Johnson and Johnson

[2010] FamCA 978

FAMILY COURT OF AUSTRALIA

JOHNSON & JOHNSON [2010] FamCA 978

FAMILY LAW – PROPERTY SETTLEMENT PROCEEEDINGS – Initial capital contributions of the parties not materially favouring one part as against the other –  Impact on property of parties from wife’s inheritances recognised – The wife had a greater capacity to derive income, albeit, that will be reduced by having to pay the husband whatever the Court orders in these proceedings from her investment portfolio – Court ultimately persuaded that a just and equitable order would, in the circumstances be, that the wife pay to the husband the sum of $120,000.00 in order to acquire his interest in the parties’ property – Makita (Australia) Pty Ltd v Sprowles [2001] 52 NSWLR 705 – Norbis v Norbis (1986) 161 CLR 513 – Kardos v Sarbutt [2006] NSWCA 11

Family Law Act 1975 (Cth)

Makita (Australia) Pty Ltd v Sprowles [2001] 52 NSWLR 705
Norbis v Norbis (1986) 161 CLR 513
Kardos v Sarbutt [2006] NSWCA 11
Pierce v Pierce (1999) FLC 92-844

APPLICANT: Ms Johnson

RESPONDENT: Mr Johnson

FILE NUMBER: PAC 4189 of 2009

DATE DELIVERED: 21 September 2010

PLACE DELIVERED: Parramatta

PLACE HEARD: Dubbo

JUDGMENT OF: Coleman J

HEARING DATE: 20 September 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Greg Kenny

SOLICITOR FOR THE APPLICANT: Campbell Paton Taylor

COUNSEL FOR THE RESPONDENT: Mr John Heazlewood

SOLICITOR FOR THE RESPONDENT: North & Badgery

Orders

1. That within 90 days, the wife pay the husband the sum of $120,000, whereupon the husband shall do all acts and things, and execute all documents necessary to transfer to the wife absolutely and beneficially the whole of his right, title and interest in the property known as and situated at U Street (“the U Street property”), whereupon the wife shall indemnify the husband and forever keep him indemnified with respect to all liabilities and outgoings relating to the said property,

2. Declare that the parties’ joint tenancy of the U Street property be and is hereby severed, and that the parties do, from this time, hold their interest as tenants in common in shares of thirty one forty‑thirds to the wife and twelve forty-thirds to the husband.

3. That the husband have the right of exclusive occupation of the U Street property until the payment to him of the sum hereby ordered, provided that he shall maintain the property in reasonable order and condition and meet outgoings and reasonable expenses referrable to it. 

4. That the wife give to the husband not less than 4 weeks prior notice of her intention to exercise the option to purchase the husband's interest in the U Street property created by these orders. 

5. That, save to the extent indicated, each party retain as his or her property absolutely and beneficially, all property real or personal possessed by either of them.

6. That the husband forthwith resign as director of the C Business provided that the wife indemnify the husband with respect to any liability arising to or relating to the husband’s directorship of the C Business.

7. That the effects referred to in Exhibit “X” attached hereto be left for the wife at the U Street property in good order and condition upon the husband vacating that property.

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

FAMILY COURT OF AUSTRALIA AT DUBBO

FILE NUMBER:    PAC 4189 of 2009

MS JOHNSON

Applicant

And

MR JOHNSON

Respondent

EX TEMPORE REASONS FOR JUDGMENT

1. The proceedings which were heard yesterday relate to settlement of property. Although the issues involved are rather more wide ranging, ultimately, the case comes down to the sum of money which the wife should pay to the husband in order to acquire his interest in a jointly owned property known as and situated at U Street (hereinafter referred to as “the U Street property”).

2. In final addresses, counsel for the wife submitted that the consideration for the acquisition of the husband's interest in the U Street property should be $40,000.00. In his concluding address, counsel for the husband submitted that the acquisition should occur at a price of approximately $173,000.00. It is self-evident, having regard to the asset pool which approximates $1,286,670.00, and to the reality that the U Street property is worth $430,000.00, that the parties are far apart. That is unsurprising, as will be seen, given that not only on one side of the case but on both sides of the case, the impact of inheritances assumes significance.

3. A matter which does not assume significance in determining the proceedings is credit. Each of the parties presented as candid and impressive witnesses. Each was able to make concessions in favour of the other party where that was appropriate. Although ultimately little turns upon it, the Court is left with the impression, in the light of the cross-examination of the parties, that the wife's recollection of financial transactions during the course of cohabitation is on balance somewhat sharper and more accurate than is that of the husband. Little ultimately turns on that, as will be seen.

