Hearst and Hearst & Ors - [2010] FamCA 977

FAMILY COURT OF AUSTRALIA

HEARST & HEARST AND ORS

[2010] FamCA 977

FAMILY LAW – PROPERTY – Proceedings for settlement of property part of which co-owned by husband and member’s of husband’s family – Determining asset pool required determination of third party interests – Equity of exoneration successfully raised by co-owners against husband – Charge for capital value of improvements to co-owned realty by husband and wife reduced by occupation fee payable to co-owners – Co-owners entitled to orders pursuant to s 66G Conveyancing Act 1919 (NSW) in default of husband paying out their entitlements to co-owned assets as determined by the court – Approximately one third of party pool considered referrable to husband’s inheritances – Further one third considered overwhelmingly referrable to contentions by wife to jointly owned company valued at approximately one third of parties pool – Deposited valuation of company determined – Section 75(2) adjustment in husband’s favour referrable to wife’s greater earning ability – Overall entitlement of parties to non-superannuation assets determined as 48 per cent to wife and 52 per cent to husband – Entitlement of parties to superannuation interests determined as
75 per cent to wife and 25 per cent to husband – Cost reserved

Family Law Act 1975 (Cth) ss 79, 75(2)

Coulton v Holcombe (1986) 162 CLR 1
Metwally (No 2) v University of Wollongong (1985) 60 ALR 68
Ryan v Dries (2002) NSWCA 3
Coghlan v Coghlan (2005) FLC ¶ 93-220
Spencer v The Commonwealth (1907) 5 CLR 418
Makita (Australia) Pty Ltd v Sprowles [2001] 52 NSWLR 705
Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd [1981] HCA 4; (1981) 146 CLR 336
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 24
Commonwealth v Reeve (1949) 78 CLR 410
Preece v Preece (1981) FLC 91-048
Pierce v Pierce (1999) FLC 92-844
Kardos v Sarbutt [2006] NSWCA 11
Farmer v Bramley (2000) FLC 93-060

APPLICANT:

Ms Hearst

FIRST RESPONDENT:

Mr Hearst

SECOND RESPONDENT:

Ms Kent

THIRD RESPONDENT:

Ms Somers

FILE NUMBER:

SYC

5110

2008

DATE DELIVERED:

18 October 2010

PLACE DELIVERED:

Dubbo

PLACE HEARD:

Dubbo and Parramatta

JUDGMENT OF:

Coleman J

HEARING DATES:

24, 25, 26, 27 August 2009 and 8 December 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Robert Lethbridge SC with Ms Anne Rees SC

SOLICITOR FOR THE APPLICANT:

Campbell Paton & Taylor

COUNSEL FOR THE FIRST RESPONDENT:

Mr Peter Batey

SOLICITOR FOR THE FIRST

RESPONDENT:

Lee Dalton & Associates

COUNSEL FOR THE SECOND & THIRD

RESPONDENTS:

Mr Julian Millar

SOLICITOR FOR THE SECOND & THIRD

RESPONDENTS:

Messenger & Messenger

Orders

That the husband hold his equity in Lot 51 OE Property and A Property on trust for himself and the wife as tenants in common in shares of 61 percent to the husband and 39 percent to the wife.
That the parties have leave to file minutes of order implementing the court’s reasons for judgment in chambers.
That any party have liberty to apply on 48 hours notice on or after 29 November 2010.
That costs be reserved.

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

FAMILY COURT OF AUSTRALIA AT DUBBO

FILE NUMBER: SYC 5110 of 2008

MS HEARST

Applicant

And

MR HEARST

First Respondent

MS KENT

Second Respondent

MS SOMERS

Third Respondent

REASONS FOR JUDGMENT

Introduction

The proceedings before the court relate to settlement of property. The applicant and first respondent are husband and wife. The second and third respondents are sisters of the husband. Though tempting, endeavouring to simply and meaningfully comprehensively explain the competing interests asserted in the proceedings is likely to create more confusion than clarity.
Essentially, the husband’s sisters have been involved in the proceedings in order to preserve the interests they have in property co-owned with the husband. Determining the property rights of the husband’s sisters impacts upon a determination of the assets of the husband and wife available for distribution in the property settlement proceedings between them.
The proceedings were heard at Dubbo in August 2009 and Sydney in December 2009. Written submissions of counsel were received thereafter, the last of them being dated 19 August 2010.
The proceedings have taken longer to finalise than they otherwise would by reason of a tragedy which occurred near Orange in January. Whilst the court has privately communicated its sympathy in relation to the tragic loss suffered by the solicitor for the husband, it is appropriate to formally reiterate that sympathy. It is also appropriate to acknowledge the compassion and forbearance of the solicitors for the parties, all of whom practice in central western New South Wales, and, at least inferentially, the parties, in relation to the impeded progress of the proceedings to judgment.

