Kendrick and Barnwell (No 2)
[2019] FamCA 699
•30 September 2019
FAMILY COURT OF AUSTRALIA
| KENDRICK & BARNWELL (NO. 2) | [2019] FamCA 699 |
| FAMILY LAW – PROPERTY SETTLEMENT – Just and Equitable – Where the parties were in a de facto relationship – Where the length of their relationship is disputed but its exact length is not necessary to determine for these proceedings – Where the wife had an interest in a business when the parties commenced living together – Where the parties each contributed to the running of the business – Where there was a dispute about the husband’s commissions and whether he left them for the benefit of the business – Where after a consideration of the property of the parties, their respective contributions, the relevant statutory provisions, and making appropriate adjustments, a just and equitable division of the property of the parties in this matter is 61/39 in favour of the wife. |
| Duties Act 1997 (NSW) Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) |
| Hall vHall (2016) FLC 93-709 Sexton v Sexton [2012] FamCAFC 218 Stanford v Stanford (2012) 247 CLR 108 Steinbrenner & Steinbrenner [2008] FamCAFC 193 |
| APPLICANT: | Mr Kendrick |
| RESPONDENT: | Ms Barnwell |
| FILE NUMBER: | BRC | 2650 | of | 2016 |
| DATE DELIVERED: | 30 September 2019 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Forrest J |
| HEARING DATE: | 16, 17 & 18 April, 26 & 27 November and |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Kirk QC |
| SOLICITOR FOR THE APPLICANT: | Hirst & Co |
| COUNSEL FOR THE RESPONDENT: | Mr Priestley SC |
| SOLICITOR FOR THE RESPONDENT: | Barry.Nilsson |
Orders
That the applicant shall retain as his property absolutely the following:
(i)The real property situated at Town A, more particularly described as Lot … in Deposited Plan … in the State of New South Wales, or any net proceeds of its sale;
(ii)The real property situated at Town B Property 1, more particularly described as Lot … in Deposited Plan … in the State of New South Wales;
(iii)The balance of any bank account operated in his name;
(iv)The motor vehicle 1;
(v)His superannuation entitlements; and
(vi)All other property currently in his possession.
That subject to the obligation imposed upon her by paragraph (3) of these Orders, the respondent shall retain as her property absolutely the following:
(i)The real property situated at Town B Property 2, more particularly described as Lot … in Deposited Plan … in the State of New South Wales;
(ii)The real property situated at Town B Property 3, more particularly described as Lot … in Deposited Plan … in the State of New South Wales;
(iii)The real property situated at Town C Property 1, more particularly described as Lot … in Deposited Plan … in the State of New South Wales;
(iv)Her interest in the real property situated at Town C Property 2, more particularly described as Lot … in Deposited Plan … in the State of New South Wales;
(v)Her interest in the following legal entities:
(i)E Pty Ltd;
(ii)E Investments Pty Ltd;
(iii)Barnwell Family Trust;
(iv)Barnwell Unit Trust;
(v)D Pty Ltd;
(vi)The balance of any bank account operated in her name;
(vii)Her interests in superannuation; and
(viii) All other property held in her name, possession or control as at the date of these Orders.
That the respondent shall pay to the applicant the sum of $1,049,550 (one million, forty-nine thousand, five hundred and fifty dollars) before 25 December 2019.
That the respondent shall indemnify and hold the applicant indemnified against any and all liability to the Barnwell Unit Trust in respect of the liability for the sum of $50,000 that is recorded in the balance sheet of that entity as an asset of that trust being a debt owed by the applicant to that trust.
That from the date of these Orders, unless otherwise specified:
(5.1) each party shall be solely entitled to the exclusion of the other to all property and/or financial resources in the possession of such party as at the date of these orders including but not limited to any jewellery, furniture, furnishing, appliances, shares, motor vehicles, debtors, choses in action and any other property and/or financial resources, whether realty or personally, wheresoever situate and/or of whatsoever kind presently in the possession of or registered in the name of that party;
(5.2)monies standing to the credit of the parties in any bank account standing in their sole name as at the date of these Orders will be the property of the party in whose name such bank account is held.
That each party hereby foregoes any claims they may have to any superannuation benefit to or owned by the other. The party in whose name any such policy of superannuation or insurance stands will be deemed to be the sole owner and beneficiary of such policy to the exclusion of the other.
That each party shall be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.
That save for the debt dealt with in paragraph (4) of these Orders, the parties shall be and remain solely responsible for each and every debt/liability standing in their separate names respectively as at the date of these Orders, including but not limited to credit card liabilities and debts owing to the Australian Taxation Office, and indemnify the other party and hold them harmless in relation to any such debt/liability.
That each party shall be solely liable for and indemnify the other against any taxation liability arising from the transfer to them of any property pursuant to these Orders, including but not limited to capital gains tax incurred upon the sale of any property subsequent to these Orders.
That any duty levied pursuant to the Duties Act 1997 (NSW) payable on transactions arising from these Orders or any documents executed pursuant to these Orders be paid by the transferee party receiving the benefit of same.
That the parties shall comply with all requisitions issued by Revenue NSW in relation to any document executed or transaction entered into pursuant to, or to put into effect, by these Orders. In default of either of the parties complying with any requisitions so issued within fourteen (14) days of the date upon which any requisition issues, the party not in default shall be entitled to comply with any of the outstanding requisitions and recover from the other party in default, the costs and outlays incurred in complying with the requisition, such costs to be calculated in accordance with the Family Law Rules 2004 (Cth).
That in the event that any party to these Orders refuses or neglects to comply with any or all of the provisions of these orders, the Senior Registrar or a Registrar of the Family Court of Australia at Brisbane is hereby appointed, pursuant to s 106A of the Family Law Act 1975 (Cth), to execute all deeds and documents in the name of the respondent and/or the applicant and to do all acts and things necessary to give validity and operation to these Orders and for the purposes of these Orders, an affidavit by either party or their respective solicitors is deemed to be sufficient evidence of non-compliance.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Kendrick & Barnwell has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 2650 of 2016
| Mr Kendrick |
Applicant
And
| Ms Barnwell |
Respondent
REASONS FOR JUDGMENT
The parties in this matter lived in a de facto relationship for several years until around the beginning of 2016. They agree on that. They also agree that they met in 2000 and commenced an intimate relationship sometime not too long thereafter. They cannot agree on when, “as a couple”, they actually started “living together on a genuine domestic basis” – the essence of the statutory definition of a “de facto relationship” contained in s 4AA of the Family Law Act 1975 (Cth) (“the Act”) and the statutory trigger of this Court’s jurisdiction to make property adjustment orders pursuant to Part VIIIAB of the Act.
