4.Personalty comprising artwork, furniture and furnishings. According to Exhibit F the current value of the inherited personalty is in the sum of $9,280 ($3,100 + $2,100 + $4,080).
The total of these amounts from the husband’s mother’s estate are $2,869,813 ($750,000 + $1,124,554 + $985,979 + $9,280).
I note in passing that the amount of $2,869,813 is different from the amount that you would expect reading the whole probate document which is Annexure “NN”. The value of the overall estate on the probate document is $3,642,384. There are specific bequeaths totalling $101,500 which means that there is a balance of $3,540,884 to divide between the husband and his sister. The husband’s share of this would be $1,770,442. The reason the husband eventually received $2,860,533 remains a mystery to me. Even allowing for the fact that some of the payments were made to the husband up to over a year after the date of the probate document, there is a difference of over $1 million dollars.
Senior counsel for the husband asserted that the difference between what is on the probate document (annexure NN) and what the husband actually received is explained by an assertion that the proceeds of the sale of the A property fell into the estate of the husband’s late mother. It is asserted that that property sold for $4 million and the husband’s counsel says this increased the amount the husband received from his mother’s estate by around $1.6 million. Senior counsel for the husband points to the fact that annexure NN has no figure next to the entry “estate of the late [Mr Froth Snr]”. The way I interpret that entry on page 276 is that there is no missing figure. The figure on the probate accounts is for the interest in the estate of the late Mr Froth Snr that is held by the husband’s mother’s estate.
It would indeed be surprising of $4 million had been left out of the accounts for the probate of the husband’s late mother and I am less than convinced that the account given by Senior Counsel for the husband is accurate.
The husband deals with this issue in his affidavit at paragraphs 193 to 196. He records that his sister elected not to purchase the A property in July 2002 and records that the A property was sold on 26 September 2002 by public auction for a sum of $4 million. At paragraph 196 he says his mother was the principle beneficiary of his late father’s Will and most of the proceeds of the A property went to his mother. It is clear from that evidence that the A property had been converted at the time of the husband’s mother’s death, in March 2004, into cash and probably shares. It was this cash and shares that are recorded in the probate document of the husband’s mother. I have no independent evidence to substantiate the claim by Senior Counsel for the husband that the gross amount of the husband’s mother’s estate was around $7.65 million.
It seems clear that I do not have all the relevant documents from the probate.
This issue however is of little relevance given that the hearing proceeded on the basis of what the husband actually received from the two estates which on the evidence available to me as set out above was $3,347,734 ($477,921 + $2,869,813).
Added to that is the sum of $97,284 that the husband received when he sold his life assurance policy with MLC, being a policy received from his maternal grandfather (without any evidence one way or the other as to whether or not any payments were made on that policy during the marriage).
Counsel for the wife submitted that the husband’s inheritance of the D Homestead property from his mother’s estate in 2004 should be viewed in the context of the contributions that both parties had made towards the improvement and conservation of that property over nearly 24 year period.
Counsel for the wife suggested that the inheritance of D Homestead from the husband’s mother should be seen in circumstances analogist to the circumstances discussed in the case of James & James (1978) FLC 90-487. Counsel for the wife submitted that in relation to D Homestead:-
“It was a property that they both improved; it is property they both worked on; it is property, in terms of the homestead, that the wife improved substantially; it is a property upon which a new home was constructed, and there was evidence, even conceded by the husband, that domain of hers, being the property, was a fairly significant contribution in terms of its – the aesthetics of its construction, and also the surrounds of the home.”
Counsel for the wife submitted that it was a fair assumption to make that given that both parties had worked so hard, there was a mutual intention between them that one day the D Homestead property would be theirs.
Senior Counsel for the husband did not concede that there were any contributions made by the wife in the expectation that the property would be at some point in time the husband’s. He did concede that the wife maintained the homestead, as she undertook work on the property, as she cared for the children and that those contributions should be recognised.
The facts in James are that the wife stayed on the farm, worked it in anticipation that they would one day inherit it. In this case there is no evidence that the wife stayed at the D Homestead in anticipation that she would one day inherit it.
Counsel for the wife attempted to trace the part of the asset pool that is referrable to inheritances received from the husband’s parents and argued that not all of the inheritances received by the husband between January 2002 and June 2005 found their way into the current list of assets. It was asserted that some of it must have been expended on post separation living and expenditure by the husband.
I find that the following amounts or part of them, were referrable to or expended from the inheritances:-