4. Some dates and events provide background to the proceedings. The wife was born in 1964, which makes her 46 years of age. The husband was born in 1959, which makes him 51 years of age. The parties married in 1987. Thereafter, for a period, the parties lived on a property owned by the husband's father, Mr Johnson senior. The property, in fact, is two adjoining properties, WA Station and WB. For convenience, they can be referred to and have been referred to by the single expert who valued them as “the WA aggregation”. The parties lived there, and within a year of commencing to do so, the husband was paid wages by the entities which operated the WA aggregation.

5. At the time the parties married, each had some assets. For her part, the wife had approximately $7000.00, being the proceeds of sale of a shop she previously owned. She held shares in Australian Pharmaceutical Industries (“API”) which she had inherited from the estate of her deceased grandmother. The value of those shares at the time does not seem to emerge from the evidence, but what does emerge from the evidence is that between what was subsequently sold of that shareholding and what remains of the shareholding, about $32,000.00 can be accounted for over a period of time up to and including the present time. The wife owned furniture, household effects and a motor car.

6. For his part, the husband owned an interest in a property at N, which he and his brother equally owned. It had been given to the husband and his brother by his father in about 1986. From about 1996 until the property was realised in about 1999, the property at N generated income by way of rental. The husband realised his interest in the property in about 1999, receiving $46,883.12 which was utilised for the benefit of the family in ways which do not emerge with absolute clarity, but which are not controversial.

7. The wife, within a short time of the marriage, won what she described in her affidavit evidence as a lucky door prize of $10,000.00. There does not seem to have been any challenge to that evidence. The money was applied for the benefit of the family.

8. There are two children of the marriage, twins who were born in November 1988. As is self-evident, in November 2006, the children turned 18 years of age. Thus, the parties having separated on a date very close to the birthday of the children, there were no dependent children in the post separation period.

9. Whilst the parties were living on the WA aggregation and the husband was working there, the wife borrowed $30,000.00 from her parents to purchase sheep. That was an interest free loan and the contribution of the interest not required to be paid on that capital sum was a contribution by or on behalf of the wife upon which she relied in these proceedings.

10. In 1990, the parties left WA. It seems not in doubt that life at that time on the station was financially relatively unrewarding and in fact a fairly taxing existence for both of the parties and their two very young children. The parties then moved to the South Coast. They spent approximately three months living with the wife's parents at R.

11. In 1991, the parties purchased a property at E Street, the purchase price was about $265,000.00. The parents of each of the parties gifted equal or substantially equal sums to enable that purchase to occur, the balance of the purchase moneys being borrowed from the Orana Credit Union. Neither party suggests that his or her contribution should be regarded as enhanced by reason of the funding of that property acquisition.

12. The property was sold not terribly long after, and an arrangement which does not emerge with absolute clarity was entered into between the parties and the wife's parents. The E Street property does not appear to have generated a profit, but the parties were left with approximately $120,000.00 after the completion of its sale. Whatever the precise nature of the arrangement between the parties and the wife's parents in relation to it, it is not in doubt that in about 1992 a 900 acre holding at O was acquired. That, the evidence suggests, was purchased for about $365,000.00. It was subsequently, and not very long after, sold for, the evidence suggests, about $355,000.00.

13. In the course of the period during which the O property was held, the wife's parents sustained some increased capital borrowings by virtue, the evidence suggests, of the activities of their son in reliance upon their credit facilities. The effect of all that was that whereas the parties put $120,000.00 into the O venture, they received nothing back from it. The evidence suggests that their $120,000.00, in effect, and without being critical of anybody or suggesting any unfair or improper motivation, was utilised to meet debts which rightly or wrongly, the wife's parents were responsible for. In fairness, counsel for the wife does not suggest that the $120,000.00 which belonged to the parties in the early nineties should be seen as having done some kind of disappearing act. As will be seen, the fate of that sum requires consideration in the context of contributions.

14. Once the O property was sold, the evidence suggests, having been financially and probably emotionally, an unrewarding experience for the parties, they moved, in about 1994 to R where they managed a business owned by the wife's parents.

15. In July 1996, the husband’s father passed away. By his will, the husband in these proceedings was left a one third share in the WA aggregation. More will necessarily be said about that interest later in these reasons.