However, as there is no dispute that they lived in a de facto relationship for at least eight years, the Court’s jurisdiction to hear the husband’s (that is what I shall call the Applicant for ease of description) application for property adjustment is not in issue. Determining whether it is just and equitable to make property adjustment orders between them pursuant to s 90SM of the Act involves considerations different from those necessary to determine when their “de facto relationship” actually commenced. As was submitted by Queen’s Counsel for the husband, it is the contributions of each party (as set out in s 90SM(4) of the Act) that are considered and weighed as the most significant part of determining any property adjustment orders to be made, as opposed to time together in the de facto relationship.
In the course of considering the evidence in this matter and making the findings that are necessary to determine the dispute between the parties, I will give consideration to the competing claims as to when the parties actually started living together as a couple on a “genuine domestic basis”. I will even settle on an approximate time when I consider they started living together as a couple. However, I do not consider its determination to be critical in the overall determination of the matters in dispute between the husband and the wife (I will call the Respondent that for ease of description) in this particular case.
The critical issues for determination
In his written submissions, Queen’s Counsel for the husband conveniently set out what he considered were the critical issues for the Court’s determination. Those were:
(i)Whether it is just and equitable to make property adjustment orders at all;
(ii)The period of the de facto relationship;
(iii)The period during which contributions were made;
(iv)The contributions of the parties, in particular the involvement of the husband in the business and the quality of his contributions in that regard;
(v)Issues in respect of determining the pool of property interests of the parties or either of them, including:
(a)The loans that remain unpaid by the wife;
(b)How to categorise the husband’s own discretionary family trust, created through the Will of his late father;
(c)The question of value of the property owned by the wife in which the parties lived together and in which she still lives and the question of value of an adjoining property owned by the husband;
(vi)The issues arising in the consideration of the matters set out in s 90SF(3) of the Act and their impact on any determination of just and equitable orders.
As I have already observed, I am not persuaded that it is absolutely critical to determine the exact period of the de facto relationship or, for that matter, the exact period during which relevant contributions of the parties were made. What is critical is the determination of the relevant contributions each made and an assessment and weighing of those in the process of determining property adjustment orders that are just and equitable. Otherwise, I respectfully accept Queen’s Counsel’s summary of the critical issues that require determination. Indeed, I do not consider there was any serious opposition levelled against the importance of the determination of these matters by Senior Counsel for the wife.
As for whether it is just and equitable to make property adjustment orders at all, I consider that is relatively easy to determine in the circumstances of this particular matter. The husband seeks quite extensive property adjustment orders. There is no doubt that he considers them necessary to do justice and equity between him and the wife. Whilst the wife’s position initially appeared to be one of arguing that no orders should be made at all, at the conclusion of the trial she asked for orders that have her paying the husband $125,000 – a sum she “concedes” she “owes” him. Whilst it is probably unfair to characterise that as a concession from the wife that property adjustment orders must be made to do justice and equity as between them, when for her it might simply be argued that would be an order requiring her to repay him money she agrees she owes the husband, I consider that property adjustment orders between the parties will be necessary to do justice and equity between them in all the circumstances of this case. Consideration of the factual circumstances of this matter in the light of what was said in paragraph [42] of the judgment of the plurality of the High Court in its decision in Stanford v Stanford (2012) 247 CLR 108 satisfies me of that.
Some relevant background
The husband was born in 1967. He was around 33 years of age when he first met the wife and is now almost 52 years of age. The wife was born in 1962. She was 38 years of age when she first met the husband and is now 57 years of age.
They met when they were both working for a business in a northern New South Wales coastal town.
The wife was in an apparently unhappy marriage at the time they met. She had two children of that marriage who were 12 and nine years old respectively. The husband had not been married before and had no children.
The wife lived with her then husband and their two children in the property that she and her husband owned in a small beachside hamlet near the town in which she worked. The husband lived in a property that he owned in another coastal town a little further to the north. He let out rooms in his home to third parties and generally had one or two tenants living in his home on that basis from the time he had purchased that property in 1995.
In late 2000, the husband left the business the two were working for when they met, and took up a sales position, on better remunerative terms, in another town just in the coastal hinterland from the hamlet in which the wife lived.
The wife and her former husband separated “under the one roof” in 2001. The husband and the wife were, it seems, in an intimate relationship, though not an exclusively monogamous one from the husband’s point of view, by this point in time. Although the wife’s then husband had not moved out of their home yet, in the first few months of 2001, the wife left her employment and took her two children to Sydney to live for a few months whilst she undertook the necessary training and study to acquire the credentials to open her own business.
Whilst down there doing the training, the wife and children lived in a property on the outskirts of Sydney that she had inherited from her late father’s estate and she undertook some renovations of that property. It was one of two properties that she solely owned following the settlement of her late father’s estate, along with another in which she had an equal joint interest with each of her three other siblings. The wife had all of those interests in the three properties before she even met the husband.
In mid-2001, on her return to the coastal hamlet, the wife started her own business, operating it from the garage of the home she was still sharing with her husband from whom she had separated. She was, by this time, carrying on the relationship with the husband, seeing him once or twice a week. I am satisfied that the wife’s commencement of that business formed part of a plan that took shape between the wife and the husband in those early days of their relationship that she would start this business, that he would help her behind the scenes whilst he worked for another business in the hinterland town until such time as he could confidently leave that employment and move across to join the wife in the operation of the business that she had established, which they would then run together. That does not mean that I am satisfied that they owned that business jointly from the moment she started to operate it. I am not.
The evidence satisfies me that the husband and the wife’s intimate relationship had reached a stage, in or around November 2001, where the wife was purchasing consumable items such as clothing for the husband and was being reimbursed by payment with cheques written against the husband’s personal cheque account. Their relationship had also reached a level of trust that provided for cheques on the husband’s personal cheque account being written out for him by the wife in her own hand for him to sign so that his personal and property related expenses could be paid as and when they had to be paid. Also, from as early as April 2001, the wife was writing out deposit slips for the deposit into the husband’s bank accounts of cheques he was receiving for his sales commissions and other things. The evidence satisfies me that this type of conduct, clearly founded on trust between them, continued through until at least 2004. Indeed, in December 2004, there is a cheque drawn on the husband’s personal cheque account paying $2,745 for the office rent of the wife’s business. Clearly, he was helping her and the business out financially at that time.
