Grace v Grace (No 2)
[2012] NSWSC 1321
•30 October 2012
Supreme Court
New South Wales
Medium Neutral Citation: Grace v Grace (No 2) [2012] NSWSC 1321 Hearing dates: 25 October to 2 November 2010; 4 November to 2 December 2010; 23-24 June & 22 July 2011 Decision date: 30 October 2012 Jurisdiction: Equity Division Before: Brereton J Decision: Supplementary reasons given
Catchwords: FAMILY LAW - adjustive property orders - Family Law Act, s 79 - valuation of property of parties available for division Legislation Cited: (CTH) Family Law Act 1975, s 79 Cases Cited: Grace v Grace [2012] NSWSC 976 Category: Consequential orders Parties: David Alexander Grace (plaintiff)
Deborah Sharon Grace (first defendant)
Julienne Grace (second defendant)
Nevilda Holdings Pty Ltd (prov liq'r appted) (third defendant)
Nevilda Investments Pty Ltd (prov liq'r appted) (fourth defendant)
Dutchie Pty Ltd (sixth defendant)
Phoenix Rising Investments Pty Ltd (seventh defendant)Representation: Counsel:
D Williams SC w S Goodman (plaintiff)
A Moses SC w D Stewart (first, second & seventh defendants)
Solicitors:
James Tuite & Associates (plaintiff)
Clinch Long Letherbarrow Pty Ltd (first, second & seventh defendants)
File Number(s): 2006/259566
Judgment
In the substantive judgment in these proceedings [Grace v Grace [2012] NSWSC 976] delivered on 23 August 2012, I said - in connection with the identification and valuation of the property of the parties available for division for the purpose of Dr Julienne Grace's cross-claim for adjustive property orders under (CTH) Family Law Act 1975, s 79:
250 The evidence does not permit the exercise to be undertaken with precision, largely because there is no clear picture at any single date of Julienne's position, a matter for which she must bear responsibility. Nonetheless, the property of the parties as at or about the date of Colin's death may be summarised as in the following table. Notes explaining the various entries follow the table. As will become apparent, in respect of the shareholdings in the private companies, I have adopted the methodology used in the defendants' submissions, but as at an earlier date. This has usually involved substituting different revaluations of real property into financial statements for different years from those used in the submissions. To avoid excessively cluttering these reasons I have not set out the calculations in detail; but if the parties desire supplementary reasons in that respect they are at liberty to seek them, preferably before final orders are made.
The invitation to seek supplementary reasons was made in connection with the valuation of the shareholdings in the private companies, namely Nevilda Investments, Nevilda Holdings, Grace Securities, Sharander, and N&H Grace Holdings. Supplementary reasons having been requested, I now set out in more detail the calculations which implement the methodology described above, namely (1) adoption of the methodology used in the defendants' submissions (which the plaintiff's reply submissions generally followed), (2) substitution of the financial statements for years more proximate to the date of notional adjustment (November 1992) where available, and (3) substitution of revaluations of real property more proximate to the date of notional adjustment.
Nevilda Investments. As explained in the substantive judgment (at [260]), the defendants substituted into the Nevilda Investments accounts for the 1995 year, revaluations of real property as at that date. This is shown in the first column below. I used the valuations of the relevant properties as at January 1993 (ascertainable from the table of valuations in DX287) rather than May 1995, and substituted them into the 1993 accounts (ascertainable from the previous year column in the 1994 accounts in DX314) rather than the 1995 accounts. This is shown in the second column below.
Defendants'
submission:
1995 valuations
and accounts
Judgment:
1993 valuations
and accounts
14 Lamrock
985,000
805,000
284 Bondi Rd
1,875,000
1,500,000
95-103 Wellington
1,705,000
1,560,000
726 Anzac
700,000
595,000
2/754 New Beach (1)
259,474
0
46 Boston (2)
264,106
0
Other non-current assets
83,800
53,130
Current assets
96,607
244,024
Total assets
5,968,987
4,757,154
Total assets
5,968,987
4,757,154
Less, total liabilities
-1,045,473
-675,475
Net asset value
4,923,514
4,081,679
1/112 share
43,960
36,444
Colin = 12/112 shares
527,520
437,323
(1) 2/754 New South Head Rd was acquired after 30 June 1993.