16. In about May 1997, the wife's mother passed away and the wife acquired a half-share in the C Business, which I hope I'm correct in thinking, was located at R.

17. Thereafter, in 1998, the wife's father also passed away, leaving by his will, the other half of the C Business to the wife. The wife also acquired a significant parcel of shares in API, some 47,000 shares in that corporation. Probates of the various wills of the deceased parents of the parties were granted in due course. When the freehold and licence of the business was sold, the wife realised in about mid 1999, $653,294.00, together with the realisation of the API shares which generated about $114,000.00.

18. The parties then moved back to Dubbo and the U Street property was purchased for $275,000.00. About $30,000.00 was spent in relation to the construction of a swimming pool on those premises. The U Street property became the matrimonial home until the parties separated more than nine years after its acquisition.

19. For about the last decade, the husband has been employed in Dubbo, currently earning about $500 per week. Since the realisation of her parents' estates, the wife has, after the acquisition of the U Street property, retained a significant investment portfolio, which has, as the evidence identifies and quantifies, generated and continues to generate a significant investment income in the wife's hands.

20. The parties, in about 2007, provided funds to one of their children. The evidence makes clear that such funds came from the wife’s inheritance. The sum given was $52,836.00. To their credit, the parties do not suggest that this sum should be taken into account, either by notionally adding back or otherwise in these proceedings.

21. The parties have, since 2000, bought and sold motor vehicles, horse floats and the like. The sum total of the assets currently available reflect those acquisitions. In 2010, the wife acquired, through her corporate alter ego, a business called H Business for $87,791.00 or thereabouts. It does not seem to be suggested that that enterprise has a market for commercial value.

22. Since separation, the wife has lived in rented accommodation in a de facto relationship with a gentleman identified in her financial statements since late 2009. The husband has lived rent free in the U Street property.

23. The property of the parties is not in doubt, and their degree of disagreement in relation to its qualification is quite limited. The U Street property is agreed to be worth $430,000.00, it is unencumbered. The wife's interest in C Business Pty Limited, which is treated as the wife's property absolutely and unconditionally, and sensibly so, having regard to the wife's evidence about that entity, is worth $405,804.00.

24. The wife has a horse float, a horse, contents, and another horse float and some shares which she has sold, plus some shares which she has retained. The property held by the wife has, it emerges from the final working balance sheet provided by counsel for the parties during final submissions, is worth, after allowing for two $15,000.00 debts particularised by the wife, $432,594.00. The property of the husband is largely referrable to his interest in the WA aggregation. That topic will be addressed in some detail very shortly. He has other assets which are not in doubt and which are not controversial in terms of their values. And they relate to his Santos shares, Tabcorp shares, tractor and tools, Yamaha motorbikes, livestock, horse, horse truck, motor vehicle, Orana Credit Union sheep sale proceeds, trailer and contents.

25. The single expert, Mr Y, valued the husband's interest in the WA aggregation by reference to the two parts of the aggregation, WA and WB. The figures derived by Mr Y were respectively, $190,000.00 and $162,333.00, being one third, of the values he deduced in relation to the whole of the property. Yesterday, counsel for the husband, having no doubt discerned that the valuation of the husband's interest in the WA aggregation may not be as straightforward as it appeared to have been considered to be up to that point, obtained from Mr T, a very well qualified and vastly experienced valuer of, amongst other things, rural holdings, a valuation letter, which became exhibit R3 after cross-examination of Mr T on the voir dire. In that letter, Mr T valued the husband's interest in the WA aggregation at $216,280.00.

26. Mr T was asked to revisit Mr Y’s valuation of the whole of the WA aggregation on the basis that the husband's mother may have a life estate in the aggregation. At page two of his valuation, Mr T revealed the basis upon which he concluded as he did with respect to the value of, if it be a remainder interest, the husband's remainder interest in the WA aggregation. Cross-examination of Mr T provided no rational basis for rejecting his expert opinion evidence as to the value of a one third reversionary interest in the WA aggregation. As counsel for the wife submitted, and as is self evident, Mr T could not, and in fairness did not purport to give any evidence as to the likelihood or otherwise of the husband’s mother holding a life estate.

