GABRYS & GABRYS

FAMILY COURT OF AUSTRALIA

GABRYS & GABRYS

[2015] FamCA 908

FAMILY LAW – PROPERTY – Where it is just and equitable to make an order for property settlement – Where the husband has had the benefit of the major assets of the parties since separation – Where both parties have had access to significant sums of money since separation – Where the husband has a significantly higher earning capacity and ability to regenerate capital than the wife – Where it is found that the property of the parties should be evenly divided based on contributions – Where an adjustment of 2.5 per cent in favour is made in the wife’s favour based on considerations arising from s 79(4)(d)-(g) of the Family Law Act 1975 (Cth) – Where the wife sought to have sole occupancy of the former matrimonial home pending sale – Where that property has since been sold and that application is no longer considered.

FAMILY LAW – CHILD SUPPORT – Where the wife seeks an order pursuant to s 123 Child Support (Assessment) Act 1989 (Cth) that the husband be liable to pay for all the child’s school and associated costs and private health insurance costs – Where the husband seeks these non-periodic payments account for 100 per cent of the child support payable by him – Where the wife seeks this order not be credited against the husband’s liability under any administrative assessment – Where it is found the husband’s non periodic payments will count for 100 per cent of the annual assessment of child support payable by the husband – Where the husband seeks the parties equally meet the costs of the child’s boarding school fees – Where it is found that both parties have significant capital and it is just and equitable for both parties to equally bear the costs of boarding fees.

FAMILY LAW – PARENTING – SECURITY FOR INTERNATIONAL TRAVEL – Where the husband asserts the wife is a flight risk – Where the wife’s family reside in the United Kingdom and Country Q – Where the wife has no ties to Australia, has no secure residence in Australia and has travelled extensively since separation – Where the child has a desire to travel overseas to visit the maternal family – Where the parties travelled significantly throughout the marriage with the child – Where it is found that there is a risk of the child being retained overseas but that risk is mitigated by the age of the child – Where the child is permitted to holiday overseas on certain conditions - Where the wife is required to provide $75,000 as security for the child’s return to Australia.

Child Support (Assessment) Act 1989 (Cth)
Family Law Act 1975 (Cth)

Line & Line (1997) FLC 92-729
Rosati and Rosati (1998) FLC 92-804

APPLICANT:

Mr Gabrys

RESPONDENT:

Ms Gabrys

FILE NUMBER:

SYC

828

2013

DATE DELIVERED:

23 October 2015

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

Watts J

HEARING DATE:

29 – 31 July 2015

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Todd

SOLICITOR FOR THE APPLICANT:

U Solicitors

COUNSEL FOR THE RESPONDENT:

Mr Tregilgas

SOLICITOR FOR THE RESPONDENT:

Gordon & Barry Lawyers

Orders

Pursuant to s 79 Family Law Act 1975 (Cth) (“the Act”) an order for property settlement be made in accordance with paragraphs 2 to 8 below.
The parties are to divide the net proceeds of the sale of the property at X Street, Suburb X (“the Suburb X property”), after payment of the anticipated costs of sale in the approximate sum of $130,000, as follows:
2.1.To the wife or her nominee as to 59 per cent;
2.2.To the husband or his nominee as to 41 per cent.
The wife shall have the option to purchase the German motor vehicle, registration number … as follows:
3.1.Within 21 days the wife provide notice to the husband in writing as to whether or not she wishes to acquire the German motor vehicle;
3.2.Within a further 14 days the husband inform the wife in writing as to the value of the German motor vehicle as recorded on the most recently lodged depreciation schedule with the Australian Tax Office;
3.3.The wife within a further 14 days elect whether or not she wishes to acquire the motor vehicle at its depreciated value and inform the husband of her election in writing;
3.4.In the event that she does elect to purchase the motor vehicle, the husband transfer or cause any entity which is currently the registered owner of the German motor vehicle to transfer to the wife (including but not limited to signing the Notice of Disposal attached to the registration of the German motor vehicle to indicate that the husband is the “seller” and the wife is the “buyer”);
3.5.Pending transfer of the German motor vehicle, the wife shall have exclusive use of the German motor vehicle and the husband will take all steps to deliver the German motor vehicle to the wife;
3.6.From her share of the proceeds of the sale of the Suburb X property, the wife pay to the husband or J Holdings Ptd Ltd the value of the German motor vehicle.
Upon the settlement of the sale of the Suburb X property, the wife do all things and sign all necessary documents to transfer to the husband all her right, title and interest in any asset which the husband is to receive in accordance with the distribution table set out in the Reasons for Judgment published with these orders.
Upon the settlement of the sale of the Suburb X property, the husband do all things and sign all necessary documents to transfer to the wife all his right, title and interest in any asset which the wife is to receive in accordance with the distribution table set out in the Reasons for Judgment published with these orders.
Except as otherwise provided in these orders each party be solely entitled to the exclusion of the other to all other property, chattels and superannuation in their respective names or possession as at the date of these orders and each party indemnify the other in relation to any debt associated with any asset that is kept by each of them respectively.
The parties shall divide the furniture and contents in the Suburb X property (as existed at the date of separation) equally by agreement and failing agreement using a pick a pile method, with the wife to prepare and provide to the husband two lists on or before 60 days from the date of these orders and the husband to select one of those lists. If the wife elects not to retain any of the furniture or contents in the said property the husband shall retain the items of his choice and dispose of the rest at his cost.
Either party have liberty on 14 days notice to make any application in relation to the implementation of the property settlement order.
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 Act to execute such documents on behalf of such party.
The wife be at liberty to remove A, born … 2000 (“the child”), from the Commonwealth of Australia from time to time subject to the following conditions:
10.1.The wife provide the husband with an itinerary, a copy of the child’s return air ticket, and addresses where the child will be staying, forthwith upon the child’s air ticket being booked, with any amendments to the said itinerary and/or return air ticket to be notified as soon as practicable;
10.2.The wife maintain her mobile phone number where the child is contactable;
10.3.The wife facilitate a call from the child to the husband on each alternate day; and
10.4.The wife deliver to the husband’s solicitors at least 7 days prior to the child’s departure from Australia, a bank cheque in favour of the husband’s solicitor’s trust account in the amount of $75,000 or alternatively, in the event that the wife wishes to take the child overseas prior to the settlement of the sale of the Suburb X property, an irrevocable authority that a bank cheque for $75,000 be drawn and delivered from the wife’s share of the proceeds of the sale of the Suburb X property. The bank cheque is to be held by the husband’s solicitor in escrow pending the child’s return to Australia;
10.5.The husband’s solicitor provide the wife with a letter confirming the wife’s compliance with order 10.4;
10.6.In the event that the child has not returned to Australia 21 days after the date stated in the itinerary provided by the wife to the husband in accordance with order 10.1, the husband shall be entitled to authorise his solicitor to transfer the sum of $25,000 to a bank account held in his sole name and in relation to the balance amount of $50,000, the husband has liberty to apply to the court for release of additional funds to cover costs (not covered by the $25,000) he proves that he has incurred or will incur to repatriate or attempt to repatriate the child to Australia.
Upon the wife receiving the letter referred to in order 10.5, the child’s name be removed from the Family Law Watchlist AND IT IS REQUESTED that the Australian Federal Police give effect to this order by removing the name of the said child from the watch list enforced at all points of arrival and departure in the Commonwealth of Australia.
No later than 72 hours after the child’s return to Australia, the wife will make available for collection by the husband or his agent the child’s Australian passport.
Commencing the date of these orders, pursuant to s 123 of the Child Support (Assessment) Act 1989 (Cth) the husband pay 100 per cent of all educational expenses for the child including all private school fees at EE SCHOOL, Suburb FF, including but not limited to tuition fees, excursion fees, incidental sporting costs, the cost of school books and the cost of school and sports uniforms and the husband and wife shall each pay 50 per cent of the boarding fees at St Vincent’s.
The non-periodic amounts payable by the husband pursuant to order 13 is to count for 100 per cent of the annual rate of child support in any given year.
The non-periodic amounts payable by the wife pursuant to order 13 is to count for 100 per cent of the annual rate of child support in any given year.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Gabrys & Gabrys has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 828 of 2013

