Harrington and Harrington

FAMILY COURT OF AUSTRALIA

HARRINGTON & HARRINGTON

[2010] FamCA 731

FAMILY LAW – PROPERTY – Settlement in relation to marriage

Family Law Act 1975 (Cth)

Lee Steere and Lee Steere (1985) FLC 91-626
Ferraro and Ferraro (1993) FLC 92-335
Hickey and Hickey (2003) FLC 93-143; 30 Fam LR 355
Coghlan and Coghlan (2005) FLC 93-220; 32 Fam LR 414
Clauson and Clauson (1995) FLC 92-595; 18 Fam LR 693
Cabbell and Cabbell [2009] FamCAFC 205
Mitchell and Mitchell (1995) FLC 92-601

APPLICANT:

Ms Harrington

RESPONDENT:

Mr Harrington

FILE NUMBER:

SYC

7912

2007

DATE DELIVERED:

19 August 2010

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

Justice Johnston

HEARING DATE:

19 & 20 July 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Livingstone

SOLICITOR FOR THE APPLICANT:

Beilby Poulden Costello

COUNSEL FOR THE RESPONDENT:

Mr Henness

SOLICITOR FOR THE RESPONDENT:

Bowring Macaulay & Barrett

Orders

The husband do all acts and things and execute all deeds, documents, instruments and writings necessary to procure the transfer to the wife, subject to order 2 hereof, all of the husband’s right, title and interest in the property known as T property in the State of New South Wales being the whole of the land contained in Folio Identifier … (“the T property”).
That the husband pay to the wife, or as she shall direct in writing:
2.1All mortgage payments at a rate sufficient to repay the mortgage fully not later than three years from the commencement of these orders and the husband is to ensure that he has paid sufficient funds to the wife to ensure that at least one-third of the current outstanding balance is fully repaid on each anniversary of the commencement of these orders;
2.2The sum of $132 365 in three instalments of $44 122 the first payable not later than one year from the date of commencement of the orders, the second payable not later than two years from the said date and the third payable not later than three years from the said date.
That the husband pay to the wife the following sums as and when they fall due until the husband has complied with his obligations pursuant to order 2 hereof:
3.1The cost of all insurance premiums payable to General Insurance Limited (“GIO”) necessary to maintain the present fire and all risks home and contents insurance policy over the T property provided that the indemnity coverage be increased by Consumer Price Index (“CPI”) increases calculated as at the anniversary date of the policy, the first of such increases to occur on the first anniversary date of the policy after the making of these orders, the relevant CPI being the Sydney All Ordinaries Index.
3.2The wife’s membership and medical and dental insurance with Medibank Private at the existing level of cover provided for her.
That the husband pay to the wife, or as she shall direct in writing, as and when they fall due payments of interest and principal of the wife’s personal loan at the Commonwealth Bank of Australia in relation to a loan in her name entered into for the acquisition of a motor vehicle, registration number …, obtained for the parties’ daughter, E Harrington, until the said loan is repaid in full.
That the husband pay the sum of $600 per week by way of spousal maintenance for a period of three years to the wife with CPI increases calculated annually, the base index being the All Ordinaries Index (All Groups Sydney), the first of such payments to commence seven days from the date hereof and that the said payment be increased in accordance with the last CPI on each anniversary date of these orders, such sum to be paid to the wife or as she shall direct in writing.
That pending the making of the last of the payments referred to in orders 2, 3, 4 and 5 hereof, that the husband be restrained from appointing further directors or beneficiaries in the following:
6.1      H Services;
6.2      P Pty Limited;
6.3      P Trading Trust;
collectively referred to as “the entities”.
That pending compliance with orders 2, 3, 4 and 5 hereof, that the husband be restrained, in his capacity as a director, shareholder or creditor of the entities, from executing any document, charge, mortgage, encumbrance, transfer (the dealings), save in the ordinary course of business, of any of the assets and undertakings of each of the three entities and that where any such dealing is proposed by the husband, that he give one month’s written notice thereof to the wife including full particulars of any such dealing.
That pending compliance with orders 2, 3, 4 and 5 that the husband provide to the wife for the term that such orders are operative, the following documents as and when they fall due for filing and no later than seven days of such filing:
8.1 All income tax returns and assessments in relation to:
8.1.1The husband’s personal tax position;
8.1.2That of any of the entities; and further;
8.1.3That the husband provide BAS statements and management accounts of the entities on a quarterly basis to the wife.
