KANE & KANE

FAMILY COURT OF AUSTRALIA

KANE & KANE

[2011] FamCA 480

FAMILY LAW - PROPERTY SETTLEMENT – Determining matrimonial asset pool – add backs – assessment of reasonableness of expenditure – where husband’s superannuation interests have vested – husband’s superannuation interest constitutes divisible property – parties’ superannuation interests included in asset pool

FAMILY LAW - PROPERTY SETTLEMENT – Contributions – contributions assessed with respect to superannuation interests – financial contributions to superannuation made from funds jointly held by the parties – equal financial contributions – husband’s investment skill and expertise greatly increased parties’ superannuation interests – finding that husband’s contribution to superannuation interests greater than the wife’s – contributions assessed with respect to all other assets – parties agree pre-separation contributions were equal – post-separation contributions were equal

FAMILY LAW - PROPERTY SETTLEMENT – Adjustments – husband is retired – husband has access to superannuation – wife has capacity for employment – wife’s income earning capacity inferior to the husband’s – wife cohabits with new partner – wife’s current partner earns comfortable income – financial support of youngest child paid from parties’ joint funds – no adjustment

Family Law Act 1975 (Cth) ss 79(4), 75(2)

Chorn & Hopkins (2004) FLC 93-204
Coghlan & Coghlan (2005) FLC 93-220
In the Marriage of Ferraro and Ferraro (1993) FLC 92-335
Figgins and Figgins (2002) FLC 93-122
Hickey & Hickey & Attorney General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143
Hill & Hill (2005) FLC 93-209
JEL and DDF (2001) FLC 93-075
Mallett v Mallett (1984) 156 CLR 605
In the Marriage of McLay and McLay (1996) FLC 92-667
Norbis v Norbis (1986) 161 CLR 513
Omacini & Omacini (2005) FLC 93-218
Stay v Stay (1997) FLC 92-751
Teal v Teal [2010] FamCAFC 120
Van der Linden & Kordell [2010] FamCAFC 157
Zyk & Zyk (1995) FLC 92-644

APPLICANT:

Ms Kane

RESPONDENT:

Mr Kane

FILE NUMBER:

SYC

1097

2010

DATE DELIVERED:

22 June 2011

PLACE DELIVERED:

Newcastle

PLACE HEARD:

Newcastle

JUDGMENT OF:

Austin J

HEARING DATE:

10, 11 and 12 May 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Batey

SOLICITOR FOR THE APPLICANT:

Rod Paull Lawyers & Notary

COUNSEL FOR THE RESPONDENT:

Mr Bateman

SOLICITOR FOR THE RESPONDENT:

Stacks - The Law Firm

Orders

The husband is declared the sole legal and beneficial owner (as between the parties) of the real property and improvements comprising the property commonly known as … M Street, Town 1, NSW (“the property”), and the wife shall forthwith do all such acts and things and sign all such documents as may be necessary to transfer all her right, title, and interest in the property to the husband.
Subject to compliance with Order 1 hereof, and in consideration of that transfer, the husband shall indemnify and keep indemnified the wife against all rates, taxes, statutory charges, mortgage repayments, and other outgoings and liabilities affecting or relating to the property.
The husband is declared the sole legal and beneficial owner (as between the parties) of the shares in the corporation known as K Company Pty Ltd (ABN …) (“K Company”), and the wife shall forthwith do all such acts and things and sign all such documents as may be necessary to transfer to the husband, or his nominee, any right, title, or interest she currently holds in K Company shares.
The wife shall forthwith do all such acts and things and sign all such documents as may be necessary to resign any office she holds in K Company.
Subject to compliance by the wife with Orders 3 and 4 hereof, and in consideration of that transfer and resignation, the husband shall indemnify, and keep indemnified, the wife in respect of any and all liability attaching to or associated with K Company, including but not limited to:
(a) Overdraft or other debit accounts conducted by K Company;
(b) Loan accounts conducted by K Company;
(c)Taxation liabilities, whether past, present, or future, incurred by the parties with the Australian Taxation Office, either individually or jointly, arising out of the conduct of K Company by the parties
Each party shall forthwith do all such acts and things and sign all such documents as may be necessary so as to direct K Company, as trustee of R Investments (ABN …), pursuant to Part 7A of the Superannuation Industry (Supervision) Regulations 1994, to roll-over or transfer the benefits to which the wife is entitled in R Investments to another regulated superannuation fund, approved deposit fund, exempt public sector superannuation scheme, or retirement savings account, as nominated by the wife in writing.
Within 7 days of these orders, the husband shall pay to the wife, or at her direction, the sum of $719,723.
Unless otherwise provided:
(a)Each party shall be the sole legal and beneficial owner (as between the parties) of all other assets in their respective possession as at the date of these orders, and for that purpose bank accounts are deemed to be in the possession of the person named as the account holder, investment accounts are deemed to be in the possession of the named investor, and superannuation entitlements are deemed to be in the possession of the superannuant.
(b)Each party shall be solely liable for and shall indemnify the other against any and all debts attaching or relating to the property in their respective possession and any debts in their respective sole names.
In the event of either party refusing or neglecting to sign within 7 days of a written request to do so any document necessary to implement the terms of these orders, the Registrar of the Family Court of Australia at Newcastle is empowered to execute such documents on behalf of the parties pursuant to s106A of the Family Law Act 1975 (Cth).
Costs are reserved for 28 days.
All outstanding applications are dismissed.

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

FAMILY COURT OF AUSTRALIA AT NEWCASTLE

FILE NUMBER: SYC 1097 of 2010

Ms Kane

Applicant

And

Mr Kane

Respondent

REASONS FOR JUDGMENT

Introduction

The applicant wife and respondent husband remain in dispute about the settlement of their property interests after a lengthy marriage.
The parties reached agreement about an interim division of their property in May 2010, but could not agree upon the division of their superannuation interests contained within a family superannuation fund.
Although the parties agreed in May 2010 upon the ambit of their residual dispute, the controversy has since widened, necessitating revision of the prior agreement. These reasons finally determine the parties’ property interests.