Mr Gabrys

Applicant

And

Ms Gabrys

Respondent

REASONS FOR JUDGMENT

INTRODUCTION

The controversy in this case between Mr Gabrys (“the husband”) and Ms Gabrys (“the wife”) primarily relates to what property settlement order should be made. There are additional outstanding disagreements in relation to the payment of non-periodic child support and the provision by the wife of security if she wishes to travel overseas with the child of the marriage who is almost 15 years of age.
During the course of the hearing, agreements were reached and orders were made in respect of the sale of the major asset of the parties, a property at X Street, Suburb X (“the Suburb X property”), in which the husband has lived since separation and which had an agreed value of $6.1 million at the time of the final hearing. In the period judgment has been reserved, the parties have informed the court that contracts have now been exchanged for the sale of the Suburb X property at a price of $7.4 million. The parties also agreed upon the splitting of the parties’ interests in a self-managed superannuation fund and I made an interim property settlement order in relation to that fund.
The final version of the joint balance sheet (Exhibit 26) contained in excess of 70 items. There was significant disagreement as to whether or not some of those items should be included at all and/or at what value many of the items should be included. There was a major disagreement as to the valuation of the husband’s 70,000 ordinary shares in J Holdings Pty Ltd (“J Holdings”). Two forensic accountants gave evidence, prepared a joint statement and were cross examined concurrently in relation to that issue.
Whatever the settled balance sheet, the husband asks the court to make a property settlement order as to 55 per cent in his favour. The wife on the other hand asks that the court make a property settlement order as to 55 per cent in her favour.
As part of the overall distribution, the wife wants returned to her the German motor vehicle which is owned by J and which the husband currently drives. Up until about November 2014 that motor vehicle was driven by the wife. The husband repossessed that motor vehicle in December 2014, notwithstanding an undertaking given to the court in 2014 that he not do so. During the final hearing he sought to explain the circumstances in which he came to do so.
The wife has offered security in the sum of $25,000 in relation to the child’s overseas travel. The husband wants $500,000.
The parties have agreed that the contents of the Suburb X property that existed as at the date of separation will be divided by a pick a pile method.
In respect of the contributions of the parties, there is controversy over what monies both parties had available to them after the separation and how those monies have been expended by both parties.
The wife sought an order that she have the ability to occupy the Suburb X property pending sale.

CHRONOLOGY

The husband was born in 1957 and is currently 58 years old.
The wife was born in 1968 and is currently 47 years old.
On 10 October 1988 the husband purchased an apartment at Suburb C and the parties commenced cohabitation in that apartment in 1989.
The parties were married in 1989.
On 4 May 1995 F Pty Limited (“F”) was incorporated. The husband was appointed director of F. The Gabrys Superannuation Fund was then established by Deed with F as trustee.
The husband sold the Suburb C unit on 31 May 1994 for $300,000. The parties then purchased a property at Suburb D.
On 22 December 1995 the husband and Mr CC purchased a property in Suburb E as tenants in common. The husband held 70 per cent of that property.
On 18 July 1997 the parties purchased a property in Suburb G.
On 14 October 1998 the husband incorporated J Pty Limited (“J”) with Mr H. The husband and Mr H held equal shares in the company until the husband acquired Mr H’s shares later in October 1998.
The parties purchased a property at I Street, Suburb K (“the I Street, Suburb K property”) in March 2000.
In 2000 the parties’ child, A (“the child”), was born and is currently 14 years old.
In March 2002 the wife incorporated L Pty Limited.
On 4 September 2002 the husband purchased a property at Z Street, Suburb K (“the Z Street, Suburb K property”).
Between 2002 and 2007 the husband discharged the mortgage over the Z Street, Suburb K property with dividends that were paid to him.
In May 2007 J Holdings was incorporated.
In June 2008 J Investments Pty Limited (“J Investments”) was incorporated.
The Z Street, Suburb K property was transferred to F on 26 June 2007. L Pty Limited leased the premises.
On 11 August 2008 the husband received inheritance of $71,158.16.
The parties purchased the Suburb X property, which was the former matrimonial home, on 9 May 2009 for $4,305,000. That property was then subsequently refurbished. At this time, the I Street, Suburb K property was sold.
The wife sold her interest in L Pty Limited on 8 August 2010 for about $17,000 to a friend.
In December 2012 the wife met Mr M (“Mr M”). The wife and Mr M were in a relationship off and on until early 2015. Much of the wife’s overseas travel between separation and 2015 involved Mr M.
The husband said the parties separated in January 2013.
On 1 February 2013 the wife withdrew $50,000 from a joint ANZ bank account. That same day the wife’s parents loaned the wife $10,000.
Between 3 February 2013 and 20 February 2013 the wife travelled overseas and the husband was solely responsible for the child.
The wife says the parties separated on 4 February 2013.
On 9 February 2013 the husband filed an Initiating Application in this court and sought orders that the child’s name be placed on the airport watchlist.
On 13 February 2013 the husband withdrew $67,000 from the parties’ joint account, $328,326 from the ANZ offset account, and $209,000 from the self-managed superannuation fund’s bank account.
Between 4 April 2013 and 26 April 2013 the wife travelled overseas and the husband was solely responsible for the child.
Between 13 May 2013 and 26 May 2013 the wife travelled overseas and the husband was solely responsible for the child.
On 1 June 2013 the wife says she left the Suburb X property. The husband asserts the wife left the home on 16 August 2013.
On 7 June 2013 orders were made by consent providing for the provision of $290,000 to be paid by the husband to the wife.
Between June and July 2013 the wife withdrew $33,492 from the Gabrys No. 2 Superannuation Fund.
On 12 June 2013 the husband paid the wife $10,000.
On 1 July 2013 the wife commenced to rent an apartment at Suburb N.
On 11 July 2013 the wife paid the insurance on the Suburb X property.
The wife received $280,000 from the husband on 12 July 2013.
Between 15 July 2013 and 11 August 2013 the wife travelled overseas and the husband was solely responsible for the child.
Between 31 August 2013 and 9 September 2013 the wife travelled overseas and the husband was solely responsible for the child.
In September 2013 the husband’s new partner commenced to reside in the Suburb X property with the husband.
On 29 October 2013 the wife wrote to the husband stating “effective today [the child] will be living full time with me and I have advised the school of the change in living arrangements. For access, please liaise through our respective lawyers.”
On 16 December 2013 the wife was notified that her father had a stroke in the UK. The wife requested the husband’s permission for the child to travel with her to the UK but the husband refused.
It is contended by the husband that on 19 December 2013 the wife travelled to the UK without notice to the husband and left the child with friends. On 21 December 2013 the husband collected the child and she remained in his care until the wife returned on 5 January 2014.
On 28 January 2014 interim consent orders were made providing for the child to attend boarding school and spend each alternate weekend with the parents.
Between 13 March 2014 and 25 March 2014 the wife travelled overseas and the husband was responsible for the child during this period.
Between April and May 2014 the wife moved into her friend’s home at Suburb O.
The husband cancelled the wife’s health insurance in April 2014.
On 22 April 2014 interim orders were made providing that the ANZ facility be extended by $300,000, with each party receiving $150,000.
On 13 May 2014 the wife’s father died in Country Q and the wife travelled to be with her family until 20 June 2013. During this period the husband was responsible for the child.
On 23 May 2014 the ANZ bank declined to extend the facility.
On 20 June 2014 the wife moved into another friend’s home at Suburb R.
On 25 July 2013 the parties’ divorce became absolute.
On 18 September 2014 the wife moved out of her friend’s home in Suburb R and into another home of a friend in Suburb T.
Between 15 October 2014 and 4 January 2015 the wife travelled overseas. She says her mother was unwell during this period of time and her travel plans were extended. The husband says he was not notified of the travel arrangements and was not provided with a return date. The husband was responsible for the child during this time (although the husband departed Australia for a holiday to Hawaii on 31 December 2014).
On 24 October 2014 orders were made by Justice Stevenson for the Z Street, Suburb K property to be sold.
On 7 November 2014 the wife withdrew $8,560 from bank accounts held by the Gabrys No. 2 Superannuation Fund.

On 23 November 2014 the husband repossessed the German motor vehicle the wife had been driving. The husband asserts the wife abandoned the car. The reality is that the wife left it parked on a street outside her friend’s home while she was overseas for a few months.
On 12 December 2014 the wife transferred $8,500 from the superannuation fund bank account to her personal account.
On 2 February 2015 the wife again withdrew $8,500 from the superannuation fund account to her personal account.
On 6 March 2015 the wife transferred $1,800 from the superannuation fund account to her personal account and on 9 March 2015 she transferred $5,000 from the superannuation fund account to her personal account.
On 9 April 2015 the wife transferred $3,500 from the superannuation fund into her personal account and on 13 April 2015 she transferred $5,000 from the superannuation fund account to her personal account.
Between 17 April 2015 and 21 May 2015 the wife travelled overseas. The husband was responsible for the child during this period.
On 14 May 2015 the Z Street, Suburb K property was sold.
Between 6 June 2015 and 19 June 2015 the wife travelled overseas.
On 30 July 2015, by consent, I made an order for the sale of the Suburb X property. In September 2015 the parties sold the Suburb X property for $7.4 million with anticipated costs of sale at about $130,000. I have been advised settlement of the Suburb X property will take place on 29 January 2016.

APPROACH TO PROPERTY SETTLEMENT

In this matter my task is to:
74.1.Identify according to ordinary common law and equitable principles and then value the property, assets, financial resources and liabilities of the parties;
74.2.Determine whether it is just and equitable to make an order altering those interests and if so;
74.2.1.Identify relevant contributions and assess them;
74.2.2.Consider relevant matters referred to in Section 79(4)(d) – (g) of the Family Law Act 1975 (Cth) (“the Act”);
74.3.Determine what order adjusting the property, assets and liabilities of the parties is just and equitable.

