Georgeson & Georgeson

[1994] FamCA 180

[1994] FamCA 180

FAMILY LAW ACT 1975

IN THE FAMILY COURT OF AUSTRALIA

AT SYDNEY   No. SY 6680 of 1993

IN THE MARRIAGE OF:

PETER GEORGESON

(Respondent/Husband)

AND

MARIA GEORGESON

(Applicant/Wife)

BEFORE THE HONOURABLE MR JUSTICE S.R. O'RYAN ON THE 31 ST OCTOBER. 1994 AND IST, 2^ND, 3^RD, 4^TH, 7TH AND 8TH NOVEMBER. 1994

REASONS FOR JUDGMENT

DELIVERED ON 15TH DECEMBER. 1994

APPEARANCES:

Mr. Rose, QC   Senior Counsel, (instructed by Messrs, Paltos & Cumming

Solicitors, 2 O'Connell Street, Sydney, NSW, 2000) appeared on behalf of the Applicant Wife.

Mr. Johnston   of Counsel, (instructed by Messrs Henry Davis York,

Solicitors, Level 25, 135 King Street, Sydney, NSW, 2000) appeared on behalf of the Respondent Husband.

PROCEEDINGS

Before the Court have been competing Applications by the parties relating to orders for property settlement and spousal maintenance.  I do not propose going through the history in relation to the various applications which have been made to the court because the Applicant (hereinafter referred to for the sake of convenience as “the wife”) by a Minute filed in court on 31 October, 1994 indicated the orders ultimately sought by her and the Respondent (hereinafter referred to for the sake of convenience as “the husband”) indicated at the commencement of the hearing that the orders sought by him are as set out in an Answer filed on 26 August, 1993. On the last day of the hearing a Minute of orders sought was filed on behalf of the husband but it did not alter the substance of the relief sought by him.

The wife sought the following orders:

“1.Within 28 days from today, the husband pay to the wife the sum of $110,000.00.

2.Upon the husband complying with Order 1, the orders made 30 July, 1993 be and are hereby discharged.

3.Within 28 days from today, the husband shall sign all documents and writings and do all acts and things necessary to transfer to the wife the free and unencumbered title to [Motor Vehicle 1], registered number ….

4.The husband indemnify the wife in respect of all claims and demands whatsoever which may be made upon her by [B1 Pty Ltd] in relation to:

(i)           her loan account with that company;

(ii)          all matters arising out of her having been a director of that company;

5.Simultaneously with the husband’s compliance with Order 1 hereof, the wife sign all documents and writings and do all acts and things necessary so as to:

(i)resign as a director of [B1 Pty Ltd];

(ii)          transfer to the husband or his nominee the one ordinary share held by her in the                capital of  [B1 Pty Ltd].

6.Declaration that otherwise as provided by these Orders, each party be declared to be the absolute owner of all items of real and personal property in their possession, custody or control as at the date of these orders.

7.The husband pay to the wife by way of spouse maintenance the sum of $400.00 per week otherwise usual order.

8.The husband pay the wife’s costs of and incidental to the proceedings.”

In the Minute filed on his behalf the husband sought the following orders:

“1.That on or before 1 December, 1994 the wife shall pay to the husband a sum equivalent to 40% of the value (as determined by the Court) of the former matrimonial home situate at 1 C Street, Suburb D (“the home”).

2.That in default of payment by the wife to the husband of the sum referred to in Order 1 of these orders that the home be sold upon the following terms and conditions:

(a)that the wife forthwith on 2 December 1994 do all acts and things necessary to place the home on the market for sale by private treaty at a price agreed upon between them and failing such agreement at a price equal to the mean of two market estimates one obtained by the husband and one obtained by the wife such market estimates to be made not more than two weeks apart from each other;

(b)In the event that the home is not sold by private treaty within two months of 2 December 1994 the wife forthwith do all acts and things necessary including the execution of all documents necessary for the sale of the home by public auction with an auctioneer and agent as the parties may agree and failing agreement then by such agent as the President for the time being of the Real Estate Institute of New South Wales shall appoint and the wife shall:

(i)Sign an exclusive agency agreement in favour of an agent for the purpose of effecting a sale of the home by public auction such auction to take place within eight          weeks of the 2 February 1995;

(ii)Execute all documents requested by the agent and/or auctioneer for sale of the said     home;

(iii)Request the auctioneer to recommend a reserve price to be placed upon the said home for the purpose of the auction sale;

(iv)Pay to the auctioneer all fees necessary for the auction;

(v)Instruct Messrs Paltos & Cumming to act on the sale and prepare a contract;

(vi)Sign all documents and give all appropriate instructions in order to effect the sale of the home;

(vii)Co-operate in every way with the auctioneer in relation to the auction of the said home;

(viii)Attend at the auction sale and negotiate with the highest bidder and in the event that the reserve price is not reached and to accept the advice of the auctioneer as to the acceptance of a price less than the reserve price;

(ix)Execute a contract for sale and all other documents necessary to complete the sale.

3.That upon completion of the sale of the home the wife shall do all acts and things necessary to procure the proceeds of sale to be paid in the following manner and priority:

(i)In payment of agent’s commission and auction expenses (if any) due on the sale.

(ii)In payment of legal costs and disbursements referable to the sale.

(iii)In discharge of any arrears of rates, taxes and insurances in respect of the home.

(iv)In payment of the sum referred to in order 1 to the husband together with an amount payable by way of interest on that sum at the rates prescribed by the rules from 2 December 1994 to the date of     actual payment;

(v)In payment of the balance thereof to the wife.

4.Declare that each party be otherwise solely entitled to the exclusion of the other to all property of whatsoever nature and kind in the possession of such party as at the date of these orders and for this purpose bank accounts are deemed to be in the possession of the person whose name appears in the bank record thereof, insurance policies are deemed to be in the possession of the beneficiary thereof, superannuation entitlements are deemed to be in the possession of the person who is named as the worker whose age or working future provides the conditions for payment out of such entitlements.

5.That the orders made 30 July, 1993 be and are hereby discharged.

6.That within 28 days the husband and the wife cause [B1 Pty Ltd] to sign all documents and writings and do all acts and things necessary to transfer to the wife the free and unencumbered title to [Motor Vehicle 1] registered number ….

7.That the husband indemnify the wife in respect of all claims and demands whatsoever which may be made upon her by [B1 Pty Ltd] in relation to:

(i)her loan account with that company;

(ii)all matters arising out of her having been a director of that company.

8.That the wife sign all documents and writings and do all acts necessary so as to:

(i)resign as a director of [B1 Pty Ltd];

(ii)             transfer to the husband or his nominee the one ordinary share held by her in the   capital of [B1 Pty Ltd].

9.In the event that any party fails, neglects or refuses to sign any documents to give effect to these orders within the time required by these orders to do so then a Deputy Registrar of the Sydney Registry of the Family Court of Australia is hereby appointed pursuant to Section 84 of the Family Law Act to execute such document in lieu of the party who fails, neglects or refuses to sign any document to give effect to these orders.

10.All applications and proceedings before the Court which are not expressly dealt with by these orders are dismissed.

11.Each party is given liberty to apply in respect of the implementation of these orders on seven (7) days notice.”

SHORT HISTORY

The husband was born in 1952 and is now aged 42 years.  The wife was born in 1956 and is now aged 37 years.  The parties were married in late 1979.  The parties separated on 31 January, 1993 when the husband ceased to reside in the then matrimonial home.  The period of cohabitation was approximately 13 years. In early 1994 a Decree Nisi of Dissolution of Marriage was pronounced, which Decree Nisi became Absolute in mid- 1994. The period of cohabitation was approximately 13 years.

There are three children of the marriage, X born 1985, Y born 1987 and Z born 1989.  The three children have remained in the daily care of the wife since the date of separation.  The parties have resolved the proceedings in relation to guardianship, custody and access and by consent I made orders in relation to such matters.  By the terms of the orders the wife was granted custody of the three children.

PROCEEDINGS

The present proceedings were commenced on 23 July, 1993 when an Application was filed on behalf of the wife.

On 30 July, 1993 Orders were made by consent providing inter alia, for an order in relation to certain monies held in a term deposit account with the National Australia Bank in the name of a company called B2 Pty Ltd.

The parties did not cohabit prior to the date of marriage. 

At the date of marriage the wife had the following assets:
*             1C Street, Suburb D
*             Personal and household items
*             Jewellery
*             Motor Vehicle 2
*             Savings of about $11,000.

At the date of marriage the wife also had an interest in certain entities established and controlled by her father. The wife was a beneficiary of the E Family Trust. The wife was a beneficiary of what was for convenience later called the F1 Trust which was established on November, 1963. The wife’s parents were the trustees of the F1 Trust. The wife was also the beneficiary of what was for convenience later called the F2 Trust which was established in June, 1967. The wife’s parents were the trustees of the F2 Trust. An accountant Mr G gave evidence that the F2 Trust was established for taxation reasons and that income paid to the F1 Trust was distributed to the F2 Trust. The wife was a beneficial owner of shares in F Pty Ltd.

At the date of marriage the husband had the following assets:

*             Savings of approximately $10,000
*             Motor Vehicle 3.

The parties did receive as wedding presents, cash gifts of about $3,000.

At the date of marriage the husband was employed as a professional and the wife was employed as an educator. 

The wife acquired the shares in F Pty Ltd and the interest in the various trusts from her father and at all times, during the marriage, and to the present day such interests have been looked after by the wife’s father[1].  Neither the wife nor the husband have, at any time, participated in the management of these entities and the work done by the wife’s father, in my view was done on behalf of and for the benefit of the wife[2].

[1] See Affidavit Wife 27/9/94 pa 78

[2] See in the Marriage of Gosper (1987) 11 Fam LR 601 per Fogarty J

At the date of marriage the parties commenced to reside in the wife’s property at 1 C Street, Suburb D (“the home”).

The wife purchased the home in mid-1978 for a price of $124,000.  To assist with payment of the cost the wife obtained a sum of $64,000 from her father, Mr H, together with an amount of money sufficient to pay stamp duty and legal costs associated with the purchase.  The wife further obtained a loan for $80,000 from F Pty Ltd which company it is said was controlled by the wife’s father.  The husband made no contribution to the initial acquisition of the home.  The loan from F Pty Ltd was repaid by June, 1984 and the source of funds to repay the loan in 1984 came from the wife’s father who lent the money to the wife. The wife received a loan for $46,000 from her father. In the period 1978 to 1984 dividends payable to the wife in respect of shares owned by the wife in F Pty Ltd and distributions from certain trusts were used to pay the loan from F Pty Ltd.  The wife repaid the loan from her father in 1989 using money which again she received from F Pty Ltd. The husband made no financial contribution towards repayment of the loans acquired by the wife to purchase the home.  During the
period of cohabitation the parties always lived in the home and the wife and the children still live in this property. There was a dispute between the parties as to the value of the home. The wife is seeking to retain the home and the husband is seeking a sale and a division of the proceeds of sale.

Subsequent to the date of marriage the husband continued in employment as a professional and the wife continued in employment as an educator.

In late 1982 the parties purchased in joint names an investment property being   J Street, Suburb K for a price of $68,500.  To assist with payment of the cost the parties obtained a mortgage loan from the then L Financial Company for $36,000 and the balance of the amount required to complete the purchase came from accumulated savings. This unit was rented.