Background

The parties commenced cohabitation in about September 1980.[1]
[1] Wife’s affidavit, pars 4, 12
The parties finally separated on 21 June 2009.[2] That date was contentious, with the husband contending that final separation occurred in December 2008.[3] I reject the husband’s belief and submission because the issue has already been determined between the parties. It was conceded by the husband that the wife had previously filed an application for divorce in which she deposed that final separation occurred on 21 June 2009. The husband did not contest that assertion and so the Court found as a fact that separation occurred on that date in the course of granting the divorce application. It is not now open to the husband to contest that finding.
[2] Wife’s affidavit, pars 5, 44
[3] Husband’s first affidavit, pars 5, 11-13
In any event, the husband agreed that the wife did not finally depart the former matrimonial home until 21 June 2009.[4]
[4] Husband’s first affidavit, par 6
Four children were born during the parties’ marriage. All but the youngest are now adults. The youngest child attains her majority in a matter of weeks.[5]
[5] Wife’s affidavit, par 7
Upon separation the wife departed the former matrimonial home. The husband remained in occupation with the youngest child, which remains the case.[6]
[6] Wife’s affidavit, par 27
During the marriage, in 1993, the parties formed a corporation called K Company. The parties were equal shareholders in the corporation and each were directors of it. That remained the case up to and beyond the parties’ final separation.[7]
[7] Husband’s first affidavit, pars 40, 55-56; Wife’s affidavit, par 22
The parties used K Company as a vehicle for several business ventures. One such venture involved its participation as a beneficiary in a unit trust which established and conducted private businesses.[8] That venture proved to be particularly profitable. When the trustee of the unit trust subsequently sold the trust assets in 2008, K Company’s unit holding in the trust yielded substantial proceeds of sale. Although the wife deposed to the sale proceeds amounting to $2,100,000,[9] she admitted in cross examination that the actual net amount after payment of expenses approximated $1,650,000. That concession is consistent with the evidence of the husband[10] and the parties’ accountant, Mr C.[11]
[8] Wife’s affidavit, par 24
[9] Wife’s affidavit, pars 25, 32, 34
[10] Husband’s first affidavit, pars 37, 60
[11] Affidavit of Mr C filed 13 January 2011, pars 13-14
During 2008 the parties approached their accountant for advice about investment of the sale proceeds they expected K Company to receive from the transaction. The accountant’s advice included the parties making contributions to a superannuation fund.
Apparently in pursuit of that advice, on 11 June 2008, the parties attended upon the accountant to execute the documents necessary to constitute a family superannuation fund called R Investments (“[R Investments]” or “the superannuation fund”).[12] K Company became the trustee of R Investments.[13]
[12] Husband’s first affidavit, par 61-62; Affidavit of Mr C filed 13 Jan 2011, pars 5-6
[13] Husband’s first affidavit, pars 56, 62: Affidavit of Mr C filed 13 Jan 2011, par 7
As the sale proceeds became available to K Company, using those funds, superannuation contributions were made by K Company to R Investments on behalf of both parties. When the superannuation fund members’ statements were subsequently prepared for the 2009 financial year, the statements did not reflect the contributions as having been made for the parties in equal shares. Greater contributions were allocated to the husband.
The parties’ final separation occurred on 21 June 2009, contemporaneously with the end of the 2009 financial year on 30 June 2009. Within about a week of the separation, the wife began her cohabitation with Mr R,[14] with whom she continues to cohabit.
[14] Affidavit of Mr R, par 8
Shortly after separation, on 23 June 2009, the wife withdrew the sum of $350,000 from the banking accounts of K Company. She did so after discussing the withdrawal with the accountant, but without discussing the transaction with the husband. The accountant prepared documents for the wife to execute, causing the withdrawal to be shown in K Company’s financial accounts as a loan to the wife.[15]
[15] Wife’s affidavit, pars 44-46, 52
These proceedings were commenced by the wife filing an Initiating Application on 24 February 2010, to which the husband responded by filing a Response on 14 April 2010.
Shortly thereafter, on 26 May 2010, the parties reached agreement upon interim property adjustment orders. The effect of those orders was as follows:
a)The wife was required to repay the sum of $350,000 to the banking account of K Company (Order 3);
b)Contemporaneously with that payment, the parties were to cause K Company to pay fully franked dividends of $120,640 to each of them (Order 4(a)), and the husband was to make further payments of $84,360 and $145,000 to the wife (Orders 4(b), 6);
c)Contemporaneously with the husband’s payments to the wife, the wife was to transfer to the husband all of her proprietary interest in the real property at Town 1, together with her shareholding in K company for consideration of $1 (Orders 6, 7, 8);
d)The division of chattels between the parties (Orders 9, 10, 11);
e)The wife’s resignation as a director of K Company (Order 12);
f)The parties cause the wife’s superannuation member entitlements within R Investments to be rolled into another compliant superannuation fund (Order 13);
g)With respect to the remaining assets, each party was made the sole owner of the property in their respective possession, custody or control (Order 15);
h)Restraint of the husband from diminishing the value of his superannuation member entitlements held within R Investments (Order 19)
The parties believed that the interim orders generally resolved all aspects of their dispute over settlement of their property,[16] with the exception of some limited issues relating mainly to their superannuation interests.[17]
[16] Husband’s first affidavit, par 110
[17] Notation B made on 26 May 2010
However, the parties apparently did not implement the interim orders in totality. In particular, the husband gave unchallenged evidence that:
a)The wife did not transfer her interest in the Town 1 realty to the husband,[18] despite the husband’s payment to the wife of an amount of $145,000 representing a one-half share of the value of that property.[19]
b)The wife failed to resign her directorship of K Company[20] and also failed to transfer her shareholding in K Company to the husband,[21] despite the husband’s payment to the wife of $54,000 and the dividend payment of $120,640 through K Company[22] and the acceptance by either he or K Company of sole responsibility for a variety of actual or potential liabilities associated with K Company.[23]
c)The parties have not rolled out the wife’s allocated superannuation entitlements from R Investments,[24] apart from cheques totalling $91,904.84, which cheques were forwarded to the wife in October 2010[25] and subsequently banked by her into her new superannuation fund styled B Pty Ltd ATF W Investments.
[18] Husband’s second affidavit, par 18
[19] Husband’s first affidavit, pars 111(a), 114(a)
[20] Husband’s second affidavit, par 18
[21] Affidavit of Mr C filed 13 January 2011, par 18
[22] Husband’s first affidavit, pars 111(b), 111(c)
[23] Husband’s first affidavit, pars 111(e)-(h), 115(a)-(c)., and 134
[24] Husband’s second affidavit, par 18
[25] Affidavit of Mr C filed 13 January 2011, pars 18-19
Although the interim orders explicitly required the wife’s repayment of $350,000 to the banking account of K Company,[26] it is common ground that did not occur. Nonetheless, the husband perplexingly asserted, impliedly if not expressly, that the wife’s retention of those monies was factored into the settlement achieved on 26 May 2010.[27] The wife adopted a consistent position during the trial, contending that the interim orders were structured so as to achieve approximate equivalence in the distribution of property, excluding superannuation interests, between the parties.
[26] Order 3 made on 26 May 2010
[27] Husband’s first affidavit, par 113(a)
The apparent inconsistency between the literal meaning of the interim orders and the parties’ mutual perception of consummated equality was not satisfactorily explained by either the evidence or the parties’ submissions, but I proceed to determine the proceedings on the basis jointly promulgated by the parties. I assume that they each overlooked the need to fully explain the circumstances.
After the interim orders were made in May 2010 the parties’ financial positions remained in hiatus. The matter proceeded to trial on 10 May 2011 and judgment was reserved at the conclusion of the trial on 12 May 2011.

Proposal and evidence of wife

The wife pressed for property adjustment orders set out within her Case Outline document, subsequently amended orally, the effect of which orders was as follows:
a)The husband shall pay to the wife the sum of $1,473,000 within 7 days (Order 1.1);
b)The husband is restrained from dealing with the portfolio containing his allocated superannuation interest within the family superannuation fund, R Investments (albeit erroneously described by a different name in the minute of orders), pending his compliance with the first order (Order 1.2);
c)The parties otherwise retain any item of property or superannuation interest in their respective possession or control (Order 1.3); and
d)The husband indemnify the wife in respect of any liability that may arise from her shareholding in, or directorship of, K Company and R Investments (again misdescribed in the minute of order) (Order 1.4).
In support of her proposal, and subject to evidential objections, the wife relied upon:
a)Her affidavit filed on 22 September 2010;
b)Her Financial Statement filed on 23 December 2010; and
c)The affidavit of Mr R, her partner, filed on 22 September 2010

Proposal and evidence of husband

The husband pressed for the orders set out within his Amended Response filed on 23 March 2011, the essential effect of which orders was as follows:
a)Retention of the distribution of property achieved by the parties under the orders made with their consent on 26 May 2010 (Orders 1, 1.1); and
b)The wife indemnify both the husband and K Company in respect of any liability arising by virtue of the wife removing the sum of $350,000 from the assets of K Company on or about 23 June 2009, and any liability arising from the wife holding any office in K Company or R Investments (Order 1.2). As did the wife, the husband erroneously described R Investments by another name.
In support of his proposal, and likewise subject to evidential objections, the husband relied upon:
a)His two affidavits filed on 6 and 13 January 2011;
b)His Financial Statement filed on 6 January 2011; and
c)The two affidavits of Mr C filed on 24 September 2010 and 13 January 2011

Determining property adjustment orders

In determining the property adjustment orders that should be made between spouses the Court follows a recognised four-step process (see Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at [39]):
a)Firstly, the Court should identify and value the matrimonial pool of property, comprised of property, liabilities and financial resources at the date of the hearing.
b)Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss 79(4)(a)-(c) of the Act, and determine the contribution based entitlements of each party as a percentage of the matrimonial pool of assets.
c)Thirdly, the Court should identify and assess the relevant matters referred to in ss 79(4)(d), (e), (f) and (g), and s 75(2), and determine the adjustment, if any, that should be made to the contribution based entitlements of the parties.
d)Finally, the Court should consider the effect of those findings and resolve what order is just and equitable in all the circumstances of the case.

Matrimonial pool of property

Establishment of the matrimonial pool of property is the first step in the recognised four-step process.
The process of establishing the matrimonial pool proved to be remarkably difficult. Even though the litigation was commenced more than a year ago, the parties were unable to even agree upon the extent of their disagreement until after the trial commenced.
A “Further Amended Joint Balance Sheet”, the title of which indicates the number of revisions, was filed on 16 February 2011 and formed part of procedural orders made by the Registrar on that date. It was the balance sheet relied upon to make procedural orders on 8 March 2011 in readiness for the trial. Despite the narrowed scope of the parties’ disagreement manifest from that balance sheet, the parties filed Case Outline documents containing or referring to individual balance sheets which bore little resemblance to the joint balance sheet filed only weeks before on 16 February 2011.

