GILL & GILL
[2015] FCCA 98
•18 February 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| GILL & GILL | [2015] FCCA 98 |
| Catchwords: FAMILY LAW – Property – 25 year relationship/marriage – dispute about the value of a business conducted by the wife together with associated land – parties $1m apart – dispute about the appropriate way to deal with a failure by the wife’s son to pay rent for a jointly owned property – consideration of the impact of orders on the wife’s ability to retain the business from which she earns income. |
| Legislation: Evidence Act 1995 (Cth), s.144 |
| Hoffman & Hoffman (2014) FamCAFC 92 |
| Applicant: | MS GILL |
| Respondent: | MR GILL |
| File Number: | NCC 1350 of 2012 |
| Judgment of: | Judge Terry |
| Hearing dates: | 29, 30 & 31 January & 23 June 2014 |
| Date of Last Submission: | 11 August 2014 |
| Delivered at: | Newcastle |
| Delivered on: | 18 February 2015 |
REPRESENTATION
On 29, 30 & 31 January 2014:
| Counsel for the Applicant: | Mr Jackson |
| Solicitors for the Applicant: | Stephen Hopper and Associates |
On 23 June 2014:
| Counsel for the Applicant: | Mr Jackson – Direct Brief |
| Counsel for the Respondent: | Mr Rugendyke |
| Solicitors for the Respondent: | Powe & White Family Lawyers |
ORDERS
The husband is declared the owner to the exclusion of the wife of the money held in trust by John Brent & Co from the sale of the former matrimonial home up to the amount of $85,321.00. Any amount over that shall be paid as to 50% to the wife and 50% to the husband.
The wife shall within 60 days of the date hereof advise the husband in writing as to whether she is able to pay him the amount of $670,070.50 and refinance the (omitted) Bank loans in connection with Property P being the whole of the land comprised in Certificate of Title Folio Identifier (omitted) and Property R being the whole of the land comprised in Certificate of Title Folio Identifier (omitted) without the sale of any property being required.
If the wife so advises the husband then within a further 30 days the wife shall:
(i)Pay the husband the amount of $670,070.50.
(ii)Refinance into her sole name the (omitted) Bank loans in connection with Property P and Property R;
(iii)Sign all documents and do all acts and things required to transfer to the husband at the expense of the husband the whole of her right title and interest in Property N being the whole of the land in Certificate of Title Folio Identifier (omitted) and facilitate the discharge of any mortgage which the husband is required to discharge.
Contemporaneously with the wife complying with Order (3) the husband shall:
(i)Sign all documents and do all acts and things required to transfer to the wife at the expense of the wife the whole of his right title and interest in Property P;
(ii)Sign all documents required to facilitate the discharge of the mortgages which the wife is required to discharge;
(iii)Refinance into his sole name or discharge the (omitted) Bank mortgage securing the loan or loans directly relating to Property N and (business omitted).
If the wife fails within the time specified in order (2) to so advise the husband or fails to comply with Order (3) the husband and wife shall forthwith do all acts and things and sign all documents required to list Property P for sale on the following terms:
(a)the property shall be listed for sale with a real estate agent agreed between the parties;
(b)in the event that the parties cannot agree on the nomination of such agent they shall jointly approach the President of the Real Estate Institute of New South Wales and accept his or her nomination of a real estate agent to sell the property;
(c)in the event that the parties are unable to agree on a listing price, selling price, the time of listing, the method of sale or the conditions of sale they shall accept the recommendations of the real estate agent appointed pursuant to these orders in respect of each such matter;
(d)upon completion of the sale the proceeds of sale shall be applied as follows:
(i)in payment of the costs and expenses of sale including agent’s commission and legal costs;
(ii)in payment of adjustments, if any;
(iii)in payment of the amount owing to (omitted) Bank directly relating to the Property P property;
(iv)the balance to the husband.
The balance of the husband’s entitlement following the sale of Property P shall be 50% of a pool in which the amount received by the husband from the sale of Property P is substituted for the amount of $560,000.00 less $90,000.00
LESS
$295,859.00 plus the amount received by the husband from the sale of Property P is deducted.
Within 30 days of the settlement of the sale of Property P the wife shall advise the husband in writing as to whether she is able to obtain finance to pay him the balance of his entitlement and to refinance into her sole name any remaining loans for which she is responsible without the sale of either (business omitted) or Property R being required.
If the wife so advises the husband then within a further 30 days the wife shall:
(i)pay the husband the balance of his entitlement;
(ii)refinance into her sole name the (omitted) Bank loan in connection with Property R & (business omitted);
(iii)sign all documents and do all acts and things required to transfer to the husband at the expense of the husband the whole of her right title and interest in Property N and facilitate the discharge of any mortgage which the husband is required to discharge.
Contemporaneously with the wife complying with Order (7) the husband shall:
(i)sign all documents and do all acts and things required to transfer to the wife at the expense of the wife the whole of his right title and interest in Property R;
(ii)sign all documents and do all acts and things required to facilitate the discharge of the mortgages which the wife is required to discharge;
(iii)refinance into his sole name or discharge the mortgage securing the loan or loans directly relating to Property N.
If the wife fails to so advise the husband or fails to comply with Order (7) within the required time frame then the wife shall forthwith do all acts and things and sign all documents required to list Property R for sale on the following terms:
(a)the property shall be listed for sale with a real estate agent agreed between the parties;
(b)in the event that the parties cannot agree on the nomination of such agent they shall jointly approach the President of the Real Estate Institute of New South Wales and accept his or her nomination of a real estate agent to sell the property;
(c)the wife shall authorise the agent to freely provide information to the husband about the sale;
(d)the listing price, selling price, the time of listing, the method of sale or the conditions of sale shall be as agreed between the parties and if they are unable to agree they shall accept the recommendations of the real estate agent appointed pursuant to these orders in respect of each such matter;
(e)upon completion of the sale the proceeds of sale shall be applied as follows:
(i)in payment of the costs and expenses of sale including agent’s commission and legal costs;
(ii)in payment of adjustments, if any;
(iii)in payment of the amount owing to (omitted) Bank secured by mortgage over the property;
(iv)in payment of the balance of his entitlement to the husband and the remainder to the wife.
The balance of the husbands entitlement (if any) after the sale of Property R shall be 50% of a pool in which the net amount received by the husband from the sale of Property P and the sale of Property R, is substituted for the amounts of $560,000.00 less $90,000.00 and $750,000.00 less $558,000.00
LESS
$295,859.00 plus the amounts received by the husband from the sale of Property P and the sale of Property R shall be deducted.
If there is still an amount owing to the husband following the sale of Property R, the wife shall pay that amount to the husband within 30 days of settlement of the sale and shall pay interest at the rate in the Family Law Rules on any amount unpaid after this time.
If at any time after the sale of Property P and before he receives the balance of his entitlement the husband is in a position to refinance the loan secured over Property N, he may advise the wife accordingly and the wife shall at the husband’s expense and at the request of the husband to do so sign all documents required to discharge the relevant mortgage and transfer her interest in Property N to the husband.
The husband must no later than contemporaneously with the settlement of the sale of Property R refinance the loan secured over Property N into his sole name and for this purpose the wife shall at the husband’s expense and at the request of the husband to do so sign all documents required to discharge the relevant mortgage and transfer her interest in Property N to the husband.
The husband shall sign all documents and do all acts and things required to assign to the wife at the expense of the wife the whole of his right to the interest in rent owed by X in respect of Property P.
The husband shall indemnify the wife and keep her indemnified from liability for any amount shown as owing by the wife to (business omitted) in the books of the business.
Subject to the preceding orders, each party is declared the owner to exclusion of the other of all property and superannuation in their possession or under their control.
If either party refuses or neglects within 14 days of a written request to do so to sign any documents necessary to give effect to these orders, the Registrar of the Newcastle Registry of the Federal Circuit Court of Australia is hereby appointed pursuant to s.106A of the Family Law Act1975 to execute such documents on behalf of such party.
IT IS NOTED that publication of this judgment under the pseudonym Gill & Gill is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT NEWCASTLE |
NCC 1350 of 2012
| MS GILL |
Applicant
And
| MR GILL |
Respondent
REASONS FOR JUDGMENT
Introduction
Ms Gill and Mr Gill cannot agree about a property settlement following the end of their 25 year relationship/marriage.
The principal difficulty is that the wife maintains that her (omitted) business and the land from which it operates are worth $710,000.00 while the husband maintains that they are worth $1.7m.
A secondary difficulty is that the husband claims that rent owed by the wife’s son X for his occupation of a jointly owned property should be included as an asset and deemed to be in the possession of the wife while the wife claims either that there is no debt or that for a variety of reasons it should be disregarded.
There are other smaller disputes about the composition of the pool and the end result is that the wife asserts that the pool is worth net $929,321.00 and the husband that it is worth net almost $2m.
The husband proposes that the pool of almost $2m be divided more or less equally. The wife proposes a 58/42 division in her favour if the pool is as she maintains and a 72/28 division in her favour if the pool is as the husband maintains.
The wife says that the 58/42 division of her pool is justified because contributions should be assessed as 55/45 in her favour and she should receive a 3% adjustment for s. 75(2) matters.
The wife says that the 72/28 division is justified because:
a)If the (omitted) business and land are now worth $1.7m they have increased in value by over $800,000.00 in the three years since separation. As she has been the one operating the business she should receive the credit for this increase in value and for having paid down the (omitted) business loan. Contributions should be assessed as 75.58% by her and 24.42% by the husband and in this scenario the husband should receive a 3.58% adjustment for s.75(2) matters;
b)Alternatively and leading to a similar although not identical result, if the husband’s valuation is accepted and her claim to have contributed more than the husband is rejected, then contributions should be assessed as 55/45 in her favour and a 15% adjustment made in her favour for s.75(2) matters because if she is required to pay the husband a sum of money based on a 50/50 division or even a 55/45 division of his pool, she will not be able to borrow sufficient to pay him and will have to sell the business and at the age of 60 will lose her livelihood.