In late 1985 the Suburb K unit was sold for a price of $69,000 and after payment of costs of sale and the amount required to discharge the mortgage the parties received approximately $38,000. There was very little evidence before me as to the disbursement of these proceeds of sale with the exception of mention of the purchase of a motor vehicle. However I am of the view that such funds were used for joint purposes of the parties.  At one time the proceeds were held by the wife in a bank account in her sole name.

In 1981 the husband commenced to work as a contractor. In mid-1983 the husband commenced to practise in his own account.

In 1985 the wife ceased employment because she was pregnant.  In 1985 the first child, X, was born. In 1987 the child Y was born.

In the period 1985 to 1988 improvement work was done to the home. In 1988 renovation work was done to the kitchen in the home. In 1989 major renovations and extensions were done to the home. It was agreed by the parties that the 1989 renovations cost $120,000 excluding the cost of furniture and furnishings ($9,500). 

In 1987 a motor vehicle was purchased for $20,000.

In 1988 the wife undertook some casual employment.

In mid-1989 there was incorporated in New South Wales a company called B1 Pty Ltd.  The husband and the wife were appointed directors of this company and they each acquired one ordinary share.  This company acquired a 50% interest in a partnership business called N Associates which business carried on a business.  B1 Pty Ltd acquired an interest in the partnership business in about mid-1989.

In 1989 the child Z was born.

In October 1989 the husband joined Superannuation Fund 1.

In early 1992 the wife commenced part time employment and her earnings were used for the benefit of the family.

In 1992/1993 additions were made to the property. The cost of this work was included in the costs of $120,000 identified above (1989) and the wife’s father contributed $9,500.

On 31 January, 1993 the parties separated when the husband ceased to reside in the home.  The children and the wife remained in the home and as I have said the wife is seeking an order which would enable her and the children to live in the home. 

In March, 1993 the wife received $12,500 from her father which money the wife has used to pay for living/property expenses for herself and the children[3]

[3] See Exhibit O

In mid-1993 there was incorporated in New South Wales a company called N Pty Ltd.  The husband is a director of this company.  The other director is Mr O.  The husband has one ordinary share and Mr O has one ordinary share.  Since mid-1993 this company has conducted the business which was previously conducted by the partnership M Associates.  M Associates ceased operating as and from mid-1993. No notice was given to the wife of the transfer of the business. No meeting of directors was held at which the wife was in attendance. The husband said that he wanted to be in a position to make decisions without having to refer to the wife. It also appears that in February 1993 significant funds ($200,000) of the company B1 Pty Ltd were removed from a bank account by the husband without the consent of the wife[4] or notice to her and these actions of the husband resulted in orders being made on 30 July, 1993.

[4] See Exhibit AR

In 1994 the husband’s father died and the husband received from the estate of his late father an interest in certain real estate.  The value of this interest is agreed.

In mid-1993 the wife became a member of Superannuation Fund 2

The husband is currently employed as a professional and the wife is employed in a clerical capacity, on a part time basis by a company called P Pty Ltd which company is controlled by her father.

Approach to property settlement proceedings

The approach to be taken to the determination of proceedings pursuant to s79 is well established by authority and this is the approach which I propose to take in this matter: See In the Marriage of Lee Steere[5]; In the Marriage of Ferraro[6] ; Davut and Raif[7] .

[5] (1985) 10 Fam LR 431 (FC)

[6] (1992) 16 Fam LR 1 (FC)

[7] (1994) 18 Fam LR 237 at 234 (FC)

Section 79 (2) provides that the court shall not make an order under the section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order. In coming to my decision, I am required in considering what order, if any, I should make to take into account the respective contributions of the parties referred to in paragraphs (a), (b) and (c) of s 79(4), the effect of any proposed order upon the earning capacity of the parties, the matters referred to in s 75(2) so far as they are relevant, any other order made under the Act affecting a party or a child and any child support under the Child Support (Assessment) Act.

Assets

The first step is to determine the extent and value of the property of the parties.  The parties are in agreement as to the identity and ownership of the assets but are in dispute about the value of the home, the husband’s shares in M Associates and the wife’s shares in F Pty Ltd. There is also an issue about the current balance of the wife’s loan account with the E Family Trust and F Pty Ltd.

Valuation of matrimonial home.   On behalf of the wife written and oral evidence was given by Mr Q, Registered Valuer.  Mr Q valued the home at $1,000,000.  This evidence appears in an up to date valuation report of Mr Q[8]..  Mr Q had previously valued the home at $1,050,000.  On behalf the husband written and oral evidence was given by Mr R who valued the home at $1,300,000.  This evidence appeared in an up to date valuation report of Mr R[9].  Mr R had previously valued the property at the same value and this appears in his
Valuation Report dated late 1993 which is attached to an Affidavit sworn by him[10]. In his submissions counsel for the husband said that the value was $1,265,000. 

[8] See Exhibit B

[9] See Exhibit E

[10] See Affidavit sworn 15/9/93

It appears that both valuers valued the home by the use of what is referred to as “the comparable sales method of valuation”.  This method which is a conventional valuation technique requires analysis of comparable sales which then enables the valuer to give effect to an informed opinion as to the value of the property being valued.  The valuer must rely to a degree on his own skill and judgment in assessing the utility of transactions in the market because comparable sales do not always reveal precise information and no two parcels of land are identical in all respects.  Both Mr Q and Mr R provided evidence of sales which they each analysed in assessing the value of the home.  The real estate valuers conferred pursuant to O30A, r9, but were unable to reach any agreement[11]

[11] See Exhibit AE

The home is described as a waterfront allotment having a steady terraced fall from the low side of C Street, Suburb D to the Suburb K River at the rear.  The land has an area of 1,024 square metres.  The dwelling is of cavity brick construction with face brick external walls (rendered at the rear extension), timber/aluminium framed window/doors and a cement tiled roof.  The accommodation in the home comprises, inter alia, entry porch, lounge room, dining room, three bedrooms, internal laundry, sunroom, kitchen, family room, rumpus room and an under-stairs storage.  It also comprises a single lock-up brick garage at street level and a small storage shed, jetty and pontoon to a deep water mooring. Mr Q said that the original section of the dwelling was erected in the late 1920’s or early 1930’s with additions effected in subsequent years resulting in a “...hybrid architectural style.” This description of the home is confirmed by various photographs which were tendered in evidence.

State of Repair.     In his first report Mr Q gave evidence of the state of repair and condition of the home (p 10-11) and in particular said that he would recommend that a building inspection report be obtained as to the extent and cost of necessary work and that he reserved the right to revise his valuation in the light of such a report. A building inspection report was obtained and in consequence of the report Mr Q revised his valuation by decreasing the value by $50,000. In oral evidence Mr R said that he would allow $35,000 and he also reduced his valuation by this amount Counsel for the husband said that that therefor disposed of the issue of the effect on the value of the repairs and condition of the home. Senior Counsel for the wife said that this was not so and misunderstood the relevance of the evidence about the state of repair and condition. Senior Counsel said that it was very relevant to the appearance and presentation of the home and that this was part of what he called the melting pot of matters relevant to the value of the home.

Mr Q said that the total estimated cost of the work necessary was in the vicinity of $135,000 and that while this figure could vary it could be regarded as an indicative cost. Mr Q said that the expenditure may be perceived as an over capitalisation and that prudent prospective purchasers may regard the existing improvements as functionally obsolete. Photographs tendered in evidence provide a visual illustration of the state of repair of the home and confirm the appearance as described by Mr Q[12]. One of the points of disagreement between Mr Q and Mr R is stated in the O30A r 9 report was the affect of the existing repair and condition on the market value of the home[13]. Mr R in his written evidence had made no mention of a number of the matters which he conceded in his oral evidence were relevant to the state of repair of the home.  Mr Q said that upon satisfactory completion of repairs and maintenance, the home will still comprise a three bedroom dwelling having single car accommodation.

[12] See Exhibit R

[13] See Exhibit AE

Sales evidence.    Mr Q, in his first report, identified as sales evidence 2 C Street, Suburb D, 3 C Street , Suburb D, 4 C Street, Suburb D, 1 S Street, Suburb D and 2 S Street, Suburb D. Mr Q also found a further sale namely 1 T Street, Suburb U.  Mr R, in his written evidence, identified as sales evidence, some twelve sales, five of which were sales referred to by Mr Q, but as well, sales at 3 S Street, Suburb D, 1 V Street, Suburb D, 2 V Street, Suburb D, 3 V Street, Suburb D, 1 W Street, Suburb D, 2 V Street, Suburb D, 4 V Street, Suburb D, 5 V Street, Suburb D, and 2 T Street, Suburb U.

Mr Q gave evidence that the sales in V Street, Suburb D were not really relevant because they are non-waterfront properties and they are purchased by what he called a different market sector. It would appear that Mr R also emphasised that the properties in V Street were non-waterfront, although a property at 2 V Street had what he called a waterfront reserve. Mr R did not agree that there was any real significance to be attached to any differences between C Street and V Street. V Street is higher than C Street and affords better views of the Sydney city sky line. Mr Q said that more is paid for a waterfront than a view. Mr Q said, which I accept, that the sales in V Street have no impact on the value of the home.

Mr Q said that 2 S Street, Suburb D was not comparable to the home.  The property at 2 S Street, Suburb D was sold in mid- 1992 for a price of $1,500,000[14]. The land area comprises 1,397 square metres, battleaxe with a 4.57 metre frontage.  It is a five year old brick and tile residence comprising five bedrooms, en suite, air-conditioning, in-ground pool, boatshed and jetty.  It is described by both valuers as being superior to the home.  Mr R said that it has a superior
house.  Mr Q said that it is a far superior location, land, waterfront improvements, aspect and views.

[14] See Exhibit S

Both valuers considered 3 T Street, Suburb U.  This property was sold in early 1993 for a price of $1,325,000[15]. It has a land area of 1,410 square metres.  It was said to be a forced sale by a Bank.  The improvements comprise a three bedroom dwelling with formal lounge and dining rooms, study, family room, billiard room, wine cellar and on-site parking for five cars.  Mr R said that the property needs upgrading.  Mr Q said that he did not think the property needed upgrading.  Mr R said that it has an inferior house on superior land.  Mr Q said that the waterfront facilities included a 25 metre pool, boatshed and slipway.  Mr Q said that it is a far superior location.  There was tendered in evidence a photograph in a publication called Australian Property News of 3 T Street and my own assessment, based on looking at this photograph, confirms the view formed by both valuers that 3 T Street, Suburb U has superior land and superior waterfront facilities[16]. There was a dispute between the valuers as to whether a tennis court could be installed at this property. Mr Q said that there was room for a tennis court. Mr R said that it would be necessary to fill in the swimming pool. What, in my view, is important is that Mr R said that it is not possible to overcapitalise on inner city waterfront property. The attraction then of such properties is the waterfront and waterfront facilities.  Mr R said that the matrimonial home was valued at $1,300,000 in late 1993.  The property at 3 T Street which has superior land and superior waterfront and waterfront facilities sold for $1,325,000 in early 1993.  I am satisfied that 3 T Street, Suburb U is superior to the home. The view of Mr R about capitalisation of waterfront properties appears to confirm the view of Mr Q about the waterfront values in V Street.