The wife’s former husband moved out of their home early in 2002 and, by agreement, the wife’s children continued to live in the wife’s care in their home, spending time with their father each other weekend. That coincided with the finalisation of their own property settlement at that time, with the wife buying her former husband’s interest in the property they had shared. She had sold the property she had inherited and renovated in Sydney and used the proceeds of sale of that property to help buy out her former husband’s interest in their property.
Due to their sensitivities to the emotional needs of the wife’s children, the husband and the wife initially spent days and nights together, with one sleeping over at the home of the other, when the children were not in the wife’s care. Clearly, when living by these arrangements, they were not yet “a couple living together on a genuine domestic basis” – that is, they were not yet living in a “de facto relationship” as that term is statutorily defined.
Additionally, as the husband was working in the employment of another business based in the small hinterland town only about 20 minutes’ drive from the hamlet in which the wife lived and established her business, the husband had to be very careful not to be seen to be overtly helping the wife’s business that was in direct competition to that of his employer.
Nevertheless, their relationship continued to develop.
Sometime in late 2002, the wife considered it appropriate to move the business she was running out of her home and into office premises in the hamlet in which she lived. The husband helped her in this process.
The husband’s brother, who is a solicitor in Brisbane, met the wife for the first time as the husband’s girlfriend late that year. He had come to the coastal hamlet at the invitation of the husband to give the two of them some advice about the choice of office space to move the business into. He was shown around by the husband and the wife and taken to each of the potential office locations for assessment so that he could give his opinion. He recalls the husband saying things to him, in the presence of the wife, that made him believe that they intended at some point in the future to run the business together. Though the husband did not introduce the wife to his brother as his girlfriend, the husband’s brother said that he considered that his brother and the wife were in a relationship. He said he could tell by their body language and the way that they spoke to each other that day. He gave them advice about what he thought was the preferred location of the office spaces they had visited; some advice about a company being the best structure to run the business through; and some other advice about negotiating the lease for the premises. He said that after that day, the husband brought the wife with him to the husband’s family events and special occasions as a couple. He also presented photographs taken of the husband’s extended family gatherings at Christmas in 2003, 2004, 2006, 2007 and 2008 in which the wife, and sometimes her children appeared.
In late November 2002, a company with the name “E Pty Ltd” was incorporated and the business moved from the wife’s home to a centrally located, main street office in the coastal hamlet. The husband was neither a director nor a shareholder of that company. I accept that this was because he was still working for the competitor in the hinterland town and it was considered inappropriate for him to have direct ownership and management links to the business being operated by the wife. I am satisfied that he was helping her as he could though – sometimes practically by doing things like helping her physically set up the office and by putting out signs, sometimes by referring customers to her, and also sometimes giving her financial support. I do not consider it was their jointly owned business though. The wife continued to run it, though now through the corporate entity. The husband was helping her out, as boyfriends and girlfriends often do.
The wife’s business started out, as many small businesses do, not making a lot of income beyond breaking even. In the 2003, 2004 and 2005 financial years, the wife’s assessed taxable income was $3,754, $7,040 and $665, respectively. For the same three years, the husband’s assessed taxable income was $135,335, $93,930 and $142,734. These figures demonstrate the high probability that the husband was helping the wife out financially during those years as their relationship continued. I accept that he was.
Indeed, although the wife did not concede that it was money that came from the husband, documentary evidence was adduced that satisfied me that the husband had advanced at least $20,000 to the wife in 2003, either to assist her with the establishment of the business or for her financial support. In the “Asset and debt details” section of a Child Support Agency form that the wife completed and signed in February 2004, she represented to the Child Support Agency that she owed “a friend” the sum of $20,000 as at August 2003 and that she was to repay that amount “with interest” by June 2004. I am satisfied that money came from the husband but was not repaid to him by June 2004 or thereafter.
In addition, in that same Child Support Agency form, the wife represented that her weekly expenses, including her weekly home loan repayments, totalled $1,156. There is no way that she could have been meeting those expenses in those three financial years of 2003 to 2005 without some financial assistance, given her taxable income. I am satisfied that she was getting some financial assistance from the husband.
Additionally, there is no dispute between the parties that in September 2006 the husband drew a cheque for $10,000 on his cheque account that was paid into an account of the wife’s. In November 2006, another $5,000 was drawn on his account and paid into an account of the wife’s. There is also evidence in the form of a note written under the hand of the wife on a post-it note dated 13 October 2007 which says:
E Pty Ltd owes Mr Kendrick $35,000 as of 13.10.01.
With the two amounts from 2006 totalling $15,000, there had to have been an additional $20,000 that the wife was acknowledging having received from the husband prior to that date. I am satisfied that there was. In addition, I am satisfied that the husband would give the wife small amounts of cash out of his wallet from time to time over those early years of their boyfriend-girlfriend relationship, whilst she was growing the business.
I am also quite satisfied that over time the husband and the wife began spending even more time in each other’s company, including more and more nights together in one or other of their separate homes. That said, I am satisfied that it would be some time before the husband actually moved into the wife’s home to live with her on a full-time basis.
Though the husband had initially asserted in his Initiating Application that he and the wife commenced cohabitating in a de facto relationship in 2001, he later conceded that was wrong. At the trial, he was asserting that it was sometime in 2005 that he “moved into” the wife’s home and began living there with her. He asserted that it was coincidental to doing some fencing repair work and taking a pony to be agisted in the wife’s large yard.
In contrast, the wife says that the husband did not move in to live with her at her home until mid-2007. In that year, her son turned 19 and her daughter turned 16. Consistent with the wife’s position on this, there is evidence that the wife instructed her accountant that she would declare in her income tax return for that year that the husband was her spouse. That was the first time she had done that. In his tax returns, several of which he only caused to be completed at or around the time that he started working in E Pty Ltd in mid-2007, the husband still asserted that his home address was at his property in the other coastal town, further to the north.
To the extent that it matters at all in determining these proceedings, I am satisfied that the husband did not actually move in to live with the wife as “a couple on a genuine domestic basis” until mid-2007. I accept the wife’s evidence about this and reject the husband’s evidence that it was in 2005.