Background facts

Some factual background to the proceedings will hopefully be of assistance, particularly in terms of gaining an understanding of the issues involving the husband’s sisters.
The husband and wife married in 1979. Their cohabitation continued until March 2008, a period of almost 29 years.
The husband was born in 1956 and is thus aged 54 years. The wife was born in 1957 and is thus aged 53 years.
There are two children of the marriage, a daughter who was born in 1982 and is now aged 28 years, and a son who was born in 1983 who is now aged 27 years.
When the parties commenced cohabitation, the husband owned some farming plant and equipment which he asserts to have been worth about $28,000.00. Unsurprisingly, there is no reliable evidence of the value of that plant and equipment. In oral evidence, the husband deposed to his indebtedness with respect to the farming plant approximating 50 per cent of the purchase price of such plant and equipment.
The wife had personalty and savings at the commencement of cohabitation which she asserted to have a value of approximately $15,000.00. Unsurprisingly, there is no reliable evidence of the value of such personalty.
On balance, it is difficult for either party to successfully suggest that his or her net worth at the commencement of cohabitation materially exceeded that of the other party.
From the date of marriage until 1994 (wife’s recollection) or 1995 (husband’s recollection), the parties lived on rural properties not associated with the husband’s family. The husband was employed on those properties. The husband derived income from his employment on such property, or properties, whilst the wife contributed as homemaker and parent. Prior to 1994, or 1995, the wife had some off-farm employment in a part-time capacity. The husband also earned some income working off-farm.
The evidence suggests that the contributions of the parties from 1979 until 1994, or 1995, should be seen as equal.
In 1994 or 1995 the husband and wife, and their two children commenced to reside on a rural property known as “OE” (“OE”). That property was owned by the husband’s parents. The husband worked on OE and, at times, was paid a wage. The husband and wife lived in a cottage on OE. The husband’s parents lived in the main homestead.
Soon after the parties commenced to live on OE, the wife was diagnosed with, treated for, and recovered from cancer. The husband assisted the wife throughout that ordeal.
In August 1995, the husband and his parents purchased a property known as “ST” (“ST”) as tenants in common in equal shares for approximately $186,000.00. Most, if not all of that sum was raised by a borrowing from the National Australia Bank. It is probable that the borrowing was secured over OE and ST.
Shortly thereafter the husband acquired a one third interest in the partnership formerly conducted by his parents. The terms upon which he acquired that interest are unclear. The three partners had equal interests in the partnership assets. The partnership then serviced the partnership’s NAB loan.
In December 2000 the husband and his parents purchased the rural property “A” (“A”) for $554,240.00 plus sale costs of $32,460.00. The property was acquired by the husband and his parents as tenants in common in equal shares. To fund the purchase, the partnership borrowed $620,000.00 from the NAB on a first mortgage over A, and a second mortgage over OE. The NAB borrowings of the partnership were increased to $778,000.00 in order to complete the purchase of A. The partnership between the husband and his parents continued farming operations over OE, ST and A.
Subsequent to 1995, significant and ongoing improvements were undertaken at OE. Other than the period during which the wife was precluded from doing so by cancer, the wife was in full time off-farm employment during that period.
In September 2001 the husband’s father passed away. Thereafter the former partnership of the husband and his parents became a partnership between the husband and his mother. At least for accounting purposes, the partnership between the husband and his parents was finalised as at 30 June 2002, at which time the partnership owed NAB a total of $700,992.00.
Under the terms of the husband’s father’s will, his estate was distributed as follows:
(a)OE Lot 51 was devised to the husband’s mother for life, passing to the husband and his three siblings as tenants in common in equal shares upon her demise.
(b)Another portion of OE, Lot 21, was devised to the husband’s mother.
(c)The husband’s father’s one third interest in ST was devised to the husband’s three siblings in equal shares as tenants in common.
(d)The husband’s father’s one third interest in A was devised to the husband and his three siblings as tenants in common in equal shares.
Thus, upon completion of administration of the husband’s father’s estate, the four properties to which reference has been made were held as follows:
(a)[ST]:
(i)the husband – 3/9^th;
(ii)[Mrs Hearst Snr] (husband’s mother) – 3/9^th;
(iii)[Ms Kent] (husband’s sister) – 1/9^th;
(iv)[Ms Somers] (husband’s sister) – 1/9^th;
(v)[D Hearst] (husband’s [brother]) – 1/9^th
(b)[OE] Lot 51:
(i)The husband – 1/4^thin remainder;
(ii)[Husband’s brother] – 1/4^thin remainder;
(iii)[Ms Kent] – 1/4^thin remainder;
(iv)[Ms Somers] – 1/4^thin remainder;
(v)[Husband’s mother] – life interest.
(c)[OE] Lot 21:
(i)[Husband’s mother] – 100%.
(d)[A]:
(i)the husband – 5/12^th;
(ii)[Husband’s mother] – 4/12^th;
(iii)[Husband’s brother] – 1/12^th;
(iv)[Ms Kent] – 1/12^th;
(v)[Ms Somer] – 1/12^th.
In 2003, the parties’ daughter purchased a property at R Street. The husband and wife provided a $20,000.00 deposit to facilitate that purchase, and entered into a loan agreement with the mortgagee as joint borrowers. Mortgage repayments for the R Street property have been met from the account of the wife, a corporation, Z Pty Limited (“Z”) and the partnership of the husband and his mother. Such payments totalled approximately $72,000.00 to the date of the hearing.
After the wife’s health recovered in about 1995, she commenced off-farm paid employment in which she continued until approximately 2004, at which time Z was incorporated. The parties had, and have retained equal shareholdings in Z, although it is not in doubt that the corporation has at all material times been operated by, and effectively been the alter ego of the wife. The husband performed some duties for Z, albeit not of a nature or to an extent rivalling those performed by the wife.
From the date of its commencement to the present, Z has operated from the homestead on Lot 51 OE. As its core business, Z Pty Ltd supplies to companies in the central west, N Company being the company’s most substantial client.
In 2004 the parties undertook substantial renovations to the homestead on OE. Z provided the funds for such renovations, the cost of which approximated $386,000.00. At least until final submissions, it has been either common ground, or not seriously disputed, that, by virtue of the provision of those funds, the wife is entitled to a charge against Lot 51 OE upon which the homestead stands in the sum of $315,000.00. The improvements to it have increased the value of the homestead on Lot 51 OE by an agreed sum of $315,000.00. Upon completion of the renovations to the homestead on OE, the husband’s mother, who had previously occupied it, moved to a cottage elsewhere on the property.
On 6 August 2004 the husband, his mother and three siblings entered into a deed of family arrangement. The effect of the implementation of that arrangement was that:
(a)The property ST was transferred to the husband’s brother D Hearst unencumbered in November 2004;
(b)In return for the transfer of ST, the husband’s brother relinquished his remainder interest in OE Lot 51, and as a consequence the interests in that property became:
(i)The husband as to a 1/3^rd share in remainder;
(ii)The husband’s sister, Ms Kent, as to a 1/3^rd share in remainder; and
(iii)The husband’s sister, Ms Somers, as to a 1/3^rd share in remainder.
(iv)The husband’s mother’s life estate continued.
(c)The husband’s brother relinquished his interest in the property A and as a consequence that property was thereafter owned as follows:
(i)The husband retained his existing 1/3^rd share;
(ii)Mrs Hearst Snr (the husband’s mother) retained her existing 1/3^rd share;
(iii)The remaining 1/3^rd share was held by the husband and each of his two sisters as tenants in common in equal shares (i.e. each having a 1/9^th interest in the whole of the property).
Pursuant to the deed, the husband’s mother covenanted that she would at all times maintain a will providing that, on her death, the husband would receive:
(i) Her interest in A
(i)The whole of her interest in OE Lot 21
(ii)Her interest in her partnership with the husband, and
(iii)The forgiveness of any money due and payable by the partnership to her.
The mother complied with her obligations pursuant to those covenants.
Subsequent to execution of the deed of family arrangement, the husband and his sisters entered into mortgages secured over Lot 51 OE and A. The total sum secured pursuant to those mortgages, as at 11 October 2004 was $778,000.00. That sum was likely to have been referrable in some measure to the acquisition of ST and A, and debts accumulated by the farming partnership over previous years, but the evidence in those respects is not entirely clear.
On 1 June 2008, the husband, his mother and sisters entered into a 30-year lease with F Group for construction of towers on A. The lease provided that if there had not been any commencement of construction within five years of 1 June 2008, either party could terminate the lease. A one-off payment of $5,000.00 was received and banked into the account of the partnership between the husband and his mother. To date no tower infrastructure has been constructed or commenced to be constructed.
In June 2009, the husband’s mother passed away. The husband is the executor of his mother’s estate. The husband’s mother’s will provided that:
(a)The husband receive her interest in Lots 211 and 212 OE (also known as Lot 21 OE).
(b)The husband acquired his mother’s one third interest in A. He thus held seven ninths of A, each of his sisters holding one ninth of A as tenants in common.
(c)The husband acquired his mother’s interest in the partnership formerly conducted by them.
(d)The husband was forgiven any loan owing by him to his mother.
The husband’s mother’s life estate having been extinguished, the husband and his two sisters became absolutely and beneficially entitled to Lot 51 OE in equal one third shares.
The effect of the wills of the husband’s parents, and the deed of family arrangement, is that, at present:
(i)The husband owns the whole of Lot 21 OE.
(ii)The husband owns one third of Lot 51 OE as tenants in common in equal shares with his sisters.
(iii)The husband owns seven ninths of A.
It was ultimately submitted on behalf of the husband that his interest in A was sixteen thirty sixths. Though perhaps technically correct, the court does not believe that the husband’s beneficial interest in A is thus limited. The husband originally acquired a one third interest in A. Pursuant to the deed of family arrangement in 2004, the husband’s mother covenanted to devise to him her one third interest in A. So doing, the husband had an entitlement to two thirds, or six ninths of the legal and/or equitable interest in A. In addition, the husband retained the one ninth share in A which he had as a consequence of the 2004 deed of family arrangement.
The husband accordingly holds seven ninths of A as tenants in common with his sisters, the respondents in these proceedings, each of whom holds a one ninth interest in the property as tenants in common.
Against that background, some better appreciation of the competing positions can hopefully be gained. It is perhaps helpful to refer first to the positions of the husband and wife with respect to the interests of the husband’s sisters.