[15] See Exhibit T

[16] See Exhibit T

Mr R gave evidence that 2 T Street, Suburb D was sold for $1,300,000 although he did not say when it was sold, nor did he give any evidence of the size of the land area.  He did, however, say that it was a brick cottage which needed upgrading on a large waterfront block with boatshed, no jetty, but panoramic views of the city skyline.  Although Mr Q had not referred to 2 T Street, Suburb D in his written evidence, he gave oral evidence in chief that 2 T Street, Suburb U was located in a far superior location and that it had a substantial residence in good condition.  The property at 2 T Street, Suburb U is clearly superior to the home. Mr Q said that the properties in T Street are located in one of the best waterfront streets in the Suburb K area.

Mr Q also gave evidence of a sale at 1 T Street in mid-1994 for $971,000 but there was no evidence that the sale has been completed. It also had no waterfront facilities and none possible.

Mr R gave evidence that 3 S Street, Suburb D was sold in early 1994 for a price of $1,410,000.  The land area comprises of 1,650 square metres.  Mr R described 3 S Street, Suburb D as having a much superior house, set well down and close to the water on a large battleaxe block and that it was overall a superior property. Mr Q said that it was a far superior property to the matrimonial home. It has superior views and a deepwater frontage.  I do not believe that the sale of 3 S Street, Suburb D is of assistance in the valuation of the home.

It is not, in my view, necessary to consider all of the sales identified by the valuers, but only those which in my view are relevant to the task which I have to undertake.

The remaining sales analysed by the valuers are located in the same street as the home.  The first sale in the same street was 3 C Street, Suburb D which was sold in mid-1993 for a price of $1,400,000[17]. It has a land area which is smaller than the subject property.  The next sale in the same street as the home was 2 C Street, Suburb D which was sold in early 1994 for a price of $962,500 and has a land area of 872.6 square metres.  There was tendered in evidence a copy of the relevant Deposited Plan[18] on which there is identified the location of the home and numbers 2 C and 3 C Street, Suburb D. Counsel for the husband submitted that the sales of  2 C and 3 C Street road are the most important sales to consider. It should be noted that the home has larger land area than the other properties in C Street.  The advertising brochure for the sale of 3 C Street Road, Suburb D[19] has on the back an aerial photograph which shows numbers 3C and 2 C Street and the home.

[17] See Exhibit U

[18] See Exhibit X

[19] See Exhibit U

The property at 3 C Street, Suburb D was sold, subject to approximately twelve months’ delayed settlement, occupation by the purchaser pursuant to a licence agreement and a development consent for refurbishment and extensions to provide for a large three level residence. Mr Q said that it was also subject to the transfer of a commercial mooring.  It appears that subsequent to the purchase, the purchaser has caused to be constructed on the land a residence which has a significantly different configuration from the residence which was the subject of the development consent at the time of the sale.  It appears then that the purchaser has, subsequent to the purchase, demolished the improvements that were on the property at the time of the purchase and caused to be constructed a new residence. There was an issue between the valuers about whether the commercial mooring could be transferred with the land; Mr R said that it could not be transferred. The advertising brochure for the sale of 3 C Street included a commercial mooring[20]. There was also an issue between the valuers about the views available from the home compared with those available from 3 C Street
[21]. Mr R described the previous improvements as being an older style brick and tile 45 years old residence in need of upgrading; however Mr R did say that although the house was inferior to the home, 3 C Street, Suburb D had superior waterfront amenities.  Mr Q said that the waterfront improvements comprised a large reinforced concrete salt water pool, change room, boatshed, slipway, pontoon and mooring pen.  Notwithstanding then the slightly smaller size of the land area of 3 C Street, Suburb D compared to the land area of the home, it is clear that the land and the waterfront improvements and amenities at 3 C Street, Suburb D are clearly superior to those of the home.  Mr Q said that the sale price of $1,400,000 should be treated with caution as adjustments are necessary for the delayed settlement period, the licence agreement, the existence of a development consent and the value of the commercial mooring.  Mr Q said, and it is apparent from photographs which were tendered in evidence, that the bulk scale and height of the current improvements on 3 C Street, Suburb D are considered out of character with the surrounding development and a gross over-capitalisation for the locality[22].  I have had considerable difficulty in analysis of the evidence in relation to 3 C Street, Suburb D when considering the value of the home.  Mr Q said that if one were to attempt to break up the components of the sale price of $1,400,000 then he would allocate $1,000,000 for the land, $100,000-200,000 for waterfront facilities and $100,000 for the development application.  Mr Q did concede that he was not experienced with respect to the valuation of a development application. The husband gave evidence about the cost of a development application but in my view it was not satisfactory. What is important is that no attempt was made to put before me evidence of the actual cost of the development application.  Mr Q said that he considered that $1,400,000 was an optimum price for this property. Mr O said that he ascertained that the development consent was of no relevance to the purchaser who submitted a completely new and different development application. Further as I have said Mr R said that the commercial mooring can not be transferred. There are aspects of the sale of 3 C Street which it is agreed, at least by Senior Counsel, a prudent approach should have prompted the valuers to consider more evidence such as looking at the contract.  In order to provide evidence of value, sales must be voluntary and free of any suspicion and the circumstances surrounding sales of comparable property should be investigated and weighed before the prices realised are accepted as a measure of value.   There may be circumstances such as a sale by a mortgagee and this is a matter which suggests caution and investigation because the forced sale could result in a sale price lower than fair market value.  On the other hand there are circumstances where prices may be paid above current market values and one such circumstance is where the sale is on unduly liberal terms and conditions. In the circumstances where, inter alia, there is a delayed settlement then this in my view is a matter which should put a valuer on notice that the sale requires further investigation and analysis. Mr R attempted to put a value on the benefit of the occupancy and delayed settlement and made the assumption that the deposit was released to the vendor. I am of the
view that no assumptions can be made and this is a matter which should have been investigated. I am of the view that it is not possible to consider or consider adequately the use to which one can make of the sale of 3C Street, Suburb D in arriving at the valuation of the home.  The nature of the sale and the components of it are such that in order to be of assistance in the valuation of the home then more evidence would be required.

[20] See Exhibit U

[21] See Exhibit Y

[22] See Exhibit U

The next sale is 2 C Street, Suburb D which as I have said was sold in early 1994 for a price of $962,500[23].  It is described by Mr R as a brick house on a waterfront reserve block.  It is of a land size area which is smaller than the subject property.  Mr R described the improvements as comprising a 5 bedroom residence in need of renovation with an in-ground pool being a larger house than the subject house but on much inferior land.  Mr Q described the improvements as being a well-maintained cavity brick residence being more substantial than the subject property and as well, has an in-ground pool.  However in conclusion Mr Q said that it was inferior to the subject property due to the absence of true water frontage. Mr Q said that he would place a land value on the home of $800,000-900,000 and a land value on 2 C Street of $400,000-600,000. Mr Q said that he would value the improvements on the home at $100,000-200,000 and the improvements on 2 C Street at $400,000-450,000. Mr Q laid emphasis on the state of repair of the home.

[23] See Exhibits V and W

There was a further sale in C Street namely 4 C Street which sold in late 1993 for $1,440,000.  4 C Street is described as a superior property.  It is a two storey dwelling containing five bedrooms.  It has a more substantial dwelling, a salt water pool, sauna and boat shed.  It also has more expansive views.

Advocate. Senior Counsel for the wife made a strong attack on the evidence of Mr R submitting, inter alia, that Mr O had assumed the role of an advocate. I am of the view that although Mr R was forceful about his opinions he did not transgress the requirement that the expert valuer not become an advocate.  Mr R in my view did not have such bias to support his opinion that it could be said that hardly any weight should be given to his evidence. That does not mean however that I necessarily accept the opinion expressed by Mr R. I had before me evidence from two qualified experts both of whom adopted the same method of valuation and both of whom provided comprehensive written reports.

Conclusion.     I am of the view that the valuation of Mr Q is to be preferred. In my view the sale at 2 C Street is evidence which supports the value of $1,000,000 for the home. The land value of the home is clearly superior to the land value of 2 C Street. The home has larger land area and has superior waterfrontage and waterfront facilities. On the other hand the improvements at 2 C Street
 are in my view superior to the improvements the home. The improvements on 2 C Street are larger and in better condition than the home. The improvements at 2 C Street comprise five bedrooms, two bathrooms, an inground pool and two car accommodation. Mr Q said that he would estimate the land value of the home at $800,000-900,000 and the land value of 2 C Street at $400,000-600,000. Mr Q said that he would estimate the vale of the improvements at the home at $100,000-200,000 and the value of the improvements at 2 C Street at $400,000-450,000. Notwithstanding the superior land and waterfront facilities at the home it is difficult to accept that it could have a value of approximately $340,000 more than 2 C Street.  So also the sale of 4 C Street, in my view supports the value of the home.  Mr O says that the home is only worth $175,00 less than 4 C Street, which is clearly a far superior property.  Nextly, the sale of 2 T Street, Suburb U which sold for a price which is approximate to the value which Mr R placed on the home and yet are situated in, what I accept is as Mr Q described it, a far superior location than that of the home.  T Street, in my view, is a clearly superior and more desirable location than C Street and in my view Mr R was wrong in failing to concede the differences. Nextly, the state of repair of the home. In my view Mr R failed to consider adequately the state of repair of the home and in my view the appearance and presentation of the home is, as Senior Counsel said, part of the melting pot of matters which are considered when valuing a property and it is no answer to simply make allowances for the costs of repair.  Mr R did agree that appearance is a significant factor. I am of the view that Mr R did fail to consider adequately the state of repair and sought to understate the affect of the appearance and presentation on the value of the home[24]. I am also satisfied that extent of the improvements on 3 C Street do have an affect on the value of the home. The improvements on 3 C Street are very significant and large, much larger than the improvements at the home and in my view do emphasise the inferiority of the home improvements and interfere with the privacy at the home[25]. These matters must be relevant to the appearance of the home and Mr R was very reluctant to concede such matters. I am also satisfied that the analysis of Mr Q of sales evidence was more reliable than that of Mr R.

[24] See Exhibit U

[25] See Exhibit U

Value of Wife’s Shares The wife is the beneficial owner of 625 ordinary shares in F Pty Ltd. This company was incorporated in New South Wales in early 1964. The business of the company is property owner and investor. The directors are the wife’s parents and her sister Ms AB. The shareholders are the wife’s father; 1 ‘A’ Class redeemable preference share, the wife’s mother 1 ‘B’ Class redeemable preference share, the wife’s sister Ms AB 1 ‘C’ Class redeemable preference share, the wife’s parents 2,500 ordinary shares in trust for each of the wife and her three sisters. The wife and her three sisters thus each hold beneficially 625 ordinary shares. The main assets of the company comprise a number of items of real estate, shares in P Pty Ltd, and commercial bills. The income of the company comprises mainly

rental and interest income. The outgoings of the company mainly relate to the investment real estate and accountancy fees. For the four financial years ended 30 June, 1994 the company has not paid nor declared any dividends.

On behalf of the wife Mr AC, Chartered Accountant valued the wife’s shareholding at $365,940. On behalf of the husband Mr AD, Chartered Accountant valued the wife’s shareholding at $909,500. Both accountants said that the most appropriate method of valuing the company was the net tangible assets method. Mr AC valued the net realisable assets at $4,150,000 and Mr AD valued the net assets at $4,416,678. The accountants conferred pursuant to O30A r9, and produced a statement dated late 1994[26] in which they said that they agreed that the proportionate interest of the wife, before discounting, was $1,070,000.