Finally, during the first day of trial, the parties produced another joint balance sheet which attempted to refine the extent of their dispute over the matrimonial pool. The document was tendered.[28] Regrettably, some of the calculations within the balance sheet remain erroneous. The balance sheet disclosed the existence of various residual disputes over the actual or notional inclusion of items in the matrimonial pool, and the calculation or valuation of those items. It is necessary to address those contested issues individually.
[28] Exhibit A

Issue 1 (Balance Sheet item 3)

Although the husband’s interest in a St George bank account was inserted in the “Assets” column of the balance sheet, the balance of the account was disclosed in parentheses as “(8,500)”. It was later confirmed that the account was in debit balance for that amount, rather than credit balance. Why it was not therefore disclosed in the balance sheet as a liability rather than as an asset remains unexplained, but for consistency I will account for the item just as the parties did.

Issue 2 (Balance Sheet item 5)

The parties were at odds over the value to be attributed to the shareholding in K Company. The parties intended that the husband be the sole proprietor of the shareholding in K Company as a consequence of the orders made on 26 May 2010[29].
[29] Orders 4 and 7 made on 26 May 2010
The husband wanted the value of the shareholding to be accepted as $230,073, representing the value of the corporation by reference to its balance sheet compiled to 30 June 2010 by the accountant.[30]
[30] Exhibit H1, par 2
The wife wanted the value of the shareholding to be accepted as $498,262, being the value of the corporation by reference to its balance sheet compiled to 30 June 2009.[31] The wife adopted that position because of the alleged absence of any explanation from the husband about the reason for the decrease in the corporation’s value during the 2010 financial year.
[31] Exhibit W2, page 6
The wife’s argument proceeded from a premise that it is common ground that from the time of separation, established to be 21 June 2009, the wife has had no involvement of any sort with K Company. The husband admitted that to be so in cross examination. Even if the husband had not made that admission, he made no suggestion that the wife breached the warranty given by her at the time of their agreement to the interim orders on 26 May 2010, representing that she had had no dealings with K Company since separation.[32] Consequently, any transactions involving K Company resulting in any variation of its assets or liabilities since the parties’ separation, which separation occurred contemporaneously with the conclusion of the 2009 financial year, must have occurred at the behest of the husband. It was submitted for the wife that the evidence does not reveal any explanation for the decrease in the value of the corporation since 30 June 2009, and so the diminution of its value since that time must logically have benefitted the husband, or at least been caused by his unilateral decision.
[32] Notation C made on 26 May 2010
The flaw in the wife’s submission is that the husband did adduce evidence explaining the change in valuation of K Company, about which neither he nor the accountant was directly challenged in cross examination.
The husband deposed that he did not make any personal expenditure or take any drawings from K Company during the 2010 financial year.[33] It is useful to pause at this point and observe that that evidence is not strictly correct, because the parties did each receive a dividend of $120,640 from K Company pursuant to the orders made on 26 May 2010[34]. Those two dividends paid by K Company benefitted the parties equally. However, the husband’s evidence was not directed to transactions which jointly benefitted the parties. He was addressing the issue of his alleged unilateral benefit from K Company during the 2010 financial year.
[33] Husband’s second affidavit, par 17
[34] Order 4(a) made on 26 May 2010
Unfortunately, there are no 2010 financial year statements for K Company, either in draft or final form, in evidence to clarify any transactions that occurred within the 2010 financial year. However, a letter from the accountant to the husband discloses that by 16 March 2010 the adjusted value of K Company was $449,229, and the accountant explained the variation in value of the corporation between 30 June 2009 and 16 March 2010.[35] The variation was due to asset realisations and payment of costs by K Company, not due to any financial advantage enjoyed by the husband exclusively from the wife.
[35] Affidavit of Mr C filed 24 September 2010, Annexure A
The subsequent reduction in value of K Company between 16 March 2010 and 30 June 2010 is explained by the payments made by K Company in order to implement the orders agreed between the parties on 26 May 2010.[36] The accountant confirmed in cross examination that the payment by K Company of equal dividends of $120,640 to the parties accounts for the reduction in the value of K Company.
[36] Affidavit of Mr C filed 24 September 2010, Annexure C
Consequently, the diminution in value of K Company throughout the 2010 financial year was largely, if not totally, caused by the provision of assets to the parties to fulfil the intention of the agreement struck between them in May 2010 – an agreement they each contend was consummated satisfactorily.
The husband’s only personal withdrawals in the 2010 financial year were made from R Investments.[37] The husband was born in October 1949[38] and he therefore attained the age of 60 years in October 2009. I infer that upon attainment of that age his superannuation interest within R Investments moved into the payment phase, thereby permitting his withdrawal of monies from the superannuation fund conformably with the terms of the deed governing the fund.[39]
[37] Husband’s second affidavit, par 17
[38] Husband’s first affidavit, par 2
[39] Affidavit of Mr C filed 13 January 2011, par 15
The parties mutually conducted the trial on the basis that the interim orders upon which they agreed on 26 May 2010 achieved equivalence in the distribution of all assets other than superannuation interests between them. The evidence discloses that the value of K Company as at 30 June 2010 reflects intended implementation of the parties’ agreement, and is therefore the appropriate valuation of the shareholding in K Company to adopt for present purposes. Adoption of the valuation of K Company as at 30 June 2009 would be repugnant to the parties’ asserted satisfaction with the interim orders.

Issue 3 (Balance Sheet items 14 and 15)

Although the parties’ balance sheet discloses “TBA” in respect of potential add-backs for legal fees paid by the parties, the trial was mutually conducted by the parties on the basis that there would be no add-back for either of them on account of any paid legal fees.

Issue 4 (Balance Sheet items 15a and 18)

When the wife borrowed the sum of $350,000 from K Company in June 2009 a corporate loan account was created for the wife recognising the loan as an asset of K Company and a liability of the wife.
The parties agree that it was necessary for the loan to be treated as a genuine commercial loan, lest the ATO regard it as a dividend paid to the wife rather than a loan, with consequent taxation implications for K Company and the parties. Accordingly, the loan accrued interest at commercial rates. The parties agreed that the accrued interest was properly calculated at $20,200, covering the period from the grant of the loan on 23 June 2009 until the parties’ agreement on 26 May 2010 for the husband to take unilateral control of K Company.
The husband paid that loan interest to K Company in order to preserve the commercial reality of the loan transaction.[40] The paid loan interest is therefore a debt the husband incurred to implement the parties’ interim property distribution and should be reflected in the balance sheet. That interest calculation appears as item 18 on the balance sheet.
[40] Husband’s first affidavit, par 111(f)
The wife has no objection to inclusion of item 18 on the balance sheet, unless item 15a also appears on the balance sheet. The wife contends that it is double-counting for both items to appear.
Item 15a represents the calculation of the interest the wife would have earned on investment of the $350,000 she borrowed from K Company, calculated over the period between the loan on 21 June 2009 and the agreed interim orders on 26 May 2010. As with item 18, the parties do not dispute the calculation.
In effect, the husband expects the wife to account for both the interest he had to pay to K Company on account of the wife’s borrowing (item 18) and the interest she earned on investment of the borrowed money (item 15a). I accept the wife’s submission that such accounting requires the wife to account for the borrowed funds twice over. Only one of those items should be taken into account. The wife was unperturbed as to which item was included in the balance sheet, so long as it was only one and not both. It is more appropriate to include item 18, as the sum of $20,200 is used for calculations set out below affecting other items. Item 15a is therefore excised from the balance sheet.

Issue 5 (Balance Sheet item 15b)