THE COMPETING CLAIMS

In written submissions on her behalf, senior counsel for the wife sought that the interests of the husband’s sisters in Lot 51 OE be subject to a charge in favour of the husband and wife in the sum of $315,000.00, and that Lot 51 OE be sold. It was submitted that the parties should equally share the assets in their ownership, albeit that outcome was predicated upon the net asset pool asserted on behalf of the wife being accepted.
The husband sought the sale of A and the distribution of proceeds of sale to the husband and his sisters as tenants in common in accordance with their legal interests, after first deducting selling costs, the husband’s sister’s share of the “$500,000 mortgage” and any statutory charges owing on the land together with a sum representing “their one third interest in Lot 51 OE”. The husband sought in the alternative that he pay to his sisters a sum equal to their share in A and Lot 51 OE upon payment of which the husband’s sisters transfer their interest in those properties to him.
The husband sought payment from the wife of $435,000.00 in consideration of the transfer by him to the wife of the whole of his interest in Z Pty Ltd and his resignation from the corporation. The husband further sought that the wife retain monies paid with respect to the R Street property, any monies owing by the parties’ son with respect to a speed boat, stock horse and horse box to the value of $104,300.00. The husband further sought that he retain the assets currently possessed by him.
The husband sought that Lot 51 OE be charged in favour of the husband and wife by reason of the increased capital value of the property resulting from renovations effected by the parties, and that such charge be offset by an occupation fee accrued during the husband and wife’s occupation of Lot 51 OE.
The husband’s sisters sought orders for the sale of Lot 51 OE and A and distribution of the proceeds of such sales (exclusive of any mortgage secured on the properties) in accordance with their legal interests. The husband’s sisters sought to reduce the obligation to pay for the value of improvements to OE by deducting an occupation fee from such obligation.

CREDIT

It was submitted by senior counsel for the wife that credit did not assume significance so far as the proceedings involving the second and third respondent were concerned, and that there were “few if any factual issues between them”.
The submissions of counsel for the husband, though critical of a number of transactions undertaken by the wife, did not specifically engage with the issue of credit. Nor did the submissions of counsel for the husband’s sisters.

In reality, there are no significant disputed factual issues in relation to the proceedings involving the husband’s sisters. No finding with respect to credibility is either necessary or helpful for the determination of those disputes.
Whilst there were some disputed issues of fact as between the husband and wife in the matrimonial cause, the court agrees with the contention of senior counsel for the wife that, at the conclusion of their evidence, there was considerable agreement between the husband and wife in relation to matters of substance. It was thus submitted to be “unnecessary” for the court to make any findings adverse to the credit of either of the husband or the wife. The court agrees with that submission.
The evidence of the husband and wife revealed a refreshing willingness to make concessions where they were clearly called for. The evidence also reflects a similarly refreshing willingness of the parties, and their respective counsel, to confine cross-examination to issues of potential significance. Each of the parties who were cross-examined impressed as essentially honest.
Whilst not strictly a matter relating to credit, a balanced reading of their evidence would confirm that the wife’s recollection of the details of financial transactions was somewhat greater and more reliable than that of the husband. Ultimately that conclusion has limited practical significance.

The property of the parties to the marriage

Counsel for the husband provided the court with a helpful draft joint balance sheet. That document is reproduced below, and provides the matrix within which disputed “pool” issues will be considered:

Name:	[HEARST & HEARST] & ORS
3rd DRAFT JOINT
BALANCE SHEET		File No:	SYC 5110 of 2008
Date:	26/08/2005
Before:	JUSTICE COLEMAN
No.	Ownership	Description	Husband's	Wife's
value	value
ASSETS
1	Estate	Lot 21 [OE] (Lots 211 and 212)		NIL	$300,000
2	Husband	Lot 51 [OE] - Agreed value = $2,050,000 - Husband has one third share		$683,333	$683,333
3	Husband	[A] - Agreed value is $1,180,000 - Husband has 16/36 entitlement		$524,444	$917,777
4	Joint	Charge in favour of the Husband & Wife against the 2nd & 3rd Respondents		$315,000	$315,000
TOTAL REAL ESTATE		$1,522,777	$2,216,110
5	[…] FARMING PARTNERSHIP
5a	Husband	Stock Horses - Value of $33,300 - Husband has 50% share		$16,650	$33,300
5b	Husband	Plant & Equipment - Value of $198,200 - Husband has 50% share		$99,100	$198,200
5c	Husband	Sheep - Value of $179,065 - Husband has 50% share		$89,532	$179,065
5d	Husband	Cattle - Value of $142,158 - Husband has 50% share		$71,079	$142,158
5e	Husband	Hay - Value of $5,840 - Husband has 50% share		$2,920	$5,840
5f	Husband	Grain - Value of $9,000 - Husband has 50% share		$4,500	$9,000
5g	Husband	Wool - Value of $18,000 - Husband has 50% share		$9,000	$18,000
5h	Husband	Cee Gees - Value of $35,000 - Husband has 50% share		$17,500	$35,000
5j	Husband	1,100 AWB Shares - Value of $2,200 - Husband has 50% share		$1,100	$2,200
5	TOTAL VALUE OF HUSBAND'S 50%		$311,381	$622,763
INVESTMENTS
6	Joint	[Z] Pty Ltd (1,387,572)		$1,550,000	$770,540
7	Wife	[Z] W.A.		NIL
8	Wife	Debt owed by [parties’ son]		$104,340	$104,340
9	Wife	Wife's savings		$13,084	$13,084
TOTAL		$1,667,424	$887,964
PERSONALTY & CHATTELS
10	Husband	Furniture		$500	NK
11	Wife	Wife's furniture & Painting		$32,000	$32,000
12	Wife	Jewelry		$2,000	$2,000
TOTAL	$34,500	$34,000
TOTAL GROSS ASSETS			$3,536,082	$3,760,837
ADD BACKS
13	Wife	Wife's paid legal costs		$128,000	NIL
14	Husband	Husband's paid legal costs		$11,000	NIL
15	Wife	Moneys paid by Wife to children's super fund post sepearation over the 9% levy $246,171		$246,171	NIL
16	Wife	Money removed from joint account after separation		$14,000	NIL
17	Wife	Deposit on South Africa Trip		$10,000	NIL
TOTAL ADD BACKS				$409,171	$0
TOTAL GROSS ASSETS		$3,945,253	$3,760,837
LIABILITIES
No	Ownership	Description	Husband's	Wife's
value	value
18	Husband	Husband's 50% of […] Partnership $40,000 overdraft		$20,000	$40,000
19	Husband	Mortgage on [A]		$500,000	$500,000
20	Wife	Loan account with [Z] Pty Ltd		$379,461	included in 4 above
21	Joint	Liability for occupation rent (if any) to sisters		NK	NK
22	Joint	CGT on [A] & Lot 51A		$150,000	NIL
TOTAL LIABILITIES				$1,049,461	$540,000
NET TANGIBLE ASSETS				$2,895,792	$3,220,837
SUPERANNUATION
Ownership	Description	Husband's	Wife's
value	value
23	Wife	MLC Fund		$355,113	$341,938
24	Husband	MLC Fund		$97,801	$97,801
25	Husband	IOOF - Global Fund		$144,773	$144,773
TOTAL SUPERANNUATION ENTITLEMENTS			$597,687	$584,512
TOTAL NET ASSETS & SUPERANNUATION			$3,493,479	$3,805,349