The evidence
The wife relied on her application filed on 23 May 2012, her affidavit and financial statement filed on 9 January 2014, the affidavit of her son X filed on 4 June 2014 and the affidavit of Mr A, a valuer, filed on 18 June 2014. Mr A valued the (omitted business in 2009.
The husband relied on his response filed on 27 August 2012, his affidavit and financial statement filed on 22 January 2014 and the affidavit of Mr T, a valuer, filed on 18 June 2014. Mr T valued the (omitted business in 2014.
The wife, husband, X and Mr T were cross-examined. Mr A was not required.
Also in evidence were two joint valuations of (business omitted), a business operated by the husband, prepared by Ms D, an accountant and a joint valuation of Property P prepared by Mr S, a valuer.
The parties’ counsel prepared written submissions and I have read the submissions filed by the husband on 18 July 2014 and by the wife on 4 August 2014 and the submissions in reply filed by the husband filed on 11 August 2014.
I do not have any major concerns about the husband’s credit but I have many concerns about the wife’s.
The information in the wife’s affidavit proved wrong on a number of occasions. Careless errors about dates can be overlooked but the wife admitted during cross-examination that the information she provided about the amount of rent she received from X for the Property P property and the bank accounts into which it was deposited was wrong and this was serious, because the wife was well aware that the issue of whether X had paid all the necessary rent and whether the wife had properly accounted for the rent she received had been a longstanding issue in the case.
The wife failed to mention in her affidavit and raised for the first time during cross-examination, a claim that any unpaid rent should be forgiven because X had done tens of thousands of dollars’ worth of work on a retaining wall at the property.
A troubling aspect of the wife’s case was that she continued to insist that the (business omitted) and (business omitted) land be placed in the pool at a value of $710,000.00 even after she belatedly produced a valuation prepared by Mr A in November 2009 on her instructions, which on her case established that these assets were then worth $840,000.00.
The wife was not a witness of credit and while this does not mean that I can simply accept the husband’s version of events, every time his evidence differs from the wife’s it does mean that I must treat the wife’s evidence with considerable caution.
Background
The parties’ commenced cohabitation in 1986, married on (omitted) 1998 and finally separated on 30 June 2011.
The parties separated and reconciled several times before their final separation and it is impossible to be entirely sure about the length of their separations in total. The wife gave very imprecise evidence about this issue and husband said that they were separated for about 10 months between 1995 and 1996, 8-9 months in 2006 and 6 months in late 2010 but referred elsewhere in his affidavit to a separation in 1998.
It is likely that the parties were separated in total for about two of the 25 years between 1986 and 2011 but in truth it does not greatly matter whether the relationship was 23 or 25 years in length.
The parties have two children, Y born in (omitted) 1988 and Z born in (omitted) 1990.
The wife has a son X born in (omitted) 1981. He was 5 when the husband and wife commenced cohabitation and he lived with them after cohabitation commenced and took the husband’s surname.
When cohabitation commenced the husband was working as a self-employed (occupation omitted) and either at or shortly after cohabitation the wife began running a (business omitted).
The parties lived in rented accommodation until 1988 when they purchased Property D in joint names.
In about 1987 the wife began working for the owners of a (omitted) business located at Property P. The wife and X’s father had operated a similar business at this address between the late 1970’s and 1983.
In about 1990 the wife’s parents became the owners of the (omitted) business. The wife worked for them until (omitted) 1997 when she purchased the business from them.
The parties separated in April or May 1998 and Property D was placed on the market. However they reconciled in September or October 1998, around the time the sale of the property settled and they used the net proceeds of sale, about $38,000.00 on the husband’s evidence, as a deposit for the purchase of Property P in joint names. They moved into the three bedroom home at the rear of the property and the wife continued to run the (omitted) business from the front. The husband was still working in the (omitted) industry but by this time was commuting to work in Sydney.
In or about 2000 or 2001, the husband’s employment in Sydney came to an end and the parties leased Property N with a view to starting a second (omitted) business to be run by the husband. They called the new business (business omitted).
In April 2003 the parties purchased Property N in joint names for $190,000.00.[1] They borrowed the whole of the purchase price and the loan was secured over the Property P and Property R properties.
[1] See Settlement statement Annexure G Wife’s affidavit
In September 2003 the wife sold (business omitted) for $350,000.00. The purchasers became the lessors of the business premises at Property P and the house on the property was also rented out. Contemporaneously, with the sale the parties purchased Property F for $575,000.00 using the sale proceeds as part payment and taking out a loan for the balance.
After the sale the husband continued to run (business omitted) and the wife worked in the business doing office work and sales and deliveries.
In 2006 the purchasers of (business omitted) decided not to renew their lease and the husband and wife agreed to lease the business premises and the house to the wife’s son X and they went guarantors for an overdraft of $100,000.00 to help him set him up a business as (business omitted).
Although the husband agreed to this he was not terribly happy about it and as a result the parties separated for a short period but then reconciled.
In October 2006, (business omitted) was purchased in the wife’s name for $320,000.00. The parties jointly borrowed $340,000.00 to fund the purchase and to provide money for minor improvements and the loan was secured over joint property. The wife became the lessee of Property R, the premises from which the (omitted business) operated.
In his June 2014 report, Mr T said that the (omitted business) was purchased in September 2009 but this is not correct; the settlement statement provided by the wife confirms that it was purchased in October 2006. The error seems to have arisen because the wife renewed the lease in September 2009 and Mr T wrongly assumed that this was the date on which the business was purchased.
In March 2010, the (business omitted) premises at Property R was purchased in the wife’s name for $380,000.00 plus GST i.e. $418,000.00. The parties took out a joint loan to fund the purchase and the loan was secured over joint assets.
The husband said that he believed at the time that the land had been purchased in joint names. The wife was somewhat evasive during cross-examination when asked about why the land was registered only in her name and it was certainly contrary to the way the parties had conducted their affairs up to then but nothing turns on it. Regardless of whose name the land was registered in, it was purchased during the marriage with money provided jointly by the parties.
The parties separated on 29 June 2011. Property F was placed on the market and sold quickly and the net proceeds of $102,000.00 were placed into trust. The parties have since used some of the money to pay for valuations and $85,321.00 remains.
Since separation the wife has run (business omitted), the husband has run (business omitted) and X has continued in occupation of Property P.
The applicable law
S.79 (1) of the Family Law Act 1975 empowers the court to make such orders as it considers appropriate altering the parties’ interests in property. S.79 (2) provides however that the court shall not make an order under this section unless it considers that it would be just and equitable to do so.
In Stanford & Stanford the High Court said that the court needed to give careful and separate consideration to s.79(2) but in the case before me both parties sought property settlement orders and in Stanford & Stanford the High Court also said as follows:
In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship and the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).[2]
[2] Stanford & Stanford (2012) 247 CLR 108
This neatly encapsulates the situation in this case. I am satisfied that it is just and equitable to make property settlement orders and I intend to take the usual steps to resolve the question of what particular alteration of interests in property would be just and equitable. Those steps are:
(i) to identify and value the assets and liabilities of the parties;
(ii) to assess the contributions of the parties under s.79(4)(a), (b) and (c) and to express those contributions as a percentage;
(iii) to consider the matters in s.79(4)(d), (e), (f) and (g), which include the matters in s.75(2) so far as they are relevant, and determine whether any adjustment should be made as a result to the contribution based entitlements;
(iv) to consider the effect of those findings and resolve what orders are just and equitable in all the circumstances of the case.
Step 1 – identifying and valuing the assets and liabilities
The parties agreed on the identity and value of the following assets:
(i) Property P - it was valued by Mr S at $540,000.00 in November 2012 and at $560,000.00 in January 2014. The parties agreed that it should be included in the pool at a value of $560,000.00.
(ii) The balance in trust from the sale of Property F - $85,321.00 remains.
There was a dispute about whether motor cycles which are currently in the parties’ possessions should be included in the pool. The husband’s motor cycles were in existence at separation. The wife’s motor cycles were not but they derive in part from a motor cycle owned by her at separation and later traded in.
The husband’s counsel submitted that all the motor cycles should be included in the pool. The wife’s counsel submitted that the wife’s motor cycles should be excluded as they were post separation purchases and the husband’s motor cycles should go out as well in fairness.
This latter proposition does not entirely make sense and I am satisfied that all the motor cycles should be included because they either existed at separation or were purchased partially by money obtained from trading in pre-separation motor cycles. However the husband’s pre-separation motor cycle has an agreed value of $13,000.00 and the wife’s two motor cycles an agreed value of $23,000.00 but some of the value in them was the result of post-separation contributions presumably from the wife’s income.
To level this particular playing field but acknowledging that it is an arbitrary solution, I intend to attribute a value of $13,000.00 to the motor cycles of each party.
The parties each own motor vehicles but they have bought and sold motor vehicles since separation and the vehicles they now own are either leased or heavily encumbered. It was agreed that the motor vehicles currently owned by the parties and any debts associated with them would not be included in the pool.
In their financial statements both parties declared that they owned household contents and gave an estimate of value. It was agreed that the household contents would not be included in the pool.
The parties agreed that (business omitted), (business omitted) and Property R should all be included in the pool but they disagreed about the value of each item.
(business omitted) has been valued twice on the joint instructions of the parties by Ms D (now Ms D), a chartered accountant.
In a report prepared in 2013 Ms D valued the business at $343,000.00 as at 30 July 2012. This was on the basis that Property N was included as an asset of the business and Ms D said that she proceeded in this way because she considered that this was what she had been asked to do so and also because the land was shown as an asset in the books of the business.