(2) Boston Ave, East Malvern was acquired after 30 June 1994.
Prior to his death, Colin held 10 of the 112 shares in Nevilda Investments, and was beneficially entitled to another two (held in trust for him by Hilda and Carolyn). This process results in Nevilda Investments having net assets of $4,081,679 as at 30 June 1993, so that one ordinary share would be worth $36,444, and Colin's twelve ordinary shares $437,323.
Nevilda Holdings. As explained in the substantive judgment (at [261]), the value of the ordinary (equity) shares is derived from the same process as applied by the defendants as at May 1995, but substituting the value of the underlying Nevilda Investments shares as deduced in the previous paragraph, and using the 1993 instead of the 1995 accounts.
Defendants'
submission:
1995 valuations
and accounts
Judgment:
1993 valuations
and accounts
100 Nevilda Investments ORD
4,395,995
3,644,400
Current assets
1,393
1,389
Total assets
4,397,388
3,645,789
Total assets
4,397,388
3,645,789
Less, liabilities
-63,121
-60,525
Net asset value
4,334,267
3,585,264
1/600 ORD
7,224
5,975
Colin = 300/600 ORD
2,167,133
1,792,632
This results in a value for Colin's 300 ordinary shares of $1,792,632 - an immaterial discrepancy from the $1,792,012 mentioned in the substantive judgment.
Grace Securities. As explained in the substantive judgment (at [262]), the defendants ascribed to each share a value of $2,286,150, by substituting 1995 valuations, this time into the 1993 financial statements - presumably because the 1995 financial statements were not contained in DX314. In any event, on my preference for the September 1992 date, the 1993 financial statements are more proximate and appropriate. However, 1993 and not 1995 valuations should be used for that purpose. In the case of this company's properties, however, only 1995 valuations were obtained. From the overall trend in the valuation evidence over this period, I have assumed a general increase in values of about 20% over the relevant two-year period. Working backwards, this involves a discount of about 15% from the 1995 values. It is also necessary to substitute the revaluations of the 300 shares in Nevilda Holdings (as per para 6 above) and the 200 shares in Sharander (as per para 9 below).
Defendants'
submission:
1995 valuations
and 1993 accounts
Judgment:
1993 valuations
and accounts
17 Sir Thomas Mitchell
965,000
820,250
124 Roscoe
1,460,000
1,241,000
Other non-current assets
21,618
21,618
300 Nevilda Holdings ORD
2,167,133
1,792,632
200 Sharander A
183,326
163,540
Other current assets
108,980
108,980
Total assets
4,906,057
4,148,020
Total assets
4,906,057
4,148,020
Less, liabilities
-333,757
-333,757
Net asset value
4,572,300
3,814,263
1/2 ORD
2,286,150
1,907,131
Colin = 1/2 ORD
2,286,150
1,907,131
Julienne =1/2 ORD
2,286,150
1,907,131
This results in a value for each of Colin's and Julienne's shareholding of $1,907,131, and exposes an error in the substantive judgment, where I concluded that value per share was $1,724,978. I have not been able to identify the source of that error in the previous calculation.
Sharander. As explained in the substantive judgment (at [263]), using a similar process, the defendants attribute to 200 shares held by Colin in Sharander a value of $183,326 as at April 1995, and a corresponding value to the equivalent number of shares held by Julienne. Sharander's property at Curlewis St was valued only as at 1995, and accordingly I have applied a 15% discount and substituted that discounted valuation in the 1993 instead of the 1995 accounts; this results in each parcel of 200 shares being worth $163,540, a minor discrepancy from the $163,604 mentioned in the substantive judgment.
Defendants'
submission:
1995 valuations
and accounts
Judgment:
1993 valuations
and accounts
86 Curlewis
1,160,000
986,000
Other property etc (1)
78,421
96,209
Other non-current assets
8,128
7,977
Current assets
168,560
220,622
Total assets
1,415,109
1,310,808
Total assets
1,415,109
1,310,808
Less, liabilities
-131,827
-166,025
Net asset value
1,283,282
1,144,783
1/1400
917
818
Colin = 200/1400
183,326
163,540
Julienne = 200/1400
183,326
163,540
(1) Derived by deducting 86 Curlewis at Directors' valuation $432,425 (as per 1991 and 1995 Financial Statements) from total property plant and equipment $528,634.