[26] See Exhibit AH

Having established the value of the company it is then necessary to determine the value of the interest of the ordinary shareholders. It is at this stage that the accountants came to very different conclusions to the extent that the accountants were $543,560 apart. The reason for the significant difference of opinion was in relation to the extent of appropriate discounting for the wife’s 25% interest in the value of the issued ordinary shares of the company. As Mr AC said the valuation of the wife’s interest in the company is a more subjective exercise. Mr AD in his oral evidence agreed that this was so.  Mr AC said that he considered that the most appropriate basis of valuation of the wife’s interest was by the discounted cash flow method. Mr AC said that the main concept of this methodology is the time value of money that is a dollar received in the future is worth less than a dollar received today. Mr AC said that an appropriate discount rate was 5% per annum and that the present value of one dollar using a 5% per annum discount rate over 22 years is 0.342. Mr AC said that under this method, the present value of the wife’s entitlement to one quarter of the surplus assets of the company, discounted at 5% is $1,070,000 x 0.342 = $365,940. Mr AD did not agree with the approach taken by Mr AC and Mr AD said that the value of the wife’s shareholding is calculated using a simple discount rate of 15% and that under this method the value of the wife’s shareholding is $1,070,000 -15% = $909,500.

Both accountants recognised that the value of shares in a non listed company will depend on the size of the interest being valued. A controlling interest in a company will carry with it control of the management of the company and, inter alia, dividend policy. Controlling interests are given a greater value than minority interests. The size of the parcel of shares held will effect the basis on which it is valued. It is accepted that for example there should be a discount of value where there is a lack of negotiability of the shares. However as was pointed out by Mr AC the extent of the discount will involve a degree of subjectivity. A minority shareholder differs from a controlling shareholder because the minority shareholder is not in a position to direct or perhaps even influence, the
distribution of dividends or investment of retained profits. A minority shareholder cannot usually effect the liquidation of the company. A minority shareholder also has a lack of access to information about the company. In summary minority shareholders are at a significant disadvantage. Both accountants recognised that it was necessary to discount the value of the wife’s shares.

One traditional method of valuation of a minority interest is the capitalisation of future maintainable dividends because the value of the shares lies in the right to receive dividends. Mr AC considered the possibility of valuing the shares of the wife on the basis of capitalisation of future maintainable dividends however for reasons, which he set out in his written evidence and in particular because it is unlikely that the company will pay dividends to ordinary shareholders, Mr AC said that he did not consider that this method was appropriate and further that in any event the result would be less than the discounted cash flow valuation which he undertook. Mr AD did not value the shares on the basis of capitalisation of future maintainable dividends but accepted that it was ordinarily appropriate in what he called the hypothetical vendor-purchaser situation. Both accountants therefore did not consider this method as appropriate in the circumstances of this matter.

There are significant disadvantages attaching to the shares of the wife. The rights attaching to the classes of redeemable preference shares are set out in the written evidence of both accountants. The “A” class redeemable preference share is held by the wife’s father and is not transferable and shall be redeemed on the date of his death or in late 2049 which ever event happens first. The “A” class share entitles the wife’s father as long as he remains its holder to exercise votes equal in number to one more than the total number of votes to which holders of all other shares in the company are for the time being entitled. The “B” class share is held by the wife’s mother and shall not be transferable and shall be redeemed on the date of her death or may be redeemed at any time prior to her death by the company.  The “B” class redeemable preference share entitles the wife’s mother, after the “A” class redeemable preference shares have been redeemed, to exercise votes equal in number to one or more than the total number of votes to which the holders of all other shares in the company are for the time being entitled.  The “C” class redeemable preference share was originally allotted to Mr AE.  The “C” Class redeemable preference share is currently owned by the wife’s sister, Ms AB.  The “C” Class redeemable preference share entitles the holder to exercise votes equal in number to one or more than the total number of votes to which the holders of all other shares in the company are for the time being entitled, but only after the “A” and “B” Class redeemable preference shares have been redeemed.  On the redemption of the “A”, “B” or “C” Class redeemable preference shares the holder of such share is entitled to receive the payment of $2.00 being the paid up value of the share.  The redeemable preference shares are entitled to a fixed non-cumulative preference dividend at the rate of 5% per annum on the capital for the time being paid up, out of the profits of such year available for dividend but without any right, in the case of deficiency, to resort to the profits of subsequent financial years.  In the event of a winding-up, the redeemable preference shares are entitled to a repayment of capital in priority to all other shares, but shall not confer any further right to participate in any profits or assets.  The wife’s father, Mr H, by his holding of the “A” Class redeemable preference share has control of greater than 50% of the voting rights at a general meeting of members.  Upon Mr H’s death the “A” class redeemable preference share is redeemed and control of the company then vests in the owner of the “B” class redeemable preference share who is currently the wife’s mother.  On the death of the wife’s mother the control of the company is transferred to the owner of the “C” class redeemable preference share who is currently the wife’s sister who is aged 29 years.  The current life expectancy tables indicate that the wife’s sister statistically should survive the wife’s father and mother and that the expectancy is 51.46 years based on a current age of 29. 

The ordinary shareholder’s only benefit from the company (excluding dividends, if any), if and when the company and its assets are eventually sold or liquidated, or upon the eventual death of the wife’s sister (unless her share is redeemed earlier). Whilst the wife’s proportionate equity interest in the company is 25%, the wife has no control or influence over the management of the company, and is unable to realise the equity value of her shareholding until the company’s eventual winding-up.  Until the company is wound up the only benefit the wife will receive are dividends.  Because the wife’s father is unable to participate in the surplus assets of the company, and would receive $2.00 return of capital upon redemption of his share, or winding-up, Mr AC said that Mr H has no incentive to cause the company to be wound up during his lifetime.  Mr AC said that the statistical life expectancy of Mr H is 16.81 years.  Mr AC said that the wife’s mother upon the death of Mr H also has no incentive to cause the company to be wound up and that the statistical life expectancy of the wife’s mother is 21.60 years.  Mr AC said that upon the death of the wife’s parents, the wife’s sister will have control of the company, in a similar manner to the control currently exercised by the wife’s father.  Mr AC said that based on statistical life expectancies of the wife’s parents this will not occur for approximately 22 years.  Mr AC said that the wife’s sister has a statistical life expectancy of 52.35 years. Mr AD said that the control of the company rests in the hands of the preference shareholders, who on the present life expectancy may control the company for at least another 21.81 years and possibly 51.46 years.

Mr AC was of the opinion that it was unlikely the company will be wound up prior to the death of the wife’s mother which according to statistical life expectancy tables will be in approximately 22 years.  In particular, Mr AC said[27]  “Upon the death of [Ms AX] (assuming [Mr H] predeceases her), [Ms AB] will assume control of the company.  She may then, with the acquiescence of at least two of the remaining three ordinary shareholders, cause a special resolution for the winding-up of the company to be passed.  If the “C” class redeemable preference

[27] See Affidavit Mr AC 27/10/94

share was redeemed, for whatever reason, three of the four ordinary shareholders are still required to cause a special resolution winding up the company to be passed.  It is unlikely that the wife will ever be in a position to cause the company to be wound up, although she can at any point in time support such a resolution.  We consider it most likely that the company will be wound up upon the death of [Mr H] and [Ms AX].”

Mr AD said[28]: “The ordinary shareholders only benefit from the company (excluding dividends, if any) if and when the company and its assets are eventually sold or liquidated, or upon the  the eventual death of [Ms AB] (unless her share is redeemed earlier)”

[28] See Affidavit Mr AD 6/9/94

The wife, therefore, is in a very restricted position in regard to her shareholding in the company.  The wife can participate in the receipt of dividends as they are declared, but the wife cannot cause to be passed a resolution in favour of such dividends.  Further the wife is entitled to vote at general meetings of the company but she has no control.  The wife is entitled to participate in the surplus assets of the company on winding-up, but Mr AC says this is unlikely to occur for approximately 22 years. Mr AD said that the holders of the ordinary shares would be unlikely to realise their value in the ordinary shares through a distribution in specie of assets in the immediate future. 

Mr AC said that using the methodology of a discounted cash flow valuation he considered the value to the wife of her shareholding to be the present value of the wife’s one-quarter share of the surplus assets of the company which may be received in 22 years depending upon the way the wife’s sister exercises her control and that Mr AC considered this to be the most appropriate basis of valuation.  Mr AC said that the appropriate discount rate to be used was the rate which an investor could expect to obtain by investing in other investments with a comparable risk and that he considered, for reasons which he explained, that an appropriate discount rate was 5% per annum.  Mr AC stressed that the value to the wife of her shareholding is not presently realisable by her and that this value envisages that the company, subject to the wife’s sister exercising her control, will not be wound up for 22 years.  Mr AD says that this is inappropriate because, inter alia, the wife has in the past received benefits from the company and in all likelihood will continue to do so in the future.  Mr AD cites as examples of such benefits, dividends, the use of a car and other matters. The difficulty with this is, that it is to an extent, inconsistent with the reality that no dividends have been declared for four years and may not be declared in the future which as will be seen shortly was acknowledged by Mr AD.  Mr AD in his written evidence did say, that in his opinion, the most likely method by which the holders of issued ordinary shares would realise their value would be through the sale of their shares to a current shareholder other than the eventual winding up of the company on the death of the wife’s parents and that this option was the most likely scenario particularly after the death of the wife’s parents. The difficulty with this is that, with perhaps the exception of the wife’s sister who will
ultimately gain control, such a purchaser would labour under exactly the same difficulties as the wife presently has. Mr AD said that he ignored the hypothetical vendor and purchaser approach and valued the shares of the wife having regard to the value of the shares to the wife as a member of the E family and that he had considered the decisions of the Family Court in a number of cases which he specifically referred to.

No one can categorically state that the value of an asset is $X. The best evidence of the value of an asset is the prevailing market price. Value depends on what is being valued, when the valuation takes place, the method chosen and the quantity of the asset being valued. The purpose of the valuation will also affect and determine the method chosen: See In the Marriage of Antmann[29]; In the Marriage of Shaw[30]; In the Marriage of Hull[31]. The reasons why courts are required to value an asset are varied eg resolve questions concerning the sale and purchase of businesses, determine the basis of assessment of stamp duty, to divide property in deceased estates, to determine adequate compensation in the case of compulsory acquisition, to determine value for the purposes of rating and for land valuation appeals. These are some of the reasons but the list is by no means exhaustive. Further courts determine value, given the circumstances of each case. The circumstances of each case are each case’s own particular facts and the evidence of experts on the value of the asset in question.. The classic statement of “value” was made by Griffith C.J in Spencer v The Commonwealth[32]: “In my judgement the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, ie, whether there was in fact on that day a willing buyer, but by inquiring “What would a man desiring to buy the land have to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell ? “. It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together”. It is the principle by which courts are to be guided in determining whether a method of valuation determines what is or what is not fair value: See In the Marriage of Dunbar[33]; In the Marriage of Gamer[34] .