Discharge the mortgage over the G property (paragraph 199(a) husband’s affidavit)

$370,000.00

Purchase for the wife of a Mercedes Benz motor vehicle (paragraph 199(b) husband’s affidavit)

67,700.00

Repayment to W of the amount which had been borrowed from him to assist in the acquisition of the G property (paragraph 199(c) husband’s affidavit)

175,000.00

Monies spent on renovating the G property (paragraph 199(d) husband’s affidavit)

52,000.00

Repayment to J of monies lent for the acquisition of the G property (paragraph 138(a) husband’s affidavit in relation to this borrowing)

175,000.00

Contribution from the husband’s late father’s estate in relation to the acquisition of the G property (paragraph 138(b) husband’s affidavit)

386,000.00

Inheritance of D Homestead (its current value)

750,000.00

Chattels

9,280.00

Shares

985,979.00

$2,970,959.00

This is to be compared with the amount of the husband’s inheritances which is in the sum of $3,347,734.
Counsel for the wife pointed to the fact that the husband had sold $175,000 worth of shares at year ended 30 June 2006 and in year 30 June 2007 there had been withdrawals from E-Trading of $178,000. That is, a portion of the inheritance has been expended by the husband in those two years.
But, it needs to be observed that the money put into the G property in the sum of $1,158,000 ($370,000 + $175,000 + $52,00 + $175,000 + $386,000) together with personal exertion led to an asset which was sold by the parties for $1,727,612 net. The sale of the G property provided the source of funds for the remaining portion of the sale of the G property (item 3), the farm management account (part of item 6), the husband’s shares (part of item 13) and some of the wife’s superannuation (part of item 14).
So it might be said that the husband has not clearly accounted for what happened to all the funds from his inheritances.
Counsel for the husband argued that that whole of the inherited figure can be traced to assets on the balance sheet. Whilst I don’t accept that it is absolutely clear, it is in my view sufficient to say that the inheritance can be substantially traced to assets on the balance sheet.

Monies received by the wife post separation

After the separation the two children of the marriage, then aged 23 and 21 years, were living with the wife. The wife agreed she received about $66,000 after separation from a jointly operated account. The husband did not suggest these funds should be added back against the wife.

Monies withdrawn from the D Trust by the husband

It is not disputed that after separation the husband had control of the funds, plant and equipment of C Pty Ltd. The husband was cross examined in some detail about an amount of approximately $700,000 that he took from the D Trust over a period of time after the separation. Counsel for the wife, however, in final submissions did not suggest that these funds were taken by the husband other than in the course of ordinary operation of the business accounts. Counsel for the wife did not seek that any of these funds be added back into the balance sheet as against the husband.

Husband’s contributions to the farm management deposit

As previously mentioned the husband has contributed about $76,000 towards the current pool of assets as a result of the tax saving when he made the $200,000 farm management deposit”.

Conclusion on contributions

Both parties have given extensive evidence about what they did during the marriage. At the end of the hearing there was not a great deal of controversy about the fact that both parties had over the period of 24 years and 8 months of their marriage contributed to the best of their individual abilities towards the advancement of the marital partnership. The wife’s assertions as to the extent of her efforts were almost wholly accepted by the husband. Over the period the parties were together the wife’s involvement associated with the family’s farming and grazing activities was not insignificant. In fact, probably the only direct dispute between the parties is whether or not the wife had ever placed a branding iron in a gas flame before handing it to the person who branded the cattle. Counsel for the wife submitted, and I accept, that the wife could not have done much more by way of the expenditure of her energy over nearly 25 years than she did. These contributions were in addition to her substantial efforts fulfilling the primary role of homemaker and parent and working part time as a nurse.
Had D Plains not been irrigated, the evidence is its current value would be $2,711,500. The husband had an 87.5 percent equity in this property at marriage. That equates to $2,372,562 today ($2,711,500 x 87.5%). This of course ignores the myriad of contributions made by both parties to maintain and conserve D Plains over almost 25 years.
The husband’s inheritances add about $3,348,000 late in the marriage. I do not intend to place any significant weight on the timing of the receipt by the husband of his inheritances.
Although both parties can point to other smaller amounts that came from outside the personal efforts of each of them during the marriage, the present day value of the husband’s equity in D Plains at the date of marriage and the value of the husband’s inheritances add to $5,720,562 ($2,372,562 + $3,348,000) which is over 57 percent of the total assets of the parties. As I have found the inheritances can be substantially traced to assets on the balance sheet.
Counsel for the husband submits that I should adopt a pseudo mathematical approach and give the first 57 percent of the assets to the husband with the balance divided evenly. This would lead to a 78.5/21.5 split in favour of the husband (close to the 80/20 split for which Senior Counsel for the husband agitates).
Counsel for the wife submits that a result based upon a pseudo mathematical approach would be an error. Given the legal principles referred to above, I accept that an outcome, based on such an approach, would give an inappropriate result given the myriad of other contributions the parties have made during the marriage of almost 25 years.
I however disagree with the submission by counsel for the wife that a 60/40 percent division in favour of the husband, based upon contributions, would be appropriate.
Taking all matters under s.79(4)(a) to (c) FLA into account, I conclude that the division of net assets based on contributions should be 67.5 percent to the husband and 32.5 percent to the wife.