In fact, in mid-2005, the wife unilaterally terminated the relationship after she learned that she had contracted a sexually transmitted disease which she assumed she had contracted from the husband. He had not long before gone on a holiday to Asia with a client of his in the business where he then worked and had, himself, apparently contracted a sexually transmitted disease whilst there. When the wife learned that she had been diagnosed with the sexually transmitted disease, she confronted him and terminated their relationship. I am satisfied that this termination did not actually require him to physically move out of the wife’s residence as I do not accept that he had actually been living there full-time prior to that break-up.
Later that same year, in or about October 2005, the husband and the wife resumed their relationship. The wife contacted the husband and made the first reconciliatory overtures. The husband accepted those and they started seeing each other again. At the same time, the wife asked the husband if he would consider buying a residential property that adjoined her property just outside the coastal hamlet in which she lived. She told him that she was not in a financial position to buy it and she was of the opinion that combining the two properties would potentially unlock opportunities to subdivide the combined blocks and generate substantial profits for the owners of the two properties in the future. It is not in dispute that she proposed to the husband that if he bought that property that they could do that together and share in any profits ultimately generated by sale of the subdivided blocks.
The husband agreed to do that, and using his other property as additional security for the borrowings, along with, no doubt, the husband’s relatively good income ($142,734 taxable in 2005 and $123,430 taxable in 2006) to prove his repayment capacity, he borrowed 100% of the purchase price of that property. Indeed, he asserts that he paid more than he considered the property was actually worth, in order to secure the potential development potential of the two adjoining blocks. In the absence of expert evidence about the actual value of that property when he bought it, I am not prepared though to accept the factual accuracy of his assertion of that opinion. Nevertheless, financing 100% of the purchase price meant that even after he rented the property to third parties for market rent on an arms’ length basis, he was still going to be considerably out of pocket after offsetting rent received against financing and holding costs. I will return to this issue later.
Business clearly started improving for E Pty Ltd because in the financial years of 2006 and 2007, the wife’s assessed taxable income increased to $56,165 and $72,630, respectively. The husband’s, on the other hand went from $123,430 to $67,645, but that second year also included the impact of his claimed losses on the negatively geared property that he had purchased adjoining the wife’s property.
I am satisfied that the wife had asked the husband to join her in E Pty Ltd on a number of occasions over the years after she commenced it, but that he did not think the time was right to do so on each of those occasions. He eventually did join her in mid-2007.
The husband has asserted that “the catalyst for [him] joining the business” was when premises with excellent exposure in the town in which he was working came up for sale in mid-2007. It is not a matter of dispute that the husband and wife discussed the prospect of purchasing the leasehold on these premises from the existing tenant who was wanting to sell and agreed that they would do so with the intention of opening an office of the E Pty Ltd business in that town that the husband would then run.
However, the wife said there was another layer to the factual circumstances that prompted the husband to decide to end his employment with the competitor agency and to join her in business. He had an existing long-term friendship with some people who owned a large property in the area that they were intent on developing through subdivision for sale. I am satisfied that through his relationship with these people he expected to get the sale listings for the properties. The wife asserts that the husband, knowing of the substantial total commissions that would be generated by the sale of these properties, determined that he would join her in the business before selling the properties. I accept that in deciding this he was motivated by a desire for the total commissions that would be earned to benefit him and the wife as a couple, rather than large shares of the total being retained by the employer for whom he was working before he left and joined the wife. The fact that those properties went to auction in early November 2007 adds weighty support to the accuracy of the wife’s assertion about this.
Given that the total commissions generated on the sale of eight lots in this development eventually amounted to $479,600, I am satisfied of the correctness of the wife’s evidence in this respect. I have no doubt that was also a major factor influencing the husband’s decision to leave his employer and join in the business with the wife in mid-2007.
Adduced into evidence also was a document the husband said he found in 2016 that was called “E Pty Ltd Town F Branch Summary of Proposal”. I am satisfied that document was prepared at the relevant time – in mid-2007. It set out the plan to purchase the leasehold in the hinterland town for $110,000 and to spend another $90,000 on getting it set up and started, with provision for start-up with $40,000 working capital. It reflected a proposed restructuring of the holding entity for the business with the creation of a unit trust that would own the business. It reflected that the $200,000 capital required to complete those plans would be provided by the existing business as to 50%, to be funded by a $100,000 bank loan, and by the husband as to the other 50%. The husband was to be the licensee of the new office. He was to be paid a base salary of $40,000 plus commissions calculated at 55% of the total he generated. He was to then share any profit equally with E Pty Ltd. Any management work obtained would be undertaken and managed by the management team from the other office of the business in the coastal hamlet.
Notwithstanding the existence of that document, the arrangements for the acquisition of that business and opening of a new office of the business in that town, did not happen strictly in accordance with those stated plans. The purchase price of $110,000 was provided by E Pty Ltd from further borrowings secured by existing mortgage security provided by the wife. The balance of funds necessary to set up the office, about which there is dispute between the parties as to the amount spent, was also provided by the existing business. The husband did not contribute any funds at that time or any mortgage security directly to the acquisition and set-up.
He was then “engaged’ with the business through a “Statement of Engagement” that described him as an employee. He was to be paid a gross weekly wage of $546.46 and commission on a monthly basis after receipt of the commission by the business. There were other allowances provided for, such as for motor vehicle and mobile phone expenses, and it also provided for his leave entitlements. The husband signed the document, as did the wife as the authorised representative of his new employer.
The husband’s evidence was that the wife told him sometime before settlement of the purchase of the leasehold premises in the hinterland town that she had been to see the accountant who had her sign a lot of documents to effect a restructure of the ownership of the business. The husband said that he told the wife that he was surprised that it was happening without his involvement. He said that the wife said to him that she did not understand the complexity of it and that she was just doing what she was advised to do. In response to what he seems to be asserting was a complaint by him, his evidence is that the wife told him that it was set up in this way, through a set of trust structures, to include him as her “de facto partner”. He said that she told him she did not want to change anything now as it would cost even more than it already had in stamp duty and she reassured him that as her “de facto partner” he was “entitled to 50% of everything” in any event.
I am satisfied that a conversation to this effect did take place between the husband and the wife. Indeed, there is evidence from the husband and his brother, that I accept, that around this time when the husband and the wife were visiting with the brother, the husband raised the restructure with his brother and there was a conversation between the three of them about it. The wife said something like “I don’t understand the restructure or why it was done” and the brother offered to call the accountant and speak to him about it. At a later date, the brother told them both that he had called and spoken with the accountant. He offered them the opinion that he could not see the commercial relevance of the restructure the accountant had recommended “unless [the husband] was going to join as a partner”. The husband’s evidence is that he remembers the wife saying to him after hearing about the brother’s conversation with the accountant and his opinion about the restructure, words to the effect of “I thought that being de factos, that this structure allowed me to distribute income in a way we couldn’t do otherwise”.