The parties agree that Lot 51 OE is worth $2,050,000.00, and that the husband’s one third share is accordingly worth $688,333.00. That interest is subject to a charge in favour of the husband’s sisters, the quantum of which is not the subject of unanimous agreement between the parties.
The husband is asserted by his learned counsel to hold sixteen thirty sixths of A, the entirety of which has an agreed value of $1,180,000.00. Senior counsel for the wife contended that the husband holds seven ninths of A. This issue is not devoid of practical significance in determining the property of the parties as the value of the husband’s interest asserted by his counsel is $524,444.00, as against $917,777.00 asserted on behalf of the wife.
Although counsel for the parties do not agree as to the practical effect of the provisions of the will of the husband’s father and 2004 deed of family arrangement which the husband, his sisters and their mother entered into in the draft joint balance sheet, the submissions of senior counsel for the wife and counsel for the husband reveal agreement as to what actually occurred with respect to the ownership of A.
Prior to the death of his father, the husband held a one third interest in A. The husband’s mother also held a one third interest in A. Those interests could not be impacted by the terms of the husband’s father’s will. Nor were the interests impacted by the subsequent deed of family arrangement.
Pursuant to the will of his father, each of the husband and his sisters, and brother D, acquired equally their deceased father’s one third share in A. Each sibling thus acquired one quarter of one third of A, or a one twelfth interest in the property.
As part of the deed of family arrangement in 2004, D Hearst relinquished his one twelfth interest in A to the husband and his two sisters in equal shares. The husband and his two sisters thus each acquired a further one third of one twelfth, or one thirty sixth interest in A.
The husband thus became entitled to sixteen thirty sixths of A, being the twelve thirty sixths or one third which he had always owned, together with the further four thirty sixths, which he acquired by the terms of his deceased father’s will and the deed of family arrangement. Upon the death of the husband’s mother the husband acquired or became entitled to acquire her one third, or twelve thirty sixth, interest in A. The husband thus came to hold twenty eight thirty sixths, or seven ninths of A.
The figure of $917,777.00 is accordingly the value of the husband’s interest in A for present purposes.
Senior counsel for the wife urged the court to include as an asset of the husband Lot 21 OE, and to do so in the sum of $300,000.00. Counsel for the husband contended that the court should not include any sum with respect to Lot 21 OE in the balance sheet.
The submission with respect to Lot 21 OE, on behalf of the husband was that “as at the date of hearing the husband did not hold an indefeasible title” to such property and that “at best…his provisional entitlement can only be a financial resource and should be excluded from the asset pool”. It was submitted that no injustice would be caused to the wife by adopting such an approach.
With respect to the submission of counsel for the husband, the evidence raises no doubt that the husband will receive Lot 21 OE pursuant to the terms of his mother’s will. The time at which the benefit is receivable relative to the separation of the parties is relevant to the approach the court takes to it and to its significance in the matrimonial cause, but does not alter the nature of the interest. The husband has an absolute right to the interest. It is accordingly able to be considered as “property” for the purpose of section 79 of The Family Law Act 1975 (Cth) (“the Act”).
There is reliable expert opinion evidence as to the value of Lot 21 OE (affidavit of Mr H filed 21 August 2009) which supports a finding that Lot 21 OE is worth $300,000.