SECTION 79(4)(d) – (g) FACTORS

The parties were married 24 years and 8 months. At the time of the marriage the husband had contracted to acquire the D Plains property. They worked D Plains and lived on D homestead.
Counsel for the wife submitted that there should be somewhere between a zero and five percent adjustment in favour of the wife for s.79(4)(d) – (g) factors.
Counsel for the husband submitted that on the basis that the wife received 20% of the overall assets based on contributions then she would be receiving almost $2 million worth of assets and that this would make her “on any view, relatively speaking, a wealthy woman”.
In the event I accept counsel for the husband’s submission on contributions, which I have not, he conceded that another 5% adjustment would not be inappropriate.

The wife’s state of health

Dr K, orthopaedic surgeon, gave unchallenged evidence that it was probable that the wife had a degenerative disease of her lumbar spine. The doctor opined that the wife’s lower back problems may have some bearing on her future income earning capacity in the health industry. Specifically it would limit her ability to do shifts that would necessitate her using medical equipment. She might further be limited in her ability to do heavy lifting. The doctor believed that the wife’s lower back pain would gradually worsen over a prolonged period of time with intermittent flare ups. The wife also provided evidence from Dr H who was the wife’s general practitioner. In addition to evidence about the wife’s problems with her lower back, Dr H confirmed that the wife has left heel pain which has been diagnosed as “plantar fasciitis”. Dr H is of the view that this probably was a chronic condition which is exacerbated by the wife being on her feet all day. The general practitioner was of the view that both conditions that the wife suffers from will have a marked bearing on the wife’s future income-earning capacity in the health industry. Both conditions are chronic and painful and restrict her ability to work comfortably. Dr H was of the view that these conditions will prevent the wife from continuing in her current employment over the long term and that it will only be a matter of time before she will have to give up her current employment and seek to find a less taxing job that does not stress her back and her left heel as her current employment does.
The wife’s medical condition and her prognosis will affect her future employment prospects.

The husband’s state of health

The husband gave evidence that in 2000 he injured his shoulder and received specialist diagnosis that he had a rota cuff injury. He underwent surgery in August 2000. During August 2000 until June 2001 he was unable to do heavy work on the farm. From August 2000 until December 2000 he worked in the New England region for a company that were authors of agricultural software.
He says that in or about October 2002 whilst working on D Plains he suffered a medical condition called Dermatomyositis. This resulted in his hospitalisation for 11 days in December 2002 with intensive medical examination in the following three months. There is no evidence however that the husband would not be able to continue an active involvement in his farming activities should he chose to do so. I have no evidence that the husband’s current health would mean that he would be unable to do heavy work on the farm.
It is however clearly the husband’s intention that in the foreseeable future that he will live with Ms S in the T area. I take the husband’s current intention in relation to the D property to be that he will fulfil the role of an overseer to the farm’s operations, leave day to day management to the farm manager and the heavy work to persons employed on the farm. He made it clear that he intends to manage his investments as part of his income producing endeavours on a day to day basis.