The husband accepts that the wife engaged the solicitors who were required to do the legal work for them in effecting the restructure, the purchase of the leasehold business and the assignment of that lease they were buying. Again, he was not involved in that, apparently by acquiescence.
I accept that all of this actually happened as I have just outlined. I do not find that the wife was not telling the truth in the things that she said to the husband and his brother at that time. I specifically do not find that the wife deliberately excluded the husband from an ownership position in this restructure. I am satisfied that, as the husband’s brother identified, if the husband was to come into the business as a legal “part-owner”, he could do so by acquiring units in the unit trust that now owned the business. That said, I am quite satisfied that the husband and wife saw themselves as partners in a “de facto relationship” from this time on and that the husband did move in to the wife’s home on the outskirts of the coastal hamlet at around this time, though perhaps a little later in the 2007 calendar year, from which point they were “living as a couple in a genuine domestic relationship”. Up until the time that he moved in and started living there on a full-time basis, I do not consider that their relationship bore sufficient of the factual indicia required to meet the statutory definition, most particularly by reference to “the nature and extent of their common residence” and “the degree of mutual commitment to a shared life”.[1]
[1] See Family Law Act 1975 (Cth) ss 4AA(2)(b) and (f).
From when the husband moved in to live with the wife in her home on a full-time basis, which I find happened sometime in the second half of the 2007 calendar year not long after he began working full-time in the business, I am satisfied that they were in a “de facto relationship” as that term is defined in the Act. I am satisfied that they regarded the business as “their” business, regardless of actual legal ownership structuring that left actual formal control in the hands of the wife. They both knew of the legal ownership structuring and accepted it, nevertheless I am satisfied they both believed that they were working for a common cause in a business that was benefitting them both.
What interests in property did they each have when they commenced living together?
At the time the husband moved in with the wife, the wife had the following property:
(i)The real property at Town B Property 2. She had bought her former husband’s interest in that property in late 2001 after the property had been valued then at $775,000. She also had a debt secured by mortgage over this property, the amount of which at that time was not in evidence. She did depose to a mortgage debt of $222,500 in mid-2000 and then she said she borrowed $200,000 more to pay out her former husband. In the Child Support Agency form she completed in February 2004, she asserted the property to be worth (on her estimate) $1,500,000 at that time and stated the mortgage liability to be $410,000;
(ii)The real property at Town C Property 3. She had inherited this property from her late father’s estate and owned it when she met the husband. It was unencumbered;
(iii)A quarter interest (the other three quarters being owned by her three siblings) in the real property at Town C Property 2 that she had inherited from her late father’s estate and also owned when she met the husband. It was unencumbered;
(iv)Her interest in the business which was not worth much at all at that point in time and there was additional debt owed to the bank for the $110,000 just borrowed to buy the leasehold interest in the premises in the hinterland town.
The wife also had some superannuation at that time. The value of that at the time was not in evidence. She did depose to it being worth approximately $2,246 in June 2001 though.
At that same time, the husband had the following property:
(i)The real property at Town A that he had bought in 1995 for around $200,000. The wife deposed to that property being valued at about $500,000 in mid-2000 when they met and about $700,000 in 2007. The wife also deposed to the existence of a mortgage debt over that property of $168,453 in the middle of 2006;
(ii)The real property at Town B Property 1 that he had bought in 2006. The husband had purchased this for $627,000 and had borrowed all of the purchase price using the two real properties as security with these borrowings. He still owed all that.
The husband also had some superannuation at that time. The wife deposed to the existence of a member statement for his interest showing it to be worth $72,000 in 2007.
From the commencement of cohabitation on
The former couple then worked in the business, the wife running the office in the coastal hamlet where they lived, the husband running the office in the hinterland town where he had worked for seven years up to that point in time. He concentrated on sales and managing the sales team. She concentrated on managing the whole business and the management side of the operation, but also did some sales work.
The declared taxable incomes of the husband and the wife for the financial years 2008 through to the financial year in which they separated were as follows:
Financial Year
Husband
Wife
2008
$39,111
$107,084
2009
$71,619
$69,134
2010
$126,842
$90,201
2011
$79,896
$125,856
2012
$18,343
$79,610
2013
$9,532
$74,610
2014
$33,895
$79,465
2015
$64,275
$79,909
2016
Not in evidence
$85,717
Commencing again in January 2008, the husband kept advancing money to the wife to be used in the business or for some other personal purpose. Whilst $35,000 that he had advanced her up to the end of 2006 had apparently been regarded by both of them as money loaned to the wife (though there is no evidence that it was ever repaid), there is no contemporaneously produced documentary evidence that supports a finding that all of the following amounts were actually also regarded as loans that were to be repaid, probably because they were, by this time, living together as a genuinely committed couple. Neither party asserted that there were any loan agreements documented, any separately kept record of amounts advanced and any record of any request for or attempt at repayment. The husband gave evidence in his trial affidavit that the historical bank records reflect that he advanced the following amounts to the wife over the four years between 2008 and the end of 2011:
Date of Advance
Amount
31 January 2008
$20,000
12 May 2008
$20,000
22 May 2008
$10,000
22 May 2008
$10,000
11 August 2008
$20,000
27 April 2009
$5,000
18 May 2009
$15,000
25 June 2009
$15,000
15 July 2009
$10,000
31 August 2009
$50,000
28 June 2010
$25,000
31 August 2010
$20,000
1 July 2011
$20,000
22 September 2011
$10,000
Total asserted
$250,000
Despite including these assertions in his trial affidavit, at the trial, the husband conceded that the day after the first $20,000 in this list was drawn on his bank account, $20,000 was deposited back into his account and that it must have been the same $20,000 being returned to him. Furthermore, although the wife was initially disputing the fact that she had received $20,000 from the husband on 11 August 2008, at the trial she conceded she had received it, saying that she had since found another account into which that money had been deposited.
However, the wife still disputed the fact that she had received $5,000 on 27 April 2009 and $20,000 on 31 August 2010, saying she could find no evidence that such amounts had been deposited into any of her accounts. The husband maintained his assertion that those amounts were drawn from his account payable to the wife at those dates. In the circumstances, particularly having regard to the wife’s late concession that one of the other advances that she had disputed had been received by her, I am prepared to accept the husband’s evidence that those two amounts totalling $25,000 were drawn and paid to the wife, or at her direction or, at least, for some purpose that benefitted them both at the time.