THE ENTITLEMENTS OF THE HUSBAND’S SISTERS

The husband and wife have been regarded throughout the proceedings as having an entitlement as against the husband’s sisters of $315,000.00 with respect to improvements effected by them to the homestead on Lot 51 OE. The figure is not controversial, being, in accordance with the authorities, the lesser of the value added to Lot 51 OE by the monies expended by the parties, and the monies which they actually expended for that purpose.
The court struggles to appreciate why the husband would not be liable to contribute one third of that sum, as he remains entitled to one third of the increased value of OE. To visit 100 per cent of the liability upon the husband’s sisters appears unjust when they are only entitled to receive 66.6 per cent of the increase in value. A liability of $210,000.00 appears more appropriate. If the court is wrong about this, and all parties suggest that the liability should be $315,000.00, without a corresponding liability of the husband of $105,000.00, that could be readily rectified pursuant to the Slip Rule.
Albeit strictly a potential liability of the husband and wife, it is appropriate to consider the claims of the husband’s sisters with respect to Lot 51 OE in this context. Two issues arise in that respect. They relate to the claim to be exonerated with respect to monies secured over A and/or Lot 51 OE, and the claim for an occupation rent to be offset against the charge over Lot 51 OE discussed above.
By way of background to these claims, counsel for the husband’s sisters recorded some matters of history having particular relevance, and made submissions in reliance upon those matters.
By reference to the affidavit of the executors of the husband’s father’s estate, who were the husband and his brother D, it was submitted by counsel for the husband’s sisters that it was “clear that the debts which arose in relation to the purchase of properties were treated as debts of the partnership between the deceased, his wife and [Mr Hearst] (the husband) and the estate was acknowledged as having a one third share of that liability”.
It was thus submitted to have been “recognised” by the husband that the debts in relation to funding the purchase of the properties were debts of the partnership between the husband, his mother and late father. The partnership accounts for the year ended 30 June 2002 provide support for that contention (see Exhibit JMH 7 to the wife’s primary affidavit).
In support of his contention that the court could not conclude that the intention of the husband’s father, or indeed his mother, had been to provide equally for their four children, and by reference to the deed of family arrangement, counsel for the husband’s sisters submitted that such deed was favourable to D Hearst as he obtained the “entire legal and beneficial interest in the ‘[ST]’ property with no debt secured on the property”. The deed was submitted to have also been “very favourable” to the husband as he was able to operate the partnership business with his mother over both A and OE whilst increasing his interest in OE and A from his brother D. Further, it was submitted that the husband being entitled to receive on the death of his mother her entire interest in the partnership, her shares, her interest in A subject to any mortgage, and the release from any debt owed by him or the partnership to his mother at the date of his death, supported that contention. It was ultimately submitted that the husband obtained “far more” under the will of his mother than did either of his sisters.
The court is not in a position to determine, if it be possible to do so, the relative values of what each of the husband and his three siblings ultimately received from the estates of their parents. On the evidence before the court, and in the light of the submissions of counsel for the husband’s sisters, the court cannot find that the intention of the husband’s parents, or either of them, was to benefit their four children equally or otherwise upon their deaths or that, irrespective of those intentions, the agreements entered into by the siblings resulted in their parents’ estates being shared equally, or in any particular or specific shares.
It was submitted by their counsel that nothing in the deed of family arrangement indicated that either of the husband’s sisters was to assume any obligation in relation to any debts secured by the mortgage referred to in it with respect to A.. That submission is well founded.
It was further submitted that the mortgages subsequently entered into by the husband and his sisters with respect to Lot 51 OE and the husband and his mother with respect to A secured debts of the husband and his mother, no portion of which was referrable to the husband’s sisters, or the properties in which they had interests. All but the last of those propositions is correct. It may or may not be correct.
The balance sheet of the partnership of the husband, his mother and father for the year ended 30 June 2002, which became the partnership of the husband and his mother, reveals bank loans, secured and otherwise, totalling approximately $637,653.00 as non current liabilities of the partnership. A was included as an asset of the partnership in the sum of $544,604.00, as was ST, at a figure of $195,649.00. What proportion of the indebtedness was referrable to A and ST cannot be suggested, although some part of it must have been.
A number of exhibits upon which counsel for the husband’s sisters relied (see paragraph 37 of submissions) are supportive of his contention that the evidence before the Court does not suggest that any funds advanced by the banks were received by the husband’s sisters. Counsel for the husband’s sisters submitted, correctly, that there was no suggestion from any other parties that they had.
It was thus submitted by counsel for the husband’s sisters that:
38.There is little evidence in the case to establish what all of the funds presently owing to National Australia Bank were expended on and accordingly, who obtains the benefit from that expenditure. The mortgage would also appear to secure the partnership business overdraft account. This could only benefit the partners to the partnership. [2^nd & 3^rd Respondent’s Submissions, par 38, page 11].
It was further submitted:
39.Even if it were established that the original amounts lent by the bank were used to purchase the properties and that the debts for those amounts have been "rolled over" from time to time by the bank they have been repeatedly "rolled over" in favour of the partnership. The debts to National Australia Bank are the debts of the partners, not [the husband’s sisters]. One way to demonstrate this is to consider the position of the bank if it were a plaintiff trying to sue [Ms Kent] or [Ms Somers] to recover the funds. On the evidence presently before the Court the bank could not prove any agreement for loan between the bank and [Ms Kent] or [Ms Somers] and would have no difficulty proving the liability of the partners (now [the husband] alone since he has succeeded to his mother's interest in the partnership) for the whole of the amounts which have been lent by the bank. [2^nd & 3^rd Respondent’s Submissions, par 39, page 11 & 12].
It was thus submitted that an equity of exoneration arose in favour of the husband’s sisters and that the husband was thus “primarily liable” to meet the debt secured on the property in which they held an interest.
It was submitted on behalf of the husband’s sisters that the contention of counsel for the husband that $500,000.00 represented the balance remaining of funds raised to buy the properties was not supported by the evidence and that “what is clear is that the debt is not the debt of [Ms Kent] or [Ms Somers] and is the debt of [the husband] and his mother, and now [the husband] himself”.
In the “Overview” to his submissions, senior counsel for the wife suggested that, whilst as between the parties at trial it was indicated that the wife would take no issue with the second and third respondents’ claims in relation to an equity of exoneration:
1.1.5…An analysis of the evidence leads to that concession being in part withdrawn, that is to the extent that the present debt reflects funds borrowed for the original acquisition of the properties [A] and [ST]. [Wife’s Submissions, page 2, par 1.1.5].
In his written submissions, senior counsel for the wife clarified that the concession made on behalf of the wife at trial with respect to exoneration remained over Lot 51 OE.
Counsel for the husband’s sisters opposed any resiling from the concession made on behalf of the wife during the course of the trial of the proceedings. In essence, that was on the basis that the wife had never pleaded an issue in relation to exoneration and, at least inferentially, that the court could not conclude that, had the concession been withdrawn prior to the conclusion of evidence at trial, the husband’s sisters could not have adduced further evidence in support of their position (see Coulton v Holcombe (1986) 162 CLR 1 and Metwally (No 2) v University of Wollongong (1985)60 ALR 68).
By the time of final submissions, the wife’s position in relation to the mortgage over A had changed in the light of “further consideration” of the impact of the deed of family arrangement.
It was submitted that the acquisition of ST and A was achieved with bank funding totalling $671,700.00. The husband’s father’s estate was submitted to have been responsible for one third of that debt, being the sum of approximately $223,900.00. By reference to the accounts of the partnership subsequent to his death, the husband’s father’s estate was submitted to have been responsible for $195,618.33 of partnership debts. It was fairly acknowledged that such proportion of indebtedness was not broken down “with respect to its derivation”. A number of assumptions were then advanced in support of the proposition that the remaining NAB debt was in the sum of $500,000.00.
The court was asked to “infer that that amount was the residual debt arising from the purchase of the ST and A properties” and that accordingly the husband’s father was responsible for one third or $166,667.00 of that sum. It was accordingly submitted that the husband’s sisters should each now be held responsible for $32,000.00 of such indebtedness.