That the husband do all things necessary and execute all documents necessary to procure the execution of a floating and fixed charge (“the charge”) in favour of the wife and all documents necessary in order to secure the compliance by the husband and the company with the provisions of these orders and that the husband, in his capacity as a director or shareholder of the company, execute that charge and return it to the wife’s solicitors within seven days of the submission of the charge to the husband’s solicitors.
That upon the husband completing compliance with orders 2, 3, 4 and 5 that the wife do all acts and things necessary to transfer to the husband all of her right, title and interest in the entities known as P Pty Limited, P Trading Trust and H Services.
That the husband do all things necessary so as to cause the entities to make available to the wife the four wheel drive Prado motor vehicle, registration number …, including paying for its reasonable maintenance, registration and all insurances and to ensure that not later than three years from the date of commencement of these orders the entities transfer the vehicle to the wife free of encumbrance.
That the husband be responsible for and indemnify the wife in relation to the following:
12.1All liability of whatsoever kind or nature in relation to P Pty Ltd, P Trading Trust and H Services including but not limited to all business dealings, any liability, claims, costs, demands, suits, actions, and proceedings which may be made against or incurred by the husband or the wife in relation to the said entities or any business conducted by such entities;
12.2The husband shall bear the responsibility as and when they fall due in relation to all tax liability, incurred in the past, present and the future as a result of his business dealings including but not limited to the entities referred to in these orders including any liability that the wife may receive in respect thereof.
That the husband bear the onus for and be responsible for the outstanding tax liability in relation to the wife’s tax return for the financial years ending 2005/2006, 2006/2007, 2007/2008 and 2008/2009 and indemnify the wife in respect thereof.
That the wife forthwith transfer to the husband her interest in the Joint Westpac Bank account.
That other than as herein provided the husband and wife are each declared the sole legal and beneficial owners of all other items of property in their respective possession and / or control, including but not limited to money, shares, real property, motor vehicles, furniture, furnishings and personal belongings.
That pursuant to section 90MT(4) of the Family Law Act 1975 (“the Act”), the Trustee of Media Super (“the Fund”) allocate an amount of $60,000.00 of the husband’s interest in the Fund to the wife (“the base amount”) by way of a splitting order as follows:
That pursuant to section 90MT(1)(a) of the Act:
16.1The wife is entitled to be paid the amount of $60,000.00 in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001; and
16.2The husband’s entitlement in the Fund is correspondingly reduced;
16.3That the Trustee do all things necessary to pay the entitlement whenever the Fund makes a splittable payment out of the husband’s interest in the Fund;
16.4That this order have effect from the operative time and the operative time is seven days from the date of the order;
16.5Having been accorded procedural fairness in the making of these orders, order 16 shall bind the Trustee of Media Super.
That each party be given leave to relist this matter upon giving seven days notice to the other for the purpose of enforcing or implementing these orders.
That the husband pay the costs of F Accountants in relation to the preparation and attendance costs in respect of evidence provided by Ms B in these proceedings on 20 July 2010.
That in the event that the husband fails to pay any periodic or other sum by the date prescribed by these orders, the husband shall pay interest to the wife on such sum as remains outstanding to the wife, calculated from the due date for payment until the date of such payment at the rates the wife is required from time to time to pay under the mortgage secured over the T property and pursuant to these orders.
That the husband and the wife do all such things and execute all such instruments, documents and writings as may be necessary to comply with these orders and in the event that the husband or the wife fails in this obligation, that pursuant to s 106A of the Family Law Act 1975 the Registrar of the Family Court of Australia in Sydney shall be hereby appointed to perform all such actions and things and execute all such instruments, documents and writings on behalf of either of the husband or the wife to give effect to these orders.
That these orders not commence operation until 3 September 2010.
That both parties have leave to relist these proceedings for further submissions in relation to the form of the orders only at any time until 2 September 2010.
That all exhibits be released.