BALANCE SHEET

The settled balance sheet is set out below. In a letter to my associate dated 30 September 2015 the parties sought to advise that there were three agreed amendments to the joint balance sheet. I have incorporated the new figures for items now numbered 1, 23 and 34. Where values are not agreed they appear in bold as determined by me. The reasons for each determination is set out under item numbers following the table.

Assets
Item no.	Title	Description	Husband	Wife	Agreed/ Determined	Value
1	J	X Street, Suburb X	$7,400,000.00	$7,400,000.00	Agreed	$7,400.000
2	J	ING #...	$1.00	$1.00	Agreed	$1.00
3	J	ING #...	$1.00	$1.00	Agreed	$1.00
4	W	ANZ cheque account #...	$8,348.00	$8,348.00	Agreed	$8,348.00
5	W	ANZ online saver #...	$22.00	$22.00	Agreed	$22.00
6	H	ANZ premium cash management cheque account #...	$21,000.00	$21,000.00	Agreed	$21,000.00
7	J	F Pty Ltd (trustee of super fund)	$1.00	$1.00	Agreed	$1.00
8	H	70,000 ordinary shares in J Holdings P/L	$129,000.00	$563,000.00	Determined	$360,000.00
9	H	70 ordinary shares in J Investments P/L	$369,000.00	$369,000.00	Agreed	$369,000.00
10	W	7 redeemable preference shares in J Holdings P/L	$7.00	$7.00	Agreed	$7.00
11	H	Loan account to J P/L	$70.00	$70.00	Agreed	$70.00
12	H	70 A class units in the J Property Trust	$70.00	$70.00	Agreed	$70.00
13	H	1000 discretionary & 100 fixed income units in the Mr Gabrys Hybrid Trust	$200.00	$200.00	Agreed	$200.00
14	W	Jewellery	$165,966.00	$3,000.00	Determined	$3,000.00
15	W	Cash	$50,000.00	$0.00	Determined	$0.00
16	W	Advance to wife	$310,000.00	$0.00	Determined	$0.00
17	H	U trust account	$22,000.00	$22,000.00	Agreed	$22,000.00
18	H	Unpaid interest, penalties and fees in respect of joint ANZ supplementary home loan #0983 from 12.3.15 to 12.7.15	$0.00	$5,091.00	Determined	$0.00
19	H	Payments to U (including disbursements and fees) (excluding $33,109.35 paid to U on 2.7.14 and counted below)	$41,880.00	$41,880.00	Agreed	$41,880.00
20	W	Payment to Barkus Doolan	$1,026.00	$1,026.00	Agreed	$1,026.00
21	W	Payments to Pearson Family Lawyers (including disbursements and fees)	$91,568.00	$91,568.00	Agreed	$91,568.00
22	W	Payments to Gordon & Barry Lawyers (including disbursements and fees)	$46,431.00	$46,431.00	Agreed	$46,431.00
Total assets						$8,364,625.00
Liabilities
Item no.	Title	Description	Husband	Wife	Agreed/ Determined	Value
23	J	ANZ supplementary home loan #0983	$325,343.68	$325,343.68	Agreed	$325,343.68
24	W	Loan from Ms W	$0.00	$170,804.00	Determined	$170,804.00
25	W	Westpac visa card #...	$10,078.00	$18,041.00	Determined	$10,078.00
26	W	David Jones store card	$9,923.00	$9,923.00	Agreed	$9,923.00
27	H	ANZ visa #...	$12,400.00	$12,400.00	Agreed	$12,400.00
28	H	2013 income tax (assessed)	$123,727.00	$123,727.00	Agreed	$123,727.00
29	H	2014 PAYG	$53,560.00	$0.00	Determined	$0.00
30	H	Interest on unpaid income tax and PAYG instalments	$9,730.00	$0.00	Determined	$0.00
31	H	Latent CGT re 70,000 ordinary shares in J Holdings Pty Ltd	$31,000.00	$0.00	Determined	$0.00
32	H	Latent CGT re 70,000 ordinary shares in J Investments Pty Ltd	$90,000.00	$0.00	Determined	$48,000.00
33	H	Loan from J	$14,330.00	$14,330.00	Agreed	$14,330.00
34	J	Costs of sale of Suburb X property	$129,894.00	$129,894.00	Agreed	$129,894.00
35	H	Amount due to U (including disbursements and fees)	$135,000.00	$135,000.00	Agreed	$135,000.00
36	W	Amount due to Gordon & Barry Lawyers (including disbursements and fees)	$222,139.00	$222,139.00	Agreed	$222,139.00
37	W	Amount due to Y Accountants	$0.00	$33,889.00	Determined	$17,000.00
38	W	Loan from Ms AA	$0.00	$2,500.00	Determined	$2,500.00
Total liabilities						$1,221,138.68
Total net assets						$7,143,486.32

Item 8 – 70,000 ordinary shares in J Holdings Pty Ltd (item 14 in Exhibit 26)