As already noted, the husband commenced to make withdrawals upon his superannuation interest held in R Investments during the 2010 financial year, during which year he attained the age of 60 years.
The wife contended that the balance sheet should reflect an add-back of all of the money withdrawn by the husband from R Investments since the time of the parties’ separation in June 2009, which she alleged totalled $463,000.
Conversely, the husband asserted that any withdrawals he made were for his ordinary living expenses and there should be no add-back at all.
The mere fact that a party has expended money realised from assets that existed at the time of separation, without more, does not justify notional add-back of the expended funds as a premature distribution or waste of matrimonial assets. There is no appropriate basis for notionally adding back to the pool monies or assets that existed at separation but which have been subsequently spent or dissipated on meeting reasonably incurred necessary living expenses. The parties are not required to go into a state of suspended economic animation once they separate, pending the resolution of their financial affairs. Parties are entitled to continue to provide for their own support, and are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives (see Chorn & Hopkins (2004) FLC 93-204 at [24]).
The Court needs to make some assessment of the reasonableness of the expenditure (see Omacini v Omacini (2005) FLC 93-218 at [39]), before deciding whether to notionally add-back the expenditure under one of the recognised categories of add-back (see Omacini at [30-31]). The failure of the party responsible for the dissipation or expenditure to afford a comprehensive explanation for the dissipation or expenditure is a matter of significance in the determination of the reasonableness of it (see Omacini at [39]).
The husband was challenged in cross examination with the proposition that he had withdrawn “approximately $463,000” from R Investments since the time of separation. The husband answered with words to the effect of “I haven’t done reconciliations. There would probably be that amount of movement.”
In final submissions, it was ultimately contended for the wife that the husband’s answer amounted to an admission of his withdrawal of $463,000 from R Investments since separation. I do not accept that submission.
Firstly, the husband actually made no admission at all. An admission, as defined in the Evidence Act 1995 (Cth), is a representation made by a party which is adverse to that party’s interest in the outcome of the proceedings. The husband’s evidence on the issue did not have that quality. The husband only said that there may have been “movement” in the accounts, which is not necessarily the same thing as “withdrawals”. Movement in banking accounts connotes, or even denotes, the occurrence of both withdrawals and deposits. The syntax is significant because the husband gave uncontradicted evidence during cross examination that he made both withdrawals from, and deposits to, R Investments accounts. Moreover, the husband did not unequivocally concede the amount of the movements, expressly saying he had not reconciled transactions in the R Investments accounts.
Secondly, neither the Court nor the husband was ever taken to any document or other evidence bearing out the underlying proposition that the husband had withdrawn from R Investments since the parties’ separation an amount of, or approximating, $463,000. It was a bare proposition which may or may not have been accurate.
Even if the husband had withdrawn $463,000 from R Investments over that period, the evidence does not permit a conclusion that the totality of the withdrawals offended Omacini principles.
The evidence therefore falls considerably short of establishing that there should be any add-back to the balance sheet of a figure approximating $463,000. But that is not to say there should be no add-back at all.
The husband did admit a more specific proposition in cross examination when handed documents for his examination, should he desire to inspect them. The husband conceded he had withdrawn the sum of $269,200 from R Investments in the relatively short period elapsed between 1 January 2011 and the trial. It was contended the husband could not justify the withdrawal and expenditure of that sum over a period of less than 5 months. It became apparent from the husband’s cross examination that such a contention was incontrovertible.
The husband was unable to explain how all of that money was expended, although he could explain some of the expenditure. The husband said the money was used variously to service debt associated with K Company, pay legal fees, purchase motor vehicles for himself and the parties’ youngest child, and cover living expenses for himself and the youngest child.
The evidence is quite indistinct about the apportionment of that expenditure, but the evidence does establish the following facts:
a)The husband expended the sum of $2,300 per week on living expenses for himself and the youngest child, and in assisting the parties’ other adult children.[41] He was not challenged about the accuracy of that calculation. Allowing for the elapse of nearly 19 weeks between 1 January 2011 and the trial, the gross expenditure over that period would equate to $43,700.
b)From the amounts withdrawn from R Investments, the sum of $50,000 was paid back to R Investments by the husband as a superannuation contribution.
c)The husband was uncertain about how much money was used to service the debt associated with K Company. The husband only referred in his evidence to payment of the interest incurred on the loan account which had been created to reflect the loan by K Company to the wife of $350,000 in June 2009. That interest appears as item 18 on the balance sheet, the quantum of which was agreed at $20,200.
d)The sum of approximately $72,000 was used to purchase an Audi motor vehicle for the husband, which vehicle is not disclosed on the balance sheet or in the husband’s Financial Statement.
e)The sum of approximately $10,600 was used to purchase a BMW motor vehicle for the husband. Although disclosed by the husband in his Financial Statement,[42] it is not disclosed on the balance sheet compiled by the parties.
f)The sum of approximately $6,700 was used to purchase a vehicle for the youngest child. That vehicle is not otherwise disclosed in the evidence either.
[41] Husband’s Financial Statement, pars 19-34
[42] Husband’s Financial Statement, par 40
The husband’s uncontested living expenses, the money repaid in the form of a superannuation contribution, and the interest paid by the husband on the K Company loan account, are all amounts reasonably expended and explained by the husband since 1 January 2011. Those amounts total $113,900 (= 43,700 + 50,000 + 20,200). None of the other expenditure from the withdrawn total of $269,200 survives evaluation of reasonableness pursuant to Omacini principles, at least by reference to the available evidence. The balance of $155,300 (= 269,200 – 113,900) should therefore be notionally added back to the balance sheet.
There should be no add-back referrable to withdrawals made by the husband from R Investments in the period between separation and 31 December 2010. Even if the withdrawals from the time of separation do amount to $463,000, as alleged by the wife, the amount withdrawn up until 31 December 2010 was therefore $193,800 (= 463,000 – 269,200). Withdrawal and expenditure of that sum over a period of some 18 months is generally consistent with the unchallenged quantum of the husband’s weekly living expenses.

Issue 6 (Balance Sheet item 19)

As a consequence of the wife’s withdrawal of $350,000 from the banking accounts of K Company in June 2009, the banking accounts were left in overdraft.
The debit balance on the overdraft was $18,756, some days later at the conclusion of the 2009 financial year, and was reflected in the financial statements of K Company.[43] The figure was confirmed by the husband.[44]
[43] Exhibit W2, page 6
[44] Husband’s first affidavit, pars 108, 111(g), 115(c)
The husband agreed that K Company would assume responsibility for that liability under the orders made on 26 May 2010, which was tantamount to him bearing the liability.[45] He therefore argued for its inclusion on the balance sheet.
[45] Husband’s first affidavit, pars 111(g), 115(c)
The wife opposed that course, arguing that the liability was integral to the calculation of the value of K Company as at 30 June 2009, as disclosed by the financial statements of the company. That is correct, but by reason of the previously explained determination to include in the balance sheet the value of K Company as at 30 June 2010, rather than 30 June 2009, the debt of $18,756 is not apparently accounted for unless it is included in the balance sheet of matrimonial property. It should therefore be included.

Issue 7 (Balance Sheet item 20)

The husband asserted that, by reason of the implementation of the orders made on 26 May 2010, he will incur a tax liability of $71,578 in respect of unfranked dividends that he will receive from K Company.[46]
[46] Affidavit of Mr C filed 24 September 2010, pars 19-20
However, cross examination of the accountant demonstrated that not to be so. A liability of that quantum would only be incurred if the husband elected to cause K Company to pay to him the entirety of the net assets of K Company in the form of an unfranked dividend within the 2011 financial year.
No such dividend has yet been paid to the husband, and there is no evidence that it will be. There is not even any evidence that a portion of the net assets of K Company will be paid to the husband before 30 June 2011.
Consequently, no tax debt of any amount yet exists. If, as the parties intend, the husband acquires the totality of the shareholding in K Company and has exclusive directorial control of it, the husband will be at liberty to choose when and if the net assets of K Company are paid to him in future years. There is certainly no urgency for that to occur because the husband has resort to the crystallised superannuation interests held in R Investments to meet his living expenses.
In the event the husband causes K Company to pay unfranked dividends to him in the future, any potential tax liability would be calculated by reference to any other income, capital gains, and capital losses he experiences in those relevant financial years.
Given that there is no existent debt of the sort alleged by the husband, and may never be, the item is excised from the balance sheet.

Issue 8 (Balance Sheet item 22)

During submissions the parties agreed that item 22 should be excised from the balance sheet, since it was factored into the calculation of item 16.

The Balance Sheet

As a consequence of the foregoing findings and conclusions, the pool of matrimonial property and resources is constituted as follows:

No.	Asset	Party	Value	Total
1	[…M St, Town 1]	H	290,000
2	St George Acc […]	H	576
3	St George Acc […]	H	(8,500)
4	Mitsubishi	H	12,000
5	100% shareholding in [K Company]	H	230,073
6	[Company 3] shares	W	4,640
7	Hyundai	W	15,000
8	Household contents	H	3,000
9	Household contents	W	3,000
10	[omitted]
11	Dividend from [K Company]	H	120,640
12	Dividend from [K Company]	W	120,640
13	Payment by husband to wife pursuant to Orders 26/5/10	W	84,360
Sub-total	875,429	875,429
Add-backs
14	Legal costs	W	nil
15	Legal costs	H	nil
15a	Interest accrued on the money borrowed by wife from [K Company]	W	nil
15b	Unexplained/unjustified withdrawals by husband from [R Investments]	H	155,300
Sub-total	155,300	1,030,729
Liabilities
16	Debt due to [K Company] by husband	H	224,551
17	[omitted]
18	Loan interest paid by husband	H	20,200
19	Bank overdraft debt, reducing value of husband’s interest in [K Company]	H	18,756
20	Potential tax debt on unfranked dividends payable by [K Company]	H	nil
21	[omitted]
22	Debt born by husband to pay out wife under Orders 26/5/10	H	nil
23	[omitted]
24	[omitted]
Sub-total	263,507	767,222
Superannuation
26	[B Pty Ltd ATF W Investments]	W	92,524
27	[K Company ATF R Investments] (No 2 account)	W	484,887
28	[K Company ATF R Investments] (No 1 account)	H	2,842,883
28a	[Super 1]	W	7,199
28b	[Super 1]	H	10,298
28c	[Super 2]	W	970
Sub-total	3,438,761	3,438,761
Net assets and resources	4,205,983