[29] (1980) 6 Fam LR 560 at 565

[30] (1989) 12 Fam LR 806 at 817

[31] (1983) 9 Fam LR 241 at 246-247 per Nygh J

[32] (1907) 5 C.L.R 418 at 432

[33] (1987) 11 Fam LR 901 at 911

[34] (1988) 12 Fam LR 73 at 79

It has been said that it is open to the Family Court to find that the value in one party’s hands is at variance with the value to a hypothetical purchaser, and to value the asset accordingly[35]. In Hull’s case Nygh J said[36] that in the circumstances of that matter the test laid down in Spencer’s case was of no application because there was no market for the shares.  In the Marriage of Reynolds[37] the Full Court said that it is doubtful whether valuation methods which have been developed for commercial purposes are entirely appropriate for the purposes of family law and that “The present commercial or capital value of shares in a proprietary company may not reflect their value to the spouse, who either has control after divorce or who stands ultimately to benefit from them or control them after the death of generous parents, as appears to be the case here”. In Sapir v Sapir(No 2)[38] Young J after reviewing various authorities of the Family Court said[39] that he would adopt as the basis of valuation the value of the shares to the party not their commercial value or their value to a hypothetical purchaser. In Turnbull and Turnbull and others[40] Baker J said[41] that it is not appropriate, in the context of family law proceedings, to value shares in private family companies on the basis of what a hypothetical purchaser may pay and that it is also inappropriate to adopt the approach taken in revenue and resumption cases. The idea of value to the owner has also been examined, although not to any length by the learned author of  “Valuation of Company Shares and Businesses”[42].

[35] Australian Family Law Vol 1. Butterworths at p 1462 pa [s79.115]

[36] at p246

[37] (1984) 10 Fam LR 388 at 394

[38] (1989) 13 Fam LR 362

[39] at p 365

[40] (1990) 15 Fam LR 81

[41] at p 94

[42] M.S.Adamson. Seventh Edition, Law Book Company Limited at p 25.

The question which arises is what is the appropriate method of valuation to be used in the Family Law context to achieve fair value?  There is no substitute for market price as the true determinant of fair value however not all assets are in markets where value is readily determined and consequently methods other than comparable sales must be considered. Traditionally the most often used methods are tangible asset based or earnings based methods. In this matter both valuers agreed on the method to determine the value of the company but disagreed on the method to determine the value of the minority interest of the wife. In this matter I have to determine the present value of the shares of the wife in circumstances where she has no control of the company.

I am of the view that the valuation exercise in this matter is being undertaken for the purpose of property settlement proceedings pursuant to the provisions of s79 of the Family Law Act. In such proceedings the court is required to make an order which is just and equitable in all the circumstances. As part of the task of determining what is just and equitable the court must firstly determine and value the assets of the parties. I am of the opinion that the appropriate method of valuation used depends not only on the purpose for which the valuation is being done but also the circumstances of the individual matter. The circumstances of the individual matter must be looked at and considered. I agree that valuation methods used for other purposes such as revenue collection or compensation may be
inappropriate for the purpose of proceedings under the Family Law Act. In Mallett v Mallet[43] (HC) Mason J said[44]:“What is the appropriate method of estimating the value of shares in a proprietary company depends upon a variety of factors. They include the purpose for which the valuation is made, the nature of the shareholding, the character of the company’s business, its capacity to earn profits and the net value of its assets.”[45] .

[43] (1984) 9 Fam LR 449

[44] at p 464

[45] See also Gibbs CJ at p 457.

What however must be remembered is that because the purpose of valuation in the family law context may be different from circumstances such as revenue collection or compensation the method chosen to value must be one which achieves the real value. In Mallet’s case Mason J said[46]:There is always the risk that in examining methods of valuation attention is diverted from the object of the exercise, namely the ascertainment of the real value of the shares, to the means           by which the object is to be achieved.

[46] at p 464

A compound interest calculation consists of a series of interest calculations. eg an investment in government bonds or fixed interest investment involves the surrender of cash for an agreed period of time at the end of which the cash is repaid. The concept of compound interest assumes that the interest payment is retained in the investment pool thereby increasing the investment amount and itself attracting interest at subsequent periods. Where the task is to ascertain the present value it is simply the reciprocal of compound interest. This is the process of discounting a sum of money receivable in the future. The principle involved is that there is a loss of investment potential because the sum in question is not available now. Accordingly the present value of the sum receivable in the future is such that, if invested, it will compound to be equivalent to that future sum. It is this concept that constitutes the time value of money. If $1,000 is available today then it’s present value is $1,000. But if the $1,000 is not available until some years have passed then the sum diminishes in value because of the time element. The discounting simply compounds investment potential foregone. All of the exigencies of the matter such as risk, inflation and economic climate are subsumed by the interest rate chosen. The discounted cash flow analysis has been used by Australian courts although there has been no close analysis of the approach[47].

[47] Albany and Ors v Commonwealth of Australia (1976) 12 A.L.R 201 per Jacobs J.

Counsel for the husband refereed to and relied upon an unreported decision of Baker J in Moylan and Moylan[48].   In Moylan’s case  Baker J, rejected as a method of valuation, an approach whereby the value of the shares was based on the present value of the anticipated realisation price of the shares given an expectancy that in a specified number of years the value may be realised. It determines the future value of the shares discounted to a present day valuation, given the variables of the life expectancy of the longest surviving controlling shareholder, the anticipated capital growth rate of the
underlying assets and business discounted by the required rate of return. Baker J found that the value of the shares must be determined on the basis of their worth to the shareholder. In Moylan’s case Baker J valued the shares on the basis of their net tangible assets and then applied a discount rate of 20%. Mr AD said that he valued the shares of the wife on the basis of the value to her as a member of the E family and in so doing relied on  the decisions of Turnbull, supra; In the Marriage of Hull, supra; In the Marriage of Reynolds ,supra and Sapir v Sapir ,supra. I do not doubt the correctness of the method of valuation used by Baker J in Moylan’s case but in my view the circumstances in that case are different to those which I have to consider. In Moylan’s case there was evidence that the husband considered that his shares were of a value significantly greater than the value placed on the shares by his expert accountant. Further the husband was the only member of the family who had significant involvement in the day to day affairs of the company and His Honour was of the opinion that the husband would ultimately assume the role of managing director; the husband had been closely involved with the company either as an employee or as an executive director; the husband would ultimately assume the position occupied by his father; the husband’s continued involvement was absolutely essential for the good of the shareholders His Honour said that it was necessary to look at the reality of the situation. I agree that it is necessary to look at the reality of the situation. In my view the task is to ascertain the real present value of the shares.  The reality of the situation in this matter is that the wife is an employee of the company and has never had any position of management and has never played and there is no evidence that she is likely to play any role in the management of the company. The wife will not step into the shoes of her parents in relation to the control of the company. The wife’s continued involvement is not essential for the good of the shareholders.  The wife has had the benefit of dividends which have been credited to a loan account in her name with the company and also interest on the loan account. The wife has been able to draw money from the loan account, from time to time, for her own benefit but she has no ability to determine or influence whether dividends or interest are paid. The wife’s evidence made it very clear that her father is in control of the company and he makes decisions in relation to the affairs of the company (and for that matter the personal financial affairs of the wife) of which not only does the wife play no part but in some instances she has no notice of. However in the absence of evidence, in my view, I must proceed on the basis that the actions of the wife’s father are not contrary to any obligations he has at law or contrary to the rights at law of the shareholders. Mr AD in his report said that the company has not in the last four years paid any dividends, nor is it under any obligation to pay dividends in the future and the directors may decide to accumulate the profits of the company for reinvestment.  Mr AD says that the reality is that the shares of the wife have a value which represents only a 15% discount from the optimum or what was called the full proportional value namely $1,070,000. I do not agree. I do not accept that the reality is that the shares have a real present value of a figure which represents only a 15% discount of the present full proportional value. The wife is in a position where she could not obtain the benefit of the full proportional value for at least 22 years and perhaps longer. As Mr AC pointed out, ultimately control flows to the wife’s sister, who is younger than the wife and the wife may get no
value even when her sister assumes control. The rate chosen by Mr AC takes into account risk, lack of negotiability and lack of control. In my view no one would give the wife $900,000 for her shares and there are no benefits received or receivable by the wife which could justify such a high current value in the hands of the wife. Further what benefits the wife has received such as interest on a loan account and drawings have not , in my view been as a result of the shareholding. I do not see how Mr AD could support a discount rate of 15% when in the circumstances of Moylan’s case Baker J used a discount rate of 20%. Mr BB said[49] that the valuation of minority interests in profitable companies which have not paid a dividend in recent years should be assessed as the present value of the eventual return such shares might offer to a prospective purchaser. In my view Mr AC has realistically sought to provide a real current value on the shares of the wife. Mr AD has failed, in my view to provide any or any cogent reasons why he chose the discount rate of 15%. I was provided by Counsel with a copy of the unreported judgement of Coleman J in the Marriage of Mourd[50] in which Coleman J accepted, as appropriate in the circumstances of that matter, a discount rate of 50% for the value of a minority interest. Further Coleman J refered with approval to what Baker J said in Turnbull about value to the holder.  In my view Mr AD failed to provide any or any sufficient reason for the valuation he arrived at[51]. In my view the value of Mr AC is to be preferred.

[48] Unreported. 12 November 1992

[49] at p 74

[50]  Unreported. Canberra. 29 November, 1991.

[51] See Affidavit sworn 6/9/94 at p 015

Mr AD said that he undertook a check as to the reliability of the approach which he took, he did an exercise which resulted in a discounted value of $909,500[52]. I do not see this as reliable in supporting the figure of Mr AD. Mr AC was examined on this approach.  What has to be addressed are acceptable reasons why the shares of the wife have such a high current value and I do not see how the provision of dividends, interest, a motor vehicle, life insurance premiums and perhaps legal fees can be said to justify such a low rate of deduction. Mr AD says that the wife has received benefits of a value of $300,000 over a period of thirteen years. As I have said, in my view a number of these have no nexus with the shareholding and nextly it is a very low return on an investment of $900,000.

[52] See Exhibit AM

Value of shares in M Associates.
M Associates was incorporated in mid-1993.  The company operates the business which was previously carried on as a partnership through B1 Pty Ltd and AM Pty Ltd.  The partnership of M Associates was formed in mid- 1989 pursuant to a formal partnership agreement.  In mid-1993 the business was transferred to M Associates.  The directors of M Associates are the husband and Mr O.  Mr O is the secretary.  Each of the husband and Mr O hold 1 ordinary share.  As a 50% shareholder the husband is unable to control the affairs
of the company.  The business owned by the company does not specialise in any particular type of work and it has one repetitive client being AF Bank.  The business employs six staff including the husband and Mr O.  The husband and Mr O have remunerated themselves by way of salary, superannuation and consultancy fees.  The husband is the registered owner of a business name “[AZ Services]” which has derived consultancy fees from the partnership of M Associates.  Mr AC said that as M Associates is an active trading entity the most appropriate method of valuation is the capitalisation of future maintainable earnings and a comparison of the result obtained with the assets utilised in generating that result.  The accountants, Mr AC and Mr AD conferred pursuant to Order 30A, rule 9 Family Law Rules and prepared a report[53].  In this report the accountants said that they agreed that in determining the future maintainable profits they had agreed on all adjustments other than in respect of reasonable remuneration of the principals of the business.  Further they agreed that the discount to be applied to the husband’s 50% shareholding was 10% and further they agreed that the future maintainable earnings should be calculated as the average of the adjusted net profits for the years ended 30 June, 1992, 1993 and 1994.  The accountants disagreed on three matters:  firstly, the reasonable remuneration for the principals; secondly, the capitalisation rate; and thirdly, the income tax rate to be applied to future maintainable earnings, capital gains tax and retained profits.  In the Order 30A, rule 9 report the accountants set out how they arrived at their respective values. The consequence of the three areas of difference are set out in the Order 30A, rule 9 Report.  Mr AC values the husband’s shares in M Associates at $214,821 and Mr AD values these shares at $110,427. 