That amounts to a total of $230,000 that the husband drew from “line of credit” facilities secured by mortgages over his two real properties and advanced to the benefit of the business, the wife and him over those four years, most of which was in the immediate, post-“global financial crisis” period.
In her evidence about these advances, the wife asserted that only $40,000 of those advances went to the business, with the balance going to her personally. She went on to assert that in May 2010, two years after the payments that she said went into the business, she caused two amounts of $20,000, totalling $40,000, to be paid from business accounts to the husband as “repayment” of the money he had advanced to the business two years before. The husband did not dispute these assertions by the wife and I accept them. There is no evidence as to what he did with that amount of $40,000, but I consider it safe to accept that he put it back into the line of credit facility, making it also safe to accept that it was a net total of $190,000 that he contributed from that facility over those years.
The effects of the global financial crisis on the performance of the business and the financial needs of the couple were significantly tempered by the commissions earned on the sales of the blocks that had been sold by the husband for his long-term acquaintances that I refer to above, totalling $479,600. Those commissions were received by the business over a two year period that began in November 2008 and ended in December 2010. As far as contributions are considered, I am satisfied that these commissions came into the business by way of the husband’s connections and efforts and accept that as a contribution principally made by him.
The business grew substantially in the years that the husband worked there from 2007. In the 2007 financial year, it had total income of $528,184 and a net profit before tax of $59,154. In the 2016 financial year, the last full one in which the husband worked in the business, it had a total income of $1,453,295 and a net profit before tax of $448,691.
In 2017, the total increased again to $1,471,003 but the net profit before tax was down to $312,690. For the first half of the 2018 financial year, income recorded in the management accounts was $926,272 with net profit before tax recorded as $245,098. So, clearly, things were still going very well for the business even though the husband had completely severed any ties with it in late 2016.
In or around 2011/2012, the parties decided to let their employed sales team shrink by natural attrition to the point where there were only the two of them left selling properties, supported by administrative and management staff. That change did not have a negative impact upon the performance of the business, but rather a positive impact. The husband attributed that to there being no need for him to continue supervising and managing the employed sales team, so that he was then freed up to concentrate on his own sales.
The wife also said in her evidence that after some years in the office in the hinterland town, the husband started spending more and more time working out of the office in the coastal hamlet, leaving the other office staffed by employees only. She also said that in 2012, a decision was made to close down that office in the hinterland town, save for keeping a window display there. The husband did not dispute that evidence. From that point in time, the two of them worked out of the same office in the coastal hamlet and without other sales staff.
The husband’s commissions
A lot of time and energy was spent in and around the trial by the parties and their legal representatives on the disputed issue of the husband’s assertions that over the years he left commissions that were owed to him in the accounts of the business from time to time for the benefit of the business.
The wife seemingly took issue with it, but did, as I understood her position, ultimately concede that he did actually do that from time to time. She attributed that principally to his desire to manage his taxation obligations by minimising and/or flattening out his income from one financial year to the next.
In the end, when the husband exited the business in mid-November 2016, several months after his separation from the wife, after what became a rather acrimonious “employment” dispute, the wife ensured that the business paid him out all leave entitlements he was owed and what she said was calculated as the amount he was still owed in unpaid commission entitlements.
Though the husband’s Queen’s Counsel proved that some of the calculations of the husband’s commissions that were provided by the staffer from the business were apparently incorrect, the husband did not vigorously argue in the proceedings before me that he was actually still owed more money in unpaid commissions. He made absolutely no attempt at asserting that he was still owed a specific amount and that he should be paid it. His own acquiescence with how he was being paid by the business and with what he was paid on separation from the business, combined with his own lack of any record keeping notwithstanding his practice of leaving commissions in the accounts for some time before being paid them, makes it nigh impossible to determine exactly how much he may not have been paid from his commission entitlements in the end. Indeed, no such position was urged upon the Court.
Nevertheless, Queen’s Counsel for the husband produced a table in his written submissions that demonstrates, by reference to the documentary evidence that was adduced, that the husband’s taxable income paid to him by the business from the 2008 financial year to the 2016 financial year totalled $767,825 but that the commissions that were recorded that he had earned or been entitled to in the same period totalled $952,334. That is a difference of $184,509 that was, at least at the end of the 2016 financial year, left in the business. The evidence is that he was paid about $54,000 as “unpaid commissions” upon his exit later in 2016. That clearly was not all that he had actually been entitled to.
In the circumstances, I accept that he made contributions to the financial success of the business by leaving commissions owed to him sitting in the accounts of the business for longer than they would otherwise have been there, if he had been paid them immediately his entitlement to be paid the total commission had accrued. I also accept that a large amount of the commission that he left in the business accounts was never actually paid to him, even in the tumultuous circumstances of his exit from the business, when some amount was paid to him. Additionally, the share of the commissions that his sales earned that was retained by the business is also something that I consider, particularly when comparing the wife’s taxable income with the husband’s from year to year during those years. Her income clearly reflected earnings of the business overall, including commissions earned by the husband’s sales, and not just her own commissions earned through sales.
There was, though, another issue in dispute between the parties at the trial that related to the issue of the husband’s commissions that were left in the business. In June 2015, the husband was required to contribute an amount of $50,000 towards a nursing home bond fee in connection with a nursing home his father was moving into, in an arrangement with his three siblings. He did not have ready access in his own accounts to that sum. The wife authorised one of the staff of the business to cause $50,000 to be transferred from business accounts and her evidence is that it was written up as a loan in the management accounts. The financial records of the business as seen by the single expert accountant who provided opinion as to the value of the parties’ interests are certainly consistent with that. The evidence of the staff member who made the arrangements for the advance of the $50,000 is also consistent with that.
The husband disputed that and asserted that the $50,000 was paid to him as part of his unpaid commissions. He said that he had been told that by the staff member who arranged it and by the wife herself. As it was recorded in the management accounts and financial statements of the business as a “loan” to the husband, I do not accept that it was payment of unpaid commissions. I am satisfied that if it was actually payment of unpaid commissions it would have been recorded as such. Of course, it is possible that there were sufficient funds in the accounts at that time to advance the $50,000 to him because he had been leaving some of his commission entitlements in the accounts. But in deciding this disputed issue in favour of accepting that it was an advance to him treated in the books of the business as a “loan”, I am fortified by the fact that at the husband’s exit from the business his unpaid commissions were calculated and paid to him. If that $50,000 had been unpaid commissions being paid to him, I am satisfied that would more likely than not have been picked up at that stage and he would have been given credit for that payment rather than the $50,000 payment continuing to be recorded in the business accounts as a loan to him.