Exhibit 17, the joint statement of the experts, sets out the differing positions of the two experts in relation to the valuation of the husband’s interests in J Holdings.
Two issues emerge. The first is whether or not the single expert has correctly excluded an amount of $500,000 from the earnings recorded in financial statements of the company for the financial year ending 2014. The amount of $500,000 related to a debt the company said it owed in 2012 to a contractor, the BB Group (“BB”) that subsequently entered into administration. The adversarial expert is of the view that amount may not have been appropriately excluded from the 2014 earnings, saying the taxable earnings of the company for 2014 may need to be adjusted to be $500,000 higher. This amount of $500,000 had been treated in the 2012 financial statements of the company as an accrued expense thereby lowering the reported taxable earnings of that company in the 2012 financial year. The question arises as to whether or not the single expert has appropriately excluded the write back in the 2014 financial year.
The effect of the exclusion of the amount of $500,000 by the single expert means that the net maintainable earnings of the company averaged over a number of years is lower and consequently the valuation of the company is lower than it would be had the amount of $500,000 not be excluded by the single expert.
Both experts agree that the matter is one that requires factual determinations by the court to answer the question as to whether or not the single expert has treated the $500,000 in the appropriate manner.
On 24 July 2015, shortly before the commencement of the hearing, the wife’s solicitors wrote to the husband’s solicitors seeking information and documentation in regards to the $500,000 (see Exhibit 13). The husband’s solicitors did not respond to that letter. The husband, in cross examination, said that he had seen the letter, had had some discussions with people in his company, but had decided it was not in his domain to make enquiries about finding any relevant documentation. When pressed, the husband said that he would be able to make relevant enquiries to have the letter answered by the second day of the hearing. The day prior to the hearing, the husband’s solicitors were also sent a letter from the wife’s solicitors, which requested the husband to execute an authority direction to the administrator of BB to provide relevant documents in respect of the $500,000 (Exhibit 14). In cross examination the husband was shown that authority. He accepted he had seen it but had not signed it because in his view it was “unnecessary”. He said that the request was something outside his knowledge and to which he had no ability to respond.
The husband’s responses in cross examination as to why he had not provided this information were quite unsatisfactory. Notwithstanding his two thirds controlling interest in the company, the husband asserted that this was not an area he had knowledge about and would not know where to find the documents. Although his lawyers gave information purportedly on his instructions, his oral evidence would indicate that the minimalist information that was provided by his lawyers did not come from him directly. In order to avoid a Jones v Dunkel submission, the husband sought at a late stage in the hearing, to introduce evidence from Mr CC.
Mr CC’s affidavit, sworn 30 July 2015, was filed in court and he gave oral evidence by electronic means. Based upon Mr CC’s evidence, I am satisfied that in or around 2012 J entered into a contract with BB to complete work on a J project. BB initially issued an invoice for $210,000, which was paid. They issued a further application for progress payment in the sum of $728,000, which was not paid. Mr CC says that J assessed the claim at $511,709 plus GST (which was rounded out to $500,000 when the accrued expense was placed into the financial statements for the financial year 2012). Mr CC says that on or about 28 May 2012 BB entered into administration and that the company received no further communication in relation to the second progress claim. Neither BB nor the administrator issued an invoice for that outstanding amount, although the company anticipated that an invoice would be issued. When that had not happened two financial years later, the amount of $500,000 was added back into the financial statements thereby increasing the taxable income of the company in the 2014 year by $500,000.
Mr CC during his oral evidence, however indicated that BB had simply walked off the site and the company incurred unspecified expenses in employing a new contractor to rectify and complete the work that BB was required to complete under their original fixed term contract. Mr CC was not able to give the court any evidence as to the expense the company incurred in so doing. It was agreed that that expense would be a set off against any claim that the BB Group or the administrator would have had against the company in respect of the requirement of the company to pay the sum of $500,000. Notwithstanding that this issue had been squarely raised, the husband had not disclosed anything about this information that Mr CC gave in his oral evidence.
The court is left in a position where there is no information about the quantum of the setoff.
The wife is entitled to make the submission that it would be reasonable to draw the inference that the reason why the administrator of BB did not chase the debt was because the amount J expended to rectify and complete BB’s responsibility under BB’s contract by employing another contractor at a higher rate on a do and charge basis, made any recovery of funds from J improbable. It is agreed that any expenditure paid by the company to rectify BB’s work would have been properly claimed either in the 2012 or subsequent financial years as a legitimate expense of the company (thereby lowing its net maintainable earnings). Counsel for the husband suggested that he might have to make an application to reopen the hearing to lead further evidence about this issue but that has not happened.
Having made the factual finding that it was not appropriate to assume that the $500,000 would have been payable by the company had the administrator chased the debt, both experts accepted that taking $500,000 out of the 2014 financial accounts when reaching a conclusion about average net maintainable earnings is not appropriate and that deduction should be removed from the calculations.
What flows from that finding is that alternate 2 in [16] of the expert’s joint statement is applicable and the husband’s interest is either $360,000 or $563,000, depending upon the determination of the second issue.
The second issue upon which the experts disagree, relates to the methodology to be used in the valuation.
The single expert considers that the capitalisation of EBIT is the most appropriate basis of valuation, whereas the wife’s adversarial expert is of the opinion that the most appropriate basis of valuation is the capitalisation of EBITDA. That is, the single expert includes depreciation and amortisation as an expense of the company but the adversarial expert excludes it as an expense. The single expert calculates net maintainable earnings of the company at $220,000 and applies the EBIT multiple of 3.75 which (after other adjustments) leads to 100 per cent value of the company in the sum of $585,000. The adversarial expert calculates net maintainable earnings at $330,000 per annum and applies an EBITDA multiple of 3.50, which leads to a 100 per cent value of the company (after the same adjustments) in the sum of $914,000. Upon the single expert’s valuation, the husband’s share in the company, discounted for his minority interest, is $360,000 and the adversarial expert’s value for the husband’s discounted share is $563,000.
In the joint statement, the single expert summarises the reasons for her opinion as follows:
(a)the volatility of [the company’s] earnings and the relativity between EBIT and EBITDA
(b)the reporting of comparable transactions on an EBIT basis ([the single expert] notes that eight out of 11 transactions were reported on the basis of EBIT). There is insufficient information available with respect to these transactions as to the level of earnings and depreciation to assess the implied EBITDA multiple.
(c)the application of the capitalisation of EBIT methodology is a generally accepted valuation basis and does not specifically apply to a particular type of business. [The single expert] is involved in the annual valuation of a number of professional services firms and adopts the capitalisation of EBIT as the basis of valuation for these entities.
(d)the use of EBITDA as a proxy for operating cash flow ignores depreciation charges, which are a proxy for the economic costs of maintaining the cash flow generating capacity of the business on a going concern basis. Whilst [the company] may not be a capital intensive business, the depreciation and capital expenditure relative to EBIT adopted for valuation purposes is substantial. Based on information available to [the single expert], the capital expenditure incurred by [the company] approximates the depreciation expense:
[The single expert here sets out a table demonstrating that claimed depreciation over three years was not all that different to approximated capital expenditure]
(e)[The single expert] assumes that this level of capital expenditure is representative of the average annual ongoing requirements of the business. However, [the single expert] notes that no detailed capital expenditure information with respect to FY13 to FY14 or future projections have been made available. The question of future capital expenditure requirements is a matter of which has presumably been considered by [the company] management and to the extent that this is a significant issue in respect of determining the valuation conclusion, the requirements should be confirmed with [the company] management.
(f)the disparate values that arise from application of the two methodologies and the high level of goodwill that is implied in [the adversarial expert’s] capitalisation of EBITDA basis of valuation. In [the single expert’s] opinion, the basis of valuation (e.g. adopting EBITDA or EBIT) should not cause the assessment of value to vary materially and the disparity of the results is likely to be due to:
(i) an inappropriate EBITDA multiple being applied and the difficulties associated with accurately assessing an appropriate EBITDA multiples to vary significantly
(ii) the add back of motor vehicle depreciation in the determination of EBITDA in [the single expert’s] opinion this expense has already been accounted for in the director salary normalisation adjustments.
(g)In [the single expert’s] opinion, the level of goodwill implied in [the adversarial expert’s] proposed EBITDA basis of valuation is excessive and indicates that the valuation result is not reasonable:
[the single expert sets out a table which calculates what implied goodwill would represent as a multiple of free cash flow. The single expert calculates that the implied goodwill using the adversarial expert’s methodology for the company is in the sum of $664,000 (if the $500,000 is not written back as income) and $1,014,000 (if the $500,000 is written back as income).
The single expert opines, and I accept, that purchasers of small to medium businesses are reluctant to pay a high multiple of earnings or cash flow for a business such as [the company] which demonstrates a volatility in earnings.
In the joint statement, the adversarial expert gives the following reasons for his opinion that capitalisation of EBITDA is the more appropriate basis of valuation:
(a)that [the company] operates on a consulting/professional services business model and is not a capital intensive business (note that the written down value of Fixed Assets at 30 June 2014 was $155,000). [The single expert agreed in oral evidence that the company’s business was not capital intensive] In [the adversarial expert’s] opinion, utilising EBIT as a basis for earnings is primarily only adopted in capital intensive industries where fixed assets represent a large portion of total assets and therefore depreciation charges represent a significant operating expense. Based on [the adversarial expert’s] research and valuation experience, in non-capital intensive businesses such as [the company], EBITDA is a typically a more acceptable basis for earnings as it removes the uncertainty and risk around the ability of private companies to adopt different (and tax effective) depreciation strategies.
(b)that the reported depreciation expense of the business appears to, in [the adversarial expert’s] opinion, reflect accelerated depreciation rates adopted for income tax purposes. Historical reported depreciation expense (averaging at 23.65 per cent of the opening written down fixed asset balance for the 4 years FY10 to FY13) appears high for a non capital intensive business such as [the company] and especially the asset classes which are motor vehicles, office furniture and furniture and fittings. Further, in FY14 depreciation expense accelerates to represent 38.87 per cent of the opening written down value of assets, an increase which appears high and abnormal. Our calculation is shown below:
[the adversarial expert here sets out a table which calculations over 7 years what the depreciation expense was as a percentage of that period’s opening written down value]
The adversarial expert continues:
In [the adversarial expert’s] experience, it is common for private companies to accelerate depreciation rates in accordance with tax office rates and not necessarily representing actual useful life assessments. As a result, in our view utilising an EBIT with such depreciation could underinflate their actual earnings for that period.
Our review of the fixed assets held by [the company] (from the information provided to us) indicates that depreciation rates as high as 24 per cent to 38 per cent of the written down value would appear to be excessive and in our opinion the inclusion of depreciation expense in [the single expert’s] earnings assessment significantly distorts the future earnings capacity to [the company]. This is evident given the large percentage that depreciation expense contributes to the expense base and that depreciation in [the single expert’s] opinion should account for approximately 50 per cent of the maintainable earnings, which in [the adversarial expert’s] opinion, distorts the value of the business.
(c)the future capital expenditure requirements of the business have not been communicated to us, but given that all representations by management of [the company] is that the business activity is decreasing, we would assume that future capital requirements and according the depreciation expense would be less on a maintainable basis.
(d)For the above reasons, [the adversarial expert] considers adopting EBIT as potentially distorting earnings and as such, as not representing the most appropriate proxy for cash flow. In [the adversarial expert’s] opinion, a more appropriate method is to utilise EBITDA, which eliminates any likelihood of distortion of earnings as a result of incorrect depreciation and then capitalising those earnings with an EBITDA multiple.
(e)While [the single expert] believes that EBIT should be used as there were more transactions in her research that reported EBIT, we do not consider that as a reason to ignore EBITDA as a method. Further we note there were at least 3 EBITDA multiples available within [the single expert’s] research alone, and we would expect that there would be further EBITDA multiples to be found with additional research undertaken.
(f)[The adversarial expert’s] opinion is based on his experience in valuing businesses and he references a KPMG survey (conducted in both 2013 and 2015), named “Corporate Finance Valuation Practices Survey” whereby participants stated that when using a market approach, EV/EBITDA multiples were “always” adopted by 75 per cent of participants and “sometimes” adopted by 35 per cent of participants, and “never” adopted by 10 per cent of participants. In addition, the 2013 survey states “The widespread use of EBITDA – the multiple that is closest to operating cash flow – indicates that most participants believe cash is the main driver of value”. In [the adversarial expert’s] opinion these findings support his opinion that EBITDA is a more widespread use as a basis for future maintainable earnings. [The adversarial expert] does not believe [the single expert’s] statement that the “level of goodwill implied in [the adversarial expert’s] proposed EBITDA basis of valuation is excessive and indicates that the valuation result is not reasonable” is supported by any researched valuation metric and as a result is not a reason to exclude EBITDA as an appropriate methodology.