The wife’s contention that such notional responsibility should be afforded the husband’s sisters was supported by their absence of contribution to the reduction of the mortgage. That overlooks the reality that the husband’s sisters had no use or enjoyment of the property during the period within which any such reductions were, or may have been achieved. It is to be remembered that the properties have at all material times been income producing. There is no suggestion that the husband’s sisters have received any of that income.
The submissions of counsel for the husband’s sisters in relation to this issue are, with respect to those opposing them, to be preferred having regard to the state of the evidence. Without being critical, the evidence relied upon by the husband’s sisters was never effectively challenged. The documentation to which all counsel have referred speak for themselves and it is, as counsel for the husband’s sisters has submitted, perhaps more significant for what it does not say than what it does say for present purposes.
There is substance in the submission of counsel for the husband’s sisters that the positions now adopted by the husband and, albeit somewhat different, by the wife, were not agitated at trial. The court is not able to make the findings of fact upon which the submissions of counsel for the husband, or those advanced on behalf of the wife are reliant. Even if, as seems likely, the purchase prices of ST and A accounted for the bulk of the NAB indebtedness of the partnership at the time that they were acquired, it cannot simply be assumed that they remained so. How partnership funds were applied has not been established. The NAB debt referable to the real estate acquisitions could have been deliberately maintained at those levels, or greatly reduced, in circumstances over which the husband’s sisters had no control.
On balance, the court is satisfied that the husband’s sisters are entitled to the equity of exoneration sought on their behalf. It cannot be assumed that, had the issue been raised at trial, counsel for the husband’s sisters could not have adduced evidence putting the entitlement to an equity of exoneration beyond doubt.
It is then necessary to consider the claim with respect to the payment of an occupation fee.
Counsel for the husband’s sisters submitted, in support of their claim for an occupation fee that, the wife, albeit through the husband, having successfully claimed an allowance for improvements upon the property, such allowance should only be allowed upon her on submitting to be charged with an occupation rent. The decision of the New South Wales Court of Appeal in Ryan v Dries (2002) NSWCA 3 was relied upon in support of that proposition.
It was submitted that the occupation fee with respect to the homestead on Lot 51 OE should commence from December 2006 at which time the husband and wife commenced to occupy it. The occupation fee with respect to the cottage on Lot 51 OE was submitted to be properly payable from 4 November 2002 (the date when probate of the husband’s father’s will was granted) until December 2006, from which time the husband’s mother occupied the cottage. The occupation fee which was claimed was calculated to 30 June 2009.
It was submitted, probably correctly in strict legal theory, that the figure should be updated when the date of delivery of judgment was known. Having regard to the $10.00 per week annual increase which the occupation fee schedule reveals, rather than put the parties to the not inconsiderable expense of further evidence and/or submissions, the court will proceed on the basis that for 2009/2010 the figure of $375.00 per week should be regarded as being claimed. So doing would produce an additional $19,000.00 approximately. Applying a figure of $385.00 per week for the first three months of the 2010/2011 financial year produces an additional $4,000.00 approximately.
The other component of the occupation fee claimed relates to the rural land which comprises the great bulk of Lot 51 OE. The figure assessed for the period 4 November 2002 to 20 August 2009 by Mr H was $208,000.00, based on rental of $31,000.00 per annum. In the absence of any evidence of the higher rate, and there is none, a figure of $239,000.00 for the period ending 30 August 2010 can safely be accepted. None of these figures has been controversial throughout the proceedings.
Senior counsel for the wife conceded the obligation to pay an occupation fee with respect to the homestead on Lot 51 OE from the date of death of the husband’s mother. It was further submitted that, to the extent that the court accepted a “more extensive” occupation rent, that such rent could only be in relation to the homestead on Lot 51 OE. Senior counsel for the wife submitted that the land comprised in Lot 51 OE was not occupied by the husband and the wife, but rather by the grazing partnership conducted by the husband and his mother.
Given that the husband’s remainder interest in Lot 51 OE vested upon his mother’s death in June 2009, and that he beneficially acquired his mother’s interest in the partnership which occupied Lot 51 OE as and from that date, the court cannot accept that an occupation rent from that time would not be payable with respect to the husband’s sisters’ interests in Lot 51 OE. Upon the death of the husband’s mother, his sisters became absolutely entitled to their remainder interests. The husband’s sisters were entitled to two thirds of the rental value of the property from that time.
The court perceives the position prior to the death of the husband’s mother to be less straightforward. The court has earlier accepted the submission on behalf of the husband’s sisters that the evidence did not support a finding that the husband’s parents or either of them intended to equally benefit their children upon their deaths. Had the claim for the value of improvements to Lot 51 OE made by the wife been made by or on behalf of a stranger to the ownership of OE there does not seem to be any suggestion that, in the circumstances of this case, any issue of an occupation rent could have arisen.
It is not without significance that, as the submissions of counsel for the husband’s sisters’ acknowledge, the wife was the applicant in the statement of claim for the charge against Lot 51 OE. The husband was in fact the defendant to the application, as were his sisters. The charge was actually sought in favour of the wife, against the husband and his sisters, albeit the wife sought an order that the husband and his sisters “account to the applicant wife and the husband” in relation to the improvements contributed to by the husband and wife at Lot 51 OE. It ought not be forgotten that the husband’s sisters have the benefit of the increase in the value of their interests. The charge can be seen as the cost of that increase, although, as is not in doubt, the actual cost was greater.
It seems somewhat incongruous that, in the circumstances, the husband’s sisters could fortuitously have rights which they would otherwise not have had. As counsel for the husband’s sisters has reminded the court, parties who seek equity must also do equity. The court struggles in the circumstances of this case to accept that applying that maxim would not create significant hurdles in the path of a successful claim for occupation rent prior to the death of the husband’s mother. Consistent with authority, and for good reason, the measure of the charge sought by the wife is limited to the lesser of the two relevant figures.
During her lifetime, the husband’s mother could, and did, deal with the property the subject of her life estate as she saw fit. The husband’s mother did not require any occupation fee, for a variety of practical reasons relating to the nature of Lot 51 OE, the age of the husband’s mother, the disproportionate burden of conducting the partnership business, and the modest financial returns derived from it, which are not hard to imagine. To retrospectively impose such a fee would not be just or equitable. In all the circumstances, the court is not persuaded that it would be equitable to allow the claim for occupation rent sought by the husband’s sisters prior to the death of the husband’s mother.
Two thirds of the occupation rent claimed with respect to the homestead on Lot 51 ($375.00 and $385.00 per week) and the balance of the property, based on $31,000.00 annual rental will be allowed as and from the death of the husband’s mother in June 2009. The occupation fee allowed is accordingly two thirds of approximately $60,000.00, a sum of $40,000.00.

PARTNERSHIP ASSETS

The wife sought to include as property of the parties the totality of the assets of the partnership formerly conducted by the husband and his mother as equal partners. The value of those assets is not in dispute, being $622,763.00, offset by the partnership’s overdraft which is agreed to approximate $40,000.00.
Counsel for the husband sought the inclusion of only one half of the partnership assets, on the basis previously referred to in the context of Lot 21 OE. Largely for the reasons the court has included the husband’s entitlement to receive Lot 21 OE, the whole of the partnership assets with respect to his former partnership with his mother should in the circumstances be included in the property of the parties. The net figure of $582,763.00 will thus be included.