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

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC7912 of 2007

MS HARRINGTON

Applicant

And

MR HARRINGTON

Respondent

REASONS FOR JUDGMENT

Introduction

These are property proceedings.
The parties are Ms Harrington and Mr Harrington. For convenience I shall refer to the parties as “the wife” and “the husband” respectively.
The wife seeks orders to the following effect:
a)The husband transfer to the wife free of any encumbrances his interest in the former matrimonial home known as T property (“the former matrimonial home”).
b)The husband transfer to the wife the Prado motor vehicle registration number ….
c)The wife transfer to the husband her interest in the entities known as P Pty Limited, P Trading Trust and H Services.
d)The husband indemnify the wife against all liabilities arising from the said entities including all tax liability for the entities, for the husband, and for the wife thereunder.
e)The husband pay direct to the wife by way of spousal maintenance the sum of $500.00 per week for a period of five (5) years.
f)The husband pay direct to the wife by way of property settlement the sum of $300 000.00.
g)Otherwise, the husband and wife be declared the sole owner of all the property in their possession and control respectively.
h)There be a superannuation splitting order in relation to the husband’s interest in the Media Super Fund attributing to the wife an amount of $50 000.00 and
i)Certain consequential and enforcement orders.
On the other hand, the husband seeks orders to the following effect:
a)The parties forthwith cause the former matrimonial home to be sold.
b)Upon the sale of the former matrimonial home the net proceeds of sale be paid to the wife.
c)The husband pay to the wife by instalments the sum of $270 000.00 over four years as follows:
i)The first payment of $67 500.00 on completion of the sale of the said property.
ii)Each remaining instalment be paid in the sum of $67 500.00 on the first, second and third anniversaries of the sale of the former matrimonial home.
iii)That pending payment of the final instalment pursuant to the abovementioned order the husband pay direct to the wife by way of spousal maintenance the sum of $300.00 per week.
iv)The husband transfer to the wife his interest in the Prado motor vehicle.
v)The wife acknowledges that she has no claim to any of the entities P Pty Limited, Trading Trust, P Pty Limited and H Services.
vi)There be a superannuation splitting order in relation to the husband’s interest in the Media Super Fund, with the wife to be allocated a base amount equivalent to one-half of the current benefit of the husband in the fund and consequential orders.