The Court is generally exhorted to treat the parties’ superannuation entitlements separately from assets, but that need not necessarily be the case (see Coghlan & Coghlan (2005) FLC 93-220 at [58-68]).
The superannuation interests of the husband have now vested and constitute divisible property, or at least his interest in R Investments has done so.
It is appropriate in the circumstances of this case to treat the superannuation entitlements of the wife as property because that will achieve consistency with the manner in which the husband’s superannuation interests are treated, the value of her superannuation interests represents only a relatively small proportion of the matrimonial pool, and the payment of cash to her by the husband pursuant to the orders will afford her plenty of liquidity.
Although the superannuation interests can properly be regarded as property in the context of this case, it is also appropriate in this case to assess the parties’ contributions to the acquisition, conservation, and improvement of matrimonial property in respect of two distinct pools – one comprising the superannuation interests in R Investments, and the other pool comprising all other assets and resources.
There is no necessity to assess parties’ contributions globally, even though that is a common approach (see Norbis v Norbis (1986) 161 CLR 513 at 523, 532-533, 541). The reasons for adopting a different approach in this case are twofold. Firstly, the parties agreed that the interim orders they solicited from the Court on 26 May 2010 successfully divided all assets and resources between them, save for superannuation interests. Secondly, the parties’ disagreement about the assessment of their contributions essentially related only to the contributions they made to the superannuation interests held within R Investments.

Contributions

In the early stages of the trial the parties commendably agreed that, save for one exception, their contributions recognised under s 79(4)(a)-(c) of the Act were equal up until the time of separation. The single exception related to the husband’s contention that the parties’ contributions to their superannuation interests were disparate, in that they made individual investment choices about their own allocated superannuation interests held within R Investments.
There was no agreement between the parties’ about their respective contributions after the time of their separation. The husband’s contention about disparate contributions to their superannuation interests similarly applied to the parties’ post-separation contributions.
Given the ambit of the dispute articulated by the parties, only the contributions by the parties to their superannuation interests held within R Investments and their post-separation contributions need be evaluated closely.

Contributions to R Investments superannuation interests

The parties were directors of and equal shareholders in K Company until the interim orders were made on 26 May 2010, and apparently still remain so, but the wife has played no active role in K Company since separation on 21 June 2009.
As previously recited, K Company derived net sale proceeds of about $1,650,000 from the unit trust in which it held a stake, with such sale proceeds flowing to K Company in two tranches during 2008.
The parties then caused K Company to pay certain amounts from those sale proceeds into R Investments during the 2009 financial year. Those amounts totalled $979,400, comprising $45,391 described in the K Company balance sheet as “superannuation contributions” and $934,009 described as “superannuation contributions CGT rollover”.[47]
[47] Exhibit W2, page 3
The husband conceded in cross examination that those superannuation contributions by K Company were made with funds which were effectively jointly owned by the parties, by reason of their equal ownership of the shareholding in K Company.
The superannuation contributions are recognised in the parties’ respective superannuation fund member statements for the 2009 financial year, from which statements it is evident that the contributions did not benefit the parties equally.[48]
[48] Affidavit of Mr C filed 24 September 2010, Annexure A
The husband already had the benefit of an opening balance of $70,850 in his superannuation account from the 2008 financial year.[49] In the 2009 financial year the husband’s superannuation account was allocated the following amounts:[50]
a)The entirety of the “superannuation contribution” of $45,391 from K Company, and
b)$500,000 from the “superannuation contributions CGT rollover” of $934,009.
[49] Affidavit of Mr C filed 13 January 2011, par 10
[50] Affidavit of Mr C filed 13 January 2011, pars 11, 14(b)
Only the balance of $434,009 from the “superannuation contributions CGT rollover” of $934,009 was allocated to the wife’s superannuation account.[51]
[51] Affidavit of Mr C filed 24 September 2011, Annexure A
During the course of the 2009 financial year, as superannuation funds were paid into R Investments by K Company, the husband used those funds to invest. Some of the monies were held in a banking account and some of the monies were used to acquire shares in public corporations.[52]
[52] Wife’s affidavit, par 32
It was not until a meeting was held between the parties and their accountant in April 2009 that any decision was made to establish two separate accounts within the superannuation fund, to allocate one of those accounts to each party, and to allocate certain public corporation shares then held by K Company as trustee to those separate accounts. The parties referred to the separated accounts within the superannuation fund as “portfolios”, and they were referred to respectively as “portfolio 1” and “portfolio 2”.
Although those decisions were not taken until the meeting in April 2009, months later when the financial records were compiled after the end of the financial year, those decisions were implemented with effect from the very beginning of the financial year on 1 July 2008. The members’ statements therefore retrospectively categorised the allocation of superannuation funds over the course of the preceding financial year between the parties. Thereafter, the parties’ superannuation member statements were issued reflecting their individual interests in the two portfolios.
There is substantial discrepancy between the evidence of the wife, husband, and the parties’ accountant about the precise nature of the agreements reached by the parties at that meeting in April 2009,[53] but it is common ground that the resultant effect was the structure of the superannuation fund in the manner just described.
[53] Wife’s affidavit, par 33; Husband’s first affidavit, pars 64-65; Exhibit H1, par 6
From the inception of R Investments on 11 June 2008 until 30 June 2009 the contributions allocated to the parties within the superannuation fund were:
a)The sum of $626,391 to the husband’s portfolio,[54] and
b)The sum of $434,009 to the wife’s portfolio.[55]
[54] Husband’s first affidavit, par 66; Affidavit of Mr C filed 24 Sep 2010, par 17
[55] Affidavit of Mr C filed 24 September 2010, par 17, Annexure A
Notwithstanding the differential of $192,382,[56] the contributions all originated from K Company, in which corporation the parties enjoyed an equal proprietary interest at all times.
[56] Husband’s first affidavit, par 68
Subject to the husband’s admitted withdrawal and repayment of $50,000 at some indistinct point after 1 January 2011,[57] neither K Company nor the parties made any further superannuation contributions to R Investments after 30 June 2009.[58] Any movements in the entitlements allocated to the parties’ portfolios after that time occurred as a result of accrual of income via dividends, expenses, capital gains, or capital losses.
[57] See pars 62-64(b) above
[58] Affidavit of Mr C filed 24 September 2010, par 15
Although there have been some investment losses incurred by K Company as trustee for R Investments, the investments have generally been sound, producing dividends and capital gains. One investment in particular was a spectacular success. That was the purchase of shares in Company 1. The parties agree that the capital gain experienced by those shares is largely responsible for the capital growth of the superannuation interests held in R Investments.
From the total contributions of $1,060,400 made to R Investments before 30 June 2009, the superannuation interests within R Investments are now valued at $3,420,294, including the funds recently rolled out of R Investments into the wife’s new superannuation fund, W Investments. That enormous capital growth has occurred within a period of less than two years.