N&H Grace Holdings. As explained in the substantive judgment (at [264]), the defendants attributed to Colin's shareholding in N&H Grace Holdings a value of $263,646, by substituting the revaluation of the Sharander shares into the 1998 balance sheet obtained from the 1999 financial statements - presumably because none other after 1990 were in evidence. Applying the above revaluation of Sharander to the same balance sheet results in a value for Colin's 1002 shares of $244,056, which differs immaterially from the $244,119 mentioned in the substantive judgment.
Defendants'
submission 1995
valuations and
1998 accounts
Using 1993
valuations and
1998 accounts
200 Sharander A
183,326
163,540
Shares in public companies
4,633
4,633
Current assets
96,120
96,120
Total assets
284,079
264,293
Total assets
284,079
264,293
Less, liabilities
-17,801
-17,801
Net asset value
266,278
264,492
1/1012 ORD
263
244
Colin = 1002 ORD
263,646
244,056
The error in the substantive judgment in the calculation of the value of the shares in Grace Securities affects both the husband's and the wife's share, as each held one of two shares. On this account (and on account of the other minor discrepancies noted above) the table of assets in the substantive judgment must be amended, as follows:
Husband's Assets
Title
Value
Note
ANZ Deposit
H
531,632
1
Other cash
H
4,966
2
Super
H
61,058
3
3 Burrabirra (1/2 interest as joint tenant)
Jt
750,000
4
272 Birrell
H
640,000
5
Shares in public companies
H
132,222
8
Shares in Nevilda Investments
H
437,323
10
Ordinary shares in Nevilda Holdings
H
1,792,632
11
CUMPs in Nevilda Holdings
H
1,943
11
Share in Grace Securities
H
1,907,131
12
Shares in Sharander
H
163,540
13
Shares in N&H Grace
H
244,056
14
Shares in Debid
H
99
15
Other
H
34,500
16
Total Assets
6,701,102
Less, liabilities
Title
Value
Note
Burrabirra mortgage (1/2 outstanding balance)
Jt
82,500
4
Birrell mortgage
H
127,800
5
Other
H
122,484
17
Total Liabilities
332,784
Husband's net position
Total Assets
6,701,102
Less, total liabilities
-332,784
Net position
6,368,318
Wife's Assets
Title
Value
Note
Cash
W
0
2
Super
W
50,000
3
3 Burrabirra (1/2 interest as joint tenant)
Jt
750,000
4
2 Alma
W
385,000
6
6/2 New Beach
W
300,000
7
Shares in public companies
W
334
9
Share in Grace Securities
W
1,907,131
12
Shares in Sharander
W
163,540
13
Shares in Debid
W
100
15
Other
W
48,981
16
Total Assets
3,605,086
Less, liabilities
Title
Value
Note
Burrabirra mortgage (1/2 outstanding balance)
J
82,500
4
Alma mortgage
W
250,000
6
New Beach mortgage
W
120,000
7
Other
W
23,539
17
Total Liabilities
476,039
Wife's net position
Total Assets
3,605,086
Less, total liabilities
-476,039
Net position
3,129,047
Summary
Husband's net position
6,368,318
Wife's net position
3,129,047
Net divisible property
9,497,365
Accordingly, the net divisible property as at September 1992 was in the order of $9,497,365 (not $9,132,630), of which Julienne was entitled to $3,129,047 (not $2,946,958), or 33% (a greater share than the 32% I had originally thought). This is because the correction in respect of Grace Securities increases each of Colin's and Julienne's property by $182,153. Consequently, the alteration that would have been made had Colin not died is slightly less than I had originally contemplated, and there is similarly even less reason still to make an adjustive property order in the light of the consequences of and circumstances following his death.
As a result of the foregoing, some amendments are required to some of the summary paragraphs in the substantive judgment, as follows.
Paragraph 288 of the substantive judgment requires revision, to the following effect:
288 As at the notional adjustment date the actual distribution of assets was 67:33 in favour of Colin, and as I have concluded that an appropriate apportionment was 60:40, it can be concluded, for the purposes of s 79(8)(b)(i), that had Colin not died the court would have made an order adjusting the interests of the parties in favour of Julienne, so as to produce a distribution that was 60:40 in favour of Colin.