[53] See Exhibit AI

Reasonable remuneration.   Mr AC in his written evidence said that he considered a reasonable remuneration for the husband to be $120,000.  Mr AD said that he considered a commercial level of remuneration for the husband and Mr O for 1994 to be $140,000, being $15,000 for the motor vehicle, use of computers and plant, telephone and  home office and $15,000 for what he called “premium for [AF Bank] relationship role”.  This latter item Mr AD said recognises the roles of the husband and Mr O in maintaining and cultivating strong relationships with the AF Bank Group including extensive hours worked outside normal commercial guidelines. I prefer the view of Mr AC.  Mr AC was not really challenged about the factors which he said were relevant. I have difficulty accepting the view of Mr AD about the length of hours worked as it seems to me reasonable to expect that as part of the burden of self employment that a principal may work longer than an employee. The notion of working long hours, in my view, does not require a premium. The idea of working beyond normal commercial guidelines, in my view, is not really relevant.  I am also of the view that there is no evidence that considerable time and effort is undertaken in maintaining client relationships.. The relationship with the AF Bank is of long standing. The firm was recently given an extensive job of refurbishing floors of a commercial building in AG Street, Sydney and there is no evidence that extensive and extra effort was necessary to
achieve this job. Mr AD was unaware of this job. Mr AD had said earlier in his report that a factor which had to be taken into account was the retirement in 1994 of the head of the property department of AF Bank. However the AG Street job was obtained subsequent to the retirement and replacement of the person whom Mr AD described as the “contact referral source”. It should be noted that no information was given by the husband about AG Street to either accountant. Mr AD said that he would have looked at AG Street if he had been informed about it as it could have been significant. The husband gave some evidence in chief about AG Street but he produced no documents to substantiate the figures he gave evidence of. I found the husband’s evidence on this matter unsatisfactory. Consistent with the attitude the husband took to the involvement of the wife in the company after separation, it is my view that the husband was not anxious to reveal too much about AG Street.

Capitalisation rate.    As to an appropriate capitalisation rate Mr AC said that an appropriate rate was 27.5%.  Mr AD said that an appropriate rate was 32.5%. Each accountant allowed a high rate because of the high percentage of fees coming from one source namely AF Bank.  Mr AD said that he agreed with all of the factors listed by Mr AC when Mr AC assessed the capitalisation rate. Mr AD however said that he believed that additional factors increased the risk and he then added 5% to the risk rate selected by Mr AC. As I have said Mr AC had also allowed for the high percentage of work coming from the one source. Mr AD had also allowed for and placed weight on the retirement of the property manager who was the main referral source. As I have said the AG Street job was achieved after the retirement of the main referral source and there was no evidence that the amount of work achievable by the company is at risk or has in any way diminished.  There is no evidence that the relationship with the current property manager is such as to place at risk the amount of work the company may receive. Mr AD conceded that he had seen nothing to suggest to him that the husband had done anything other than seek to maintain the relationship with the AF Bank. Mr AD took no steps to investigate the strength of the relationship with the new property manager. Mr AC obtained information about AG Street from the new property manager. There was tendered in evidence the stock exchange report for the AF Bank[54]. Looking at this report as a whole it does not support the idea of a bleak future so far as the AF Bank is concerned. It was written for the 1992-1993 year. In my view there is no evidence that the relationship with the AF Bank is at risk. A risk rate of 32.5 % is in my view very high and I am not satisfied that Mr AD has adequately explained why such a rate is appropriate in the circumstances of this matter.  I therefor adopt the capitalisation rate of 27.5%.

[54] See Exhibit AK

Income tax rate.   As to the Income Tax issue Mr AC allowed income tax at the current corporate rate of 33%.  Mr AD, however, allowed 48.4% as the appropriate tax rate.  Mr AD said that he was of the view that the tax rate of 48.4% should be applied to the maintainable profit
instead of 33% notwithstanding the business is conducted via a company since 1 July, 1993 because the business is a professional business primarily conducted by two partners who ultimately are required to pay income tax at the top marginal rate of tax of 48.54%; further because profits earned after tax are represented by cash on deposit which are paid out as franked dividends from time to time and attract income tax at the higher marginal rate of 48.4% and finally because the husband and Mr O both derive salary income of at least $50,000 each per annum to utilise the lower marginal rates of tax. In my view this area of difference can be simply disposed of. What is being valued are the shares in a company and the corporate rate of tax is the appropriate rate. In my view the appropriate rate is 33%. In my view it is not appropriate to go back into the company and substitute the higher tax rate.

Conclusion. In my view the husband does not perceive any difficulties with the financial viability of the company.  I am of the view that the shares in N Pty Ltd are valued at $214,821.

Wife’s Loan Account  The husband asserts that the wife’s loan account with the E Trust may have a greater credit balance than the sum asserted by the wife. It is also asserted by the husband that the wife may have a loan account with F Pty Ltd which has a current credit balance.  The wife was cross examined on this issue as was Mr G. The cross examination on this issue was quite extensive as were the complaints made by counsel for the husband about the availability of documents[55] but in my view no evidence was put before me to cast any doubt on the accuracy of the amount the wife says she is presently owed by the trust[56].  I should add that the criticism about the production of documents was denied by the wife.  The amount of $14,533 is the total of dividends notionally distributed to the wife in the years 30 June, 1991 and 30 June, 1992.

[55] See Exhibit AN

[56] See Exhibit AQ

It was submitted that the general ledger and supporting journals of F Pty Ltd were missing for 1984 and in the result there was no evidence that the wife repaid in full the loan from this company by the loan from her father.  I do not understand this submission.  It was submitted that I should find that the wife has $46,000 in her loan account with F Pty Ltd which sum the wife did not disclose and Counsel for the husband, relied upon In the Marriage of Black and Kellner[57].  If this is correct then I would have to find that the wife still owes $46,000 either to her father or to F Pty Ltd.  The result would be that there is no increase in the net value of the assets of the parties.  I also note that there was no issue that the wife obtained a loan from F Pty Ltd to assist with payment of the cost of purchase of the home.  Mr G does receive instructions form the wife’s father and did receive instructions to give effect to the $46,000 repayment in 1992.  I found both Mr G and the wife to be frank and truthfull in their evidence and I have no reason to doubt the truth of what they said.  The
wife’s father did not give evidence before me but I do not see that, in the circumstances of this matter, the absence of evidence from the wife’s father leads to the inference that his evidence would not have assisted the wife[58].  It must be remembered that the wife has advance by way of loan, funds to her sister and there is no evidence that these moneys came from the joint funds of the parties or from a source to which the husband made a contribution.

[57] (1992) 15 Fam LR 343 (FC)

[58] Jones v Dunkel (1959) 101 CLR 298 (HC)

Jewellery  The wife had some items of jewellery at the date of the marriage and some items were received by her form members of her family[59].  The wife submits that jewellery of a value of $2,873 has no “nexus” with the marriage.  This was agreed by the husband.  The amount is included in the figure of $5,568 above.

[59] See Exhibit P

Summary of Assets

In my view the parties therefore have the following assets:

Property

1.        1 C Street, Suburb D  $1,000,00

2.        Shares, B1 Pty Ltd (Husband)  129,015

3.        Shares, B1 Pty Ltd (Wife)  129,015

4.        Shares, M Associates & Associates Pty Ltd (Husband)  214,821

5.        AH Bank  89,270

6.        AF Bank Savings Account  661

7.        AF Bank Account  11,681

8.        Cash  50

9.        Motor Vehicle 4  15,000

10.      Furniture (Husband)   2,840

11.      Furniture (Wife)  18,420

12.      Jewellery (Husband)  610

13.      Jewellery (Wife)  5,568

14.      AF Bank Savings Account  510

15.      AF Bank Cheque Account  450

16.      Cash  50

17.      Loan Account, E Family Trust (Wife)  14,533

18.      Loan to sister (Wife)  72,344

19.      Shares, F Pty Ltd (Wife)  365,940

20.      Interest in late father’s estate (Husband)  245,000
  ________
            Total  2,315,778

Liabilities

The parties have the following liabilities:

1.        Legal/Accounting/Valuation Costs (Husband)  67,534[60]

[60] See Exhibit AT

2.        Legal-Accounting Costs (Wife)  31,500[61]

[61] See submissions on behalf of wife

3.        Debt to father for legal costs (Wife)  22,000

4.        Credit Cards (Wife)  1,500

5.        Pre-school fees (Wife)  355

6.        Electricity (Wife)  204

7.        Service Station (Wife)  106

8.        Music Fees (Wife)  180

9.        Art fees (Wife)  120

10.      Dance fees (Wife)  130

11.      Sewer line connection (Husband/Wife)  8,500

12.      Car repairs (Wife)  969

13.      Loan Account, B1 Pty Ltd (Wife)  11,821

14.      Loan Account, B1 Pty Ltd (Husband)  21,027
  ________
            Total  (165,946)

Balance  2,149,832

Financial Resources

In addition, the parties have the following financial resources.  The husband has long service leave entitlements of $8,074, provision for dividend of a net value of $16,800 and consulting fees which are receivable of a net value of $25,800 ($50,000 gross).  The husband is also a member of Superannuation Fund 1 and as at 17 October, 1994 his resignation benefit had a net value of $20,202.  The superannuation entitlement has a significant future benefits value[62].  The husband also has an interest in Superannuation Fund 3 and the preserved benefit has a value of $4,600.76.  The hearing proceeded before me on the basis that these entitlements should be treated
as financial resources[63]The wife has an interest in  Superannuation Fund 2 and to date she has made contributions of $504. The wife joined the fund in mid-1993.  The wife also has an interest as a beneficiary in the E Family Trust.  The wife received distributions in 1991 and 1992.  The husband’s financial resources are significantly greater than those of the wife.

[62] See Exhibit G

[63] See written submission dated 4/11/94 on behalf of wife

Contribution

Section 79 (4) (a) ,(b).

At the date of marriage the wife had significant assets, namely, the home, household items, jewellery, Motor Vehicle 2, savings of an estimated $11,000 and shares held in trust for her in F Pty Ltd.  The husband has very few assets.

As I have said, at the date of marriage, the wife was in full time employment as an educator and the husband was in full time employment as a professional.  The wife continued employment as an educator and ceased such employment shortly prior to the birth of the parties’ first child.  The wife later resumed part-time employment in 1988, again in 1992 and then in 1992 commenced part-time employment with P Pty Ltd.  The wife has continued in this employment to the present day.  I am satisfied that during the periods when the wife was engaged in gainful employment she contributed her earnings towards the joint interests of the parties and also the family and that this represents a financial contribution by the wife.

The husband at the date of marriage was employed by a firm called AJ Company.  From 1981 to May, 1983 the husband worked as a contractor for a firm called AK Company which firm carried on business and the husband’s position was in charge of one strand of the business.  In mid-1983 the husband commenced to practice as a professional on his own account from rented premises at AL Street Sydney.  In late 1985 the husband employed a professional and shortly thereafter engaged the services of a secretary.  The husband’s business began to grow and more staff was engaged as time went by.  The husband said that by mid-1989 he had five assistants employed by his business.  In 1989 a partnership was established between the husband and Mr O.  The business was called M Associates and the partners consisted of B1 Pty Ltd and AM Pty Ltd.  Mr O and his wife were the directors and shareholders of AM Pty Ltd and the parties had no interest in this company.