Background

The husband was born in 1955 and he is therefore 54 years of age. The wife was born in 1959 and she is therefore 51 years of age. The parties commenced cohabiting upon their marriage in 1982. They separated on 26 August 2006. They were divorced on 20 January 2009.
There are three children of the marriage, now all adults. They are E who was born in 1985, D who was born in 1987 and R who was born in 1988. Accordingly, their ages are 25 years, 23 years and 21 years respectively.
The parties had commenced their relationship in 1979. In 1980 they became engaged for marriage.
The husband had purchased a block of land at C for $12 309. His father had loaned him $6000 towards the costs of purchase. The husband repaid his father one payment of approximately $1000. His father subsequently forgave the balance owing.
This block of land was covered by vegetation including mature trees. The parties, the wife’s father and various friends pitched in and assisted in the task of clearing the land to enable construction of what would become the parties’ first home. This was a substantial challenge and the clearing took some months to accomplish.
At the same time the husband and wife were saving as much of their respective incomes as possible to put towards the cost of funding construction of their home.
They saved approximately $22 000 between them and borrowed $50 000 which funded the costs of construction of their home. Upon returning from their honeymoon they were able to move into their new home. The home was far from completed when they took occupancy particularly with painting, tiling, some gyprock work and wardrobes installation still to be undertaken. The major part of this work was completed by the wife’s father. The wife’s father also undertook some basic plumbing and electrical work as well as much of the landscaping.
The husband was working in Sydney in the media industry. The wife was working as an employed hairdresser working 6 days per week. The wife continued in this employment until a couple of weeks prior to the birth of the parties’ eldest child E in May 1985. Then the wife tended to travel to Sydney with the husband at the start of the working week and often they stayed during the week with the wife’s parents in Sydney.
In approximately 1991 the wife’s parents sold their Sydney home and had a home built at C. They loaned the parties $60 000 which enabled them to pay out their mortgage and also fund the cost of installation of a swimming pool and some other improvements. This loan was repaid by the parties with interest.
In 2001 the parties sold their C home for $420 000. They paid out the mortgage and applied the balance towards the funding of their new home at T. The land for this was purchased by the parties in 2001. It was located at T and comprised 2.5 acres. The parties engaged a builder to build a project home on the land. They also had to borrow funds on mortgage to assist in the funding of the home. As was the case with their earlier home the wife’s father did a considerable amount of building and landscaping work.
While the new home was being built the parties and the children lived with the wife’s parents.
At approximately this time the parties assisted E in the purchase of a Toyota Celica motor vehicle. This was registered in the wife’s name.
The parties moved into their new home in 2002. At approximately this time the husband received approximately $72 000 being his share of the proceeds from the sale of a property he had inherited from his late mother’s estate in 2001. Both the husband and the wife had undertaken work to refurbish and repair the property. This inheritance was used to pay the children’s private school fees, fund a holiday to Queensland and for general living expenses.
At approximately this time the husband commenced studying at the University of Technology Sydney towards attaining a Level 4 Certificate. The area of technology involved in his employment was moving into the digital age and this Certificate would assist him to maintain proficiency in his professional field as its technology changed. The husband completed the course.
In 2003 the husband’s employer ceased trading and the husband found himself out of work. The husband established his own business P Pty Limited. This was a challenging time for the family. The business was located in Sydney. The husband was working very long hours and staying in Sydney during the week. Money was tight during the early stage of establishing the business.
In 2003 the parties assisted D to purchase a Holden Astra motor vehicle. This was registered in the husband’s name.
In 2004 E commenced studying at Bond University. The parties assisted her in payment of her accommodation and an allowance.
In 2005 D commenced studying at Bond University. Similar assistance was provided in respect of his accommodation and allowance to that received by E.
In 2005 the business purchased a Honda motor vehicle for D and a Toyota Celica for R.
In September 2005 the wife took out a $30 000 personal loan, signed by the husband as witness, to enable the purchase of a new motor vehicle for E. There is an issue about this and I shall refer to this matter again below.
Also in 2005 the husband made a business trip to Korea but the cost advantages of conducting business there were less than the husband had hoped. He decided against setting up business there.
In January 2006 the parties and the children had a holiday in Singapore and Phuket.
Then D ceased attending Bond University and commenced distance education with Monash University studying business.
In 2006 the husband travelled to China to explore business opportunities there. But he decided against setting up business there. In July 2006 he travelled to Thailand for business.
At approximately this time the husband commenced his relationship with his fiancée Ms K, a Thai national. The husband established a company in Thailand called P (Thailand) in which he held 1 share and Ms K held 1 share. The husband spent approximately $10 000 in establishing and operating this company. In October 2008 the husband gave his share to a Mr W for no consideration. Ms K continues to hold her share. The husband said that the company is worthless. I accept that the husband has no interest in this company.
As indicated above the parties separated on 26 August 2006. The wife remained living in the former matrimonial home. The husband commenced living in an apartment previously rented for D in Sydney and D returned to live with his mother in the former matrimonial home.
In November 2006 the wife withdrew $30 000 in cash from the parties’ Equity Access loan account. There is an issue about this and I shall refer again to this matter below.