Ms D placed an “enterprise value” of $120,000.00 on the business determined on the basis of capitalised future maintainable earnings and a value of $550,000.00 on the land as per a joint valuation dated 18 August 2013. She took other assets and other debts, including debts to (omitted) Bank for the purchase of the land and by way of overdraft, into account to arrive at the figure of $343,000.00.[3]
[3] Appendix C Ms D’s valuation dated 18 October 2013
When the hearing commenced in January 2014 the parties agreed that (business omitted) should be included in the pool at $343,000.00.
The parties also agreed that (business omitted) and Property R should be included in the pool at a value of $710,000.00. These assets had not been valued and the figure derived from the wife’s assertion in her financial statement filed on 9 January 2014 that the land was worth $380,000.00 (the amount she paid for it in March 2010 less the GST paid) and the (business omitted) was worth $330,000.00 ($10,000.00 more than she paid for it in October 2006).
The case was not concluded in the time available to it in January 2014 and was adjourned to 23 June 2014 for continuation of the hearing.
On 23 April 2014, the husband filed an application in a case seeking to have the (business omitted) and land valued. He proposed that the cost of the valuation be paid from the money in trust and that the wife provide any necessary access or documents to the valuer.
The application came before me on 30 April 2014 and following discussions between the parties, counsel orders were made by consent that:
(i)The husband have leave to rely on a valuation of Property R and the (business omitted) to be prepared by (omitted) Valuers.
(ii)The parties have leave to rely on an up-dated valuation of Property N to be prepared by (omitted) Valuers;
(iii)The parties have leave to rely on an up-dated valuation of (business omitted) to be prepared by Ms D;
(iv)The fees for all valuations be paid from the money in trust.
These valuations were in evidence before me on 23 June 2014.
In her 20 June 2014 report, Ms D placed a value of $158,000.00 on the (omitted) business as at 30 June 2013 or $148,122.00 if a loan shown on the books as owing by the wife was not likely to be called in.
Ms D said that as at 30 June 2013, the business did not have a positive level of maintainable earnings and that she had therefore used a net asset backing approach to value the business. She placed a value of $500,000.00 on Property N as per the valuation report of (omitted) Valuers dated 5 June 2014 and set out in an Appendix to her report how she had arrived at her conclusion about the value of the business.
The wife’s counsel adopted the figure of $158,000.00 (although he wanted to add $50,000.00 to it as I will explain in a moment) but this is the value only if a loan shown in the books of the business as owing by the wife is treated as an asset and there was no suggestion that she was expected to repay it. The correct figure to use in determining the pool is therefore $148,122.00 as asserted by the husband’s counsel.
The wife’s counsel submitted that $50,000.00 should be added to this amount because it was clear from the Appendix to her report that Ms D had taken into account as a liability a debt of $50,000.00 which was shown on the books of the business as owing to the husband’s father. He submitted that the husband had admitted in January 2014 that this debt no longer existed and if this was taken into account the value of the business was $198,122.00. [4]
[4] The wife’s counsel’s figure was of course $208,122.00 coming off the higher base
The husband’s counsel disputed that the amount of $50,000.00 should be added and said as follows:
The liability was removed as a separate liability because it was already included as a liability of the business, not because it wasn’t due.
I do not quite understand this submission, because if it refers to discussion about the pool before evidence commenced, I cannot find a reference to this loan and I have also been unable to find an admission about this in the husband’s cross-examination. However, even if I have missed something the issue surely is that Ms D valued the business as at 30 June 2013 as the parties asked her to do and at that time on the books there was a debt of $50,000.00 owing to husband’s father.[5] There were also many other liabilities and other assets such as finished goods and trade debtors.
[5] Annexure C Ms D’s report dated 20 June 2014
It is irrelevant whether the debt to the husband’s father has been repaid. I cannot just remove one plank from Ms D’s structure and not concern myself with whether any of the other figures in the balance sheet have changed. The business was valued at $148,122.00 as at 30 June 2013 and this is the value at which it must be included in the pool.
The most contentious issue was the value of (business omitted) and Property R.
Mr T of (omitted) Valuers valued these assets in June 2014 at $950,000.00 and $750,000.00 respectively.
Mr T is a very experienced valuer. He has been a registered valuer in NSW since 1989, he has prepared valuations for a wide range of purposes including family law matters and he has specific experience valuing (businesses omitted). In a letter attached to his valuation, he said that he was a panel appointed valuer for the majority of major banks providing valuations for leasehold, freehold, going concerns and greenfield sites within the (omitted) sector.
The husband’s counsel submitted that Mr T’s opinion should be accepted and that the (business omitted) should be placed in the pool at a value of $950,000.00 and the land at a value of $750,000.00.
After Mr T filed his affidavit, the wife filed an affidavit of Mr A attaching a valuation he had prepared for her in November 2009. There was a dispute which I shall refer to again later about whether Mr A valued the business and the land or only the business but even if he valued both, his valuation was $840,000.00, higher than the figure agreed in January 2014.
However the wife’s counsel made clear in his submissions that he wanted this valuation ignored for the purpose of fixing a value of the assets in the pool and only sought to rely on it in support of an argument about post-separation contributions. He submitted that the (business omitted) and land combined should be placed in the pool at a value of $710,000.00, the value agreed prior to the commencement of the hearing.
Presumably this was on the basis that if Mr A’s report was ignored and Mr T’s opinion rejected, the only evidence of value was the wife’s admission against interest in her financial statement.
The wife’s counsel made no attempt to explain why Mr A’s valuation should be ignored at this stage of the exercise but he submitted that Mr T’s valuation should be rejected because:
i)He was allowed to give evidence by telephone which undermined the weight which could be given to his evidence.
ii)The (business omitted) and land were valued separately and they should have been valued as a going concern. This might have produced quite a different figure and it was also unfair to value the leasehold and freehold interests separately when the (omitted) business had been valued differently.
iii)Cross-examination of Mr T demonstrated that he had made numerous unsafe and unreasonable assumptions and projections and failed to take certain relevant matters into account in arriving at his opinion as to value and therefore no weight could be placed on it.
I will deal with each of these contentions in turn.
It is not unusual for an expert to be allowed to give evidence by telephone. There are usually no credit issues in respect of such a witness and this was the case here.
Allowing an expert witness to give evidence by telephone can create difficulties if a large number of documents have to be shown to the witness but the wife’s counsel was not hampered in his cross-examination in this particular case by an inability to put documents to the witness.
The wife’s counsel cross-examined Mr T thoroughly and at length and there were no problems with the telephone link. I do not accept that the fact that Mr T gave evidence by telephone undermines the weight which can be given to his evidence.
The wife’s counsel next complained that it was unfair that the (omitted) business and land were valued separately when valuing them as a going concern might have resulted in a different outcome and when the (omitted) business was valued differently.
However, the wife acquired these assets separately and four years apart and Mr T pointed out that such assets were often bought and sold separately. He said that listed companies for example often wanted to buy the business but not the land. There was nothing to suggest that it was inappropriate or unfair for these assets to be valued separately rather than for them to be bundled together and valued as a going concern.
I cannot do anything about the fact that the (omitted) business was valued differently. The wife did not complain about this at any time during the hearing and there was no evidence that she sought to have any input into the instructions given to Mr T or ever proposed that the (omitted) business be valued as a going concern and it is too late to complain about it now.
The final issue raised by the wife’s counsel was that Mr T failed to take certain relevant matters into account and made numerous unsafe and unreasonable projections and assumptions and that his opinion should therefore be rejected.
I have carefully considered the lengthy submissions made by the wife’s counsel about this issue and I do not agree with any of the submissions. The overarching problem with each of them is that they either do not accurately state the actual evidence given by Mr T, or fail to take account of the detail and reasoning in his report.
I do not propose to consider each complaint in detail in this judgment. I have selected one criticism relevant to the value of the lessee’s interest and one criticism relevant to the value of the lessor’s interest as examples.
As far as the value of the business (the lessee’s interest) is concerned, the wife’s counsel spent two pages criticising Mr T’s opinion that the (business omitted) had a sustainable occupancy rate of 92.5% and pointed out the fact this had not historically been the case for this centre. However, Mr T cogently explained in the third paragraph of page 33 of his report his reason for adopting this as an achievable occupancy rate. He said as follows:
It is my opinion that any other operator could lift the performance of the business to an occupancy in excess of 90% quite readily as the fees are the lowest within this postcode area. I have adopted 92.5% occupancy within my net income assessment. Typically the market would make an adjustment for trade-up however, given the significant corporate activity which has resulted in the sale of over 300 centres upon the eastern seaboard within the last 12 months the market is now prepared to pay a multiple based upon future projected earnings. Whilst the majority of operators are trading at in excess of 95% occupancy I have applied a sustainable occupancy of 92.5%.[6]
[6] Valuation Report of Mr T, page 33.
To suggest that the court should place no weight on Mr T’s conclusion that 92.5% was an achievable occupancy rate because of things such as Mr T not naming in his lengthy and comprehensive report which centres he analysed leading to a conclusion that “all other centres I have analysed within this postcode are trading at above 90% occupancy rate” is to be unfairly nitpicking.
As far as the value of the land (the lessor’s interest) is concerned, the wife’s counsel criticised Mr T for adopting $60,000.00 as the sustainable rent for the land. His submission was as follows:
In 2010 the Wife was as a tenant and recent owner of the (business omitted) paying $500 per week rent or $26,000 per annum to the then owner of the Property R property. (See annexure “J” of the Wife’s trial affidavit). If that was what she was required to pay under a Lease registered with the NSW Lands Titles Office in 2010, in the absence of any other evidence, it is open to the Court to find that that represented the market value of the Lease relevant to that time. No other evidence suggests otherwise.[7]
[7] Written Submissions on Behalf of the Applicant Wife, paragraph 89.