27. Nothing surrounding Mr T’s valuation enlivens criticism. As the judgment of Heydon J in Makita (Australia) Pty Ltd v Sprowles [2001] 52 NSWLR 705 makes clear, an expert giving opinion evidence necessarily, and particularly in a case such as this, relies on assumptions. In this case, the assumption was that the husband's interest was subject to his mother's life estate. If the Court finds on the evidence that the husband's mother has a life estate in the WA aggregation, the value of the husband's interest in remainder becomes $216,280.00. If not, the value of the husband's legal interest in the WA aggregation remains $352,333.00. As will be seen, the issue is ultimately in the Court's assessment of it, not as cut and dry as that summary might suggest.

28. The starting point for a determination of this controversy is the Will of the husband’s late father. Reference to his Will leaves no scope for doubting that the husband’s father’s testamentary intention was to leave the WA aggregation to his three sons, or such of his three sons as survived him and attained the age of 21 years, in equal shares. The late Mr Johnson senior it seems, erroneously, purported to devise to his widow, Mrs Johnson senior, his share and interest in his "town property in [B]". Curiously, the Will, apparently having been prepared by a legal practitioner, the specific devise of that property actually referred to the town property in [B] as being "owned jointly with my wife".

29. As seems reasonably clear, the joint tenancy in relation to the B town property resulted in the husband’s mother acquiring the whole of her deceased husband's interest in that property by survivorship. The inventory of property attached to the probate of Mr Johnson senior’s will, not surprisingly, makes no reference to the town property. The husband’s mother, accordingly, by survivorship acquired the B town property, and as her evidence confirmed, she received about $30,000.00, which related to a colonial life policy, identified in the inventory of property attached to the probate of the husband’s father’s will.

30. The husband, in his affidavit, said in relation to this topic at paragraph 55 to 58 of his affidavit of evidence in chief, that under the will of his late father, he received a third share of WA, which he held as tenants in common with his brothers F and X. He proceeded to say that at the time of his father's death, his brother X was running WA with Mr Johnson senior, that X continued to run the property and that "my mother continues to live at [WA] but she has no legal entitlement to the land". The husband finally said in relation to this topic, "I do not hold a controlling interest in the property, and I am unable to force the sale of the property."

31. The Court does not perceive that the husband elsewhere in his affidavit said anything further about the WA property. In more recent times, and no doubt with the benefit of counsel and the husband's current attorney looking more closely at things than perhaps occurred earlier, it has been realised that the position is perhaps not as straightforward as paragraphs of the husband's affidavit might have suggested.

32. Recently the husband’s mother swore an affidavit in relation to this topic. The husband’s mother was cross-examined. A more impressive witness would seldom be seen. In her affidavit, the husband’s mother deposed to her late husband's death in 1996 in a motor vehicle accident and to her having been unaware at the time that Mr Johnson senior had left the two stations to their three sons. Mrs Johnson senior deposed to having continued to live in the homestead on WA station, "as I had done my entire married life".

33. Lest it be thought that that was an overstatement, Mrs Johnson senior made clear in paragraph 10 of that same affidavit, that whilst the children were at school, she lived in K in what was described in her husband's last will and testament as in the town property. The WA aggregation was about 125 kilometres distant from K, and Mrs Johnson senior, whilst the children were at school, lived in town with them and they went to school from Monday to Friday. Her assertion that the homestead on WA was home during her entire married life was substantially accurate, particularly when regard is had to the reality that home is, in part at least, a state of mind and not simply a state of physical location.

1. Mrs Johnson senior said in her affidavit that she had made it clear to her sons that she would not leave the property and would not agree to them selling the property. Mrs Johnson senior went on to say, logically and credibly the Court accepts, that she did not make any application to the Supreme Court to seek any formal interest in the property after the death of her husband, as she believed that her sons respected the fact that the property was her home and has been since she married their father. The husband’s mother concluded her affidavit evidence by confirming that she asserted and maintained that she held an equitable interest in the properties, and would, if necessary, enforce such interest.

2. Not surprisingly, cross-examination of the husband’s mother did not take this matter much further. It is clear to the Court that there have never been extensive or detailed discussions about this topic. It was simply taken for granted, the evidence suggests by the husband’s mother and least the two sons who have given evidence in this court, that Mrs Johnson senior’s circumstances, and her desire to stay living there, would not see the WA aggregation sold if it could be avoided. The husband’s mother is 80 years of age, Mr T had reference to published tables as to her actuarial life expectancy.