At one time, namely in 1982, the husband was interested in a business with two other persons and together they incorporated a company called BA Pty Ltd.  The husband said that the company was initially capitalised by each partner contributing $5,000.  It appears that BA Pty Ltd was not successful and the wife says that on one occasion during a conversation which the parties had, the husband said that the parties had lost about $50,000.  This conversation is denied by the husband and further the husband denies that such loss was ever incurred.  The husband said that the financial affairs of BA Pty Ltd in no material way affected the investments of the parties or any of their assets.  The husband says that such debts of BA Pty Ltd in respect of which the parties had a direct or indirect responsibility were met from income generated by the husband from his business.  I am satisfied that some loss of money was experienced from this venture however there is no evidence which would justify a finding of financial misconduct or that any additional burden was cast on the wife.

During the period of cohabitation the wife received dividends from F Pty Ltd which moneys were used by her to progressively satisfy the loan which she obtained to assist with the purchase of the home.  All moneys required to purchase the home came from the wife. The husband made no financial contribution to the purchase of the home. The parties always lived in the home and in my view this benefit was of significant financial advantage to the parties. The husband conceded in cross examination that during cohabitation he had the benefit of rent free accommodation.  There was examination of the wife and the family accountant about repayment of the amount borrowed by the wife to acquire the home. In my view this was irrelevant. The fact is that no contribution was made by the husband and all funds to repay the loan came from a source which the wife had at the date of marriage and/or from her father. The home was, as submitted on behalf of the wife the platform for increased savings because, with the exception of the cost of maintenance and improvement, the parties had no expense of the home. During cohabitation significant improvement-renovation work was done to the home and with the exception of $9,500 paid by the wife’s father for the additions all of the funds to pay the cost were accumulated by the parties during cohabitation and from their efforts. The husband provided the majority of such funds from his earnings. As well, during cohabitation, I am satisfied that the majority of the funds to pay the cost of property outgoings and maintenance came from the earnings of the husband. The wife did make a financial contribution during the period of her employment from the date of marriage until she ceased work in 1985.  The wife also paid some expenses from drawings on her loan account.

I am satisfied that both parties made a financial contribution to the acquisition of J Street, Suburb K. The proceeds of sale of this property were used to meet the parties’ living expenses and other financial obligations.

As I have said, during cohabitation, the husband worked as a professional and in 1983 commenced to work on his own account. Ultimately there was acquired an interest in a business. This interest was held by B1 Pty Ltd. The husband and the wife were the directors and shareholders of this company. The business is now held by M Associates of which the husband is a director and shareholder but the wife is not. The husband was responsible for the establishment, management and operation of the business together with Mr O. The wife did at one time do some physical work in the business but her effort was very minor compared to that of the husband. The wife said that she did some administration etc for a couple of months but it was not a “regular thing”.

The parties have various items of personal property such as motor vehicles, furniture and savings. These items were all with the exception of some of the wife’s jewellery acquired during the marriage. Again I am satisfied that both parties have made a financial contribution to these assets however with the exception of items which the wife had at the date of marriage the husband’s financial contribution was greater than that of the wife.

The wife has shares in F Pty Ltd, a loan account with the E Family Trust and a loan to her sister Ms AB. These assets have as their source interests which the wife had at the date of marriage and during the marriage have been looked after by the wife’s father and professional advisers. The husband made no direct or indirect financial contribution to these assets.

The husband has an interest in the estate of his late father which was received by the husband after the parties separated. The wife made no direct or indirect financial contribution to this asset.

The husband has various financial resources including an interest in a superannuation fund which commenced in late 1989. The wife made no direct financial contribution to these assets.

The wife has paid all property expenses since separation such as rates and insurance.

During the period of cohabitation considerable improvement and renovation work was carried out to the home.  At the date of marriage the husband described the state of the home as fair.  The husband gave evidence of work which was done to the property, such as replacement of window sash cords, repairing the sewage system, sanding, stripping and painting windows, painting the interior, replacing sewer line, stripping timber work, replacing the carpet.  The husband said that this work was done in the period 1980 to 1985 and that the costs associated with the work were paid from the parties’ joint funds.  As well, the husband says that the parties did work in the garden and the surrounds of the home.  In 1985 an external toilet was converted to an internal toilet, an external verandah was enclosed in the form of a sunroom, the rear courtyard was paved, the front
sandstone wall was renovated, the garage was reroofed and new drainage was installed and additional fences were erected.  The husband says that the cost of this work was met from the husband’s earnings as a professional.  In 1988 the kitchen was refurbished by the installation of new cupboard, new floor structure, new ceramic flooring and some new appliances. I am satisfied that both parties did physical work in relation to the improvements to the home. Photographs tendered in evidence demonstrate the extent of the work[64]. I am satisfied that from 1985 the husband’s earnings were the major source of funds to pay the costs of the work. I am satisfied that the wife made a financial contribution prior to 1985.

[64] See Exhibit K

In 1989 major renovations were carried out to the home and such renovations included the continuation of an external deck and the refurbishment of a garage and shed[65].  The husband prepared working drawings for the renovations and sought and obtained local council approval with the assistance of the wife.  The husband also engaged tradesmen to undertake the work.  I am satisfied that both parties supervised the tradesmen from time to time although I accept that the husband did more of this work than the wife. The parties are in dispute as to the extent of the work which was done by each of them in relation to the improvements and renovations. I am satisfied that both parties did do work in relation to the work that was done to the home but that the husband made a greater contribution in this regard than the wife. The husband asserts which I accept that because of his association with respect to tradesmen significant savings were obtained in relation to the cost of construction. I am satisfied that the husband’s earnings were the major source of funds to pay the costs of the work ($120,000).  I am also satisfied that both parties did do maintenance work to the home such as lawnmowing and gardening.

[65] See Exhibits K and L

Contribution by husband to F Pty Ltd.     In his opening counsel for the husband said that the husband had made a substantial contribution to the shares owned by the wife in F Pty Ltd. On 1 November, 1994 I granted the husband, subject to certain conditions, leave to file an Amended Answer[66].  In the Amended Answer the husband said that he made a direct non-financial contribution to the acquisition, conservation and improvement of certain assets owned by F Pty Ltd being properties at AN Street Suburb AO, AP Street Suburb AQ, AR Street, Sydney and the third floor of this property, AS Street, Suburb AT and Property AU, Suburb AV.  The husband, on 1 November, 1994, filed a further affidavit in which he gave evidence of the work which he says that he did to the assets of the company.  In summary what the husband alleges is that in respect of each of these properties he charged for the work which he did, but at a rate which was less than that which he described as his average charge out rate.  The husband said that in relation to the work which he did to AP Street Suburb AQ he charged and was paid $3,000,
however, his average charge would have been $16,500.  In relation to AR Street, Sydney the husband said that he charged and was paid $1,000 but that he would have otherwise charged in accordance with his average rate, $4,000.  The husband said that he made no charge in relation to the work which he did to AR Street, Sydney but that his average charge rate would have been $1,425.  The husband said that he made no charge in respect of the work which he did to AS Street, Suburb AT, but that he would have otherwise charged $1,050.  The husband said that he provided light fittings for Property AU, Suburb AV which he purchased in 1985 for $300.

[66] See Exhibit Z

I accept that the husband did do some work but that he was properly remunerated for the work which he did and that such work was not a contribution recognised by s 79(4) to which I can attach any weight. The husband produced no document to corroborate the extent of the work he did to AP Street. The husband produced no document to corroborate what he asserted was his charge out rate between 1984 and 1989. So also for the work done at AR Street there were no documents produced. So also for the work to AS Street parade; in fact the husband was working as a contractor at the time. As to the light fittings for Suburb AV paradise they were provided by both parties. In conclusion I do not accept the evidence of the husband either as to the extent of the work he did or the difference between what he actually charged and what he called his charge out rate. In my view the husband made no contribution to the shares of the wife.

Section 79 (4) (c)

The wife ceased working on a full time basis in 1985. The wife gave extensive written evidence of her contribution as homemaker and parent[67]. The husband also gave written evidence about the contributions made by him[68]. The husband says that the caring of the children was shared between the parties when the husband was not engaged in full time employment although he does admit that most of the caring was undertaken by the wife during what he calls the early years due to his attendance on a full time basis at work. The husband has always worked full time. The husband concedes that the wife was primarily responsible for some tasks in relation to the children such as arranging birthday parties and social functions for the children and delivering the children to school and collecting them from school. I am of the view that during the marriage the wife was the primarily responsible for household tasks and was the primary carer of the children. I am satisfied that the wife’s efforts far exceeded those of the husband. When the significant renovations were done to the home in 1989 the children X and Y were very young and Z was born in 1989. The wife did not have any domestic assistance until 1990 and then only for one and a half hours per week. The wife was not working from 1985 to 1988 and then from a date in 1988 until 1992. There was no criticism of the wife spending
time in the home during the periods when she was unemployed. The wife has been primarily responsible for the care of the children since separation in January 1993 and will continue to be the primary carer in the future. The children are still very young. The husband did during cohabitation and will in the future provide funds for the maintenance of the children but in my view the wife still made a significantly greater contribution. I am of the view that the wife attended to the majority of household tasks such as washing and ironing clothing, preparing and cooking meals and general housework. I do not accept that the husband attended to such tasks to the extent that he alleges. In my view the husband sought to bolster his involvement by the use of such phrases as “shared equally” but all of the evidence including my own observation of the husband leads me to the conclusion that this was not so. As well the wife has met all outgoings for the former matrimonial home since the date of separation and has provided supplementary financial support for the children since that time. The wife has not received any spousal maintenance since the date of separation. The wife has received $12,500 from the her father since the date of separation which she has used to pay for living expenses.

[67] See Affidavit 27/9/94 pa 7-30

[68] See Affidavit 12/10/94 pa 3-26

Approach to Determining Entitlement

Senior Counsel for the wife submitted that in determining the entitlement of the parties I should adopt the approach of considering the entitlement of the parties on an asset by asset approach or category of asset by category of asset approach rather than a global approach because in the circumstances of this matter justice and equity would best be served by such an approach: See Norbis v Norbis[69]; In the Marriage of Lenehan[70].   Counsel for the husband opposed this approach on the basis that the husband had made contributions to all categories of assets. The High Court in Norbis made it clear that it is within the discretion of a trial judge as to which is the appropriate approach to adopt provided that the exercise of the discretion is exercise properly. In the Marriage of Gill[71] Nygh J said[72] that both approaches are legitimate “..provided that those who favour the global approach heed the warning that the origin and nature of the different assets ought to be considered, and those who favour the more precise approach do not add up the individual items without standing back at the end to review the overall result in the light of the needs of the parties”. In my view in the circumstances of this matter it is appropriate to adopt the global approach. There is merit in adopting the asset by asset approach in the circumstances of particular matters such as where the cohabitation was of short duration and it is possible to approach the determination of entitlement with almost mathematical precision. In this matter the duration of cohabitation was approximately 13 years. During cohabitation the wife made a significant contribution as homemaker and parent and it could work an injustice to her if the asset by asset approach was adopted because this contribution of the wife does not have to have any nexus with

a particular asset or category of asset. So also the wife has made direct and indirect financial and non financial contributions. The husband has also made contributions to the home of both a financial and non-financial type. My view as to approach which I should take does not mean that I have not heeded the warning of Nygh J in Gill’s case and I have considered the nature and origin of particular categories of assets.