The wife’s counsel submitted that if the premises were rented for $26,000.00 in 2010, it must cast doubt on whether $60,000.00 was an achievable rent in 2014.
There are many problems with this submission. First, I am not sure where the figure of $26,000.00 comes from unless it is multiplying by 12 the figure used in the adjustments in the settlement statement at Annexure K (not Annexure J) which refers to the wife becoming the lessee of Property R
Second, the settlement statement confirms that the wife first became the lessee of Property R in 2006 not 2010.
Third, it ignores the fact that Mr T provided extensive reasons including consideration of recently negotiated rentals for other centres in coming to his conclusion about the sustainable rental for this centre in 2014.
The wife’s counsel cross-examined Mr T at considerable length about whether he had taken into account the age of the building, the fact that the business was not licensed to accommodate (omitted), whether it was reasonable for him to assume that $60,000.00 rent could be obtained for the building, whether adopting a 92.5% occupancy rate as achievable was realistic, the impact of reputation on such a business, the fact that the business was in a low socio-economic area, the value per (omitted) he had adopted and the future maintainable income figure he had adopted and he was able to convincingly answer every question.
Mr T is a very experienced valuer with specific expertise in valuing (businesses omitted). His report was thorough and well-reasoned. He went to considerable trouble to source extrinsic material to assist him. A valuation is a matter of opinion and I do not accept that the wife’s counsel has been able to demonstrate a flaw which means that I should reject Mr T’s opinion.
Even if Mr T’s opinion was rejected, it does not follow that the Court could fall back on the purchase price of the assets to fix their value. The business was purchased in 2006 and the purchase price of the business does not provide reasonably contemporaneous evidence of value of the business even at the date of separation. The purchase price of neither the business nor the land provides reasonably contemporaneous evidence of value as at the date of trial, which is what I must try and establish.
It would also be fundamentally unjust to simply refer back to the purchase prices to fix a value for these assets when the wife put into evidence and sought for other purposes to rely on a valuation by Mr A who on her case found that the (business omitted) and land were worth $840,000.00 in November 2009.
If I was obliged to reject Mr T’s valuation, I would be left with no option but to order the sale of the assets to determine their value but the wife did not want this to occur and I do not need to consider it as I am satisfied that Mr T’s opinion should be accepted.
The final issue which needs to be determined in order to reach a conclusion about the pool is whether rent owed by X to the parties should be included as an asset.
In 2006 the husband and wife agreed to set X up in business at the Property P site. They went guarantors for a $100,000.00 overdraft facility and X began operating (business omitted). He agreed to pay $3,535.00 per month for the business premises and $1,235.00 per month for the residence.
I do not accept the submission by the wife’s counsel that there was no evidence of any agreement between X and the parties to pay rent or to pay it in these amounts. This flies in the face of the wife’s own evidence and X acknowledged that he agreed to pay the parties a fixed monthly rental for the house and business premises and that he was in arrears. Mr Brent, a solicitor who had done a lot of work for the parties over the years, drew up a lease although it was never signed.
There was nothing to suggest that the amounts of $3,535.00 and $1,235.00 were unreasonably high. The purchasers of (business omitted) agreed to pay $750.00 per week or $3,250.00 per month for the business premises in 2003 and rent of $3,535.00 in 2006 therefore appears reasonable, and $285.00 per week for a three-bedroom house seems very reasonable. In both of Mr S’s valuations of Property P, he suggests that the amount being paid by X was somewhat below market rental.
Until separation the parties directed the $3,535.00 into the Property F home loan account and the $1,235.00 into the Property P loan account.
Property F was sold in September 2011 and after that X dealt only with the wife in respect of payment of the rental. The husband sought information from the wife about what was happening with the rent and it is clear from the orders he sought in his response filed in 2012 that obtaining a proper accounting for the rent and a share of the rent was an issue for him. The wife continued to pay him nothing and he could not get a straight answer from her about what was happening with the rent and in September 2013 he made an application to the CTTT seeking an order that X be evicted. The application was unsuccessful.
The information the wife provided about the situation in her trial affidavit was very unsatisfactory. She admitted during cross-examination that she had kept no record of the payments X made after July 2011 and had asked X’s girlfriend to provide the list of payments which she used in her trial affidavit and it was obvious from the information she provided and she admitted as much during cross-examination that X had not made all of the required payments.
The wife gave conflicting evidence about what happened to the rent she did receive and the particular concern was what had happened to the $3,535.00 per month previously used to repay the Property F loan. The wife said that she used some of it to pay expenses for Property P but admitted during cross-examination that some of it had been deposited into her personal (omitted) Bank account called “Holiday Account” and that money in that account had been used to fund holidays and other items solely for her benefit.
The wife was pressed during cross-examination to explain why she had failed to enforce X paying rent regularly and she eventually asserted that one of the retaining walls at Property P had failed in 2011 after a severe storm and the insurance would not cover it and that X had provided labour to restore the wall and outlaid money to hire machinery and buy materials. It seemed to be her case that if this was taken into account X would have no liability for outstanding rent.
There was nothing about this in her trial affidavit although it was clear from cross-examination of the husband that he was aware that the wall had failed and that X had done some work on it.
When the proceedings were adjourned in January 2014, the wife was ordered to file an affidavit by X prior to the resumption of the hearing providing evidence about the rent he had paid and the work he had allegedly done and she belatedly did so.
X provided a list of the rental payments he had made which exceeded the number in the wife’s affidavit but still fell well short of the total due. He alleged that he had incurred costs of $40,770.00 repairing the wall, including machinery hire and purchase of necessary items but also including an amount for use of his own labour and his own machinery. He agreed during cross-examination however, that while this reduced his debt to the parties it did not eliminate it.
There is no doubt that X owes money to the parties. He admitted as much during cross examination and the husband’s counsel submitted that the amount he owed should be quantified and placed into the pool and further that it should be treated as an asset in the wife’s hands.
The husband’s counsel submitted that the outstanding rent could be quantified at $125,840.00 and he started by referring to one of paragraphs of X’s affidavit in which he claimed to provide a list of rental payments made since June 2010. The husband’s counsel submitted that if a start date of June 2010 was adopted the rent X should have paid from June 2010 to June 2014 when the hearing ended was $228,960.00. He submitted that if the court accepted X’s evidence about the amount he had paid then $150,960.00 was outstanding.
The husband’s counsel submitted that there was a real question mark over whether X should be allowed anything for work on the property but even if he should the court should have real concerns about whether $40,770.00 was a valid figure. First, some of the items X claimed to have paid for such as tipper hire appeared to correspond with items the wife claimed that she had paid with the rent money she had received. Second, there was no evidence of any agreement between the parties and X that he could offset against rent the cost of his own labour and the use of his own equipment.
The husband’s counsel submitted that at best X should receive credit for $25,180.00 leaving a balance due of $125,840.00.
An immediate problem with this submission is that while in one paragraph of his affidavit X said that he had paid $78,010.00 rent since June 2010 in the next he itemised payments made since June 2011.
I consider that the reference to 2010 in the earlier paragraph must be a typographical error and that 2011 was intended but the situation is a little complex because in her affidavit the wife attributed two or three of the payments X made after June 2011 to rent owing prior to that. On the other hand the husband made no complaint about payment of rent prior to separation.
Assuming for a moment that all of the payments which X listed are referrable to the period June 2011 to June 2014, X has paid $78,010.00 when he should have paid $171,720.00 and owes the parties $93,710.00.
X and the wife both alleged however that substantial work which X did on the retaining wall at the Property P needed to be factored in and if expenses of $40,770.00 are accepted the arrears reduce to $52,940.00.
There is some strength in the submission that if the outstanding rent is to be included as an asset it should be treated as an asset of the wife’s. She has not been strict with her son about paying rent since separation and she seems to have no appetite for collecting the arrears now. It is unlikely that she would cooperate with the husband in suing X and there is a risk of the husband and wife giving different evidence about the offset amount. It would therefore be unjust to treat the outstanding rent partially as an asset of the husband’s.
However I am not convinced that adding an amount to the pool is an appropriate way to deal with the issue.
I cannot be sure how much would be recovered if X was sued. I do not know what the outcome of any offset argument or any limitation argument would be in civil proceedings or how legal costs would impact on the amount ultimately received. I do not know whether X has the capacity to pay the higher amount pressed by the husband’s counsel or even a much lower amount. He might declare bankruptcy, and if the parties did recover something from him it would have to be declared as income by them in amended tax returns and I cannot determine the after-tax entitlement each would have.
I consider that the appropriate way to deal with the matter is to take into account the non-payment of the rent and the wife’s role in letting the situation develop pursuant to s.75(2)(o) which allows me to take into account any matter the justice of the case requires to be taken into account. The issue of whether the wife has properly accounted for the rent she has received to the exclusion of the husband since separation is also best treated as a s.75 (2)(o) matter.
Conclusion about the pool
I am satisfied that the non-superannuation assets are as follows:
Description
Ownership
Value
Property P
Joint
560,000.00
Net proceeds of sale of former matrimonial home at Property F Joint 85,321.00 (business omitted)
The business is owned by the husband and the parties jointly own the land from which the business operates.
148,122.00
(business omitted)
Wife
950,000.00
Property R
Wife
750,000.00
(motorbike omitted) & (omitted) motorcycles
Wife
13,000.00
(motorbike omitted) and (motorbike omitted)
Husband
13,000.00
2,519,443.00
The liabilities the parties agreed should be taken into account were the following:
Description
Ownership
Value
Loan in connection with Property P
Joint
90,000.00
Loan in connection with the acquisition of the (business omitted) and Property R
Joint
558,000.00
Total
648,000.00
In his written submissions the wife’s counsel contended that a debt of $17,000.00 which the wife owed to (omitted) Bank should be included and the husband’s counsel agreed, but at the commencement of the trial the wife’s counsel informed the court that this debt was for the wife’s legal fees. In those circumstances it should not be taken into account in calculating the pool.