In 2007 R commenced a hospitality course. The parties arranged payment of her fees and books, an allowance and car expenses.
In August 2007 the husband moved out of the Sydney apartment which was also being occupied by E and R. He commenced living in his rented apartment at Y.
On 20 February 2008 the parties had certain consent orders made dealing with interim financial and some procedural matters. These included orders that the husband arrange for the P Trading Trust Pty Limited to pay to the wife amounts totalling $1513 per week as well as paying the three Westpac mortgage accounts, that the husband pay to the wife’s Mastercard facility $1000 per month, that the husband make a specified Mastercard available to assist the wife in paying the costs of the Prado motor vehicle used by her and associated costs, and that the wife pay $2000 per month to Westpac account …767 and maintain current health insurance for herself, the husband, D and R while they are students as well as household insurance with GIO. There were also other provisions which it is unnecessary to mention at present.
The husband and Ms K became engaged in December 2008. In late 2009 Ms K was granted a Bridging Visa by the Australian authorities and in March 2010 she was granted a Partner Visa. The husband and his fiancée have been living together in Australia since early 2010.

The applicable law

Sub-section 79(1) of the Act provides that in property settlement proceedings, the Court may make such order as it considers appropriate.
Sub-section 79(2) provides that the Court shall not make an order under the above sub-section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
There is a long-standing preferred approach to the determination of property applications. This involves four inter-related steps. Firstly, the Court should make findings about the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of s 79(4) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should consider the effect of any proposed order upon the earning capacity of either party, the relevant matters in s.75(2), any other order made under the Act affecting a party or child and any child support that a party has provided or for which a party might be liable. The Court is to determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of its findings and determination and resolve what order is just and equitable in all the circumstances of the case.
This approach has been confirmed in numerous cases in this Court including for example Lee Steere and Lee Steere (1985) FLC 91-626; Ferraro and Ferraro (1993) FLC 92-335; Hickey and Hickey (2003) FLC 93-143; 30 Fam LR 355; Coghlan and Coghlan (2005) FLC 93-220; 32 Fam LR 414 and Clauson and Clauson (1995) FLC 92-595; 18 Fam LR 693.

Issues

There were a few issues in relation to the available property. The first was in relation to what liabilities the Court should take into account in the proceedings. The second was whether the Court should add back as against the wife any value for a motor vehicle driven by the parties’ daughter E Harrington and who should bear responsibility for the outstanding liability for the personal loan in the wife’s name attributable to funding purchase of the vehicle. The third was whether there should be added back to the pool of available property an amount of $30 000 which the wife withdrew from the Equity Access loan in November 2006.
In relation to the first matter, at the commencement of the hearing learned counsel for the husband sought an adjournment. This application was on the basis that the husband alleged that he had substantial tax and other liabilities. I indicated that I did not consider it appropriate at that time to grant an adjournment. I pointed out that when the proceedings had come before me on 10 May 2010, I had been informed by both sides that all affidavits had been filed and that the matter was ready for hearing apart from some updating of both parties’ financial statements. Dealing with the adjournment application, I also informed the parties that I proposed to proceed with the hearing but if it became clear to me during the course of the hearing that it would be unfair not to grant an adjournment I would provide opportunity for further addresses about the adjournment application.
As it turned out, the husband chose not to press his application for an adjournment nor to press for leave to adduce further oral evidence in his case. This was in circumstances in which I had informed the husband that it appeared to me that to permit him to adduce evidence of further liabilities would open up the likelihood of having to refer for a third time to the single expert Ms B the task of further updating her valuation of the husband’s business. Current accounts and income tax returns would need to be prepared and all of this would not only involve considerable further cost but also involve many months further delay. I also indicated that such an adjournment would only be granted if the husband was prepared to pay the wife’s costs caused by this as well as the additional costs of the single expert. In these circumstances the husband indicated that he did not press these matters.
In relation to E’s car, it was suggested that this has a value of $20 000 although there was no evidence in proper form about this. It is clear that the parties had assisted E to purchase a second-hand Toyota Celica when she turned 16. After several years use by E the vehicle started to develop some mechanical problems. The wife and E decided that a new motor vehicle would be purchased to replace the Toyota. The wife asked the husband to sign the Commonwealth Bank personal loan contract as her witness for the loan and the husband did so. The husband said that he signed the loan contract under protest.
The wife said that the husband had informed her that he did not wish to arrange for a loan through his business and that she would have to take out the loan herself. The vehcile is registered in the wife’s name and the loan is also in the wife’s name. The wife said that this vehicle was intended by the parties as a 21^st birthday gift for E. There is an amount of $12 512 owing on the wife’s personal loan which was used for the purchase of this vehicle.
In my view the reality about this matter is that E is the beneficial owner of this vehicle although it is registered in the wife’s name. I accept that the husband was always a reluctant supporter of this acquisition and that he thought it was an extravagant gift. Nevertheless he assisted the wife and E by test driving the vehicle and by signing the personal loan contract as the wife’s witness. And he is the person who has provided the funds to pay the personal loan, albeit by his provision of money to the wife for her general household purposes. In all the circumstances, in my view the vehicle should be regarded as E’s vehicle and the liability should ultimately be the responsibility of the husband and the wife. After several years of the loan repayments being paid from family funds, in my view it would be quite unfair to the wife to make her solely responsible for this liability into the future.
So far as the $30 000 drawn down by the wife in November 2006 is concerned, the husband said that the wife did this without consulting him about it and that she should therefore be regarded as having had the use of these monies in effect as a preliminary distribution of the parties’ property. There is no doubt that the wife did not consult the husband about drawing these funds. The wife said that the husband had left the home several months earlier that year and was overseas at the time. The wife said that she did not know where the husband was and could not contact him because he had his phone turned off. She said that the husband had booked a holiday for the family at Daydream and Hamilton Islands for December that year and that she required funds for this and to fund the costs of Christmas.
The wife said that in addition to the above matters, she spent the money on R’s 18^th birthday, a dress for her formal evening, schoolies celebration and Koh Samui holiday, E’s graduation, visiting E in the United States of America, various holidays including a skiing holiday in July 2007 for herself and the three children and also a holiday for her parents, birthday gifts and payment of some legal and accountant’s fees.
I must say some of this expenditure was unusual and somewhat excessive even given the sort of expenditure that this family has been able to enjoy over the years. Accordingly, had it not been for certain matters, in my view it would have been necessary to add back at least some of this money to achieve a just and equitable result. But I have decided not to add money back to the pool on account of this expenditure by the wife. This is because now over several years the husband has spent a considerable amount of funds, which otherwise would have been available to the family, supporting and entertaining his fiancée Ms K. The husband has made a great number of visits to Thailand over several years part of which have been devoted to business and part of which have involved holidays with Ms K. In addition the husband has spent significant money in his sponsorship of his fiancée for her various visas.