Ms S’ financial involvement with the husband

Notwithstanding the husband’s evidence that the financial affairs of Ms S and him were intertwined, he did not call her as a witness. The information about their financial relationship is unsatisfactory.
The husband’s financial statement sworn 15 March 2007, Part E (page 4), asks him to indicate the name, age and relationship to you and gross income of each other occupant of your household (item 17). The husband has left that part of the form entirely blank.
I could not accept counsel for the husband’s submission that I should in some way rely upon the description of ‘home duties’ for Ms S in Exhibit B nor is there any weight in the submission by counsel for the husband that the husband is in some way excused from bringing evidence about Ms S’ financial position because she was once a party to these proceedings and the wife discontinued any application against her. That is a separate matter from the husband’s duty to disclose with some precision the financial relationship he has with Ms S.
Counsel for the wife submitted that I should conclude that the annual gross income, before tax, of Ms S was $161,000 (and $96,000 per annum or $8,000 per month net). These figures appear in Exhibit B which is a document from material produced by Westpac under subpoena. The document is a personal finance application. The finance application has space to complete details in relation to the applicant and details in relation to a co-applicant. Ms S’ name is the only person’s name on this document and appears on its face to be “the primary applicant”. The document records that she was born in May 1958, has three dependents, has been a customer of the bank since 1988 and at the time of the application lived in Sydney’s North Shore area. The document recorded that she was not self employed but at the time of the application was said to have been involved in home duties.

Counsel for the husband submitted that I could not rely on Exhibit B for the purposes of assuming Ms S had annual gross income (before tax) of $161,000. Counsel for the husband described Exhibit B as an internal bank working document which had not been signed by Ms S or adopted by her or adopted by the husband. Counsel for the wife replied by saying it was a business record and implied that it was the best evidence I had as to Ms S’ level of income.
Exhibit B also indicates that at the time the document was completed the bank assumed that two properties would be security for the $900,000 borrowing. The first property was described as the D property, which was said to have a value of $2.4 million and the X property that was being purchased at H, which had a contract price of $860,000.
The husband gave sworn evidence that the D property was never to be part of the security for Ms S borrowing of $900,000. He was to personally guarantee the borrowing and has made all payments in respect of the borrowing and has signed documentation relating to his guarantee. He however asserted that when documents were sent to him by the bank requiring him to connect the D property to this borrowing by way of mortgage he refused to sign them and returned them pointing out the bank’s error.
The sworn evidence that I have from the husband is that the bank were prepared to finance Ms S lending to her $900,000 on security that they value at $800,000 (see Exhibit B) with nothing more than the husband’s personal guarantee to satisfy the bank’s lending requirements.
I find that evidence difficult to accept. The D property was already mortgaged to the same bank. I was not provided with a copy of that mortgage. I however think it likely that the bank would not discharge the mortgage on the D property until the husband had made proper arrangements in relation to any outstanding liability he had in respect of the guarantee.
One other difficulty with the document is that the personal finance application at page 3 has liabilities owed by the primary applicant at $1,147,659. Nothing that I have been told about Ms S would give me any reason to believe that she has debt of that nature. That debt is more consistent with the Westpac commercial bill which is the debt of the husband.
In summary the personal financial application, although only in the name of Ms S, does have references to property owned by the husband and liabilities owed by the husband. If I cannot be confident that the “primary applicant’s liabilities” is a reference to Ms S then it would be unwise to be confident that the “primary applicant income” of $8,000 per month net is income referable to Ms S rather than a reference to the income of the husband.
The husband’s evidence was that he paid the outgoings in respect of the H property and in exchange Ms S attended to all other expenses associated with their living at the house. I took that to mean food, utilities and everything else.I infer from that evidence she has some source of income.
Given the nature of Exhibit B and the way it is set out, on balance it would be unsafe to rely on it to conclude that Ms S has an annual income of $161,000. I am simply unable to say what income Ms S has or how it is that she supports the husband in the way that he described in his oral evidence.
I am informed that Ms S still had to finalise her property settlement with her husband and that it is expected she will receive about $300,000 from that settlement which she would put into the H property when she received it.