In his written submissions the wife’s counsel contended that an amount of $20,000.00 being a personal income tax liability referred to in the wife’s Financial Statement should also be included as a relevant liability. He submitted that this was only fair because the husband’s contemporary tax liabilities had been taken into account by Ms D when valuing (business omitted).
The issue of whether the wife’s income tax debt should be included was raised with counsel at the commencement of the hearing and counsel agreed that it should not be included but as the matter was re-agitated in submissions I will deal with it.
In her 2014 report, Ms D took into account the BAS liabilities of the (omitted) business but specifically stated that she had reduced to Nil the PAYG income instalment owing by the husband which was in the balance sheet at $12,348.00. She said that the income tax liability of the husband should be included separately in his financial statement.
In the liabilities section of his financial statement the husband declared that he had an outstanding income tax liability of $92,000.00. The subsequent entries in this section raise a concern about whether the husband properly distinguished his personal liabilities and the liabilities of the business and I cannot be sure if $92,000.00 is an accurate figure but whatever the correct amount it is not appropriate to include either the husband’s post-separation income tax liability or the wife’s post separation income tax liability as a liability for the purposes of determining the pool. The parties each chose how they spent their income and organised their affairs after separation and if they owe a debt to the ATO as a result of those choices it should not be visited on the other party.
The parties each have credit card debt but they have been separated for three years and again have made personal spending choices which should not be visited on the other party.
The parties have the following superannuation:
Description
Ownership
Value
(omitted) Super
Husband
49,416.00
(omitted) Super
Wife
11,000.00
Total
60,416.00
The wife did not provide any independent evidence of the value of her superannuation. She declared that she had E$11,000.00 in her 8 January 2014 financial statement but the husband said that the figure should be $13,000.00 and during discussion at the beginning of the hearing the wife’s counsel said “We accept the 13.”
However there was no evidence to support the husband’s contention that the wife had $13,000.00 superannuation and the only evidence I have about the value of the wife’s superannuation is the admission against interest in her financial statement and I therefore intend to use the figure of $11,000.00.
The husband’s counsel submitted that the husband’s superannuation should be included at $26,000.00 but I cannot understand where this figure comes from. In his financial statement filed in January 2014 the husband declared that his interest in (omitted) Super was worth E$50,000.00 and he provided a copy of a report dated 30 June 2013 showing a current balance of $49,416.00.
The husband twice said in his affidavit that he had no superannuation at separation and during the hearing his counsel said that he only had superannuation documents for 2011 onwards which tends to support this. I will consider the fact that the husband apparently had no superannuation at separation (which seems odd but it was not successfully challenged) when assessing contributions but is not a reason to exclude the superannuation from the pool. The motor vehicles which were purchased post-separation were excluded not simply because they were post-separation acquisitions but because they were either leased or heavily encumbered which made including them likely to be an unfruitful exercise.
The husband’s counsel submitted that the court should disregard the superannuation entitlements of the parties as they were comparatively small. I do not accept this submission. It is true that they are small but the husband has four times the amount of superannuation the wife does and it would not be just and equitable to ignore the superannuation.
The pool therefore consists of superannuation worth $60,416.00 and non-superannuation assets worth net $1,871,443.00 a total of $1,931,859.00.
Step 2 – Assessing contributions
General approach
The husband’s counsel’s submissions about contributions were made on the basis that contributions should be assessed globally. He contended that the husband should be assessed as having contributed “at least 50%”.
The wife’s counsel took two different approaches.
He was content for contributions to be assessed globally if the wife’s contention about the value of the (business omitted) and land was accepted and in that event contended that contributions should be assessed as 55/45 in the wife’s favour.
If the wife’s contention was not accepted (which is the case) he in effect proposed a “two pool” approach. He submitted that the increase in the pool as a result of a combination of the wife paying down the (business omitted) loan after separation and the value of the (business omitted) and land increasing could be quantified at $996,000.00 and that the wife should be assessed as having made a 95% contribution to this pool. He submitted that the wife should be assessed as having contributed 55% to a pool containing the remainder of the assets and that contributions overall should be assessed as 75.58% by the wife and 24.42% by the husband.
I will deal with the contention above in the course of considering post-separation contributions but will first consider initial contributions and contributions during the relationship.
Initial Contributions
The parties had no significant assets at the commencement of cohabitation.
The wife brought some pre-existing experience running a (omitted) business into the relationship but I do not accept that this experience is something which means that there should be an adjustment in her favour for contributions.
The experience would have assisted her when she commenced working for her parents and, added to later experience, in running (business omitted) and assisting the husband in (business omitted). However the husband brought his existing skills as a (omitted) into the relationship and used those to earn income for the first half of the relationship. Even if it was possible to place a value on the wife’s expertise in 1986, it would be unjust to place a value on one pre-existing skill and not the other.
Contributions during the relationship
The parties both earned income during the relationship.
The wife worked in (occupation omitted) for a brief period at the start and then in a (employer omitted) before commencing work in a (omitted) business. She acquired her parents’ (omitted) business in 1997 and operated it until it was sold in 2003. She then worked at (business omitted) until she purchased (omitted) in 2006.
The husband worked as a (occupation omitted) or in the (omitted) business until about 2000 or 2001 and then commenced running (business omitted).
There was no suggestion that either party was lazy or a gambler or drug user. They both worked hard and they accumulated assets.
The wife claimed that she did the majority of the housework and parenting and was dismissive of the husband’s contribution in this regard. The husband claimed that he did his share of parenting when he was available but agreed that he was less available than the wife due to the fact that for a significant period he commuted from the (omitted) to Sydney and had to leave early and returned home late. He agreed that the wife did the majority of the cleaning and cooking.
The wife’s counsel urged a finding that the wife’s contributions as homemaker and parent so greatly exceeded the husband’s that there should be an adjustment in her favour for contributions but I do not accept this submission.
I accept that the wife did the majority of the parenting and homemaker tasks but this was to an extent because the husband was not as available as the wife. When he worked in Sydney the husband left home very early and returned home very late. Also for a period around 2001 the wife and children lived at Property P and the husband lived principally in the Property R area so that he could run the (omitted) business and again he was not as available as the wife
However this was the way the parties organised their lives. They tacitly agreed that the husband would earn income in a manner which took him away from home for long hours. The wife made no complaint about those choices rather she accepted them as necessary. The husband did what he was able to do in the 24 hours of each day and the wife did what she was able to do. There was also very likely an element of aptitudes and interests at work rather than a situation of one party shirking their responsibilities.
The parties had at least three separations which totalled about two years in all. It seemed to be implied that during those periods the children remained with the wife. No evidence was given about anything specific that happened during those periods as regards the financial and non-financial care of the children and in the light of this and in the context of a 25 year relationship overall, I do not consider that the fact that the children lived with the wife during the periods of separation is significant.
The wife’s counsel submitted that the court should take into account that her parents had in effect gifted (business omitted) to the parties in 1997. He submitted that the husband’s counsel had conceded that this was the case.
Neither of these submissions is correct. The husband’s counsel made no such concession and the wife’s own evidence was that she and the husband paid her parents $50,000.00 for the business; she provided a copy of the contract of sale[8]. The husband said that the parties in fact took over some loans to the value of $50,000.00 but that is by the by. There was consideration for the acquisition of the business and nowhere did the wife suggest that it did not represent fair value.
[8] Annexure “A” to the wife’s trial affidavit.
I also do not accept that this acquisition should be accorded some non-financial value because it “introduced the husband for the first time to a business and industry which now represents his livelihood.”
The husband’s counsel submitted that the court should take into account the husband’s contributions to the wife’s son X and he referred me to Robb & Robb, but the Full Court in Robb & Robb said that this was something the court could take into account pursuant to s.75 (2) (o), not that it was a matter relevant to contributions.
I am satisfied that the parties contributions during the relationship should be assessed as equal.
Post-separation contributions
The wife’s counsel submitted that if Mr T’s valuation was correct then the wife had made a very significant post-separation contribution. Not only had she reduced the (business omitted) loan by $136,000.00 but Mr A had valued the (business omitted) and the (business omitted) land at $840,000.00 in November 2009, only 19 months before separation, and they had therefore increased in value by $860,000.00 since then.
The wife’s counsel submitted that the husband had made no contributions to the (business omitted) and land since separation and the court should assess contributions to this total of $996,000.00 as 95% by the wife and 5% by the husband. He did not explain how he arrived at the 95/5 figure but presumably it was to take account of the fact that Mr A’s valuation predated separation.
There are numerous problems with this submission however namely:
i)Even if it is accepted that Mr A valued the (business omitted) and the land in November 2009 and not just the (business omitted), and this was in dispute, there was no evidence of what the assets were worth in July 2011 and therefore no evidence of what increase in value had occurred post-separation;
ii)The wife’s submission that the husband made no contribution to the (business omitted) and land post-separation is incorrect;
iii)The (business omitted) and land were both acquired during the marriage after discussion between the parties and using joint funds. The wife did not do anything post-separation which led to the increase in their value and in those circumstances the proposition that the wife should receive all the credit for the post-separation increase in value whatever it might be and for using the (business omitted) income to pay down the (business omitted) loan is not sustainable. The proposition also does not sit comfortably with the wife’s acceptance that the decline in value of the (omitted) business through no fault of the husband’s should be shared equally.
Dealing with these points in more detail one at a time there was a dispute between the parties about whether Mr A valued the (business omitted) and land combined or just the (business omitted) (or just the land come to that). If he valued only one of them the proposition that there has been an increase of $860,000.00 in the value of the two assets combined since November 2009 is not open.