The experts gave concurrent oral evidence. Neither expert’s professional expertise was put into question, although in final submissions, counsel for the husband submitted that the opinion of a single expert should be preferred to the opinion of an adversarial expert because of “a degree of advocacy and implied bias” arising from the adversarial expert being the wife’s shadow expert. I do not place any weight on that submission given that counsel for the husband had the opportunity of testing the wife’s adversarial expert in cross examination and in circumstances where the experts gave concurrent oral evidence.
One important aspect of the evidence is the opinions of the experts in relation to the respective multiples used by the other. The adversarial expert indicated that the single expert’s EBIT multiple did not seem unreasonable. The single expert on the other hand put in question the EBITDA multiple used by the adversarial expert. She did so because in her opinion it produced a valuation result which was excessive and on an overall basis, generated a level of goodwill for the company that was not reasonable given the volatile earnings of the business (which in the last financial year had made a significant loss). The single expert said in oral evidence that she had not turned her mind to what an appropriate EBITDA multiple would be. The wife made an application to lead adversarial evidence at a very late stage and the experts had only conferred during the trial. I accept that the single expert had not done the calculation as to what an appropriate EBITDA multiple might be if she had adopted that methodology. I accept however that it would have been substantially lower than the multiple used by the adversarial expert. The position of the single expert’s evidence is that even if different methodologies are used, those methodologies should not lead to significantly different outcomes in respect of the value of the business.
As set out above, the single expert calculated what the implied goodwill would be based upon the adversarial expert’s valuation methodology. The single expert was not challenged in respect of her opinion that the effect of the adversarial expert’s valuation would be to ascribe goodwill to the company in the sum of $1,014,000.
The adversarial expert was challenged in respect of that result during cross examination. It was put to him that his goodwill figure was excessive. He said:
The value of the business is an outcome of the typical multiple that would be applied across a range of earnings. For a business that turnover has been $10 - $20 million, and above, to have a level of goodwill that is $500,000 - $600,000, does not seem excessive.
There are two comments to make about that oral evidence. Firstly, the assertion by the adversarial expert that the implied goodwill in his valuation is only $500,000 - $600,000, is inaccurate. It is actually over $1 million. Secondly, he was challenged in relation to his view that turnover had relevance. His answer to that question was not responsive and he did not explain how turnover was relevant to the level of goodwill which was implied in his calculations. Instead, he referred to the fact that he had a limited understanding of the business but understood that it had a brand name and a class of clients, which gave him comfort that his goodwill number was not excessive. This part of the adversarial expert’s evidence was unsatisfactory.
At [34] of the single expert’s original report, the depreciation expenses reported by the company on its plant and equipment was set out for the financial years 2010 through to 2014 together with the forecast for financial year 2015. The depreciation figures in each year were remarkably consistent over those seven years. The single expert had information relating to the actual detailed capital expenditure of the company for financial years 2010 to 2012. The average annual capital expenditure over those three years was $81,000, which was slightly less than the average depreciation over those years. This underpinned the single expert’s opinion that depreciation was a real cost associated with the company’s business operations.
As set out above, the single expert in the joint statement conceded that she did not have information about detailed capital expenditure for the 2013 and 2014 years nor any projections for future capital expenditure from the company. It was agreed that that was a factual vacuum in the case. The husband controlled that information and could have supplied it. The husband however was not tested in relation to the availability of detailed capital expenditure figures for the most recent years and capital expenditure projections, nor was there any call upon the husband to produce that information during the hearing. Counsel for the wife submitted that because of that lack of evidence, the adversarial expert was entitled to adopt a methodology that eliminated depreciation and amortisation prior to capitalising maintainable earnings.
The single expert carried out an analysis based on the information that she had. That analysis supported her position. It is unknown as to whether additional information would have changed that position.
I accept the single expert’s opinion and not the opinion of the adversarial expert because:
101.1.The fact that the adversarial expert misstated the amount of his implied goodwill in oral evidence and relied upon gross turnover as a justification for the level at which he was assessing goodwill, caused me considerable disquiet.
101.2.The adversarial expert conceded that he did not have a full understanding of the nature of the company’s business and I find the single expert had a deeper understanding of the nature of the business.
101.3.I accept the single expert’s opinion that the EBITDA multiple selected by the adversarial expert is too high because it leads to an implied goodwill figure that is not reasonable given the nature of the business.
101.4.The adversarial expert removes depreciation from the expenses of the company in circumstances where there is evidence that the company has in fact made capital expenditure not much different from that claimed by way of depreciation in the three years in respect of which information is available.
101.5.The adversarial expert has inappropriately added back motor vehicle depreciation in the determination of EBITDA in circumstances where that has already been accounted for in director salary normalisation adjustments.
Accordingly, I accept the opinion of the single expert in relation to the appropriate methodology to be used. Having reached that conclusion, there is no disagreement between the experts as to what EBIT multiple should be used, nor what value should be ascribed to the value of the husband’s interest in the company. The overall value of the husband’s interest in the company is in the sum of $360,000.

Item 14 - Jewellery (item 22 in Exhibit 26)

The husband sought to rely upon old valuations and receipts of the wife’s jewellery (see husband’s tender bundle, Exhibit 12). In Exhibit 26 the husband notes that in February 2007 the wife’s jewellery was valued at $120,966. She also had pearls valued at $45,000. The wife objected to these documents. I allowed the tender of one of the documents as a business record because it was an invoice. Whilst these documents indicate that at that time, the wife had jewellery of some value, the documents cannot be relied upon as evidence of current value, and I have no other evidence of value. The husband did not seek at any interlocutory stage to have any expert provide evidence of the value of jewellery. In her affidavit the wife asserts that she has sold various pieces of jewellery and received about $7,000, which she applied to living expenses. The wife in oral evidence also indicated that a jeweller owes her the sum of $3,000 in respect of a piece of jewellery, which that jeweller has acquired from her.
I am unable to assess the current value of jewellery held by the wife higher than what the wife has conceded in oral evidence, and accordingly I would determine the value of the wife’s jewellery at $3,000. I will however take into account in a general way that the wife had jewellery of some value, which has been disposed of since separation.

Items 15 and 16 – Cash and advances to wife (items 25 and 26 in Exhibit 26)

The husband seeks that part of the cash and advances made available to the wife after separation be placed as an “addition” on the balance sheet as assets in the wife’s name.
At [349] of the wife’s affidavit filed 18 March 2015, the wife sets out the monies that she has had available to her between February 2013 and July 2014. The wife denies the husband’s assertion that she received a total of $545,194 during that time. The wife particularised the receipt of income and says the correct figure in that period is in the sum of $491,168. At [350] the wife explains that she expended those monies upon rent, legal fees, costs of the child, payment of credit cards, purchase of homewares, storage, car insurance and registration, counselling, medical costs and travel. The monies the wife has not specifically accounted for totals about $133,000 (see [351]). The wife says she spent that money on clothing, food and entertainment over 18 months, which averages at an amount of about $1,700 per week. This amount approximately coincides with the itemised list of the wife’s personal expenditure (that totals $1,600 per week) in her initial Financial Statement filed 25 March 2013. In his primary affidavit at [76], the husband asserted that in his view the wife’s expenditure is generally excessive. Counsel for the husband also submitted during the hearing that this level of personal expenditure by the wife was particularly excessive.
Although the wife has travelled extensively overseas since separation, she has had the indignity of not having a stable place of residence. The husband however submits, and I accept, that had the wife not travelled, she would have had sufficient funds to obtain a rental property.
After separation the husband has had:
108.1.The occupancy of the matrimonial home worth $7.4 million, which he resides in together with his new partner who earns an income of $150,000. In his affidavit however, the husband says that he has maintained the property by personally completing repairs, maintenance, cleaning and gardening. In oral evidence the husband said that he has spent money paying outgoings on the property and also conducting renovations over the last three years since separation.
108.2.Income earned from other major matrimonial assets (the husband’s shareholding in J Holdings and J Investments);
108.3.A level of income from personal exertion, which is a function of skills developed over the 24 years of the marriage.
I find the occupancy of the home and the income received by the husband post separation sufficiently offsets funds that the wife has received since separation.
Exhibit 22 is a table prepared by the wife’s solicitor as to money available to the husband in the period 1 January 2014 to 20 June 2015, which establishes that the husband has also spent approximately $1,700 per week post separation.
I find that after separation, both the husband and the wife have continued to enjoy a standard of living that is equivalent to their pre-separation standard of living, and that the weekly expenditure has been similar.
There is no basis arising from the discussion above to make any “addition” against the wife for cash advanced to her since the separation.

Item 18 – Interest penalties and fees on home loan (item 37 in Exhibit 26)

The wife seeks an adjustment to the balance sheet because the husband has not continued to make regular payments in respect of the mortgage that was raised against the Suburb X property in order to pay a lump sum amount to wife on an interim basis. The husband seems to have stopped paying regular payments in respect of that mortgage. In oral evidence the husband said that he had reached an accommodation with his bank so that there would be a resolution of this outstanding debt upon the sale of the Suburb X property. The fact that the husband has decided not to continue to service this mortgage on a regular basis is a matter that should generally be taken into account against him, but not by way of placing a specific sum upon the balance sheet.