Prospective tax on plant and equipment

The husband pointed to the fact that the market value of the plant and equipment presently owned by the husband and the trust exceeds its written down value. The husband says that this gives rise to a prospective taxation debt which, although not capable of precise qualification, should be taken into account pursuant to s.75(2)(a).
The husband’s accountant had advised Mr NG that if the plant and equipment had been sold at its value, it would result in taxable income of approximately $84,334. Mr NG said that that calculation was reasonable. Mr NG however did not make any allowance for tax payable on that amount given that he was unaware of any intention of the trust to see these assets.
Adopting the principles in Rosati & Rosati (supra) it is difficult to make any adjustment for potential tax on plant and equipment absent any evidence that that plant and equipment is likely to be disposed of. In fact the husband’s evidence is that his intention certainly in the immediate term is to continue the farming operations.

Other matters

If orders were made based on the contributions that both parties have made towards the development of the assets, the husband would be in a far stronger financial position than would be the wife.
Counsel for the husband submitted in his case outline that it was well established that the provisions of s.75(2) are not available for the process of social engineering and the fact that the husband is financially superior depends not only on contributions made over time by him but rather by reason of contributions of his father and mother.
The rural properties retained by the husband will provide him with significant ongoing cash flow and income.
The wife during the course of the litigation suggested that the husband had failed to disclose properly his true financial position. Apart from the inadequacy in evidence in relation to Ms S, no such case has been made out against the husband.
The wife has a new friend, Mr CS. After separation the husband continued to pay for the wife’s mobile phone. This meant that the husband got the statements in relation to her mobile phone. He consequently had a concise blueprint as to the wife’s movements. From early 2005 the wife regularly travelled to Melbourne. While she had other friends in Melbourne her primary purpose was to see Mr CS. The wife said that she was now a divorced woman and she felt that she was free to have a new friend. She denied that there was any firm plans for her and Mr CS to live together. Her evidence which I accept was that there had not at any stage been any intermingling of their finances.
I do not have any financial information about Mr CS. Given that I have accepted the wife’s evidence that up until this time there has been no intermingling of their finances, I do not make any adverse comment against the wife in that regard. Having said that, it would be naïve of me to ignore the fact that there was a reasonable possibility that the wife would enter into a more serious and permanent relationship with Mr CS. The relationship has now been in existence for a couple of years. It has involved the wife in travelling interstate on a monthly and sometimes fortnightly basis. The wife has been able to achieve that consistent with her work patterns.
I take into account in a general way the possibility that the husband may have to pay some tax on the $200,000 farm management deposit when he withdraws it.
The most important of the considerations are the husband’s superior capital after an adjustment based on contributions and the wife’s inferior earning capacity based upon her health.
Taking all the s.79(4)(d) – (g) considerations into account I find there should be a 2.5 percent adjustment in favour of the wife.

JUST AND EQUITABLE

Counsel for the wife submitted that on an overall basis the band of adjustment would be 40-45 percent to the wife and 60-55 percent to the husband.
Counsel for the husband submitted that given the substantial initial contribution and the even more substantial inheritance received by the husband at the conclusion of the marriage an overall result in this case of 75% to the husband and 25% to the wife was just and equitable.
Counsel for the wife asserted that it would be erroneous to allow the husband to end up with three times the amount that the wife receives at the end of a 25 year marriage.
Based on my assessment of contributions and s.79(4)(d) – (g) factors, the division of property would be 65% to the husband and 35% to the wife. That alteration of property would be achieved by a distribution of the assets and liabilities in the following way:-