3. The husband's brother, X, swore an affidavit and he too was cross-examined. He impressed as a witness of truth and candour typical of the farmers of this nation. Mr X Johnson deposed in his affidavit to his deceased father having left the property to his brothers and himself as tenants in common in equal shares. He deposed to F wanting to sell the property "at the time", a reference to about 1996, when the husband’s father died. Mr X Johnson deposed to not wanting to sell the property, as he wanted to work it himself and keep it in the family. Mr X Johnson has worked on the property since he came back there from other places and other things in about 1990, and the evidence suggests that since 1996, as between the three legal owners of the property, Mr X Johnson has undertaken its management and preservation.

4. Mr X Johnson deposed to the husband in these proceedings having supported him in his desire to keep working the property and keeping it in the family. The evidence is not entirely clear and it ultimately is of little concern that it isn't as to how and why the grazing activities on the WA aggregation occur in the way they do. It is ultimately of little concern just how the partnership and the corporation, if there be a corporation, operates and why, given the evidence as to the husband’s mother’s limited ability to assist with farm tasks and F Johnson’s failure to assist in any way directly or indirectly for, it seems, the last 14 years. The summary of earnings of the farm attached to Mr X Johnson’s affidavit reveals an all too familiar theme in rural Australia, that being years of loss, largely if not entirely referrable to drought.

5. Mr X Johnson’s evidence, which the Court accepts, is that if he had not been doing what he did to preserve the property, and someone else had had to in his place, it would have cost not less than $40,000.00 a year. When one factors that in to the figures appearing in annexure A to Mr X Johnson’s affidavit, it is readily apparent that there has been no likelihood for the non‑working owners of the property to have derived any benefit from it. That has dual relevance in relation to contributions, the first being that it cannot be successfully suggested that the husband has wasted his interest in the property, the second being that the inheritance of an interest, whatever the interest might be, has not been a source of contributions by or on behalf of the husband to the marriage of the parties to these proceedings, or to use a colourful but apt expression of counsel for the wife in another context, the gift was not a gift that kept on giving.

6. In his evidence, the husband, and in his evidence Mr X Johnson made clear, that unless they are forced to do so, they do not propose to liquidate the WA aggregation whilst ever their mother lives there and wishes to continue to do so. Mr X Johnson’s position is probably somewhat stronger than that, given his desire to keep the farm in the family. The husband's position is perhaps not so strong on the evidence. The wildcard, if one may use that term, seems to be F. The husband deposed to having not spoken to F in about 20 years. Mr X Johnson deposed to he and F having not got along in the early '90s, as a consequence of which, F moved to town and did not thereafter do work on the property.

7. F’s position seems less than clear. F occupies the K townhouse which belongs to the husband’s mother, but pays no rental. It is tempting to think, but ultimately immaterial that perhaps rent free accommodation is provided to F Johnson in the hope that he will be less inclined to seek to realise his interest in the WA aggregation.

8. On behalf of the husband, it was submitted, that the Court would accept that the husband’s mother holds a life estate in the WA aggregation. Counsel for the wife submitted that the Court could not, on balance, be satisfied that such was the case.

9. The complicating factor in the case in terms of the life estate claim, or complicating factors, are firstly that it is not quite the fact that the husband’s mother received nothing from her marriage to her deceased husband, albeit, other than $30,000.00 in relation to an insurance policy, he did not make provision for her by his last will and testament. The second complicating factor is that regrettably, and this is not said critically of anyone, but the evidence is what the evidence is, there is no expert opinion evidence from counsel or senior counsel specialising in succession law as to the probabilities of the husband’s mother having successfully prosecuted a claim under the Family Provision Act had she done so. Nor, and again this is not said critically, but the evidence is what the evidence is, is there expert opinion evidence from counsel or senior counsel specialising at the equity bar, as to the likelihood, were any of her sons to seek to sell the WA aggregation, of the husband’s mother successfully asserting an entitlement to equitable relief in opposition to such a sale.

10. The Will of the late Mr Johnson senior was clear and unequivocal. The evidence of the husband and Mr X Johnson is, with respect to them, and not surprisingly, somewhat unequivocal. They, like most normal people, don't approach life with Jacobs' Law of Trusts or Meagher, Gummow & Lehane's Principles of Equity foremost in their thinking. It is clear that whatever the legal interest of the husband’s mother may be, it has been accepted by her sons that they would not disturb her occupancy of the homestead on WA for so long as she lived there.

11. It is also able to be accepted, having regard to Mrs Johnson senior’s evidence, that she refrained from pursuing any possible legal remedies which may have been available to her in 1996 in reliance upon her belief that she would be able to stay in the homestead for as long as she lived and wanted to. Whether that belief arose from express statements by her sons, or, as is more likely, arose from a continuing absence of any apparent intention to sell the WA aggregation, ultimately matters little for present purposes.