Paragraphs 293 and following of the substantive judgment require revision, to the following effect:
293 The second impact of Colin's death is that, by survivorship, Julienne succeeded to Colin's share in Burrabirra Avenue, unencumbered. The practical effect of this was an adjustment in her favour of $750,000, increasing her net position to $3,879,047, or 41% of the pool of property. Only a further $157,333 would have been required to produce the notional 57.5:42.5 distribution, based on the original pool.
294 Thirdly, however, under Colin's will, Deborah also obtained significant benefits. Through the shares in Grace Securities, Deborah received property to the value of $1,907,131, and through the shares in Sharander, a further $163,540. In all, this amounted to almost 22% of the divisible pool of property. This is of importance because, having regard to (1) the alignment of Deborah with Julienne and David with Colin following separation, (2) the arrangement between Colin and Julienne following their separation that he would provide for David while she would provide for Deborah, (3) the fact that Julienne made a will on February 1988 leaving the bulk of her estate to Deborah, and explaining in the body of her will that she did so because Colin was proposing by his will to leave his estate to David, and (4) the alignment of the parties in these proceedings, so that it may be considered improbable that David would inherit significantly if at all from Julienne, it is necessary to consider whether - at least to the relatively small extent of $157,333, which corresponds to about 7.5% of Deborah's inheritance from Colin - it should be borne by Julienne's share of the matrimonial pool.
295 In my judgment it should, first because the provision made by Colin for Deborah significantly reduced Julienne's obligation to provide for her; secondly because her remaining 41% share was ample to provide for Julienne's needs; and thirdly because treating the distribution to Deborah in that way would result in Julienne receiving 41% of the matrimonial pool, David 37% (being Colin's residuary estate) and Deborah 22%, but with the likelihood that in due course Deborah and not David would inherit from Julienne.
296 Accordingly, once the s 75(2) adjustment in favour of Colin is disregarded by reason of his death, the appropriate apportionment returns to 57.5:42.5. As a result of the will, the distribution in favour of Julienne increased from 33% to 41%, by reason of her succession to Colin's interest in Burrabirra Ave. Although this implies that there ought to have been an adjustment in favour of Julienne to increase her interest to 42.5%, Deborah received 22% of the pool pursuant to Colin's will, and given the sufficiency of 41% amply to provide for Julienne's needs, and the alignments of the parties and the arrangements they agreed in respect of provision for the two children, it is just and equitable that the distribution to Deborah be treated, at least to the extent of 1.5% of the pool, as being for the benefit of Julienne.
Paragraphs 315 and 316 of the substantive judgment require revision, to the following effect:
315 The net divisible property of Colin and Julienne as at September 1992 was in the order of $9,497,365, of which Julienne was then entitled to $3,129,047, or 33%. Overall, the contributions of Colin up to that notional date of adjustment exceeded those of Julienne, in my assessment by 57.5% to 42.5%. On balance, the s 75(2) factors weighed in favour of Colin, albeit that given the size of the pool of assets, their relative impact would have been slight, justifying a further adjustment in his favour of 2.5%, resulting in an overall apportionment 60:40 in favour of Colin as at the notional adjustment date. As, at the notional adjustment date, the actual distribution of assets was 67:33 in favour of Colin, and an appropriate apportionment was 60:40, had Colin not died the court would have made an order adjusting the interests of the parties in favour of Julienne, so as to produce a distribution 60:40 in favour of Colin.
316 Once the s 75(2) adjustment in favour of Colin is disregarded by reason of his death, the appropriate apportionment returns to 57.5:42.5. As a result of the will, the distribution in favour of Julienne increased from 33% to 41%, by reason of her succession to Colin's interest in Burrabirra Ave. Although this implies that there ought to be an adjustment in favour of Julienne to increase her interest to 42.5%, Deborah received 22% of the pool pursuant to Colin's will, and given the sufficiency of 41% amply to provide for Julienne's needs, and the alignments of the parties and the arrangements they agreed in respect of provision for their two children, it is just and equitable that the distribution to Deborah be treated, at least to the extent of 1.5% of the pool, as being for the benefit of Julienne. It is therefore not still appropriate to make an adjustive property order. Accordingly, I would not make an order under s 79 in substitution for the order set aside.
Orders may now be made to give effect to the substantive judgment.
**********
Decision last updated: 30 October 2012
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