VALUATION OF Z PTY LTD

The parties are in dispute as to the valuation of Z Pty Limited, the corporation through which the wife conducts her business.
On behalf of the husband a figure of $1,550,572.00 was asserted. On behalf of the wife a figure of $1,150,000.00 was asserted. As is apparent, the difference of opinion between the experts upon which each of the parties rely translates as the sum of $400,000.00.
Mr G, the valuation expert relied upon by the wife, and Mr P, the valuation expert relied upon by the husband produced a comprehensive and instructive memorandum recording points of agreement and disagreement. That memorandum became an exhibit in the proceedings. (See Exhibit ZZ).
Mr G and Mr P were both cross-examined. Both Mr G and Mr P have impeccable professional qualifications and abundant experience in relation to the valuations undertaken by each of them. There is no suggestion that the methodology adopted by either valuer was flawed or deficient in any material respect. Nor is it suggested that the opinion evidence of either expert was ultimately based on material errors of fact, or upon any misapprehension or misconception with respect to the entity which each valued.
As is not in doubt, the dispute between the two experts falls within a narrow but intense compass. Three topics delineate the divergence of opinion between Mr G and Mr P. Through no fault of either Mr G or Mr P, neither expert can seek to support or underpin his valuation by reference to market evidence.
Fairly, and sensibly in the circumstances, each expert conceded that, whilst he was confident that the capitalisation of future maintainable earnings rate adopted by him was appropriate, he could not suggest that the capitalisation rate adopted by his counterpart was necessarily erroneous.
The case, perhaps better than most, draws attention to the nature of valuation disputes, and the function of the court in resolving such disputes. In Federal Commissioner of Taxation v St Helens Farm (ACT) Pty Ltd [1981] HCA 4; (1981) 146 CLR 336 Aickin J said:
The task of a trial judge is to approach a question of valuation in accordance with established principles and to endeavour to arrive at a fair and just figure, bearing in mind that valuation by expert witnesses is not an exact science and that the task involves in most cases a consideration of differing expert opinions. In the end his conclusion is not merely a judgment as to the value of the relevant property but is in the nature of a "value judgment". It is not a judicial discretion in the technical sense of that term but the boundary line between the formation of a value judgment and the exercise of a discretion is neither clear nor precise. It is no doubt for this reason that Dixon J. (as he then was) said in the well-known passage in his judgment in Commonwealth v Reeve (1949) 78 CLR 410 [124], at p. 423 that: "For the estimation of a money sum is usually so much a result of judgment and sound discretion and so little the product of analytical reasoning, that, were it otherwise, every appeal would mean an assessment of compensation de novo, without any assignment of error in the reasoning or conclusions of the court appealed from".
His Honour also suggested that:
The process of valuation in accordance with ordinary principles may produce different results from different judges approaching the task in accordance with proper principles and making no errors of law. There is thus invariably a range of figures, any one of which may quite well satisfy a particular judge that it is as close to true value as it is possible for him to attain.
Whilst the exercise is, to the extent variously discussed by Aickin J, Mason J and Stephen J in St Helens, discretionary, the discretion must be exercised in a judicial and reasoned manner (See McHugh J in Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 24 at 279).
Mr G and Mr P agreed that the appropriate method of valuing Z Pty Ltd was by capitalisation of future maintainable earnings. There was no dispute as between the experts as to how that exercise was conducted, although there was some disagreement as to the quantum of maintainable earnings which formed the basis of that exercise.
Mr G adopted a figure of $460,000.00 as the future maintainable earnings for the purpose of his capitalisation. Why he did so was explained in considerable detail in Mr G’s report (see Schedule 3 page 20). Mr P adopted the figure of $481,700.00 as the future maintainable earnings of Z. Mr P also (see amended valuation schedules annexure 1 to the joint memorandum) provided an explanation of why he adopted the figure of $481,700.00).
In support of his contention that Mr G’s figure for future maintainable earnings of Z ($406,000.00) should be preferred to that of Mr P ($481,700.00), senior counsel for the wife relied upon Mr G’s reasons for adopting a 3 year time frame within which to assess future maintainable earnings and submitted that Mr G’s reasoning for doing so should be preferred to that of Mr P for not doing so.
It was further submitted that Mr G’s conclusions with respect to the future of the company’s primary customer were supported by the wife’s evidence. Such evidence was submitted to have been unchallenged.
Mr G’s expert opinion was also submitted to be preferable to that of Mr P on the basis that Mr P relied upon a remuneration assessment which was beyond his admitted expertise, whilst Mr G had relied upon the opinion of a remuneration expert which opinion was not challenged. Mr L, a remuneration expert who swore an affidavit in the proceedings was not required for cross-examination with respect to his expert opinion. Mr L’s evidence should be accepted.
Whilst identifying this issue, counsel for the husband did not engage with it in significant detail. Counsel for the husband submitted that:
10.…“The significant difference in net maintainable earnings arose from the period to be used for an averaging of annual income. [Mr G] took an average of the three years 2007 – 2009, but adjusted the 2007 year to include a bonus of $62,500 that was applicable in the year 2009, and a market salary for the wife based on 2009 level of trading which was 60% greater than the 2007 trading. [Mr P] used an average of 2007 – 2008 then added 50% of 2009 actual trading to account for the decline due to asserted drop of 50% post June 30 2009.” [Husband’s submissions, page 10, par 10].
In their joint memorandum, the basis of the disagreement between Mr G and Mr P with respect to the future earnings of the business was explained. In essence, the difference of opinion was primarily because Mr P based his assessment of the future earnings on the average of 2008 and 2009 adjusted earnings, whereas Mr G based his assessment on the average of the 2007, 2008 and 2009 adjusted earnings.
Mr P maintained that the two year period was sufficient whilst the three year period adopted by Mr G was inappropriate as it purported to take into account the business operations of Z Pty Ltd prior to the September 2007 contract entered into between the company and N Company, but failed to apply “a weighting to the additional year”. It was submitted that “either a weighting should have been applied to 2007 or a 4 year average should have been used”, the consequences of not adopting either of those approaches being that the estimated maintainable earnings were thereby distorted. Although not central to the issue, a number of other matters were asserted by Mr P to militate against adopting Mr G’s three year figure.
Mr G asserted that averaging the earnings of Z Pty Ltd over a three year period was preferable, as the earnings of the business have fluctuated over that time. In essence, although expressed in more cogent detail, Mr G asserted that averaging over three years better accommodated the fluctuating supply requirements which gave rise to the income derived by Z than did averaging over two years.
Mr G relied upon events subsequent to 30 June 2009, which he detailed in the joint memorandum (paragraph 4.12) in support of his contention that averaging future maintainable earnings over three completed financial years was preferable to doing so over two financial years.
In cross examination of Mr G and Mr P a number of references were made to a further contract variation between Z Pty Ltd and N Company, the operating entity of N Business with which Z Pty Ltd deals (see Exhibit ZZ1).
Whatever proves to be the effect of the contract variation, it does at the very least suggest that the relationship between Z and N Company does fluctuate from time to time. That factor has somewhat greater significance in the light of the evidence that a significant portion of Z’s income, although not directly referrable to N Company, can be seen as indirectly resulting from Z’s contractual arrangements with N Company.
The nature of the valuation exercise is, in the Court’s view, relevant to determining this issue. The test for present purposes was expressed by the High Court in Spencer v The Commonwealth (1907) 5 CLR 418 in the following terms:
… the all important fact on that day is the opinion regarding the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted. … To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.
Common sense suggests that a hypothetical, prudent purchaser would, in the absence of sound reasons for not doing so, have regard to more rather than less extensive trading results when contemplating purchasing an ongoing business such as that conducted by Z Pty Ltd. The reasons why that is so are obvious. Even if the results for some year or years were aberrant, that of itself may be relevant to the risk associated with the business and thus support determining future maintainable earnings by reference to a longer rather than a shorter period of trading results. The measure of risk is central to the determination of the capitalisation rate, or multiplier, applied to future maintainable earnings in order to derive a valuation of the enterprise. It is also material to determining the likely level of future maintainable earnings to which that multiplier is applied.

To the extent that there is any suggestion that the continuing viability, and likely level of profitability of Z Pty Ltd may be in jeopardy, the evidence does not support a finding in those terms.
Counsel for the husband invited the court to have regard to media reports regarding expansion of N Company. The court has earlier recorded that it does not propose having regard to media reports in relation to N Company’s expansion or its likely significance, either for the local town or the Central West.
The court can safely have regard to the planning approval evidenced by the NSW Government website as submitted by counsel for the husband. So doing adds further support for rejecting any suggestion that Z Pty Ltd is likely to become less profitable or viable in the future. That information is not relied upon in support of the court’s conclusions. The submissions of senior counsel for the wife in relation to the earning capacities of the parties do not raise that issue in any event.
It is not in doubt that the wife will retain Z. It is also apparent, as senior counsel for the wife has reminded the court, that the wife’s capacity to earn at the level she currently does requires that she retain Z as a trading entity. Only by the sale of Z could the wife unlock the value which the court has found it to have.
Whilst the court accepts that some caution must be had when considering the disparity of earnings as between the husband and wife in this case, the court cannot accept that any significant discounting for this factor should apply because the value of Z must remain “unlocked” if the wife is to maintain her current level of remuneration. Essentially, it is a matter of personal choice whether a party continues to preserve, and possibly enhance a trading enterprise which provides, albeit not without considerable skill and effort, a substantial remuneration package for its proprietor, or liquidates it.
Were the wife to realise Z Pty Ltd, and repay her loan account, she would have a cash fund of approximately $1,000,000.00. The wife would also have a capacity to derive income in the field in which she has developed the expertise which she utilises for the benefit of Z Pty Ltd. Whatever its quantum might be, it can with confidence be said that if the wife were to liquidate Z Pty Ltd, she would have a large capital sum from which to generate income, in addition to her ongoing capacity to do so by personal exertion.
If, as appears improbable, the husband were to retain farming lands from which he would continue to derive an income, there is no suggestion that the value of those farming lands ought not be included as an asset of the husband, notwithstanding that, to unlock the value of the farming lands, the husband would have to liquidate them. It is difficult to see in principle how there is any difference between the farming lands upon which the husband is reliant to generate his income on the one hand and the wife’s need to retain Z Pty Ltd on the other.
The reality that the wife has a significantly greater capacity to derive income, and generate future superannuation benefits, and that such capacity has a significant nexus with the cohabitation of the parties entitles the husband to a modest adjustment pursuant to section 75(2).