Item 24 - Loan from Ms W (item 47 in Exhibit 26)

There is no dispute between the parties that the wife has borrowed from her mother an amount of $170,804.
The husband points to the fact that the wife did not refer to this loan, or the enforceability of this loan, in the primary affidavit she filed on 18 March 2015. The affidavit of the wife’s mother also does not refer to this loan.
The wife tendered in evidence a document signed by herself and her mother evidencing the debt. That document was brought into existence for the purposes of being evidence in this hearing and I place no weight on it.
Notwithstanding that, I accept the wife’s evidence (to which there was no challenge) that she will repay the amount that she has received from her mother of $170,000 out of her share of the proceeds of the sale of the Suburb X property.
Accordingly I will place this sum as a liability against the wife on the balance sheet.

Item 25 – Wife’s Westpac visa card (item 48 in Exhibit 26)

The argument between the parties is whether or not the wife’s credit card should be placed on the balance sheet at its current value or at the debt that existed on that card in March 2013 (the wife asserting the higher figure). As I have discussed above, the wife has had available to her significant funds post separation, including funds from the joint borrowing against the matrimonial home. Given the availability to the wife of those funds post separation, it is appropriate to enter the wife’s current liability as opposed to any higher historical liability in respect of her credit card.

Items 29 and 30 – Husband’s 2014 tax and interest on unpaid income tax (items 52 and 53 in Exhibit 26)

In final submissions, the husband conceded that item 52 was PAYG tax outstanding on income that the husband had earned post separation. The husband’s general answer as to why he has not paid it out of his income stream was that he could not afford to do so. The husband in my view has failed to establish that contention. There is no reason why the wife should be responsible for paying part of the husband’s tax from his post separation earnings. I find the husband should be responsible for the payment of his 2014 tax.
Similarly, in relation to interest incurred, the husband has not demonstrated to my satisfaction that he was unable to pay the principle tax liability. Any interest that has arisen as a debt to the Australian Tax Office as a result of the husband’s non-payment of tax should not be visited upon the wife. Accordingly I do not place either of these liabilities on the balance sheet, although I will take into account in a general way that the husband actually does have an unpaid income tax and interest liability to the Australian Tax Office.

Items 31 and 32 – Latent CGT on company shares (items 54 and 55 in Exhibit 26)

There is an agreement between the parties that as part of the property settlement order, the wife will transfer to the husband her right, title and interest in shares in J Holdings and shares in J Investments. As a consequence, the husband will hold all of those shares. It is agreed that if those shares were sold, a liability for the payment of capital gains tax would arise. The husband has no immediate intention of disposing of his interest in the companies in which he has a controlling and ongoing interest. Counsel for the husband points to the fact that the husband is 58 years of age and asks me to infer that the husband will not continue to work in this company after the age of 65 years old. The difficulty with that submission is that the husband at no stage gave evidence as to his future intentions in respect of retirement or as to the disposition of the shares in the company.
The single expert in her updated report dated 10 July 2015 (Exhibit 10) provides the following evidence in relation to item 31 on the balance sheet (item 54 in Exhibit 26):
[28] Based on the revised value assessed above [$130,000], I have revised the tax calculations in the [DD Report] with respect to the husband’s sale of his shares in [J Holdings]. The revised CGT payable on the sale of the shares is estimated at some $31,000.
The single expert then sets out a reasonably simple mathematical calculation of applying a 50 per cent discount to the capital gain (which given that the shares originally had zero value is the whole of the value of the shares) and then calculating tax at 47 per cent (the 47 per cent includes 2 per cent Medicare levy but excludes 2 per cent temporary budget repair levy).
The single expert then goes on to provide a present value calculation on the assumption that the sale of the shares does not happen alternatively for five, ten or fifteen years.
The difficulty in relation to the single expert’s calculations is that I have in fact assessed the value of the husband’s interest in J Holdings at $360,000 not $130,000. I am invited to do my own mathematical calculation. The calculation of the tax payable if the shares were sold today is a simple mathematical calculation. However, I am less confident about doing a present value calculation adopting the expert’s RBA variable indicator lending rate on home loans for small business at 7.95 per cent as at 30 January 2015 (some 4.2 per cent post tax). Applying the principles in Rosati and Rosati (1998) FLC 92-804, in respect of the latent capital gains tax related to the 70,000 ordinary shares in J Holdings, I do not intend to place any figure on the balance sheet at item 31, but will take that into account in a more general way when dealing with s 75(2) considerations.
In respect of item 31, the latent capital gains tax on the shares held by the husband in J Investments, the figures are more certain. The agreed figure of the husband’s interest in that company is $369,000. The single expert’s report attached to her affidavit of 20 May 2015 at pages 48 and 49 of 75, calculates the latent capital gains tax if the shares were disposed of today, at $90,000.
The single expert further provides calculations assuming that the net assets of J Investments will not be realised and fully distributed until sometime in the future. The single expert does present value calculations of the capital gains tax at 5, 10 and 15 years in the sums of $73,000, $59,000 and $48,000 respectively using RBA variable indicator lending rates on term loans for small business of 7.95 per cent at 31 January 2015 (some 4.2 per cent post-tax).
As indicated, I have no evidence as to when the husband intends to divest himself of control and interest in his current business operations. He is 58 years of age and in good health. I am prepared to assume that within a 15 year period he will have divested himself of his interests in this company and on that basis I am prepared to accept the figure of $48,000 as latent capital gains tax to be placed on the balance sheet in respect of item 32.

Item 37 – Amount owed by wife to the adversarial expert (item 60 in Exhibit 26)

The wife seeks that the amount that she owes the firm of adversarial experts for their involvement as a witness in her case be added to the balance sheet. There is no doubt that the involvement of the adversarial expert in this case has led to a different outcome than would probably been achieved had the parties relied upon the initial report of the single expert. In the letter that bears the date of 22 July 2015 (part of Exhibit 10), the single expert makes adjustments as suggested by the adversarial expert to interest and salaries. The adversarial expert highlighted the difficulty arising from the fact that the single expert had reduced the income of the company in the 2014 financial year by $500,000. Having heard the factual evidence about that it was appropriate for the adversarial expert to highlight that issue as it turned out that the information upon which the single expert relied to carry out that calculation was incomplete and the addition of that amount has significantly affected the value. On the other hand, the single expert’s preferred methodology has been accepted over that of the adversarial experts preferred methodology. I think it is appropriate that one half of the costs of the adversarial expert be placed upon the balance sheet.

Item 38 – Loan from wife’s friend (item 63 in Exhibit 26)

The wife wants a loan from a friend in the sum of $2,500 added onto the balance sheet.
At [33] of her affidavit of 27 July 2015, the wife says that on 8 June 2015 she borrowed $2,500 from a friend strictly on the basis that it would be paid back to her when the Suburb X property was sold. Although the wife does not specifically indicate why she needs the money, I am prepared to infer from other evidence that she gave, that she needed it to get by. The wife was not cross examined in relation to this debt and it is appropriate that it is placed on the balance sheet.

WHETHER AN ORDER ALTERING INTERESTS SHOULD BE MADE

The parties have separated and their partnership has ended. After the separation, there was no longer a continuing commitment to the mutual use of assets and a shared responsibility for liabilities. As the balance sheet set out above demonstrates, the assets and liabilities remaining with each party are $6,944,765.32 held jointly; $480,763 held by the husband and $(-282,042) held by the wife.
I find that in all the circumstances, it is just and equitable to make an order altering property (including adjusting liabilities).

CONTRIBUTIONS

The parties agreed contributions during the time that the parties were together would be seen as equal. The husband only has his memory as to what might have been in his superannuation fund at the time they got together (about $75,000).
When discussing items 15 and 16 on the balance sheet above, I have found that the respective advantages that both parties received post separation do not create such a difference that any adjustment should be made in respect of those post separation advantages. Whilst the wife has received a significant cash advance, the husband has continued to live in the $7.4 million home at Suburb X and has received income from the other major assets being the shares in J Holdings and J Investments. In addition he has had his earning capacity, which was substantially developed during the long period of time the parties were together.
I find that the property of the parties should be evenly divided based on contributions.