12. The Court is ultimately not persuaded, having regard to the state of the evidence, that the husband’s mother has a life estate in the WA aggregation. Conversely, the Court is not persuaded that were any of the Johnson sons minded to seek to force a sale of the property, that they would necessarily be successful in that regard. Whatever an equity court would consider her rights to be, the evidence before this court suggests that the husband’s mother is not present on WA station at the whim or will of her sons. On balance, the preferable approach to this topic is to include the aggregation at the full value, but when section 75(2)(O) is addressed, to have regard to the reality that whereas, as the wife's evidence clearly confirmed yesterday, the wife's assets are available to her to deal with as and how she pleases, the husband's major asset, his interest in the WA aggregation, is not able to be so simply and uncategorically regarded.

13. Without being critical, as counsel for the wife submitted, the onus of proof in relation to the life estate was at all material times on the husband. Whilst the Court is persuaded on the balance of probabilities that the husband’s mother probably has some entitlement, the form of that entitlement and its quantum have not been established.

14. It follows that the assets of the husband approximate $424,076.00. It will be readily apparent that the total asset pool of approximately $1,286,670.00 falls, by chance or otherwise, into three almost equal funds or pools. Two of those pools are dominated, as will be seen, by contributions referrable to the wife's inheritance. The third, the husband's pool, is dominated by contributions referrable to his inheritance.

15. The contributions of the parties require careful consideration, as is usually the case where inheritances, or as they are often called, windfalls, are involved. The discretionary aspect of that process assumes greater proportions than is generally the case. Where there are different windfalls on both sides of the case and they are as different in their nature and effect as the windfalls in this case are, the exercise of discretion becomes potentially even broader. The initial capital contributions of the parties, on balance, do not materially favour one part as against the other. As noted earlier, each party had assets at the commencement of cohabitation which were realised thereafter and utilised for the common good.

16. In terms of the parties’ periodic contributions, the evidence does not suggest a sufficient basis for regarding the day to day efforts of the parties, financial and non-financial, as other than substantially equal. Put simply, and as both parties fairly acknowledged, each did his or her best in the various areas in which each made contributions. The inheritances of the parties, on any view of the evidence, do skew the contribution based entitlements of the parties. As noted earlier, the husband's inheritance has neither been a drain on the finances of the parties nor a generator of benefits for them. The inheritance ought to be seen, and is seen, as a contribution by or on behalf of the husband.

17. In the period the parties lived on the WA aggregation prior to their leaving it in the late 1980s, the evidence does not suggest that anything done directly or indirectly by the wife would have established an entitlement, howsoever indirect to the husband's inheritance. It was a contribution solely by or on his behalf. Save in one respect, similar observations apply in the other direction to the wife's inheritance. To the extent that the parties worked long and hard in and about maintaining the assets which formed the bulk of the wife's inheritance during the time which they ran the Business in R, the evidence does not establish that the parties were under-remunerated for their efforts, nor does the evidence establish that the wife or either or her deceased parents, fuelled in the husband, an expectation that he would benefit from their estates in the event of their deaths, or the death of either of them.

18. The husband could not assert an unfulfilled expectation in relation to the estates which the wife inherited. It was, subject to the one matter to which reference will shortly be made, a contribution solely by or on the wife's behalf. The complicating factor in relation to the wife's inheritance relates back to the $120,000.00 which the parties provided to the wife's parents some years before either of the wife's parents estates vested. It is not suggested by counsel for the husband, nor found by the Court, that that $120,000.00 bears a direct or any specific relationship to the estate the wife received. Common sense, however, suggests that not having to pay out $120,000.00 and having had the benefit of $120,000.00 of funds belonging to one's daughter and son‑in‑law, must have been a not insignificant benefit for the wife's parents at the time that the O property was sold and the $120,000.00 contributed by the husband and wife in these proceedings retained or otherwise utilised by the wife's parents.

19. Regarding, in a lose way, that contribution as connected, albeit faintly, to the inheritance, does reduce, to some extent but not vastly, having regard to the quantum of the inheritance, the amount involved, and the years which have intervened, slightly the extent to which the wife’s inheritance should be regarded as a contribution entirely by or on behalf of the wife. It remains, however, a contribution which was greatly more referrable to the wife than the husband. Another difference between the wife's inheritance and that of the husband, apart from the difference in quantum, the ratio being roughly 2/1 in terms of capital, is the matter upon which the wife's counsel understandably placed significant reliance. That was that, not only did the wife's inheritance provide the purchase price of the U Street property, but it provided investment income for the parties on a substantial and ongoing basis.