SECTION 79(2)

It is conventional, and instructive, in many cases, to express the court’s conclusions with respect to contributions in percentage terms, then to adjust those percentages, if appropriate by reference to section 75(2), and then consider the justice and equity of the proposed outcome. Section 79(2) of the Act overarches the exercise of discretion. It is the outcome which must be just and equitable. Accepting that so doing is in the exercise of an undoubtedly broad discretion, and that the permissible ambit of reasonable disagreement is large, the court concludes that the parties should share their joint assets as to 48 per cent to the wife and 52 per cent to the husband. So concluding is substantially referrable to the following factors:
(a)The husband’s contributions to Z Pty Ltd materially exceed those of the wife to the husband’s inherited assets;
(b)The wife’s greater earnings during cohabitation and their impact continue to require recognition against the background of the other contributions of the parties (save with respect to Z Pty Ltd and inheritances) being essentially equal;
(c)The time at which Z Pty Ltd was acquired and enhanced, and the time at which the husband received, or became entitled to receive his inheritances, relative to the cohabitation of the parties, its cessation; and the contributions made by the parties during their cohabitation;
(d)The husband’s entitlement to recognition of the disparity of future earnings, and resultant benefits pursuant to section 75(2) of the Act.
For reasons articulated earlier, to conclude that the parties’ superannuation interests should be regarded as notionally the entitlement of the wife as to 75 percent and as to 25 per cent of the husband would be just and equitable in the circumstances. As the husband will retain his entitlement, an adjustment to the respective entitlements to the non-superannuation assets will be required.
Fifty two per cent of $3,529,916.00 is $1,835,556.00. If the husband receives/retains:-
Interest in Lot 51 OE  $688,333.00
Interest in A  $917,777.00
Interest in Lot 21 OE  $300,000.00
Partnership Assets  $582,763.00
Charge against sisters’ interests in Lot 51             $210,000.00
Paid legal fees  $ 11,000.00
And is responsible for the mortgage over A and Lot 51 OE ($500,000.00) and the occupation fee payable to his sisters, he would have net assets of $2,169,873.00. If the husband were able to retain his interests in Lot 51 OE and A, he would thus have to pay the wife the sum of $334,317.00. In addition, the husband would have to pay the wife the sum of $95,402.00, to reflect the court’s conclusion as to the entitlements of the parties to their superannuation interests. On the foregoing basis, the husband would thus have to pay the wife the sum of $429,719.00.
Although the husband appears unlikely to be able to pay out his sisters and the wife without selling Lot 51 OE and/or A or Lot 21, a short time in which to do so would be reasonable, and potentially in the interests of all the parties. If within that time the husband has been unable to meet his obligations to his sisters and the wife, Lot 51 OE and A should be listed for sale. In the event of the wife requiring a sale of real estate to generate the funds from which her entitlement can be met, that entitlement should be calculated as a percentage of the husband’s share of the proceeds of such sale or sales remaining after payment of the expenses of such sale, agent’s commission, capital gains tax, and the discharge of the mortgage on the sale(s). It is difficult, and possibly ineffective in any event, to attempts to provide a formula by which the wife’s entitlement could be calculated until it is known whether or not Lot 51 OE and/or A are to be sold in order to satisfy the entitlements of the husband’s sisters. To charge the husband’s interest in Lot 51 OE and A in the wife’s favour as to 39 per cent of her equity would however preserve her entitlement regardless of what may eventuate. That percentage is calculated as follows:-.

$429,719

=

$429,719

= 39%

$688,333 + $917,777 - $500,000

$1,106,110

The form of orders.

Each of the husband and wife seeks the opportunity to acquire or retain interests in Lot 51 OE. The court does not consider that any matter advanced on behalf of the wife should properly result in the court exercising its discretion to give the wife the first option to acquire the homestead, or any area of land surrounding it on Lot 51 OE.
There are essentially three reasons why that is so. The first is that the wife conceded in evidence that she could conduct her business from premises other than the homestead on Lot 51 OE. The second is that Lot 51 OE has been in the husband’s family for a long time. Senior counsel for the husband fairly conceded that the husband acquired his one third interest in Lot 51 OE by inheritance from his family.
Thirdly, to the extent that the husband may be able to negotiate a commercial arrangement with his sisters which enables him to retain sufficient farming lands to make a living, that opportunity ought not be adversely impacted in favour of the wife. That is not to say that the wife should be precluded from seeking to acquire Lot 51 OE, but rather that she should not be in some privileged position in that regard.
As counsel for the husband’s sisters submitted, there has been no defence, and realistically can be no defence to the claim by the sisters for an order for partition and sale of the properties jointly owned by them with the husband in accordance with the provisions of section 66G of the Conveyancing Act 1999 (NSW).
Rather than incur the expense of appointing trustees for sale, as all the owners of Lot 51 OE and A are parties to the proceedings in this court, and bound by the court’s orders, the court proposes ordering them to do all things necessary to cause Lot 51 OE and A to be submitted for sale by public auction if the husband is unable to reach an accommodation with his sisters within a short time. A period of six weeks would not be unreasonable in all the circumstances. At such auction, the husband and wife can compete for Lot 51 OE. The husband’s sisters ought not be denied the opportunity to have the value of their interests realised in an open market.

THE ORDERS WHICH SHOULD NOW BE MADE

There is little to be gained by attempting to make final orders now, or by making orders in relation to the largely uncontroversial matters and leaving final orders in relation to Lot 51 OE and A in abeyance until it is known whether either, or both of the properties will be sold. If within the next six weeks the husband has not secured an accommodation with his sisters in relation to Lot 51 OE and A, which would encompass the charge against the sisters’ interest Lot 51 OE, and their entitlement to an occupation fee, minutes of order could be submitted, or the court asked to make orders to reflect the determination conveyed by these reasons. It would however be appropriate to make an order recognising, and protecting, the wife’s entitlement to 39 percent of the husband’s equity in Lot 51 OE and A.

I certify that the preceding two hundred and sixty three (263) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Coleman delivered on Monday 18 October 2010

Associate:

Date: 18 October 2010

$429,719	=	$429,719	= 39%
$688,333 + $917,777 - $500,000		$1,106,110