The wife’s counsel submitted that it was crystal clear on the face of Mr A’s report that he had valued the land and the business as one entity.
He pointed to the fact that Mr A said that the purpose of the valuation was to:
To determine the current market value, excluding GST, of the subject property known as (business omitted), Property R, including the land and improvements, the interior inclusions and the goodwill of the business being conducted from the premises.
This valuation is prepared for submission to (omitted) Bank and may be relied upon for first mortgage finance purposes
He then pointed to the fact that in his report Mr A went into detail in his report about the trading figures for the business and using figures from 2008 and 2009 arrived at a figure of $125,836.00 which he called “calculated profit” and applied to it a capitalisation rate of 15% leading him to arrive at a figure of $838,907.00 for the value of the business. However he also went into detail about the structures on the property and provided the kind of information normally provided in a valuation of real estate.
He pointed to the fact that Mr A referred to a number of sales for (businesses omitted) and concluded as follows:
It is my considered opinion that the current market value, excluding GST, of the subject property known as (business omitted), Property R, including the land and improvements and the good will of the business being conducted from the premises is $840,000.00.
The husband’s counsel submitted that given that Mr A had arrived at a value of $838,907.00 for the business his statement that the land and improvements and goodwill were worth $840,000.00 simply did not make sense and that the only interpretation open was that despite the wording Mr A had valued the business only.
The husband’s counsel said that if this was not accepted the court should take note of the fact that Mr A stated in his report that the Valuer General’s assessment of land value was $181,000.00. He submitted that it was common knowledge that a Valuer General’s assessment related only to the unimproved capital value of the property and if Mr A had treated this as the land value then the valuation was inherently unreliable because the land was purchased for $380,000.00 only four months later.
The wife’s counsel joined issue with this and submitted that the court could not take judicial notice of the fact that a Valuer General’s assessment related only to the unimproved capital value of land because s.144(1) of the Evidence Act 1995 (Cth) made provision about the things the court can take judicial notice of and the meaning of the term “land value” in a Valuer-General’s valuation was not one of them.
I will deal with this even though it is a red herring. The submission by the wife’s counsel is not correct because s. 144(1)(b) of the Evidence Act 1995 (Cth) provides that:
Proof is not required about knowledge that is not reasonably open to question and is:
(b) capable of verification by reference to a document the authority of which cannot reasonably be questioned.
The authority of the Valuation of Land Act 1916 (NSW) cannot reasonably be questioned and s.6A of that Act provides as follows:
6A Land value
(1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner’s predecessor in title had not been made.
“Land Improvements” is defined in that Act to include such things as fencing and clearing.
However there was nothing to suggest that Mr A treated the land as being worth only what the Valuer General assessed it to be worth and this is a red herring.
Mr A’s valuation does appear on its face to be of both the land and business but the fact that his conclusion about the value of the goodwill of the business carries forward into what appears to be a valuation of the combined entity at the same figure does not make sense. It is even possible that the valuation is actually of the land, with the value of the business and the capacity of the business to pay rent being taken into account. This would be consistent with the fact that the valuation was clearly prepared in anticipation of the wife purchasing the land, which occurred in March 2010.
The husband’s counsel chose not to require Mr A for cross-examination and cross-examination surely would have cleared up the mystery but he was not obliged to do so and I am left with a puzzle.
Even if Mr A’s valuation is as it seems on its face a valuation of the land and (business omitted) combined it does not follow that the assets were worth the same in June 2011 as they were in November 2009 and there was no evidence about the extent of the increase in the value of the (business omitted) land and business between November 2009 and June 2011 as opposed to between June 2011 and June 2014. Mr T made several references to the fact that the market had changed since October 2009 which he erroneously believed to be when the business was purchased. He said as follows for example:
There has been strong sales activity for real estate components of (businesses omitted) facilities as the majority of investors recognise that there will be ongoing demand for (businesses omitted). This has resulted in a firming of yields in recent time particularly for freehold components which are underpinned by solid leases to secure corporate operators.[9]
[9] Valuation Report of Mr T, page 26.
The fact that I am unable to pin down when the increase in value occurred is not necessarily fatal to the wife’s case, because it seems most unlikely that there was a huge jump in the value of the assets between October 2009 and June 2011 and then none since and the court sometimes has to do the best it can in property cases with imprecise evidence. However there are numerous problems with the wife’s contention that she should be solely credited with any increase in value which has occurred or for paying down the loan with (business omitted) income.
First, the assets were purchased prior to separation after discussion between the parties and using joint funds.
The wife’s counsel conceded this to an extent but submitted that I should treat the purchase of the land as different to the parties other purchases during the marriage because this land unlike the other land purchased by the parties was purchased in the wife’s sole name and was purchased close to separation. However while this is true it was purchased after discussion and using money jointly borrowed and secured over joint assets and there was nothing to suggest that the parties intended this asset to be treated differently to the other assets they bought and sold during the relationship.
Second, the submission by the wife’s counsel that the husband made no contribution to the assets post-separation is erroneous. The husband and wife jointly borrowed the funds to purchase the assets and the loans were secured over joint property. The husband has continued to be liable for the loan throughout the post-separation period.
Third, there was no evidence that any effort by the wife or expenditure of money by her had led to the increase in value of either the (business omitted) or the land post-separation. The wife did reduce the (business omitted) loan but she did so by using (business omitted) income, not her own taxable income.
The flaw in the wife’s argument that she should receive sole credit for any post-separation increase in value of these assets is starkly illustrated by comparing her position about the (business omitted) with her position about the (omitted) business.
The (omitted) business has done badly since separation. Ms D valued it at $340,000.00 as at 30 June 2012 and $148,122.00 as at 30 June 2013.
The wife’s counsel conceded that there was no evidence that the decline in value was due to waste or any form of economic misconduct by the husband. Paradoxically a little later in his submissions he urged the court to give some weight to the decline in value of the husband’s (omitted) business during the post separation period particularly when it was lined up with increased value of the wife’s (omitted) business but this is of no relevance if there is no evidence that the husband contributed to the decline in value, which the wife’s counsel conceded was the case.
I cannot hold the husband to account for the decline in the value of the (omitted) business and the wife’s argument that she should receive credit for the increase in value of the (omitted business) and land when she has done nothing to cause it is therefore illogical. It is also verging into the territory of the now discredited special contributions argument, where the party who had made a fortunate business decision sought to be solely credited for the resulting amount contributed to the pool[10].
[10] Kane & Kane (2014) 50 FamLR 498, Hoffman &Hoffman [2014] FamCAFC 92
I even wonder whether some of the old cases which seem to suggest that a party should receive sole credit for purchases made with income earned by them from employment post-separation will be followed in the future. It will be interesting to see what comes of the decision in Marsh & Marsh.[11]
[11] Marsh & Marsh [2014] FamCAFC 24
The wife chose well when she chose the (business omitted) and the (business omitted) land. They have increased in value since purchase and also since separation. It is not open to me to find however that this was the result of any special skill of the wife or hard work by the wife either pre or post separation, and even if it had been the husband contributed to the acquisition of those assets and continued to contribute to them post-separation by virtue of the continuing joint loan secured over joint assets.
The husband has also worked hard in his business but his fortunes have been the reverse of the wife’s.
The fact that the (business omitted) and land are worth $1.7m today and that the loan has reduced does not entitle the wife to any adjustment in her favour on the basis of contributions.
The husband’s counsel raised a post-separation argument namely that I should take into account that post-separation the wife had received the rent money from X to the exclusion of the husband and had used some of it for her own purposes but this is something more appropriately taken into account pursuant to s.75 (2) (o).
The evidence suggests that the husband’s superannuation was acquired post-separation. However it derives from the (omitted) business acquired during the relationship and not from the husband’s post-separation income and if the wife is to get no credit for money applied to reduce the (business omitted) loan I cannot give the husband credit for acquiring this superannuation.
Conclusion about contributions
The husband’s counsel submitted that contributions “slightly favoured the husband” although he did not nail his colours to the mast and name a percentage. However the only issues he identified which were out of the ordinary were the husband’s contribution to the care of X and the wife’s use of the rent money post separation both of which are more appropriately treated as s.75(2) matters.
The wife’s counsel submitted that contributions should be assessed as 75.58/24.42 in the wife’s favour but for reasons given above I do not accept that there are any factors which support an adjustment in favour of the wife.
Neither party had any significant assets at the commencement of cohabitation. They both worked hard during the relationship in their own ways to earn income and acquire property and within the constraints of the time available to them to parent their children and maintain their household. The wife’s purchase of the (business omitted) and land were very fortunate economic events but they were purchased using joint funds and the wife cannot expect to receive the lion’s share of the credit for their existence.
I am satisfied that the parties contributed equally to the acquisition conservation and improvement of the assets in the matrimonial pool.
Applying this to the pool entitles each party to assets to the value of $965,929.50.
Step 3 – the s.79 (4)(d) (e) (f) & (g) matters
The relevant subsections are (d) which requires me to consider the effect of any proposed order upon the earning capacity of either party to the marriage and (e) which requires me to consider the matters in s.75(2). S.79 (4) (f) & (g) of the Family Law Act 1975 have no relevance in these proceedings.
I will consider the s.75(2) matters first.
s.75 (2) matters
The wife is 60. She earns income from (business omitted) and is also in receipt of such rent as is paid Property P.
In her financial statement filed on 9 January 2014 the wife said that she was receiving $550.00 per week rent from X but X is supposed to pay $4,770.00 per month which equates to $1,100.00 per week. The purchasers of Property P were paying $750.00 to lease the business premises in 2003 and Mr S suggested that the current rent was below market rental so there is some capacity for the wife to improve the amount she receives if she retains Property P.