The husband’s submission that his contributions to the accumulation of superannuation interests were superior to those of the wife is premised upon two notions – firstly, that the superannuation member statements actually reflect the binding agreement of the parties to allocate the investments between their portfolios in certain ways, and secondly, that it was his acumen that resulted in the substantially greater success enjoyed by the investments allocated to his portfolio than those in the wife’s portfolio.
Conversely, the wife asserts that the parties’ contributions to the superannuation interests were equal. That is because all of the superannuation contributions made to R Investments by K Company were funds in which she and the husband had an equal interest, regardless of the allocation between portfolios, and the wife acquiesced to the husband taking control of the investment decisions for the benefit of them both.
I accept the wife’s submission that, even if there was an agreement about the allocation of specific investments to the parties’ individual superannuation portfolios, that agreement would not bind the Court in the assessment of their contributions or in the determination as to the division of the interests between them. Consequently, despite the time taken in cross examination of the parties and the accountant on their evidence relative to the constitution of R Investments in June 2008, and their meeting in April 2009, which led to R Investments and their member statements reflecting division into separate portfolios, it is unnecessary to make any findings of fact about those issues.
I simply observe in passing that the evidence adduced by the husband[59] and the accountant[60] concerning the wife’s alleged demands about the manner of allocation of investments between the two portfolios was ultimately unconvincing. Neither of them had any contemporaneous notes of the alleged discussion, which occurred over two years ago, and so some erosion of their memories is likely with the effluxion of time. In addition, documents compiled by the accountant in relation to R Investments, apparently on instructions from the husband, were demonstrably unreliable.
[59] Husband’s first affidavit, pars 64-65
[60] Exhibit H1, par 6
The parties’ accountant admitted that documents shown to him in cross examination were financial statements and member statements relating to the parties’ interests in R Investments for the 2009 financial year, which were prepared in his office. Those documents were tendered,[61] and were plainly different from the 2009 member statements annexed to his affidavit.[62] Of the two sets of statements, one set must be false. The accountant was unable to explain why the two sets of statements were different, other than to guess that the tendered statements may have been prepared as only drafts. Even if that is the explanation, it only serves to prove the malleability of the allocation of funds between the parties’ portfolios in R Investments. The wife was not challenged about her assertion that the tendered statements were sent to her via mail in November 2009.
[61] Exhibit W4
[62] Affidavit of Mr C filed 24 September 2010, Annexure A
The parties’ accountant also admitted to the compilation of a document in his office, which document asserts that the decision to restructure R Investments into two portfolios and allocate certain investments between those portfolios did not occur until 25 June 2010,[63] even though it was common ground that the decision was taken at a meeting in April 2009. The accountant was compelled to admit the document was erroneous, at least as to its date, despite the formality of its appearance. Neither the accountant nor the husband, who had signed the document, had any explanation for why such a false document would be in open circulation. The wife was not challenged about her assertion that the false document was sent to her via mail amongst the 2010 financial statements that she was invited to sign and return.
[63] Exhibit W3
The funds deposited by K Company into R Investments in the form of superannuation contributions were admittedly funds in which the parties had equal interest, either directly or indirectly. The superannuation fund was created for the benefit of the parties jointly. All of the contributions to the superannuation fund were made before the parties separated. The wife believed that the disparate allocation of contributions between portfolios was merely a reflection of the difference in ages of the parties,[64] which belief was apparently induced by the advice admittedly proffered by the accountant.[65] The husband’s evidence was consistent with the wife’s evidence.[66] Because of the parties’ age difference, there was a benefit to be derived through allocating more of the K Company contributions to the husband than the wife.
[64] Wife’s affidavit, par 33
[65] Affidavit of Mr C filed 13 January 2011, par 15
[66] Husband’s first affidavit, pars 67-68
Even though the husband argued that the respective portfolio investments were faithfully quarantined, that was not correct. Capital losses incurred on the sale of some shares held within the husband’s portfolio in R Investments were distributed between both parties’ portfolios. That occurred with respect to the capital loss sustained on the sale of Company 2 shares, resulting in a capital loss of $28,816 being attributed to the wife’s portfolio,[67] even though the shares had been held entirely within the husband’s portfolio. The financial year accounts for R Investments were also compiled for the whole of the superannuation fund, not just for individual portfolios.[68] The whole of the invested funds were grouped together on an internet account ledger for the parties to monitor at will, with performance of the invested funds measured as a whole.[69] The investments were not divided between portfolios for that purpose. The segregation of the portfolios was therefore not as immutable as the husband contended.
[67] Affidavit of Mr C filed 24 September 2010, Annexure A
[68] Exhibit W4
[69] Exhibit W8
Moreover, the segregation of the portfolios in the manner contended by the husband was inconsistent with his own evidence. During cross examination the husband repeatedly made remarks about his control of the R Investment accounts for the benefit of both parties. In particular, he said “I operated the bank account” and “I managed [portfolio] No.1 and [portfolio] No.2 for the benefit of us both”. In relation to acquisition of the Company 1 shares, which proved so successful, the husband said they were “for the benefit of the family in total”. In relation to all of the investments the husband said “I was trying to benefit us all”. He was impelled to admit that there was no need for him to consult the wife over investment decisions, as he alleged he did, if, as he also alleged, the parties were responsible for their own portfolio investments.
The husband and the accountant contended that they acted in accordance with a resolution of K Company, as trustee of R Investments, made on 16 October 2009 dictating that “the net income of the [superannuation] fund be proportionally allocated to members based on the member’s daily fund balance”.[70] The parties entertained different notions about the meaning of that resolution.
[70] Exhibit W6
The most likely meaning is that the net income generated by all investments of R Investments would be proportionally allocated to the parties, with the proportions calculated by reference to the value of the investments allocated within their individual portfolios. It is difficult to rationally impute any other meaning. Allocation of net income of the superannuation fund in that manner would simply perpetuate the disparity of the parties’ superannuation interests arbitrarily created at first instance by the contributions from K Company.
The husband and the accountant believed that the resolution meant the parties would each unilaterally enjoy the advantage of gain and suffer the disadvantage of loss in respect of the investments allocated to their individual portfolios. Even if that was their genuine belief as to how the superannuation fund would operate, it did not always occur that way. The attribution of loss to the wife’s portfolio in respect of the Company 2 shares sold from the husband’s portfolio is a simple example.
Following the parties’ separation in June 2009 the wife had little to do with the parties’ accountant, and nothing to do with the management of K Company and R Investments. When the draft financial statements for the 2010 financial year in respect of K Company and R Investments were circulated to her, she took umbrage with the manner in which the superannuation fund member statements were compiled. She instructed her lawyer to correspond with the accountant telling him so[71] and, in the absence of satisfactory answers to her enquiries, declined to adopt the financial statements by affixation of her signature.[72]
[71] Exhibits W1, W5
[72] Affidavit of Mr C filed 13 January 2011, par 18