20. The husband, in his affidavit of evidence-in-chief at paragraphs ninety-five, six, seven and eight, set out a schedule of the parties' comparative earnings together with corroborative documentation. The wife, at paragraphs 51 and 52 of her affidavit evidence-in-chief, set out similar information, albeit over a longer period. The Court does not understand there to be any significant disagreement in relation to the figures which appear in the affidavit evidence. Two things emerge from that evidence. One is not of significance in an overall context. The second is. The matter which does not assume significance relates to what can be described as the income from personal exertion. In the Court's view, having regard to the findings in relation to the parties' efforts on a day to day basis, their earnings from personal exertion ought not impact upon the assessment of their contributions.

21. The dividend income derived by the wife, however, which it is not in doubt was referrable to her inherited funds, were substantial as paragraph 51 of the wife's affidavit makes clear. There is a significant difference between the impact of the wife's inheritance and that of the husband. As the husband's counsel quite fairly acknowledged, the wife must finish ahead, the question being how much so.

22. In the post-separation period, the husband has occupied the U Street property rent free, he has maintained it, albeit perhaps, the evidence suggests, he could have maintained it a little better than he did. He has expended some money on it.

23. The wife has lived in rented accommodation. The wife has had, in the post separation period, a significantly greater income available to her and she has had, quite properly, the enjoyment of her inheritance to the exclusion of the husband.

24. On balance, to see the post separation period as materially effecting the entitlements of the parties would not, in the circumstances, be appropriate.

25. Section 75(2) assumes significance in two ways. It has been sought to be made significant in other ways, not the least of which was, on behalf of the husband, it was submitted that the contribution finding significantly favouring the wife, as it must, the Court should, under section 75(2), have regard to the fact that the wife's assets will inevitably be significantly greater than will those of the husband.

26. The Court does not propose, in the circumstances of this case, to increase the entitlement of the husband by reference to the fact that the contribution finding the Court makes favours the wife and does so not insignificantly. There are cases where the resources on one side are so extensive and so overshadow those of the other party that such an approach may be appropriate. In the circumstances of this case, however, the Court is not persuaded that an adjustment of this kind would be fair to the wife.

27. The more difficult question relates to the disparity of earning ability. It is clear that both parties have the capacity to derive a modest income from personal exertion. The wife, however, has a greater capacity to derive income, albeit, that will be reduced by having to pay the husband whatever the Court orders in these proceedings from her investment portfolio. In the absence of any consideration of how that came about, it would be tempting to make a not insignificant adjustment under section 75(2) in the husband's favour. The Court must be careful, however, given that this is referrable to the inheritance to which the wife has made the overwhelming contribution. On balance, and the balance is not easily achieved, it would be, the Court concludes, fair to adjust modestly in the husband's favour for the disparity of earning capacity. That is to say, a modest adjustment would be appropriate having regard to the fact that the wife only has the greater ability to derive income because of her inheritance.

28. An offsetting section 75(2) factor, albeit again, a modest offsetting factor, relates to the disparity of superannuation interests of the parties. On balance, if one offset, or regarded as offsetting, the husband's greater superannuation interest on the one had, the wife's discounted greater ability to derive income on the other, that would achieve, in broad terms, a fair balance.

29. The matter which in the Court's thinking assumes greatest significance under section 75(2) arises under section 75(2)(O) of the Act, and that is a matter to which counsel for the husband alluded early in the trial as, although not expressly so stated, in the nature of a fallback position.

30. Whatever the nature of the husband’s mother interest in or entitlement to the WA aggregation, the evidence which the Court has accepted and which fairly, has not been seriously challenged, establishes that the husband is unlikely in at least the foreseeable future, for whatever reasons, and the evidence suggests a number of them to which reference has been made to benefit from the WA aggregation. Unless and until X Johnson buys his brothers out, which, on Mr X Johnson’s evidence and the financial history of WA, seems problematic, or F manages to force a sale of it, the husband will derive no benefit from WA. There is a material distinction, on the evidence, between the wife's inheritance which is there, it is available, it is real, and can be dealt with as and how the wife chooses on the one hand, and the husband's interest in WA.