The wife said that she was drawing $1,400.00 per week from the (omitted) business. She was not challenged about this and I was not provided with any information about her individual taxable income as shown in income tax returns which casts doubt on it.
In her financial statement the wife declared no outgoings in respect of the (business omitted) and said that she was paying $240.00 per week to (omitted) Bank which it is reasonable to assume is for the Property P loan.
On these figures the wife has an income of $130,000.00 per annum and has to make mortgage repayments of $12,480.00 per annum. I accept that the she may also have some other outgoings for Property P such as rates and maintenance but this is a good income.
The wife is in good health. She has not re-partnered and has no dependents. She did not give evidence that she intended to retire or voluntarily cease involvement in the business at any particular time.
The wife is entitled to $965,929.50 on the basis of contributions. If she retains Property P and the (business omitted) and land and also retains her motor cycles and her superannuation she will have assets to the value of $1,636,000.00 and will be required to pay the husband $670,070.50.
In addition to her entitlement to a share of the matrimonial pool, the wife has household contents and a motor vehicle subject to a loan. She also has significant credit card debt, a debt to (omitted) Bank for legal fees and possibly a debt to the ATO for unpaid income tax.
The wife has no dependents and there was no evidence that she had re-partnered.
The husband is five years younger than the wife and the wife’s counsel submitted that this favoured an adjustment in the wife’s favour presumably on the basis that the wife had fewer years before retirement to set aside money. This has less strength in a case where the wife is earning income from a business and did not give any indication that she intended to retire or cease to be involved in the business at any particular time but I will return to it later.
The husband is 55. He said that he was drawing $57,500.00 from (business omitted) and he was not challenged about this. The mortgage on Property N is being repaid by the business.
The husband is in good health. He did not give any evidence about his future plans or whether he intended to keep the business going or go back to his trade or look for another type of work.
If the husband retains the (omitted) business, his motor cycles, the money in trust and his superannuation and the wife retains the other assets the wife will need to pay him $670,050.50
In addition to his entitlement to a share of the matrimonial pool, the husband owns a motor vehicle and household contents. He also has credit card debt and an income tax debt and may well owe money for legal fees although I have no evidence about that.
The husband has not re-partnered and has no dependents.
The parties each submitted that there were matters which needed to be taken into account pursuant to s.75(2)(o) which provides that the court can take into account
any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account.
The husband’s counsel submitted that the husband should receive credit for his contribution to the wife’s son X “pursuant to the principle in Robb & Robb.”[12]
[12] Robb & Robb (1995) FLC 92-555
In Robb & Robb the wife had two children at the commencement of the parties 13 year relationship. The children lived with the parties and the husband made financial and non-financial contributions in respect of them. The trial judge took the husband’s contributions to these children into account under s.75 (2)(o) and the Full Court said that he was entitled to do so.
However whether this is done in any particular case is a matter of discretion and I am not satisfied that the justice of this case requires me to take into account the husband’s contribution to X.
X was 5 when the parties commenced living together. He became part of the household and took the husband’s surname, indeed the husband said during cross-examination that he thought that he had adopted him. X had hardly any contact with his natural father Mr B.
I accept that the husband helped to support X both financially and non-financially and there was no evidence that Mr B ever paid child support but that alone does not in my view mean that the justice of the case requires that there be some adjustment in the husband’s favour.
There was no evidence that X was foisted on the husband over his objections. He willingly took X into his home and treated him like his own son. He supported X without complaint just as he supported his biological daughters. There was no evidence that he pressed the wife to pursue Mr B for child support and she refused to do so.
The other problem for the husband with pursuing this issue is that just as in many cases where this claim is made, no submissions were made about how the husband’s support of X may have impacted on the parties acquisition of assets in financial terms and the extent to which the pool might now be bigger if he had not been required to provide this support nor was any submission made about what impact this factor should have in percentage terms.
I do not consider that justice and equity requires that the husband should receive compensation for the financial and non-financial support of X to which he willingly committed to in 1986.
The husband’s counsel asked me to have regard, presumably as a s.75(2)(o) matter but perhaps a matter also relevant to s.75(g), that there had been a deterioration in the value of the husband’s business in the 2013 financial year and that his debt to the Australian Taxation Office had increased. He submitted that there must be some doubt as to whether the husband’s business would survive. In comparison the wife had a profitable business which she would be able to operate in the future with minimum personal effort.
It would be double counting to take the profitability of the businesses into account as a s.75 (2) matter when their profitability has been taken into account in valuing them and in any event while the wife will retain the more profitable business it will be at a cost of funding a substantial payment to the husband which will have an impact on her income.
The husband did not give any evidence about what he intended to do with his business or what his future held if he had to close it and I cannot make findings without evidence. I cannot assume that the husband at 55 and in good health will be incapable of earning an income in the future, perhaps even a better income than he is earning now.
The other relevant s.75(2)(o) matter is X’s occupation of Property P and the receipt of the Property P rent by the wife to the exclusion of the husband since separation.
On her own admission the wife did not keep proper track of what X was paying for Property P. She said that she had to ask his girlfriend how much he had paid so that she could include this information in her affidavit.
The wife was well aware as a result of the husband’s response filed in 2012 that her retention of the rent was an issue for him and that he was seeking to receive half of the rental income. She did not provide information about the situation to the point where the husband made a CTTT application seeking to evict X and she then had the temerity to criticise him at trial for having made that application.
It is clear both from the wife’s evidence and X’s evidence that X rarely if ever paid the correct amount of rent on time after June 2011.
During cross examination the wife tried to deflect blame for this by claiming that X did work on a retaining wall which collapsed after a storm and that he should be given credit for this at the very least. The husband conceded that X had done some work and while the husband was keen to discount this and not allow X anything for his own labour, the fact is that the parties had the benefit of this work and the benefit of X providing labour for them rather than selling his services elsewhere.
However somewhat ironically the work on the retaining wall was done in 2011 and early 2012 and X’s payments of rent during this period, particularly the latter part, while patchy, but were better than they were in 2014.
A way of looking at the matter which makes clear the wife’s lax behaviour and questionable attitude toward collecting and sharing the rent is to concentrate on the period from mid-2013 when there was no issue either of work being done on the retaining wall or that work having a tail which was impacting on rental payments.
X’s own evidence established that the wife accepted $16,000.00 from him during this period when he should have paid $57,340.00, a shortfall of $41,240.00. She did not share any of the money she did receive with the husband and she failed without any consultation with the husband to require X to either pay the correct amount of rental or vacate the premises.
The fact that the wife has favoured her biological son rather than one of the parties’ children is irrelevant. The wife had no right to make decisions which financially affected the husband without his agreement and this must be taken into account in arriving at a just and equitable outcome.
The wife did not even try to explain her failure to collect the correct amount of rental in 2014 and while X said during cross-examination that he would pay what he owed there was nothing to suggest that the wife had any appetite for trying to collect it or that X had the capacity to pay it.
The wife has also had the sole benefit of much of the rent actually paid since separation, an amount of $72,000.00, and her attempts to explain how she had used that money were evasive and unsatisfactory. She was in receipt of a better income than the husband throughout the post-separation period and yet retained the whole of the Property P rental. Even if an allowance of $37,440.00 is made for payment of the Property P mortgage, the wife has still had the benefit of $34,560.00 and she was not able to establish outgoings of this amount over the post-separation period.
The wife failed to collect an amount equal to 2.5% or $41,240.00 of the pool in the last 18 months and has also had the sole use of rental money she did receive which could have been $34,560.00.
Although I will have to consider s.75(2) matters overall and need to take s.79(4)(d) into account, it will be useful to consider what sort of an adjustment this issue alone might warrant.
An adjustment of 0.5% in the husband’s favour to deal with this would give him an additional $9,571.80 and create a differential of $19,143.59 between the parties. At first glance this may not seem like much but the husband was only ever entitled to 50% of the rental, some of the money the wife did receive must have been used for expenses and the Property P mortgage payments and presumably the husband would have been obliged to pay tax on the rental if he had actually received it.
Such an adjustment would entitle the wife to 49.5% of the pool or $956,270.21 and the husband to 50.5% of the pool or $975,588.79 and would require a payment by the wife to the husband of $679,729.79.
I then need to return to s.79(4)(d), the likely impact on the parties income earning capacity of any order I make.
The wife wishes to retain Property P and the (business omitted) and land and if an adjustment is made as above for s.75 (2) matters, she will only be able to do so by taking out a substantial loan of $679,729.79 and refinancing the $90,000.00 and $558,000.00 loans already encumbering Property P and Property R.
The wife’s counsel submitted that there had to be real doubt about whether the wife would be able to borrow such an amount. He submitted that there was no evidence that a lending institution would accept Mr T’s valuation or lend such a large sum to someone of the wife’s age or that a 60 year old would be able to service the debt required to allow her to keep the business.
He said that as a result of the agreement the parties reached in January 2014, the wife did not anticipate that she would have to borrow such a large sum and therefore was never in a position to provide evidence about her prospects of doing so. He submitted that in the absence of evidence about the wife’s borrowing capacity, the court had to be concerned that there was a real likelihood that if she was ordered to pay such a sum to the husband she would be forced to sell her business and abandon her livelihood and would find herself at 60 with no means of earning an income.
The wife’s counsel submitted that therefore if all of the other findings in the case led to a conclusion that the wife should pay the husband $700,000.00 or thereabouts an adjustment of at least 15% should be made in the wife’s favour.
Even in this scenario the wife would still be required to borrow to pay the husband but the amount would be well below the net value of Property P. She would have to refinance the loan for $558,000.00 but this is well below the market value of Property R and such an adjustment should ensure that the wife was able to retain the assets of her choice.
There are numerous problems with this submission however.