SECTION 79(4)(d) – (g) MATTERS

In relation to considerations pursuant to 75(2) of the Act, the husband is older than the wife, is in his words “healthy”, and has a new partner who is younger than the wife and who has an earning capacity of $150,000.
Based on the single expert’s valuation, the case has been conducted on the assumption that the husband’s earning capacity is $180,000 per annum by way of personal exertion (the remaining income stream that comes to him from the company arising from a return on the asset itself). That additional income is the income upon which net maintainable earnings has been calculated for the purposes of valuing the asset itself and to count that income stream again against the husband would be a double counting.
The husband asserts that the wife has a reasonable earning capacity. The wife was involved in a business called “L” which ultimately was sold for $17,000 to a girlfriend. The business was a hair salon which rented out premises at the Z Street, Suburb K property, then owned by the parties’ superannuation fund. The wife says that she left this business to embark on renovations of the Suburb X property. During the early years of the marriage, the wife was employed in various roles in the advertising profession. I accept however that the wife has no formal qualifications and has a significantly lower earning capacity than the husband’s assumed earning capacity at $180,000 per annum, and a significantly lower ability than does the husband to regenerate capital.
The overall assets of the parties, including superannuation, are in the order of $9.6 million (some of which each of the parties has already expended). Based on contribution findings, each party will receive about $4.5 million. That sum includes each party receiving one half of what is currently in the self-managed superannuation fund. Although I was told the principle asset of the self-managed superannuation fund is cash held in a financial institution following the sale of real estate, the parties were unable to agree by the end of the final hearing on precisely how much was in the fund, but had agreed (and as indicated orders were made) that whatever is in the fund would be split evenly between the parties. There is approximately $2.5 million in the fund. That means each party, by way of superannuation, will have an amount of about $1.25 million locked up out of the $4.8 million that they otherwise have available to them.
I take into account that the wife has had jewellery of some value that she has mostly disposed of since separation.
I take into account in a general way that there are currently unpaid interest penalties and fees in respect of the joint ANZ supplementary home loan. Between 12 March 2015 and 12 July 2015 this was in the approximate sum of $5,000. The husband has reached an arrangement with his bank so that he will not be required to ordinarily service the loan pending the imminent completion of the sale of the home. When considering the use by the parties of the assets and the funds since separation, I have taken into account the fact that post separation the husband has had the benefit and enjoyment of the occupancy of a property which is worth $7.4 million. Since about March 2015 he has done so without fully servicing the ordinary payments on the borrowings on that property.
I take into account in a general way the husband has an unpaid tax liability to the Australian Tax Office in respect of income tax he has not paid, particularly in relation to the 2014 tax year.
As indicated above, I take into account that there is latent capital gains tax in respect of the husband’s shareholdings in J Holdings. If the shares were sold today the capital gains tax payable would be in the approximate sum of $84,600 ($360,000 x 50 per cent x 57 per cent). As I have indicated above, I am not prepared to assume that the husband will retire in anything short of a 15 year period and the figure $84,600 would need to be discounted probably in the order of about half that amount. I take into account this latent capital gains tax liability.
Both parties have taken money from the self-managed superannuation accounts for their own personal use. That money has to be repaid and the non-compliance rectified. There was an argument between the parties as to who should bear the responsibility of any ramification imposed by the Australian Taxation Office as a result of that non-compliance. The wife asserts that she took the money based on hardship but indicated that she did not seek the relevant permission to do so. On 31 July 2015 an order was made as follows:
2. By injunction, upon settlement of the sale of the Suburb X property the Wife will pay the Superannuation Due (Wife) to the [Gabrys] Superannuation Fund and the Husband will pay the Superannuation Due (Husband) to the [Gabrys] Superannuation Fund
Also, pursuant to orders made on 31 July 2015, the superannuation of the parties in a total approximate sum of $2.5 million is to be split evenly between the parties. The effect of the orders is that the wife will receive $1,250,000 rolled over into a new fund of her choosing.
The most significant s 79(4)(d) – (g) factors are the assets which each party will be entitled to receive as a result of the findings in respect of contributions and the disparity in the wife’s earning capacity compared to the husband’s earning capacity at an imputed figure of $180,000. The husband has a greater capacity than the wife does to accumulate new capital.
Taking into account all the matters that I have discussed that are relevant to s 79(4)(d) – (g), I find that an adjustment of 2.5 per cent should be made in the wife’s favour in relation to those matters.

JUST AND EQUITABLE

Based upon the findings in respect of contributions and s 79(4)(d) – (g) considerations, the net assets of the parties are to be divided as to 52.5 per cent to the wife and 47.5 per cent to the husband which can be achieved in accordance with the following distribution:

Husband gets 47.5 per cent
Assets
Item No.	Description	Percentage	Value
1	X Street, Suburb X	41 per cent	$3,009,580
2	ING #...	100 per cent	$1
3	ING #...	100 per cent	$1
6	ANZ premium cash management cheque account #...	100 per cent	$21,000
7	F Pty Ltd (trustee of super fund)	100 per cent	$1
8	70,000 ordinary shares in J Holdings P/L	100 per cent	$360,000
9	70 ordinary shares in J Investments P/L	100 per cent	$369,000
10	7 redeemable preference shares in J Holdings P/L	100 per cent	$7
11	Loan account to J P/L	100 per cent	$70
12	70 A class units in the J Property Trust	100 per cent	$70
13	1000 discretionary & 100 fixed income units in the Mr Gabrys Hybrid Trust	100 per cent	$200
17	U trust account	100 per cent	$22,000
19	Payments to U (including disbursements and fees) (excluding $33,109.35 paid to U on 2.7.14 and counted below)	100 per cent	$41,880
Liabilities
Item No.	Description	Percentage	Value
23	ANZ supplementary home loan #0…	41 per cent	$132,317
27	ANZ visa #...	100 per cent	$12,400
28	2013 income tax (assessed)	100 per cent	$123,727
29	2014 PAYG	100 per cent	$0
30	Interest on unpaid income tax and PAYG instalments	100 per cent	$0
31	Latent CGT re 70,000 ordinary shares in J Holdings Pty Ltd	100 per cent	$0
32	Latent CGT re 70,000 ordinary shares in J Investments Pty Ltd	100 per cent	$48,000
33	Loan from J	100 per cent	$14,330
34	Costs of sale of Suburb X property	41 per cent	$52,828
35	Amount due to U (including disbursements and fees)	100 per cent	$135,000
Husband receives			$87,948
Net Assets to Husband			$3,393,156
Wife gets 52.5 per cent
Assets
Item No.	Description	Percentage	Value
1	X Street, Suburb X	59 per cent	$4,390,420
4	ANZ cheque account #...	100 per cent	$8,348
5	ANZ online saver #...	100 per cent	$22
14	Jewellery	100 per cent	$3,000
20	Payment to Barkus Doolan	100 per cent	$1,026
21	Payments to Pearson Family Lawyers (including disbursements and fees)	100 per cent	$91,568
22	Payments to Gordon & Barry Lawyers (including disbursements and fees)	100 per cent	$46,431
Liabilities
Item No.	Description	Percentage	Value
24	Loan from Ms W	100 per cent	$170,804
25	Westpac visa card #...	100 per cent	$10,078
26	David Jones store card	100 per cent	$9,923
36	Amount due to Gordon & Barry Lawyers (including disbursements and fees)	100 per cent	$222,139
37	Amount due to Y Accountants	100 per cent	$17,000
38	Loan from Ms AA	100 per cent	$2,500
23	ANZ supplementary home loan #...	59 per cent	$193,026
34	Costs of sale of Suburb X property	59 per cent	$77,066
Wife pays Husband		$87,948
Net Assets to Wife		$3,750,330

Standing back, I consider an adjustment of assets and liabilities in that manner to be one that is just and equitable between the parties.
As can be seen, predicated on a sale at $7.4 million, the wife would receive 59 per cent and the husband 41 per cent of the net proceeds of sale after the discharge of mortgage and anticipated sale costs.
In relation to the future ownership of the German motor vehicle, registration number …, I am not satisfied with the husband’s explanation as to why he repossessed the motor vehicle in circumstances where an order stood in his way of doing so. The wife is to have the option of acquiring the motor vehicle and I will make an order setting out a mechanism to give her that option.

EXCLUSIVE OCCUPANCY

In relation to the wife’s application to occupy the Suburb X property pending sale, it would not be my inclination to make such an order. The joint letter of 30 September 2015 advises that the Suburb X property was sold on 12 September 2015 for $7.4 million ($1.3 million more than predicated at the hearing). The contract date for settlement is 29 January 2016. To the extent that the wife’s application was based upon her assertion that she has a better ability than the husband to prepare the property for sale I no longer need consider those arguments and there was no other basis suggested as to why an order would be made requiring the husband to leave the property.