That finding causes me to accept that the amount the husband advanced to the wife and the business over the years from 2008 to 2011 that was drawn against his line of credit and had not been returned to him was now actually reduced to $140,000. I am satisfied that $50,000 was returned to him and used by him externally to the relationship with the wife. In reaching this finding, I acknowledge that the wife effectively had the use of that $50,000 for all the years in between – years when they were together in a de facto relationship, of course, contributing to some mutual benefit.
However, as I have accepted that it is recorded in the business accounts as a loan to the husband and is, therefore, included in the value ascribed to the business interests as an asset, I will continue to treat it as an asset in the property interests of the wife and as a liability of the husband. I will, accordingly, continue to consider that the husband contributed $190,000 in funds, drawn against the equity in property he brought with him into the relationship to the business and the wife’s wellbeing during the years 2008 to 2011. This is in addition to the $35,000 that it was agreed between them in 2007 that he had contributed to that point in time.
The acquisition of other properties
In September 2008, a property was purchased at Town F in the name of E Investments Pty Ltd as Trustee for the Barnwell Family Trust. Its purchase price was $630,000. There is some dispute between the husband and the wife about how the availability of the property for purchase came to their attention. Each claims that their own personal connection with a local primary producer/businessman/investor brought it about. I am satisfied that the resolution of that dispute does not matter as I accept both had connections with him and he gave evidence that supported a finding that he had discussions with each of the parties separately about this property.
Essentially, the purchase and subsequent development of the property was done as a joint venture between the discretionary family trust controlled by the wife and this third party. The property was bought, funded by borrowings, subdivided with a new house being constructed on the newly created lot, next to the existing house. The new house was built by the wife’s brother, a builder from Sydney who moved up to the north coast for the duration of the building project and lived in the existing dwelling on the property whilst building the house. That cost the joint venture a further $450,000.
The new house could not be sold by the joint venture for the price they needed to sell it at to recover costs, so they rented it out for some time. Ultimately, in late 2015, the third party’s interest in the two properties was bought out by the wife’s family trust for $350,000.
To be clear, at no stage, had the husband provided mortgage security over his two real properties to secure the funds to purchase this property and build the house, but this did take place over a period of time during which he was advancing significant funds to the wife as she needed them and asked for them. Those advances were increasing his own mortgage indebtedness.
In August 2009, the wife, through the family trust she controlled, purchased another half interest in a unit property in J Street, Town B Property 4. That unit was bought equally with another couple for $655,000 in total. The wife arranged to borrow her share of $327,500 from the bank using her existing security (and, no doubt, the security of the unit being purchased).
There is no dispute that the husband did not consider it a good investment and tried to discourage the wife from going in to this deal. The wife and the third parties arranged for some improvements to be carried out and the unit was rented out to generate income to be used to meet the loan repayments. That unit was sold for $830,000 in early 2017, after the husband and the wife had separated. The wife applied her share of the net proceeds to reduce existing liabilities.
In 2013, the parties determined to move the business in the coastal hamlet from one office to another. The husband had a contact who owned a property he considered suitable. He persuaded the wife that it was suitable after she had initial reservations. The business acquired a lease on the premises and the parties together set out about fitting it out into a suitable office. The wife gave evidence that about $100,000 funds were used from the business to pay for the renovations and the fit-out. I accept that. The business has been operating from those premises ever since and in early 2018, another five year term was negotiated by the wife with the owner of the property.
In February 2014, another property was purchased. It was another unit in the same building in J Street, Town B Property 5 as the one purchased in 2009. It was bought by the wife’s family trust for $545,000. The wife said that this time the husband thought it a good idea to buy the unit but that he said he would not borrow money to purchase the property and that she could go ahead and do it. I accept her evidence on that. The wife arranged for some improvements to be made to the unit and rented it out with the income being used to contribute towards mortgage repayments.
That property was also sold in early 2017 for $830,000. The wife applied the net proceeds of sale, along with those from the other unit in the same building, to reduce the liability she had on the other property she had more recently bought, as well as other liabilities.
In the middle of 2014, the business purchased the customer list that was owned by another business in their coastal hamlet. The husband was not in favour of doing so. The wife determined to go ahead with the purchase and negotiated the price down from $1,000,000 to $817,554. The purchase was settled by payment of a deposit and then three further instalments over a period of a few months. The wife arranged to borrow $1,040,000 over a period of five years. The annual income of the customer list at purchase was $308,181. The loan has been repaid at about $12,333 per month and by March 2018, when the wife swore her trial affidavit, only $310,620 was owing. The wife deposed to a hope that it would be repaid within 12 to 18 months from that time.
In early 2016, the wife decided that she was going to purchase another property in Town B in a street called Town B Property 3. She and the husband separated “under the one roof” in March 2016 with the husband moving into a downstairs room at the home he had been sharing with the wife since 2007. In late May, the wife signed the contract to purchase Town B Property 3 for $1,950,000. She borrowed the entire purchase price from a bank.
In the last year or so of the relationship, some preparatory work was done by the husband and the wife towards the establishment of a casual hire business in the coastal hamlet to complement the management side of the business that expanded with the purchase of the customer list. It was not actually established by the time they separated, but the wife went on to establish it several months after their separation, running it through a company she established called D Pty Ltd.
The husband’s inheritance
In December 2015, the husband’s father sadly passed away. His wife had already pre-deceased him. The husband inherited 50 head of livestock from his father. The remainder of the estate, principally good grazing land in the fertile river valley just out of Town K, was bequeathed to the husband and his three siblings through four separate testamentary trusts established in the deceased father’s last Will that had been executed by him in late 2009. Each of the four testamentary trusts is a discretionary family trust. The husband and his brother, the commercial lawyer, are joint trustees and appointors of the husband’s trust, as is the brother with each of their sisters in respect of each of their trusts. The husband has no ability to remove his brother as a trustee and appointor.
The primary beneficiaries of the trust are any children and grandchildren of the husband. The secondary beneficiaries are the husband, his spouse, if he has one, and a long list of other extended family members.