The claim that the wife had no opportunity to put evidence before the court about her borrowing capacity is simply not correct. Mr T’s report is dated 5 June 2014 and is attached to an affidavit filed on 18 June 2014. I do not know when the wife received it but the affidavit of Mr A was filed on 17 June 2014 suggesting that she received it prior to 17 June 2014.
The trial resumed on 23 June 2014. The wife’s counsel cross-examined Mr T at considerable length so he was obviously fully instructed about the valuation. The wife did not seek leave prior to 26 June 2014 to file an affidavit about her borrowing capacity or the impact on her of an order consequent on Mr T’s valuation being accepted and the husband’s 50/50 proposal being successful nor did her counsel seek an adjournment to allow her time to make the necessary inquiries and file such an affidavit.
I have no evidence about the issue the wife’s counsel urged me to take into account and one possibility is that I do not have the evidence because the wife well knows the point has no validity.
The wife’s counsel urged me to accept that the wife’s age was relevant to her borrowing capacity but this is not a case where the wife will be applying for a loan based on income from paid employment. The wife will be applying for a loan based on income from a business and there was no evidence about the impact her age would have in this scenario.
I cannot find without evidence that it is likely that the wife will lose the (business omitted) if she is required to pay the husband $679,729.79. If she cannot borrow enough and Property P has to sold this will reduce her debt to the husband to $209,729.79 although selling costs may have an impact. The wife owes $558,000.00 on the (business omitted) and she would then have to borrow $767,729.79 in total.
I cannot find that Mr T’s valuation is likely to be so wildly wrong that having to borrow this amount will condemn the wife to losing the (business omitted) and land based on the amount she is required to pay alone but there is the issue of security for the loan. Mr T valued the land at $750,000.00 and the wife could well find it difficult if not impossible to borrow an amount which exceeded the value of the land or did not leave sufficient margin between the value of the land and the loan.
One possible outcome of the matter therefore is that the wife will have to sell the land and will be left with the (business omitted) only but this is what she started off with in 2006. If she is left with this she will still be able to earn money from the business and while she will have to pay rent for the (business omitted) she will be doing this without the need to make any loan repayments to anyone. This is hardly depriving her of an income.
I finally note that the wife may be 60 but she is a resourceful and experienced businesswoman who has both owned her own businesses and operated other businesses for over three decades. She is in good health and I cannot assume that she will be unable to earn an income by some means or other if the (business omitted) is sold and if it is she will have a significant capital sum to use either to assist her to earn an income otherwise or for other purposes.
The final problem with the wife’s counsel’s submissions is that he pointedly refrained from considering what a 15% adjustment could mean in monetary terms.
It would entitle the wife to an additional $289,778.85 and create a differential of $579,557.70 between the parties and to make such an adjustment in the wife’s favour simply to ensure that she retained the assets of her choice with the least possible financial hardship would not only be inequitable but would be to promote the wife’s interest in retaining certain assets over the husband’s entitlement to a just and equitable share of the property after a 25 year relationship.
The issue that does concern me is that the wife will only be able to retain all the assets she wishes to retain by taking out loans and incurring borrowing costs; alternatively she will have to sell Property P and possibly Property R and this is bound to affect her income one way or another. She is doing better out of the (business omitted) than the husband is out of the (business omitted) but she is five years older than the husband and has less time to accumulate assets for use in a period when she cannot work at all even somewhat passively in the (business omitted).
In light of this I intend to order that the division be 50/50 rather than 49.5/50.5 arrived at earlier. It is a very modest change but it does create a differential of $19,143.59 to take some account of the effect of either borrowing costs or the loss of assets on the wife’s income in light of the five year age difference between the parties.
This would entitle the parties to $965,929.50 each and require the wife to pay the husband $670,070.50 if she retains Property P, the (business omitted) and Property R.
I finally note that no evidence was given during the proceedings about potential capital gains tax payable if assets had to be sold and no submissions were made about this issue. This may be because the parties are small business owners and there is nothing to worry about but whatever the reason no evidence was given about this issue and there is nothing I can do about it.
The orders
Drafting appropriate orders raises yet another set of problems.
The parties were in agreement about the following disposition of assets:
a)the wife to retain Property P provided that she could refinance the loan and make the necessary payment to the husband;
b)the wife to retain the (business omitted) and Property R provided that she could refinance the loan and make the necessary payment to the husband;
c)the husband to retain (business omitted) and Property N and refinance any loans solely relating to these.
I have done my best to draft orders taking into account this underlying agreement but there are potential problems. Two possibilities that spring to mind are that the husband might not be able to refinance the (omitted) business loan or (omitted) Bank might insist on retaining all of the sale proceeds of Property P if it is sold first rather than simply taking the amount needed to recoup the $90,000.00 directly attributable to that property.
I have contemplated not making orders and asking the parties to submit a draft consistent with the decision, but on balance I am satisfied that adopting the cascading scheme proposed by the husband’s counsel is preferable. If necessary the parties will have to either agree on or apply for a variation of the machinery orders.
The cascading scheme proposed by the husband’s counsel was that the husband should receive the net proceeds of sale of Property F and that the wife be given three months to pay the balance of the money.
He proposed that if she did not pay then Property P should sold and if as expected this did not generate sufficient to pay the husband in full the wife should be given a further three months to pay the balance. If she failed to pay then an order should be made for the sale of Property R with the husband to be paid as much as was necessary to meet his entitlement.
The husband’s counsel submitted that if this did not satisfy the wife’s obligations, the wife should be required to sell the (business omitted) but given that if anything remained outstanding by then it would be quite small. I do not consider this necessary. An order for payment of the balance within a set time is all that is necessary. If the amount was not paid in within the set time interest would start to accrue and enforcement proceedings could be taken.
Save for that this is a realistic and well thought out proposal but it gives rise to another drafting issue and that is whether to order that if properties have to be sold that the husband should receive an amount arrived at by applying percentages to the amount actually received or whether he should receive a fixed amount worked out on the figures used at the hearing with no regard to selling costs or actual amount received upon sale.
The parties both proposed orders that the husband receive a fixed amount and the wife proposed that the fixed amount carry interest but of course her orders were drafted in the expectation that she would have to pay a much smaller sum and may have been based on an expectation that there was no likelihood that anything would need to be sold.
In Waters & Waters the Full Court said as follows:
Although each case has to be considered on its own individual merits, in relation to property proceedings of this type as a generality a proper approach would involve the following:
(a) Generally it is preferable to make orders which give to each party a percentage of the current value of the property rather than a fixed amount. This is especially so where a future sale is proposed as there may be delays in carrying into effect such an order.
(b) It may well be proper to order a fixed amount in a particular case provided there is available a proper and recent valuation and it is clear from the orders that such an amount is to be paid within a relatively short period of time. If a later sale is provided in default of payment the considerations referred to in (a) above would ordinarily apply in relation to an order for sale.
(c) In any event it usually reasonable to include an order for interest at current rates to operate at least from the due date of payment.[13]
[13] Waters & Waters (1981)FLC91-019
The argument in favour of ordering payment of a fixed amount regardless of selling costs and the actual selling price is that the husband will be retaining assets which have a value fixed in the pool and to give the wife the benefit of an order which will relieve her of responsibility for selling costs and relieve her of a loss associated with the difference between the selling price and the valuation may be inequitable.
However while ordering a division on a percentage basis is a nuisance because the amount the husband is to receive will need to be recalculated after each sale I intend to draft the orders to take account of the fact that the husband is entitled to fixed assets to the value of $295,859.00 being the proceeds of sale of Property F, the (omitted) business, his motor cycles and his superannuation as part of his entitlement and to provide that the amount the wife is required to pay him is worked out on a percentage basis if assets have to be sold.
This will ensure that the parties share equally any selling costs and any rise or fall in value since the valuations and it is appropriate because if sales have to occur it will not be because of a default by the wife but because of her inability to refinance.
If properties have to be sold there will be a delay in the husband receiving part of his entitlement but again this will not be because of default but because of inability to obtain finance and I do not consider that it is appropriate to order that interest be paid unless the last payment is not made within the required time.
A final look at the outcome
If the wife is able to buy the husband out without selling assets she will retain:
Property P less mortgage $470,000.00
Property R less mortgage $192,000.00
(business omitted) $950,000.00
Superannuation $11,000.00
Motorbikes$13,000.00
Total$1,636,000.00
Less
Payment to the husband $670,070.50
Total$965,929.50
The husband will retain:
(business omitted) $148,122.00
Net Proceeds of sale of Property F $85,321.00
Motorcycles $13,000.00
Superannuation $49,416.00
Total$295,859.00
Payment from wife $670,070.50
Total$965,929.50
In percentage terms a 50 50 division is just and equitable. The parties began their 25 year relationship with nothing, worked hard in employment or business activities throughout and raised three children and at the end of the relationship had a respectable asset pool which must now be divided.
In a worst case scenario the mix of assets will see the wife retaining only the (business omitted), in other words only an income and the husband receiving a business and enough to purchase a home if he wants but it will of course be open to the wife to realise the capital tied up in the (business omitted) if she wishes.
I am satisfied that the outcome is as just and equitable as I can make it on the state of the evidence.
The husband’s counsel sought an order that the wife immediately arrange for the husband’s release as guarantor of X’s business loan. There was no information about this in the evidence making it difficult to draft an order about it.
I intend to order that the husband assign to the wife the whole of his right title and interest in the rent owed by X for the Property P premises. This will advantage the wife if she decides to pursue X for unpaid rent and is successful in doing so but this seems most unlikely and the order will simply ensure that there is no loose end left which could result in further dispute and litigation involving the wife, X and the husband.
For all of the above reasons the orders of the court will be as set out at the beginning of this judgement.
I certify that the preceding two hundred and eighty-two (282) paragraphs are a true copy of the reasons for judgment of Judge Terry
Associate:
Date: 18 February 2015
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