Property available for division

The property available for division between the parties consists of the following:-

$

1.         Former matrimonial home at T

840,000

2.         Shares in P business

1,339,772

3.         Joint Westpac Bank account

20

4.         Husband’s Ducati motor cycle

4,000

5.         Husband’s household contents

5,000

6.         Husband’s paid legal fees (add back)

64,427

7.         Wife’s cash at Bank

50

8.         Wife’s household contents

5,000

9.         Wife’s paid legal fees (add back)

6,335

^{_____________}

$2,264,604

The liabilities are as follows:-

$

1.         Mortgage

408,050

2.         Equity Access loan

74,840

3.         Equity Access loan No 2

30,000

4.         Wife’s personal Commonwealth Bank loan

12,512

5.         Wife’s Commonwealth Bank credit card

2,047

^{_____________}

$527,449

The parties have the following interests in superannuation:-

$

1.         Husband’s interest in Media Super

125,293

2.         Wife’s interest in Media Super

2,882

^{_____________}

$128,175

  Total net property and superannuation

$1,865,330

Contributions

At the time the parties commenced marriage they owned their home at C subject to the mortgage. I am satisfied that the land on which the home was constructed had been acquired by the husband from his resources as described above. It is the case that the wife made some contributions to the improvement of the land by her efforts and particularly those of her father in working hard to assist the husband in clearing the land. But I regard the overwhelming contribution to the land to have been made by the husband.
The position in relation to the construction of the home was different. As indicated above, both the husband and the wife saved as much of their wages as possible in order to be able to fund construction of their home. They had become engaged. They had approached the CBC Bank and made a commitment to save with the Bank in order to become eligible for a home loan. They were successful in that they were able to borrow $50 000 to assist them in funding the costs of constructing their home.
The husband was working in the media industry for a firm in the city. The wife was working as a hairdresser. Shortly after their marriage the wife ceased her employment. Apart from some sporadic hairdressing for private clients undertaken from the C home early in the marriage and initially when the parties moved into their T home the wife has not worked in paid employment since.
But the husband has had continuity of employment. He worked for several firms in Sydney. He also worked for a firm at Gosford and a firm at Newcastle. Then he established his business. This has been a very successful business and on all appearances continues to be so. Its success is a credit to both parties. The husband has obviously worked very hard in the business, now over many years including often working 6 long days per week. But the wife has also made very important contributions to the success of the business. It is true that her direct contributions were modest, consisting of cleaning the premises when the business was established initially and organising the business Christmas parties. But the wife has been the children’s primary parent and the major homemaker. This has freed the husband to make the business his primary focus. So by enabling the husband to do this, in my view the wife has made a most important indirect contribution to the business.
As the family breadwinner the husband has made the overwhelming financial contributions. But the wife has made the overwhelming contribution to the welfare of the family unit constituted by the husband, herself and the children. This is not to say that the husband has not made contributions as parent and homemaker, because he has. He undertook work in relation to the parties’ homes. The husband involved himself with the children to the extent that the demands of his employment and business permitted.
Following the parties’ separation, the wife continued to live in the former matrimonial home. The wife has undertaken some further landscaping and garden building at the T property since separation. She has also had some fill delivered to build up the front of the land and she has redesigned the driveway and raised its level.
The parties’ two younger children continue to live at the former matrimonial home. The wife has continued to provide support to the children particularly in the provision of domestic services. Unfortunately the husband is estranged from the parties’ daughters at the present time.
The husband has continued to fund the expenses of the family including by the provision of quite generous allowances to the two younger children. He also pays their credit cards, telephone expenses, motor vehicle expenses and R’s University fees.
On a broad view of the parties’ contributions one might be tempted simply to find that their contributions overall have been approximately equal, particularly on the basis that theirs has been a long marriage over the course of which three children have been raised. In my view however, as a consequence of certain contributions by the husband, the proper finding about contributions overall is one which favours the husband, but only by a very modest margin. These contributions are the husband’s initial contribution of the land on which the C home was built and the husband’s inheritance from his late mother’s estate.
How the Court is to go about its consideration of an initial contribution by one party has been the subject of much discussion over many years. The relevant principles have been conveniently set out in the following passage from the recent case of Cabbell and Cabbell [2009] FamCAFC 205 at pages 10 and 11:
(iv)How has the Court’s jurisprudence in respect of initial contributions developed?
As the wife’s senior counsel appropriately and candidly conceded before us, there is no formula, nor could there be, given the wide discretion exercised under s 79, which prescribes how a court should deal with initial contributions in cases of property adjustment.
The principles enunciated in decisions prior to 1999 are conveniently reviewed in Pierce & Pierce (1999) FLC 92-844 at paragraphs 25 - 27 of that judgment. In those paragraphs the Full Court (Ellis, Baker and O’Ryan JJ) referred to the cases which discussed the concept of an initial contribution being “eroded” or offset to a greater or lesser extent by later contributions during the marriage, and the qualification to or expansion of this concept by Fogarty J in Money & Money (1994) FLC 92-485 at 81,054, namely that later contributions over a long marriage did not need to be greater, but rather those contributions (sometimes referred to as the myriad of other contributions) “offset” the significance which might be placed on greater initial contributions. Their Honours then, at paragraph 28, explained that in assessing contribution (including initial contributions) rather than considering if an initial contribution had been “eroded”, what was relevant was the “weight to be attached, in all the circumstances, to the initial contribution”. Their Honours then explained the initial contribution should be weighed with all other contributions, and in paragraph 30 stressed the need for a trial Judge “not only to identify the relevant contributions, but also to assess them”. That latter statement of principle is consistent with the discussion in Mallet v Mallet (1984) 156 CLR 605 where Mason J said in discussing s 79:
The section contemplates that an order will not be made unless the court is satisfied that it is just and equitable to make the order (s. 79(2)), after taking into account the factors mentioned in (a) to (e) of s. 79(4). The requirement that the court “shall take into account” these factors imposes a duty on the court to evaluate them. Thus, the court must in a given case evaluate the respective contributions of husband and wife under pars. (a) and (b) of sub-s. (4), difficult though that may be in some cases.
In Williams & Williams [2007] FamCA 313 the Full Court (Kay, Coleman and Stevenson JJ), after discussing conflicting cases determined in the New South Wales Court of Appeal under the Property (Relationships) Act1984 (NSW) which involved discussion of how initial contributions should be assessed in a property adjustment case under that legislation, said at paragraph 26:
We think that there is force in the proposition that a reference to the value of an item as at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution towards the parties. Thus where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing or the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in so doing it is equally as important to give recognition to the myriad of other contributions that each of the parties has made during the course of their relationship.
Obviously over such a long marriage there have been vast contributions by the wife. I note also the significant contributions made by the wife’s father over the many years by way of the physical work he has undertaken initially to the C land and subsequently to the parties’ homes. But notwithstanding all these contributions, in my view the husband’s contributions overall are marginally greater than those of the wife. After all, the C home was sold in 2001 for $420 000 as I have indicated above. I take judicial notice of the fact that the value of the land must have formed a substantial component of the total value of the property. So far as the inheritance is concerned, this is in the nature of a windfall which has come in on the husband’s side of the ledger as it were. I accept that a very modest contribution has been made to this by the wife. In my view however, it is to be regarded as having been largely a contribution on behalf of the husband.