H gets - 65%
Assets
Item No.	Description	Percentage	Value
1	D Plains	100%	$3,270,000
2	D Homestead	100%	$890,000
5	Irrigation licence - D Plains	100%	$972,000
6	Husband's farming businesses - "[Froth] Enterprises" and "[Froth] Investments"	100%	$834,907
7	D Trust	100%	$71,817
8	D Trust	100%	$71,817
9	Husband's beneficiary loan account - D Trust	100%	$616,448
10	Westpac account	100%	$19,736
11	Etrade ANZ account	100%	$2,446
13	Shareholdings in public companies	79%	$341,117
15	L Ski Lodge	100%	$8,000
19	Paid legal fees	100%	$119,000
21	Self managed superannuation fund	100%	$1,239,570
22	Mr & Ms Froth Superannuation Fund	100%	$103,101
25	Add-back mortgage outgoings on the H property	100%	$90,000
27	Chattels from the N property	100%	$5,303
30	Items from the G property	100%	$12,390
31	Furniture, cars and items at the H property	100%	39,125
Liabilities
Item No.	Description	Percentage	Value
32	Westpac Commercial Bill	100%	$1,200,000
33	Loan - Denistone Trust	100%	$492,033
35	Husband's sale of shares into his superannuation fund where the taxable capital gain was $391,722 - brought to account in the husband's draft income tax return for year ended 2007	100%	$49,990
36	Westpac Farm Management overdraft account	100%	$464,606
Net Assets		$6,500,148
W gets - 35%
Assets
Item No.	Description	Percentage	Value
3	Proceeds of sale of the G property	100%	$809,900
4	The N property	100%	$735,000
12	Wife's fund at bank	100%	$1,039
13	Shareholdings in public companies	21%	$90,111
14	Shareholdings in public companies	100%	$255,395
16	L Ski Lodge	100%	$8,000
17	Partial property settlement	100%	$150,000
18	Paid legal fees	100%	$164,952
20	Self managed superannuation fund	100%	$1,002,337
23	Mr & Ms Froth Superannuation Fund	100%	$159,449
24	First State Superannuation	100%	$23,199
26	Wife's interest in her late father's estate	100%	$50,000
28	The … painting	100%	$120
29	Furniture, paintings and cars at the G property	100%	$59,478
Liabilities
Item No.	Description	Percentage	Value
34	Loan - D Trust	100%	$9,047
Net Assets		$3,499,933

As can be seen from the above table, the wife is to receive shares to the value of $90,111 from the shares held by the husband in public companies.
Standing back and looking at the matter on an overall basis I consider that alteration of property set out in the above table to be just and equitable.

PROPOSED ORDERS

The husband in his affidavit indicated that he had a desire to continue to retain the properties known as “[D] Homestead” and “[D] Plains” (paragraph 251 of his affidavit).
Counsel for the wife suggested that it might be an appropriate course to bring the matter back to consider what orders should be made to implement the alteration of property adjustments once the court had fixed the percentage entitlement of the two parties.
Given that the parties have not been able to resolve their central disagreement to date, doing that would only continue the litigation between them. I am of the view that in circumstances such as this it is preferable to provide the parties with a final set of orders if that is an option that is reasonably open.
Of course the parties themselves by consent could pursuant to the provisions of s.79A(1A) agree on a different set of orders to the ones that I have made.
If the shares are transferred in specie to the wife then no CGT would be immediately payable upon the shares. There is no evidence as to what the wife’s intention would be in relation to the share portfolio.
Counsel for the husband suggested that if shares were to be sold for the purposes of making a payment to the wife then both parties should bear any capital gains tax liability in the proportion that the assets are otherwise split between the parties.
As a balancing item the wife should receive shares to the value of $90,111. The effect of that order is that the parties get shareholdings that are roughly equivalent in value (the wife has slightly over $4,400 more than the husband in shares after the adjustment).
The mechanics for choosing which of the husband’s shares are transferred to the wife will involve the parties agreeing on which shares the wife takes or in default, the husband preparing four lists of shares each totalling $91,111 or more and the wife choosing the shares in one of those lists.
Exhibit F contains notations by the parties which will be noted by me when I make orders.
The parties agree that the AMP shares are owned by the D Trust and that for the purposes of the Court’s Judgment are to be valued in accordance with the Valuation Report prepared by MR NG of 28 May 2007.
It is proposed that the AMP shares be distributed as determined by the Court’s final judgment. I have distributed the whole of what is in the D Trust to the husband.

I certify that the preceding three hundred and twenty-eight (328) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts

Associate

Date: 21 December 2007

Discharge the mortgage over the G property (paragraph 199(a) husband’s affidavit)	$370,000.00
Purchase for the wife of a Mercedes Benz motor vehicle (paragraph 199(b) husband’s affidavit)	67,700.00
Repayment to W of the amount which had been borrowed from him to assist in the acquisition of the G property (paragraph 199(c) husband’s affidavit)	175,000.00
Monies spent on renovating the G property (paragraph 199(d) husband’s affidavit)	52,000.00
Repayment to J of monies lent for the acquisition of the G property (paragraph 138(a) husband’s affidavit in relation to this borrowing)	175,000.00
Contribution from the husband’s late father’s estate in relation to the acquisition of the G property (paragraph 138(b) husband’s affidavit)	386,000.00
Inheritance of D Homestead (its current value)	750,000.00
Chattels	9,280.00
Shares	985,979.00
$2,970,959.00