31. Even if, contrary to the Court's conclusions in that regard, the husband’s mother has no interest in or entitlement to or rights with respect to WA, absent, in all probability, litigation, the husband is not going to benefit in any tangible way from that property. Accepting, as the Court does, both Mrs Johnson senior’s genuine and reasonably held belief that her sons will not disturb her occupancy of the property, and the evidence of the husband in this case and Mr X Johnson, which one would think counsel representing the husband’s mother in any proceedings in the Equity Court would be swift to procure in the form of transcript and use, the husband is unlikely in at least the foreseeable future, to derive any benefit from his inheritance.

32. To discount the husband's inheritance, under section 75(2)(O), would not, in the Court's view, be unfair. The Court has not discounted the value of the interest, either for calculating the balance sheet, nor has it, in the context of contributions, watered down in any way that interest. To fail to have regard to what is ultimately either unchallenged evidence, or if it has been sought to be challenged, unsuccessfully challenged evidence, would offend section 79(2) of the Act if nothing else. What then, is a just and equitable determination of the parties' interests?

1. As noted earlier, the exercise which the Court undertakes in proceedings of this kind involves the exercise of what has frequently been referred to by the High Court as an undoubtedly broad discretion. It is the nature of a discretion that different minds, on the same facts, would come to different conclusions, without necessarily being in error. Brennan J expressed the nature of a discretion, perhaps as well as it has ever been expressed, in his judgment in the 1986 decision of the High Court in Norbis v Norbis (1986) 161 CLR 513. His Honour referred to the generous ambit within which reasonable disagreement is possible, and suggested that it was wide indeed when there are a number of factors to be taken into account and the comparative weight to be attributed to those factors is not clearly indicated by uniform standards and values of the community. The generous ambit of reasonable disagreement marks the area of immunity from appellant interference. It is perhaps trite to observe that in this case, the generous ambit of reasonable disagreement is perhaps as wide as it can be.

2. Section 79(2) of the Act overarches the exercise of discretion. The Court is obliged, by reference to the matters contained in section 79(4) and to the extent that they are relevant, section 75(2), to make an order that is just and equitable. If one looks at the figures emerging from the balance sheet which have been earlier recorded, they conceal the reality to which reference was made in the context of section 75(2)(O). The sum of $353,333.00 of the husband's property of $424,076.00 is not property which will be available to him or able to be utilised, enjoyed or benefited from in the foreseeable future. On the other hand, having not been persuaded on the balance of probabilities that the husband's interest should be categorised as being subject to his mother's life estate, the Court is comfortable in including the figure at that sum in the balance sheet.

3. The figures referred to at the outset of these reasons as the competing positions, probably delineate what is generally referred to as "the range". That is to say, the figure advanced on behalf of the wife, quite properly, and as is usually the case, represents, for the wife, the top of the range - the bottom of the range for the husband. The figure asserted on behalf of the husband, represents for him the top of the range, or for the wife, the bottom. The Court is ultimately persuaded that a just and equitable order would, in the circumstances be, that the wife pay to the husband the sum of $120,000.00 in order to acquire his interest in the U Street property.

4. If one looks at that so doing, in order to determine and be satisfied that it is just and equitable, the effect of it is this:  after receiving $120,000.00, the husband's property would total $544,076.00, the wife's entitlement would be some $742,594.00. The difference is approximately $200,000.00. It is relevant to note two matters in this context. The first is that the years of cohabitation and the intervening contributions are relevant, as cases such as Pierce v Pierce (1999) FLC 92-844 in the Full Court of this Court, and Kardos v Sarbutt [2006] NSWCA 11 in the Court of Appeal of the Supreme Court of New South Wales recognise. The second is the section 75(2)(O) matter discussed at some length a short time ago. That is to say, lurking within, and representing the major part of, the husband's entitlement is $353,333.00, which on any view of the evidence, however it comes about, will not be available to him at least for the foreseeable future.

5. Seen in that context, the disparity of approximately $200,000.00 is in reality, a significantly greater disparity in the wife's favour than the crude figures in isolation suggest, particularly when regard is had to the duration of cohabitation of the parties, the contributions otherwise made by them during that period, the time of receipt of the wife's inheritance, the use made of it on the one hand, and the years of further contributions of both parties subsequent to it on the other.

I certify that the preceding seventy (70) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Coleman delivered on 21 September 2010.

Associate: 

Date:  26 October 2010