I am comfortably satisfied that the financial contributions made by K Company to R Investments on behalf of the parties should be regarded as contributions by the parties equally, notwithstanding the unequal retrospective division of the funds between two portfolios. That equal contribution of funds to R Investments is a significant feature, because the contributions resulted in the existence of a solid financial platform for the accumulation of greater wealth.
That leaves for consideration the assertion of the husband that the application of his acumen to investment decisions, which caused the superannuation fund to prosper, was a contribution of significance which differentiates his contributions from those of the wife and entitles him to a much greater share of the superannuation interests.
The husband made all of the share purchases for K Company and R Investments, irrespective of the member portfolio to which the shares were allocated. The husband intended that he take principal responsibility for investment decisions and the wife was content to leave the investment decisions to the husband.
The husband’s contention about his superior contribution in the form of investment skill was said to derive support from authority found in Zyk & Zyk (1995) FLC 92-644. It was submitted that the deliberate and consensual division of superannuation interests in R Investments into separate portfolios revealed the parties’ agreement to conduct their affairs separately, such that their contributions to the growth of the invested funds should be assessed individually between the portfolios. The manner in which the husband’s portfolio investments thereafter outstripped the wife’s demonstrated, it was contended, his superior contributions. The husband asserted that it was not an orthodox situation in which the parties’ contributions are properly regarded as equal.
Curiously, the wife relied upon exactly the same authority in support of her submission to the contrary. It was submitted for the wife that the husband simply invested the parties’ joint funds and that they should each benefit equally from any capital gain, analogously with the situation of one spouse buying a lottery ticket with funds belonging to both spouses.
Despite both parties’ reliance upon Zyk & Zyk, in my view, the answer to the residual argument is not found in that authority.
The conundrum was neatly encapsulated in the final submissions of the wife’s counsel when he posed the question of whether the vast growth of the investments held by R Investments was due to the investment skill of the husband or merely market forces.
The husband gave uncontroverted evidence that he researched each investment with considerable care. In particular, he researched the purchase of the Company 1 shares for weeks. He was convinced that the investment was worthy and discussed his opinion with the wife. The wife agreed in cross examination that the husband did discuss the prospective purchase with her, and that she was less than enthusiastic about the husband’s wish to invest heavily in those shares. Notwithstanding the wife’s reluctance, or even her objection, the husband proceeded to purchase Company 1 shares with R Investments funds. The investment proved to be a spectacular success. The skill of the husband in identifying those shares as a worthy investment, and backing his judgment to purchase them even without the wife’s support, undeniably played an influential role in the vigorous growth of R Investments. It was a markedly different situation from simply buying a lottery ticket in the hope of a random win, with pure chance later vindicating that hope, as occurred in Zyk & Zyk.
It was submitted by the husband that such investment skill, in the context of assessment of the parties’ contributions to the superannuation interests within R Investments, warranted a conclusion of their proportional entitlement thereto at 75% for the husband and 25% for the wife.
There is, of course, no presumption of equality in the assessment of spouses’ contributions under s 79 of the Family Law Act (see Mallett v Mallett (1984) 156 CLR 605 at 610, 613, 625, 639-640, 647). The Court is obliged to carefully evaluate the parties’ respective contributions at the second stage of the property adjustment process.
Since Mallett, the Full Court has attempted to refine the circumstances in which contributions under s 79 of the Act will be evaluated in order to reflect the special skill of one spouse, the effect of which was to significantly increase the wealth of the spouses. Although the Full Court’s expositions on the issue have not always been uniform, the only rational conclusion to draw from the existing authorities is that the law does presently recognise a principle in which weight is attributed to the special skill of a spouse.
In the Marriage of Ferraro (1993) FLC 92-335 (at 79,579) the Full Court relevantly observed:
The case law has established however that there may be special factors, such as…the breadwinner having applied outstanding entrepreneurial skill to the building up of a business, which justify the Court considering that contribution to be above the normal range or to be considered as an “extra” or “special” contribution…
…In all of the reported cases…it was said that the “business acumen” or “entrepreneurial skill” of the husband was a “special skill” or an “extra contribution”. They were all cases where the assets were of a very significant value. There does not appear to be any reason in principle or logic why those business skills should not be treated differently from the high level of skill by a professional or trade person…
In the Marriage of McLay (1996) FLC 92-667 (at 82,900-82,901) the Full Court referred to Marriage of Ferraro with approbation, when invited by the appellant to disapprove of it, saying:
We do not consider that it is appropriate to undertake a reconsideration of a considered judgment of this Court so recently delivered. In any event, we consider that the discussion by the Full Court in that case of the difficult area of evaluating disparate contributions is of considerable value and no reconsideration is called for.
Only a short time afterwards, the Full Court sought to circumscribe the application of “special skill” considerations to only those cases in which the matrimonial pool was particularly large. In Stay v Stay (1997) FLC 92-751 (at 84,131) the Full Court said:
In the instant case, the application of the skills of the husband, his ingenuity and enterprise produced assets in the medium rather than the high range as in [Marriage of Ferraro and Marriage of McLay] and, in our view, the trial judge erred in concluding that his contribution had the quality described in the authorities as special or extra or as she found as being extraordinary…we are of the view that, in assessing the totality of the contributions of the parties, her Honour attached too much weight to the financial contributions of the husband and his efforts in the acquisition of the property.
A different attitude is evident from the Full Court judgment in JEL v DDF (2001) FLC 93-075, in which it was observed (at 88,331) that comments of the Full Court in Stay v Stay did “not appear to sit well” with comments of the Full Court in Marriage of McLay. The Full Court went on to say (at 88,331):
…the determination of such a [“special” or “extra”] contribution is not necessarily dependent upon the size of the asset pool or the “financial product” achieved by the parties.
This view would seem to be more compatible with what the Full Court said in Ferraro…The concept of a “special” or “extraordinary” skill or factor cannot, without more, be rendered nugatory by the fact that the assets accumulated by the parties did not reach the magnitude of many millions. To suggest otherwise would seem, in our view, to defy the proper jurisprudential development of this area of Family Law and fail to meet the relevant provisions of the Act.
The Full Court then extrapolated principles from earlier authorities, including the following (at 88,334-88,335):
(d) In qualitatively evaluating the roles performed by marriage partners, there may arise special factors attaching to the performance of the particular role of one of them.
(e) The Court will recognise any such special factors as taking the contribution outside the “normal range” in the sense that that phrase was understood by the Full Court in McLay.
(f) The determination of an issue of whether or not a “special” or “extra” contribution is made by a party to a marriage is not necessarily dependent upon the size of the asset pool or the “financial product”. When considering such an issue, care must be taken to recognise and distinguish a “windfall” gain.
The Full Court’s decision in JEL v DDF was the subject of an unsuccessful application to the High Court for special leave to appeal, permitting an inference that the High Court perceived no error of principle in the judgment of the Full Court.
It was not long before the issue was again back before the Full Court in Figgins v Figgins (2002) FLC 93-122, where it was said, specifically in relation to JEL v DDF (at 89,295):
We are troubled that in the absence of specific legislative direction, courts consider they should make subjective assessments of whether the quality of a party’s contributions was “outstanding”. It is almost impossible to determine questions such as: Was he a good businessman/artist/surgeon or just lucky? Was she a good cook/housekeeper/entertainer or just an attractive personality? We think it invidious for a judge to in effect give “marks” to a wife or husband during a marriage. We think that this doctrine of “special contribution” should, in an appropriate case, be reconsidered.
The Full Court judgment in Figgins v Figgins was delivered a full year after the refusal of special leave to appeal to the High Court against the Full Court’s judgment in JEL v DDF, but no mention was made of the refusal.
The issue was again considered by the Full Court in Hill & Hill (2005) FLC 93-209. The preceding authorities were acknowledged, but the appeal in Hill & Hill was determined by reference to the facts and the insufficiency of reasons, without furthering the jurisprudence about “special contributions”. The facts in Hill & Hill bore some similarity to those in the present proceedings. There, it was recognised that the matrimonial pool has increased substantially after separation, either as a result of the husband’s special stockbroking skills or as a result of market forces in the nature of a windfall (at 79,523). The trial judge was held to have incorrectly concluded on the available evidence that the asset pool had doubled after separation, and made no analysis of where the pool had increased nor why it had increased (at 79,524).
That situation may be distinguished from the one at hand, where the parties were ad idem that the growth of R Investments was overwhelmingly due to the capital growth realised by the Company 1 shares. Although that capital growth has axiomatically been due to appreciation of the shares’ value on the stockmarket, the enormous growth bears no relationship to ordinary market forces that have notoriously prevailed over the last couple of years under the effects of the so called “Global Financial Crisis”.
As earlier described, the evidence in the present proceedings permits a rational conclusion that the acquisition of those shares was no fluke. The husband’s diligent research of that corporation and his decision to invest the parties’ funds in it was an inspired investment decision, manifesting considerable expertise. His decision is all the more remarkable given that he knew he was making that investment decision without the support of the wife.
I am satisfied that, without the husband’s skill in selecting and pursuing the investment in Company 1 shares, the parties’ superannuation interests within R Investments would currently be worth substantially less. It follows that the husband’s contributions to those superannuation interests were substantially greater than those of the wife. I reject the wife’s submission that her contributions were equal to those of the husband. The real difficulty is evaluating the parties’ contributions in mathematical terms.
The task of moving from a qualitative to quantitative assessment of the parties’ contributions is a difficult one, but that is the nature of the exercise of discretion (see Mallett v Mallett (1984) 156 CLR 605 at 625; Teal v Teal [2010] FamCAFC 120 at [36]; Van der Linden & Kordell [2010] FamCAFC 157 at [90]).
The parties jointly contributed to R Investments, through K Company, funds totalling $1,060,400. The investments within the superannuation fund are now worth more than treble that amount. Without the wife’s joint contribution of those funds, and her acquiescence to the husband’s inclination to invest them, the husband would not have had the funds available to demonstrate his investment prowess. Other share purchases by the husband on behalf of K Company did not enjoy the same spectacular success as the Company 1 shares, and some even realised a loss.
I conclude that the parties’ contributions to the accumulation of wealth within R Investments should reflect entitlements of two-thirds to the husband and one-third to the wife. Such apportionment reflects equal credit for the parties’ joint introduction of funds to R Investments for the purpose of investment, and an equal measure of credit to the husband for his acumen in the successful investment in those funds. The husband’s contention that his contributions were quadruple those of the wife is unsustainable.