[69] (1986) 10 Fam LR 819

[70] (1987) 11 Fam LR 615

[71] (1984) 9 Fam LR 969

[72] at p 981

Conclusion

I am of the view that the wife made a much greater contribution than the husband. The wife made a substantial initial contribution, a contribution to which I have earlier referred and those contributions are contributions to which I must and do attach weight and they have not, in my view, been completely eroded or offset by the subsequent contributions of the husband, including of course, his post separation contributions. As well the wife during cohabitation made contributions which in my view were at least equal to those of the husband. The husband has made greater contributions since the date of separation because it was after separation that he received the interest in the estate of his late father. However the wife has also made post separation contributions. In the Marriage of White[73] the Full Court said[74] referring to Crawford and Crawford[75], that an original contribution should not be carried forward as a mathematical proportion and it is but one of a number of factors to be considered and that the longer the marriage the more likely that there will be other supervening factors of significance. The Full Court said in Crawford’s case that the supervening factors will reduce the significance of the original contribution but it will remain a significant factor to which proper weight should be given along with the other contributions and the other relevant factors. In this matter Senior Counsel for the wife relies upon the decision of Lindenmayer J in the Marriage of Money[76] where His Honour said[77] that an initial contribution by one party could only be eroded by some imbalance of subsequent contributions favourable to the other party and in particular said “In my view it is clear that a contribution by spouse A during the marriage can only be regarded as an “off-setting” contribution to an initial contribution by spouse B to the extent that the contribution made by spouse A during the marriage exceeds the contribution made by spouse B during the marriage”. In Money’s case Fogarty and Holden JJ  did not agree with what was said by Lindenmayer J about the necessity of there having to be an imbalance of subsequent contributions in order to erode an initial contribution.  In so far as it may be said that what was said by Lindenmayer J in Money’s case is in conflict with what was said by the Full Court in Crawford’s case and White’s case, with respect to Lindenmayer J I propose to follow, as I must (Fogarty and Holden JJ) what was said by the Full Court in Crawford’s case and White’s
case and to weigh the initial contribution of the wife with all other, later, factors whether those later factors are equal or not. However in the circumstances of this matter I attach considerable weight to the initial contribution by the wife. The wife owned the home, shares in F Pty Ltd and other assets and as well the wife made significant contributions during the cohabitation. In my view, the contributions of the parties within the meaning of paragraphs (a), (b) and (c) of s 79 (4) thus were not equal, those of the wife, in my view, far exceeding those of the husband. I assess the respective contributions of the parties, in percentage terms, in relation to all assets as to 65 per cent to the wife and 35 per cent to the husband.

[73] (1982) 8 Fam LR 512 (FC)

[74] at p 515

[75] (1979) 5 Fam LR 1069 (FC)

[76] (1994) 17 Fam LR 814 (FC)

[77] at p 824

Section 79(4) (d), (e), (f) and (g)

Each of the parties are in good health. The husband did have problems with his health however there is nothing in the report of Dr AW which suggests that the husband’s state of health precludes him form gainful employment or will affect his capacity for gainful employment in the future[78].

[78] See Exhibit F

The wife has the ability to exercise her capacity for employment as a part-time office worker. The wife has not worked as an educator since 1985 and I accept that since then there have been changes to teaching methods and syllabus which would inhibit the wife working as an educator without undergoing some form of retraining. The wife also has the daily care of three young children.  I accept that, at the moment, there are limitations on the wife’s ability to increase her hours of work or undergo some retraining because she has the daily care of three children aged 9, 7 and 5 years. The husband has the ability to exercise his capacity to earn income as an experienced professional, self-employed either in partnership or alone. In my view the husband has a significantly greater earning capacity than the wife. 

The wife is presently employed by P Pty Ltd on a part time basis in a clerical capacity. The wife does not work during school holidays and her hours of work are between 9.30 am and 2.30pm. The wife is able to take the children to school and collect them from school. The wife has sought to find other employment which would offer the same conditions but without success. As I said the wife last worked as an educator in 1985. The wife says that she currently recives $486.43 per week being salary of $180, Child Support of $274 and Family Allowance of $32.  The husband disclosed a current weekly income of $1,000 as a salary[79].  This figure does not include the amount which the husband is entitled to receive which is paid as a consultancy fee.  An amount of $50,000 gross is presently owing to the husband.  In my view the husband’s income is approximately $103,00 gross per annum[80].  Counsel for the husband conceded that it was reasonable to treat the husband’s income as being $104,000 per annum.  The husband’s income vastly exceeds that of the wife.  The husband
said that his weekly expenses are $1,960 however the figure includes legal/accounting costs of $600 per week.

[79] Statement of Financial Circumstances sworn 12/10/94

[80] Affidavit of Mr AD sworn 27/10/94 at p.4

The wife’s property interests exceed those of the husband. However the wife’s principal asset under her control is the former matrimonial home which provides accommodation for herself and the three children.

The husband’s financial resources represented, inter alia, by current and future superannuation entitlements.  The wife has an interest in the E Family Trust.

The wife has the day-to-day care of the three young children. The wife will continue to have the day-to-day care of the three children for the foreseeable future. The wife has a need to currently accommodate herself and the three young children and to do so in the future. The wife needs security for accommodation for herself and the children which will provide a reasonable standard of living in all the circumstances.  The wife also has a need for a motor vehicle and furniture.  In my view this factor is very significant.

In my view the orders which I propose to make will have no effect on the earning capacity of either party. The husband will be able to continue his occupation as a professional.

The husband is paying child support of  $1,180.75 per month.  This assessment does not take into account that part of the husband’s income which is received as consulting fees.

The more significant factors referred to in s75(2) in this matter, in my view are the following, namely the factors referred to in paragraphs (a), (b), (c), (d), (f), (g), (k), (l), (n) and (na).The most significant of those factors are, the ongoing responsibility of the wife for the children, that being a responsibility which, of course, arose out of the marriage, the greater property of the wife, the greater financial resources of the husband and the greater income earning capacity of the husband. Balancing those matters and taking into account the matters referred to in paragraphs (d), (f) and (g) of s 79 (4), a small adjustment is called for, in my view, in favour of the wife to the extent of an additional 5% to the wife’s contribution based entitlement.

Conclusion

The wife will receive the following:

1.        1 C Street, Suburb D  1,000,000

2.        Motor Vehicle 4  15,000

3.        Furniture  18,420

4.        Jewellery  5,568

5.        AF Bank Savings account  510

6.        AF Bank cheque account  450

7.        Cash  50

8.        Loan account, E Family Trust  14,533

9.        Shares, F Pty Ltd  365,940

10.      Loan, Ms AB   72,344

11.      Payment by husband  77,000

Total  1,569,815

Less liabilities

1.        Legal/Accounting/Valuation costs  31,500

2.        Credit cards  1,500

3.        Debt to father for legal costs  22,000

4.        Pre-school fees  355

5.        Electricity  204

6.        Service Station  106

7.        Music for children  180

8.        Art classes for children  120

9.        Dance classes for children  130

10.      Sewer line connection  8,500

11.      Car repairs       969

Total  (65,564)

Balance  1,504,251

The wife will also retain an interest in Superannuation Fund 2 which has a value of approximately $504. The wife commenced to contribute to this fund in mid-1993. The wife also has her interest in the E Family Trust.

The husband will receive the following assets:

1.        Shares, B1 Pty Ltd  258,030

2.        Shares, M Associates  214,821

3.        AH Bank bank term deposit  89,270

4.        AF Bank savings account  661

5.        AF Bank 1 account  11,681

6.        Cash  50

7.        Furniture  2,840

8.        Jewellery  610

9.        Late father’s estate  245,000
            Total  822,968

Less liabilities

1.        Loan account, B1 Pty Ltd  32,848

2.        Legal/Accounting/Valuation  67,534

3.        Payment to wife  77,000

Total  (177,382)

Balance  645,581

As well the husband will retain and have the benefit of the financial resources which I have identified above.

Spousal Maintenance – ss 72, 74 & 75 (2)

The wife, as I have said, is in receipt of a current weekly income of $486.43 which includes Child Support and the Family Allowance.  The wife’s expenses are $870.75 per week which also includes expenses for the children.  No attempt was made to provide a break up of all of the expenses, set out by the wife in her written evidence, between the wife and the children except for some four items.  If the items which are solely for the children are excluded[81] ($234.35) then the expenses total $636.44 per week.  However, as I have said, of this amount some of the expenses are clearly also for the benefit of the children.  The wife has an income of $180 from employment.  The wife at the present time has a limited capacity to engage in gainfull employment by reason of her responsibility for the care of the children and her lack of current experience as an educator.  However the effect of the property orders will be that the wife will have resources of $464,253, after payment of liabilities, being the loan account, the shares in F Pty Ltd, the loan to her sister and the cash payment by the husband.  In my view the wife will be able to support herself adequately and thus
has no entitlement to spousal maintenance.  In my view the wife does not satisfy the threshold requirement of s 72.

[81] See Items (xiii), (xv), (sviii) and (xix)

ORDERS

1.That I declare that otherwise as provided by these orders, each party is declared to be the absolute owner of all items of real and personal property in their possession, custody or control as at the date of these orders.

2.That the husband pay direct to the wife or as she shall in writing direct on or before 4 pm on 30 January, 1995, by way of property settlement, the sum of $77,00 the said sum to carry interest at the rate prescribed by Order 40 rule 1 upon the expiry of the time for payment provided for in this order.

3.The orders made on 30 July, 1993 be and are hereby discharged.

4.That within 28 days the husband sign all documents, instruments and writings, pay all moneys and do all acts and things necessary to cause  B1 Pty Ltd to transfer to the wife free and unencumbered the title to Motor Vehicle 1 sedan registered number ….

5.That the husband indemnify the wife in respect of all claims and demands whatsoever which may be made upon her by  B1 Pty Ltd in relation to or arising out of:

5.1Her loan account with that company.

5.2All matters arising out of her having been a director of that company.

6.That within 28 days the wife sign all documents, instruments and writings and do all acts and things necessary so as to:

6.1Resign as a director of B1 Pty Ltd.

6.2Transfer to the husband or his nominee the one ordinary share held by the wife in the capital of B1 Pty Ltd.

7.That in the event that any party fails, neglects or refuses to sign any documents to give effect to these orders within the time required by these orders to do so then the Deputy Registrar of the Sydney Registry of the Family Court of Australia is hereby appointed pursuant to Section 84 of the Family Law Act to execute such document in lieu of the party who fails, neglects or refuses to sign any document to give effect to these orders.

8.That the Application by the wife for spousal maintenance is dismissed

9.All applications and proceedings before the Court which are not expressly dealt with by these orders are dismissed.

10.Each party is granted liberty to apply in respect of the implementation of these orders upon giving seven (7) days written notice.

11That the exhibits be returned at the expiration of one month if not required for other purposes.

12That in relation to documents produced to the Court pursuant to any subpoena or notice to produce, the solicitor for the party who caused the subpoena or notice to produce to issue uplift the said documents by 3.00 pm this day and forthwith take all steps necessary to return the documents to the person or entity entitled to their possession.

13That the matter be removed from the Active Pending Cases List.