CHILD SUPPORT

On 4 June 2013 the Child Support Agency issued an assessment in relation to the child. Since February 2014 the child has attended boarding school. On 28 January 2014 consent orders were made by a Registrar setting out an arrangement for equal shared parental responsibility and the times during school year and school holidays that the child would spend with each of her parents. Those orders have been taken out and sealed. The Registrar on 28 January 2014 recorded that all orders sought in the Response to the Application in a Case (except orders 11, 12 and 13 which are not relevant for current purposes) were “settled by the terms”. I am unsure if that is accurate. The wife in a Response to an Application to a Case filed 18 November 2013 had applied for the following orders:
9. Pending further order, pursuant to s 123 of the CS Act, the father shall pay all education expenses for the child and education expenses shall mean and including all private school fees at [EE School, Suburb FF] including but not limited to tuition fees, boarding fees (at the facilities maintained by [EE School Suburb FF] at [S School, Suburb GG]), excursion fees, incidental sporting costs, the costs of school books, and the cost of school and sporting uniforms.
10. The child support payable by the father pursuant to order 9 is not to be credited against the father’s liability under any administrative assessment of child support payable by the father to the mother in respect of the child.
The husband has paid the full amount of the child’s school fees, living expenses, and boarding costs. The parties pay the day to day costs when the child is in their care on alternate weekends and school holidays. It was my understanding at the hearing that there was an agreement that since February 2014, the husband’s payments by way of school and boarding fees have counted for 100 per cent of the annual assessment of child support payable by the husband.
The wife now seeks an order pursuant to s 123 Child Support (Assessment) Act 1989 (Cth) (“the Assessment Act”) that the husband pay all educational expenses for the child, including private school fees for EE SCHOOL, but also all boarding fees, excursion fees, incidental sporting costs, school books, school and sports uniforms. The wife however does not want this order to be credited against the husband’s liability under any administrative assessment. The wife wants the ability to have the benefit of an assessment from the agency.
The husband agrees to an order pursuant to s 123 of the Assessment Act that he be liable to pay for the child’s school fees, sporting costs, books, school and sports uniforms, as well as the child’s private health insurance costs. The husband seeks that these non-periodic payments account for 100 per cent of child support payable by him in any given year. In oral evidence the husband said that the parents should be equally liable for the child’s boarding school fees (if such fees were payable), however it was his intention that the child cease residing during the school week at boarding school and spend equal time with each parent. No parenting application has been brought before me.
Section 3 of the Assessment Act provides:
(1) The parents of a child have the primary duty to maintain the child.
(2) Without limiting subsection (1), the duty of a parent to maintain a child:
(a) is not of lower priority than the duty of the parent to maintain any other child or another person; and
(b) has priority over all commitments of the parent other than commitments necessary to enable the parent to support:
(i) himself or herself; and
(ii) any other child or another person that the parent has a duty to maintain; and
(c) is not affected by:
(i) the duty of any other person to maintain the child; or
(ii) any entitlement of the child or another person to an income tested pension, allowance or benefit.
Boarding fees would ordinarily be paid out of periodic income. However in this case, both parties have significant capital, which is an overwhelming reason why it would be just and equitable for both parties to equally bear the cost of the boarding fees given that both parents have a primary duty to make a contribution towards the cost of a child. Accordingly I shall make a child support order as sought by the husband.

PARENTING ORDER – SECURITY FOR OVERSEAS TRAVEL

The wife seeks to take the child overseas to visit the maternal family in either the UK or Country Q in the Term 4 school holidays this year. The husband asserts the wife is a flight risk.
The Full Court in Line & Line (1997) FLC 92-729 set out the factors to consider when considering the risk of non-return by a parent:
(a) The existence or otherwise of continuing ties between the departing parent and Australia (such as the ownership of real estate, the existence of business interests, or the residence of close family or friends here);
(b) The existence and strength of possible motives not to return (including the level of conflict between the parents, particularly over child related issues);
(c) The existence and strength of possible motives to remain in the other nominated country (such as the ownership of real estate, the existence of business interests, or the residence of close family and/or personal friends there); and
(d) Whether the country of travel is a signatory to the Hague convention.
The husband’s concerns relate to the wife being a Country Q National with both a UK and Country Q passport. The wife does not have an Australian passport. The wife’s mother and sister reside in the United Kingdom and she does not have any family in Australia apart from the child. The wife’s mother is currently buying a property in Country Q. The wife has resided with friends in Sydney, has no ties to Australia and is not in any paid employment. The husband says that his concerns arise from the amount of time the wife has spent outside of Australia since separation. He submits the wife’s trips have increased in length. Further, the husband asserts the wife has only come back to Australia to bring these proceedings to a conclusion and contends the wife is preparing to move overseas once the property settlement is concluded.
In his affidavit of 20 March 2015 the husband points to a diary entry from the child written on or about 28 November 2014 where she writes “I also have my beloved grandma and mum on my team trying to get me to England and out of Australia”. Further, the husband refers to emails the wife has sent to her former boyfriend, Mr M, and to a friend in Australia about property in the United States and in Country GG.
A Child Responsive Program Memorandum was prepared by the family consultant on 28 August 2014. In that memorandum, the family consultant reports that the child “vehemently disagrees with her father” that the wife is a flight risk. The child believes the husband’s concerns about the wife “kidnapping” the child are “both silly and improbable and are merely another example of [the husband’s] tendency to say “no to everything””. The child blames the husband for being on the airport watchlist and is angry with him for not allowing her to pay tribute to her maternal grandfather in person.
The child told the family consultant that she loves boarding school in Australia and expressed a preference to be able to continue at boarding school and spend time with her parents on weekends and school holidays. During cross examination the husband conceded that the child loves boarding school, clearly identifies Australia as her home and sees herself finishing high school in Sydney.

A letter from the Independent Children’s Lawyer to the parties (Annexure 9 to the wife’s primary affidavit) sets out the child’s view that she would like a passport to be able to travel overseas.
The wife told the family consultant that she believes the husband’s refusal to allow the child to travel overseas is another example of the husband attempting to try to punish her for having an affair and leaving the marriage, and to exert control over her, as the wife alleges he had done during the marriage.
As a family, the parties and child travelled quite a lot during the marriage. Much of that travel involved visiting the maternal family in either the UK or South America. The child spent great amounts of time in the care of the maternal family when the parties would holiday alone after spending some time with the maternal family. The child travelled overseas on at least eight (if not more) occasions prior to her parents’ separation.
The family consultant opines that the reality of the child’s situation is that she has had the experience of international travel prior to her parent’s separation, has a mother who is not Australian born, and has extended family members who reside outside of Australia. The child wishes to visit and maintain relationships with those family members. The family consultant records that the child clearly identifies Australia as home, does not see herself living outside of Australia and sees herself finishing her high school education in Sydney and at EE School. The family consultant opined that given the child’s age and her expressed desire to be allowed to travel internationally, the husband’s attitude to the child’s international travel until the child is 18 years old, is likely to be counterproductive for the husband’s relationship with the child at this time.
In final submissions it was put by counsel for the husband that if the wife was so intent on taking the child overseas on holidays, it would seem somewhat strange that she would not fulfil the same condition for a bond she had previously consented to (interim consent orders had previously been made permitting the child to travel overseas if the wife provided security by way of a transfer of her interest in the Suburb X property). That submission is now of little weight given the sale of the Suburb X property, but the monies that the wife receives from the sale of the Suburb X property does provide a ready fund for the provision of security.
I find that the child is of an age where if she really did not want to stay overseas and her mother tried to keep her overseas against her will, then she would find a way of contacting her father either by email or telephone to make arrangements for her repatriation. The two likely places where she would go are the UK and Country Q, both of which are Hague countries.
However, given the wife’s extensive overseas travel since separation, the fact that her mother is buying a property in Country Q and has offered to the wife and child accommodation in the UK should they ever need it, and the fact that the wife has had an off and on again relationship with Mr M (currently off) who resides in South America (with whom the wife has extensively travelled), I find there is a risk of the child being retained overseas. Although as I have said, that risk is mitigated by the age of the child.
In Line & Line the Full Court followed the following approach when considering the appropriate amount of security:
(a)to provide a sum which will realistically entice the person removing the children to return; and
(b)to provide a sum to adequately provision the party left in Australia to take action and proceedings in Australia and overseas in an endeavour to obtain the return of the children.
The wife has offered a bond in the sum of $25,000. Given the amount the wife shall receive from the sale of Suburb X, no amount that is reasonable would create a realistic enticement, but given the level of risk, I am not overly concerned about that. The sum of $25,000 is probably a sufficient sum to enable the husband to engage lawyers to involve the Central Authority to take action to ensure the return or otherwise make arrangements directly with the child to ensure the child’s return, but more may be needed. I intend to make an order the wife provide $75,000 by way of bank cheque with the husband’s lawyers if she wishes to travel overseas with the child. The amount of $25,000 will be forfeited 21 days after the child failing to return to Australia by the due date and the husband will have an opportunity otherwise to make an application to the court for further amounts from the remaining $50,000 in the event that he can satisfy the court that those funds are additionally required to repatriate or attempt to repatriate the child to Australia.
In the event that the wife wishes to travel overseas with the child prior to the completion of the sale of the Suburb X property, she can give an irrevocable authority that the bank cheque for $75,000 be drawn from her share of the proceeds of the sale of the Suburb X property. The bank cheque is to be held in escrow by the husband’s lawyers and only deposited into the trust account upon the child not returning to Australia. The bank cheque is to be provided from time to time commensurate with the child leaving Australia and return to the wife upon the child returning to Australia.

I certify that the preceding one hundred and seventy-six (176) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Watts delivered on 23 October 2015.

Associate:

Date: 23.10.2015

[2015] FamCA 908

23 October 2015

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