I assess the parties’ contributions overall therefore to have been 52 percent by the husband and 48 percent by the wife.

s.75(2) and other relevant matters

The husband is 54 years of age and he is in good health. As indicated above, he continues to operate his business P Pty Limited and its Trading Trust as its manager. The husband said in his financial statement that his salary before tax is $900 per week and that he has the use of a motor vehicle as a benefit of his employment which he estimates has a weekly value of $400. As against this remuneration, the husband estimated his weekly expenditure to be $1958.
Interestingly, Ms B, the single expert witness who prepared her valuation of the husband’s business, observed (at paragraph 2.7, page 5 of her Report) that in determining the earnings generated by the business she had allowed a notional salary package to the husband of $164 000 including superannuation for the year ended 30 June 2009.
I must say in my view it matters little whether the Court was to find that the husband is able to enjoy salary in a particular amount. What is clear is that the business is successful and it has provided, and continues to provide, the husband, the wife and the children with a standard of living characterised by overseas travel and holidays, attendance by the children at an expensive private school and supporting the children in studying at university, including Bond University and provision to each of them of their own motor vehicles. True it is that to some extent the costs of the children’s educations have been able to have been funded from the husband’s inheritance. But much more must have been paid from the business over the years.
Ms B calculated the adjusted maintainable earnings of the P Trading Trust for the financial year ended 2009 as being $363 024. This was after allowing a notional salary and superannuation package to the manager (eg the husband) of $164 000. Ms B calculated the maintainable earnings aggregated over the financial years 2007, 2008 and 2009 as being $460 000. There was one question in cross-examination directed to Ms B about this matter in relation to the adjusted maintainable earnings for the 2009 year. But in my view the witness was not shaken in relation to this or any other area of her Report.
Accordingly, in my view the business has significant value especially to the husband because it is able to generate substantial revenue and provide benefit to the husband. On all current indications, the husband should be able to continue to manage the business for many years.
The husband is living with Ms K. As indicated above she is dependant on him for her support. This situation is expected to continue at least until she has completed her studies in the English language and becomes proficient therein. Then the husband anticipates Ms K will commence some form of paid employment.
On the other hand, the wife is 51 years of age. She too is in good health. But she has been out of the paid workforce since the children were very young. Even then she only undertook some sporadic hairdressing services for private clients from home. So she continues to be reliant on the husband to provide funding for her support.
The wife has made some inquiries about obtaining employment as a hairdresser in her local area. She has sent her resume to local hairdressing salons but she has not received even one response. Her hairdressing skills have not been updated and her knowledge of technical matters such as treatments, products, styles and chemicals is outdated.
The wife has made inquiry to her local Council about their requirements in relation to setting up a hairdressing salon at home. It is not simple. Council approval would be required and there would need to be some modification to the home to establish a specific room for the salon. Plumbing and other changes would appear to be necessary. Clearly some expenditure would be required.
Accordingly, unless and until the wife is able to obtain some form of employment she would need to apply for the Newstart benefit which is $231.40 per fortnight, or rely on the husband for support.
As indicated above, the parties’ children D and R reside with the wife. R is expected to complete University this year. E is working and lives independently of the parties.
In my view there are matters which require a set-off of available property in favour of the wife to achieve a just and equitable order. This is a long marriage of approximately 24 years. For most of that time the wife has been out of the paid workforce. The skills and knowledge she had developed have not been used for all that time. It is likely that relevant technology has changed, at least to some extent. Accordingly, in my view the marriage and its duration have affected the wife’s capacity to earn income. Moreover, by devoting her attention and energy to the responsibility of being the primary parent for the children and primary homemaker the wife has contributed to the husband’s earning capacity by enabling him opportunity to concentrate on his study and development of his professional skills. These are important matters under s.75(2)(j) and (k) of the Act to take into account.
But the wife is only 51 years of age and ought to be able to enjoy many productive years as an income earner. The difficulty is likely to be that she has a limited skills base which means that unless she undertakes some form of training she will have to compete with presumably many others for what might be limited opportunities for relatively unskilled employment.
Such difficulties became the subject of observation by the Full Court of this Court in the case of Mitchell and Mitchell (1995) FLC 92-601.At page 81,997 the Full Court said as follows:
Importantly, and particularly in more recent times, there is the notorious circumstance that there is a significant gap between theory and reality for employment, especially for people in middle age, lacking experience and confidence, and who have been out of the skilled work- force for many years, and in the context of current high unemployment. Loss of security, missed promotion opportunities, loss of retraining in developing skills in an increasingly skilled work-force with the loss of confidence which this brings, particularly in times of high unemployment, are notorious circumstances of which the Court must take notice and apply in a realistic way.
I can take judicial notice of the fact that we appear to be enjoying a period of relatively low unemployment. But not for women in the age bracket of the wife who have been out of employment for a long time. So the Court must be cautious about the extent to which employment of some kind will be available to the wife. Having said this, one would have thought that the wife would be able to find some form of paid work if only on a casual part-time basis.
So there are significant differences between the parties now and looking forward. The husband is in a much stronger position to earn income than is the wife. And the wife continues to care for the two younger adult children. Having said this the husband also pays a significant amount of money towards meeting their financial needs as indicated above.
A difficulty in this case arises from the fact that so much of the value of the net property and superannuation lies in the business. If I was simply to order the husband to pay a cash adjustment to the wife, bearing in mind the current level of indebtedness of the business, and the fact that this is secured against the home, this would be likely to have the effect of forcing a sale of the business. Such would clearly affect the husband’s capacity to earn income. Accordingly, the orders will need to be crafted to take account of this difficulty.
It was submitted on behalf of the wife that there should be an adjustment of available property and superannuation in favour of the wife taking account of the relevant s 75(2) matters of 10 percent. On the other hand, it was submitted on behalf of the husband that any adjustment in favour of the wife to take account of s 75(2) matters should only be modest.
In my view an adjustment of 8 percent of the available property and superannuation on account of the relevant matters would achieve a just and equitable order as required by s 79(2) of the Act. This would be a differential between the parties of almost $300 000. In my view this would be an appropriate amount to reflect the weaker income earning position of the wife and the other relevant matters.

Fourth step

The wife is to have 56 percent of the property and superannuation available for division. This would have a value of $1 044 585 (56 percent of $1 865 330 = $1 044 585).
The wife’s position in relation to her property and superannuation is as follows:

$

1.         Cash at Bank

50

2.         Household contents

5,000

3.         Paid legal fees (add back)

6,335

4.         Media Super

2,882

^{_____________}

$14,267

But the wife also has the following liabilities:

$

1. Commonwealth Bank personal loan (for E’s car)

12,512

2. Commonwealth Bank credit card

2,047

^{_____________}

$14,559

As a machinery matter, I propose to require the husband to take responsibility for repaying the $12 512 car loan. So the wife’s only liability will be her credit card of $2047.
Accordingly, the wife has a surplus of $12 220 ($14 267 - $2047 = $12 220).
To achieve property and superannuation with a value of $1 044 585 the wife will require further property and superannuation with a value of $1 032 365 ($1 044 585 - $12 220 = $1 032 365).
The wife is most desirous of being able to retain the former matrimonial home. This has a value of $840 000. If the wife was to have the home, to achieve property and superannuation with a value of $1 032 365, the wife would require a payment of $192 365 ($1 032 365 - $840 000 = $192 365).
On the other hand the husband is to have 44 percent of the available property and superannuation. This would be property and superannuation with a value of $820 745 (44 percent of $1 865 330 = $820 745).
The husband has the following property and superannuation:

$

1.         Shares in P business

1,339,772

2.         Joint Westpac Bank account

20

3.         Ducati motor cycle

4,000

4.         Household contents

5,000

5.         Paid legal fees (add back)

64,427

6.         Media Super

125,293

^{_____________}

$1,538,512

But the husband has the following liabilities:-

$

1.         Mortgage

408,050

2.         Equity Access loan

74,840

3.         Equity Access loan No 2

30,000

4.         Wife’s personal loan for E’s car

12,512

^{_____________}

$525,402

Accordingly, the husband has net property and superannuation with a value of $1 013 110 ($1 538 512 - $525 402 = $1 013 110).
For the husband to have property and superannuation with a value of $820 745 he would pay the wife $192 365 ($1 013 110 - $820 745 = $192 365).
But as indicated above, the husband does not have the funds to pay the wife the sum of $192 365 nor to pay the mortgage, the two Equity Access loans and the wife’s personal loan for E’s car. And the husband would prefer to retain the business rather than be forced to sell it. In any event, as indicated above a sale would affect his income-earning capacity because he would no longer be able to earn income from the business.
Doing the best I can in these challenging circumstances, I propose to put in place orders which will enable the wife to retain the former matrimonial home and allow the husband three years to pay the mortgage and the money he will have to pay the wife.
The starting point will be to make an order splitting the husband’s superannuation to allocate to the wife a base amount of $60 000. This has been requested in the draft orders which learned counsel for the wife has provided to me in response to my request during final submissions for assistance with such. This splitting order will have the effect of reducing the payment by the husband to the wife to $132 365 ($192 365 - $60 000 = $132 365). This amount will be payable in three instalments of $44 122 each payable not later than twelve months after the date the orders commence in the case of the first instalment, not later than twelve months thereafter in the case of the second instalment and not later than twelve months thereafter in the case of the third instalment.
I propose to take a similar approach in relation to repayment of the mortgage. That is the husband will be required to reduce the outstanding balance so that it is reduced at least by one-third (principal and interest) each year.
The husband will also be required to pay the wife’s personal loan in respect of E’s car in accordance with the loan agreement until it is fully paid.
A difficulty with this approach from the wife’s point of view is that she will have the benefit of occupancy of the former matrimonial home but no income unless she is able to obtain paid employment. I have referred above to the realities of this. Hopefully, she will find some employment. But in permitting the husband time to pay the wife her property settlement, I am depriving the wife of opportunity to sell or encumber the home. She might have to sell the home in due course to provide funds for an income. In the meantime, until the husband pays the wife in accordance with the proposed orders, in my view, the wife will require some financial support from the husband. In any event, it would be fair to require him to pay the wife interest in the amount outstanding. But I propose to include such a component in an overall periodic amount which I consider it appropriate to order the husband to pay to the wife to ensure that she is able to support herself. Otherwise, as I say, unless she can obtain employment she will not have money to support herself. The amount will be $600 per week.
I also propose to require the husband to cause the business to continue to make the Prado motor vehicle available for the wife’s use including paying maintenance, registration and all insurances and to ensure that not later than the end of the three year period he cause the business to transfer ownership of the vehicle to the wife.
Finally, there was a submission on behalf of the wife to the effect that the husband be required to pay the costs of cross-examination of the single expert Ms B. It was submitted that the parties had agreed prior to the commencement of the hearing that the husband’s business had the value determined by Ms B, namely $1 339 772. It was submitted that counsel for the wife did not ask one question of Ms B and it was the husband who required Ms B for cross-examination.
I accept this submission on behalf of the wife. It was the husband who required Ms B for cross-examination. There was no change to the parties’ agreement to accept the value of the business as calculated by Ms B. I must say there appeared to be nothing gained from the questions asked by learned counsel for the husband of Ms B. In these circumstances, in my view, it would be appropriate for the husband to pay the costs of her cross-examination.

I certify that the preceding one hundred and three (103) paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Johnston delivered on 19 August 2010.

Associate:

Date: 19 August 2010

[2010] FamCA 731

19 August 2010

Key Legal Topics

Areas of Law

Family Law

Property Law

Commercial Law

Legal Concepts

Remedies

Costs

Procedural Fairness

Charge

Statutory Construction

Injunction

$
1. Former matrimonial home at T	840,000
2. Shares in P business	1,339,772
3. Joint Westpac Bank account	20
4. Husband’s Ducati motor cycle	4,000
5. Husband’s household contents	5,000
6. Husband’s paid legal fees (add back)	64,427
7. Wife’s cash at Bank	50
8. Wife’s household contents	5,000
9. Wife’s paid legal fees (add back)	6,335
^{_____________}
$2,264,604

$
1. Mortgage	408,050
2. Equity Access loan	74,840
3. Equity Access loan No 2	30,000
4. Wife’s personal Commonwealth Bank loan	12,512
5. Wife’s Commonwealth Bank credit card	2,047
^{_____________}
$527,449

$
1. Husband’s interest in Media Super	125,293
2. Wife’s interest in Media Super	2,882
^{_____________}
$128,175
Total net property and superannuation	$1,865,330

$
1. Cash at Bank	50
2. Household contents	5,000
3. Paid legal fees (add back)	6,335
4. Media Super	2,882
^{_____________}
$14,267

$
1. Commonwealth Bank personal loan (for E’s car)	12,512
2. Commonwealth Bank credit card	2,047
^{_____________}
$14,559

$
1. Shares in P business	1,339,772
2. Joint Westpac Bank account	20
3. Ducati motor cycle	4,000
4. Household contents	5,000
5. Paid legal fees (add back)	64,427
6. Media Super	125,293
^{_____________}
$1,538,512