Contributions to all other assets

I accept the efficacy of the parties’ agreement that their pre-separation contributions to all other assets, apart from the superannuation interests within R Investments, should reflect an equal entitlement.
As for additional post-separation contributions, the husband relied upon his primary responsibility for the burden of caring for the youngest child. In the period of nearly two years since separation, the eldest child has been a mature teenager who has not needed the level of care and supervision required by a younger child. The financial support of that child has effectively been borne by the parties equally, because the husband has withdrawn funds from R Investments to cover the cost of her maintenance. I accept the wife’s submission, that in an overall sense, the contribution by the husband of caring for the youngest child since separation does not disturb the equilibrium between the parties’ contributions.

Adjustment

The husband is currently 61 years of age.[73] He is retired[74] and ineligible for any Centrelink pension.[75] The husband is now entitled to draw upon his superannuation interest, the investment of which he continues to manage.
[73] Husband’s first affidavit, pars 2, 136
[74] Husband’s first affidavit, par 136
[75] Husband’s first affidavit, par 146
Counsel for the wife conceded that the husband only has income-earning potential as an investor, not through gainful employment. It is evident from his success with R Investments over the last couple of years that he has talent as an investor.
The wife is currently 48 years of age.[76]
[76] Wife’s affidavit, par 2
Although the wife has not worked for some years, she has completed various vocational courses and been gainfully employed for periods over the last 10 years. The wife conceded in cross examination not having sought employment since the parties’ separation, even though she also admitted that she was employable. In the face of that evidence I do not accept her counsel’s submission that she has no capacity for employment. The wife envisages that she could earn some modest income, but there is no evidence to justify the submission of the husband’s counsel that the income-earning capacity of the wife was equal to the income-earning capacity of the husband as an investor.
Although both parties asserted that they are each afflicted by anxiety, which potentially impairs their respective income-earning capacity, there was a paucity of expert medical evidence to establish the fact. It may be that their anxiety will dissipate upon the resolution of the litigation. The state of the evidence does not permit a finding either way.
The wife has cohabited with Mr R since the parties’ separation. It is her intention to remain in that relationship indefinitely, although she professes no current plans to marry.
Mr R’s financial circumstances were the subject of some interest in the proceedings. The wife introduced evidence of Mr R’s financial circumstances by annexing to her affidavit a copy of his Financial Statement filed in other litigation.[77] Mr R annexed a copy of the same Financial Statement to his affidavit.[78] The wife and Mr R realised that such evidence was relevant, otherwise they would not have adduced it. There is no evidence that the wife and Mr R intermingle their financial affairs. In fact, both asserted they assiduously segregated their finances.[79] However, it would be absurd to ignore Mr R’s financial circumstances as a resource of the wife, given their mutual intention to reside together indefinitely as domestic partners.
[77] Wife’s affidavit, par 51, Annexure D
[78] Affidavit of Mr R, par 7, Annexure E
[79] Wife’s affidavit, par 51; Affidavit of Mr R, par 6
Mr R said in cross examination that his own property adjustment proceedings against his estranged wife were concluded in January 2011. There is no evidence as to his current asset position, following that property settlement, but the quantum of his income stream is uncontentious. He receives gross income of $19,900 per month pursuant to an income protection insurance policy by reason of his continuing inability to discharge his usual duties as a professional person, which disability has been present since May 2002.[80]
[80] Affidavit of Mr R, par 5
Mr R conceded in cross examination that none of his children, or those of his estranged spouse, are minors. He chooses to assist them financially, but he is not obliged to do so. Following the property settlement in January 2011, he no longer carries the burden of the mortgage repayments on his own former matrimonial home. Apart from his joint financial commitment to the maintenance of his current household with the wife, Mr R is now relieved of the financial commitments to which he previously deposed.[81] He now enjoys a comfortable income, which he is at liberty to share with the wife if he wishes.
[81] Affidavit of Mr R, par 6
The parties’ youngest child has resided continuously with the husband within the former matrimonial home since the parties’ separation. It is common ground that the wife has not paid any amounts to the husband by way of child support in respect of that child. However, the living expenses claimed by the husband for both himself and the youngest child since separation were not the subject of any challenge by the wife, and accordingly the husband’s expenditure of funds for himself and the youngest child on living expenses has not been notionally added back to the matrimonial pool. I therefore accept the wife’s submission that the allowance of that expenditure to the husband is recognition of his expenditure of funds in which the parties had a joint interest, for the purpose of financial support of their youngest child. It is not correct to say that the husband bore that expense from his own resources.[82]
[82] Husband’s first affidavit, pars 128, 130
It is common ground that the wife provided funds to the child directly for her use, although the amounts of those payments remain uncertain. The husband deposed that the payments were $50 per week since February 2010,[83] but conceded in cross examination that the youngest child had told him the payments were $100 per week, as the wife alleged.[84] The husband was unaware whether the wife also paid for the child’s mobile telephone, about which the wife adduced unchallenged evidence.[85]
[83] Husband’s first affidavit, pars 156, 158
[84] Wife’s affidavit, par 51
[85] Wife’s affidavit, par 51

The youngest child, who attains her majority in June 2011,[86] will remain living with the husband at least until the end of this year, by which time she will have completed secondary school. Where she then lives and whether she will be self-supporting is entirely speculative.
[86] Husband’s first affidavit, par 8
Apart from those issues addressed above, neither party contended in final submissions that any other consideration under ss 79(4)(d)-(g) of the Act was materially influential at the third stage in the property adjustment process.
The husband submitted that the considerations under ss 79(4)(d)-(g) balanced out equivalently and so no adjustment was warranted to the parties’ contribution-based entitlements. I accept that submission.
The wife agreed that there should be no adjustment at the third stage of the property adjustment process, provided the Court reached a conclusion consistently with her earlier submission that the parties’ contribution-based entitlements were equal. In the event of the Court finding that the husband’s contributions entitled him to a greater share of the property at the second stage of the property adjustment process, the wife submitted that the differential should be nullified by a comparable third stage adjustment in her favour. I reject that submission as contrary to the evidence, law, and logic. Perhaps revealingly, no authority was cited in support of the submission. Either the relevant third stage considerations justify an adjustment or they do not, and they do not, as the wife’s primary submission recognised.
It follows from those conclusions that the parties should share the assets and resources in the following manner:
a)As to the superannuation interests held within R Investments and W Investments, two-thirds to the husband and one-third to the wife; and
b)As to all other assets and superannuation interests, an equal division between the parties.
The combined value of the superannuation interests now held in R Investments and W Investments is $3,420,294. Distribution of that amount between the parties in the designated proportions results in the husband’s receipt of $2,280,196 and the wife’s receipt of $1,140,098.
The combined value of all other property and resources is $785,689 (= 4,205,983 – 3,420,294). Equal distribution of that amount between the parties leads to their individual receipt of $392,844.50. The wife can have the benefit of 50c to permit calculations to the nearest dollar.
The value of the wife’s overall entitlement is therefore $1,532,943 (= 1,140,098 + 392,845), and the husband’s is $2,673,040 (= 2,280,196 + 392,844).

Just and equitable orders

The wife has had, or will have, the benefit of the following assets and resources:

No	Assets	Party	Value	Total
6	[Company 3] shares	W	4,640
7	Hyundai	W	15,000
9	Household contents	W	3,000
12	Dividend from [K Company]	W	120,640
13	Payment by husband to wife pursuant to Orders 26/5/10	W	84,360
Sub-total	227,640	227,640
Superannuation
26	[B Pty Ltd ATF W Investments]	W	92,524
27	[K Company ATF R Investments (No 2 account)]	W	484,887
28a	[Super 1]	W	7,199
28c	[Super 2]	W	970
Sub-total	585,580
Net assets and resources	813,220

For the wife to receive her proper entitlement she must be paid a further sum of $719,723 from the matrimonial pool (= 1,532,943 – 813,220). Cash of that amount can readily be paid from the husband’s crystallised superannuation entitlements held within R Investments, which are now valued at $2,842,883.
The superannuation interests of the wife, presently worth $585,580, remain in the accumulation phase. Those interests represent a valuable resource for her future needs. Upon receipt of the payment of $719,723 from the husband, the wife will have, or have had, the benefit of assets worth $947,363 (= 1,532,943 – 585,580). The vast bulk of that amount is, or has been, cash, affording the wife considerable financial freedom.
Upon payment of the designated amount to the wife, the husband will still have superannuation investments within R Investments of $2,123,160 (= 2,842,883 – 719,723). Since that interest is now vested property, he too is free to spend that money as he pleases.
The other assets and resources retained by the husband are collectively worth significantly more than the liabilities for which he accepts responsibility, leaving him with other net assets and resources of $549,880 (= 2,673,040 – 2,123,160). One of those assets is the former matrimonial home, which he and the youngest child continue to inhabit.
The orders require the wife’s transfer to the husband of her interests in the former matrimonial home and K Company, the wife’s resignation of any office she holds in K Company, and the husband’s indemnity of the wife in respect of those assets. In addition, the wife’s designated superannuation interest in R Investments is to be rolled out into another superannuation fund of her choice, and the husband must pay a cash sum of $719,723 to the wife. Otherwise, the parties retain the personal property and superannuation interests in their respective possession and bear their own liabilities.
I am satisfied that such an outcome represents a just and equitable distribution of property between the parties.

I certify that the preceding one hundred and sixty-nine (169) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on Wednesday, 22 June 2011.

Associate:

Date: 22 June 2011

Husband’s first affidavit, Annexure F
Exhibit H1, par 4

Husband’s first affidavit, par 105

Affidavit of Mr C filed 24 September 2010, par 8

Affidavit of Mr C filed 24 September 2010, Annexure A

Affidavit of Mr C filed 13 January 2011, par 14(c)

[2011] FamCA 480

22 June 2011

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