Later, in June 2017, after the husband and the wife had separated, the husband and his three siblings established a company in which they are all directors, with the shares being held equally by their four discretionary trusts. He and his three siblings then transferred all of the assets of the estate they had inherited (apart from the land) to the company. The four trusts entered into a lease with the company in respect of the land. The husband sold the livestock he had inherited to the company for just over $50,000.
The properties are run as a small livestock farming enterprise by the company. All the members of the husband’s extended family get pleasure out of the farm. Since separation from the wife, the husband has principally lived in one of the cottages on this farm.
For the husband it was submitted that he “has no expectation of being able to realise/control the trust assets” and that “he can have no reasonable expectation of any future distributions”. Reliance was placed on the evidence of the husband’s brother. It was abundantly clear that the husband’s deceased father wanted the property to stay in the ownership of the family, to be enjoyed by as many members of the family who are currently living as possible, as well as future generations. As such, it was submitted for the husband that his interest in this trust is neither property nor a financial resource. I accept that it is not property, most particularly because he does not solely control the trust, either at law or in fact. Having seen and heard the husband’s brother give evidence, I am satisfied that the husband would not control his brother to the extent of getting him to do exactly what he asked of him in respect of distributions of income and/or capital of the trust. I am satisfied that the husband’s brother would act in accordance with what he understood their deceased father’s wishes were and what was in the interests of the entire extended family.
That is not to say that he would not, along with his sisters, consider providing financial assistance to the husband in the future if he ever needed it. He effectively conceded as much under cross-examination. The husband is already permitted to live on the property in return for which he cares for it and the livestock, and he is a beneficiary of the trust, which he jointly controls with his brother. As Queen’s Counsel for the husband acknowledged, the plurality of the High Court in their judgment in Hall vHall (2016) FLC 93-709 at 81,455 [54] said in terms of the meaning of “financial resource” in the context of s 75(2)(b) of the Act (the equivalent of s 90SF(3)(b)):
… it has long correctly been recognised that a nominated beneficiary of a discretionary trust, who has no control over the trustee but who has a reasonable expectation that the trustee’s discretion will be exercised in his or her favour, has a financial resource to the extent of that expectation.
Accordingly, I do consider that the husband has a financial resource in his interest in the trust that owns a quarter of the property. Though that quarter interest was given a value by the single expert of $740,636, I cannot find the husband’s financial resource has that value. I do not find that he has a reasonable expectation that the trust would necessarily sell its interest in the land, even to his three siblings’ or their trusts, and then distribute all of the sale proceeds as capital distributions to him alone, though it is not a complete impossibility. I am unable to attribute an actual value to the financial resource in these circumstances, but I do not accept that it is worth nothing to him. Its existence is something that I will have to take into account in determining property adjustment orders that are just and equitable.
The property interests of the parties or either of them
A document called a “Joint Balance Sheet” was handed to the Court at the end of the trial. It included the following interests in property and the values of those interests about which there was no dispute between the parties:
Interest in property owned by the Wife
Value of interest
Real property at Town B Property 3
$2,275,000
Real property at Town C
$250,000
One quarter interest in real property at Town C Property 2
$77,500
E Investments Pty Ltd ATF Barnwell Family Trust
(this includes though the asset of a loan of $50,000 being the recording of that $50,000 that was advanced to the husband to pay towards his father’s nursing home bond)
$495,426
E Pty Ltd
$653,665
D Pty Ltd
Nil
E Investments Pty Ltd
Nil
Bank account – H Bank
$763
Furniture and contents
$10,000
Debt due to wife from Barnwell Unit Trust
$367,441
Unpaid present entitlement of the wife from the Barnwell Unit Trust
$231,410
Subtotal
$4,361,205
Interest in Property owned by the Husband
Value of Interest
Real property at Town A
$1,175,000
Bank account – Commonwealth Bank
$3,342
Bank account – NAB
$107
Motor car
$2,000
Listed shares – G Company
$4,000
Furniture and contents
$1,000
Subtotal
$1,185,449
That “Joint Balance Sheet” included superannuation interests of the parties about which there was no dispute. Those were:
Wife’s – Super fund 1
$184,036
Husband’s – Super fund 2
$47,530
Husband’s Super fund 3
$195,348
That same document included the following liabilities of the parties about which there was no dispute:
Wife’s liability to NAB – mortgage debt
$79,468
Wife’s liability to NAB – Town B Property 3 mortgage debt
$1,370,000
Wife’s Westpac Credit card debt
$3,500
Wife’s liability to the Barnwell Unit Trust
$722,585
Husband’s liability to NAB – mortgage debt
$1,052,661
Husband’s liability to NAB – another mortgage debt
$121,522
Husband’s recorded debt to the Barnwell Family Trust
$50,000
It was therefore agreed at the time the trial concluded that the wife had at least $4,361,205 in property interests, $184,036 in superannuation and $2,175,553 in debt.
It was also agreed at that time that the husband had at least $1,185,449 in property interests, $242,878 in superannuation and $1,224,183 in debt.
Significantly though, there remained, at the end of the trial, a very substantial dispute between the parties as to the value of the two other properties of which they owned one each. The wife is the sole registered proprietor of the property which she acquired with her former husband and in which she and the husband lived from 2007 until 2016 and in which she continued to live at the time of the trial concluding. It was agreed that it had been valued by a single expert at $2,075,000. That is the value that the wife contended should be attributed to that property in these proceedings.
The husband is the sole registered proprietor of the property which he acquired in 2006 adjoining that property of the wife just discussed. It was agreed that it had been valued by a single expert at $835,000. That is the value that the wife contended should be attributed to that property in these proceedings.
The total of those values ascribed to those two properties would add $2,910,000 to the total value of the property interests of the parties. That is the wife’s position.
In contrast, the husband contends that the value that should be ascribed to the wife’s property is only $1,850,000, whilst a value of $1,800,000 should be ascribed to his property. That would add a total of $3,650,000 to the total value of the parties’ property interests – an amount that is $740,000 greater than the amount the wife now contends for. Though that would create a higher value of the total of all the property interests of the parties, the wife opposes that.
In my judgment, the real difficulty for the husband is that the values that he contends for come from opinion evidence of an expert valuer of real property that are based on a hypothetical realignment of the current boundary dividing the two properties that could only be achieved on a successful application by both parties to the responsible local government authority responsible for assessing and approving such applications.
It is correct that such an application, or at least an application for approval of some form of subdivisional development plan, was indeed once contemplated by the parties. That is what initially prompted the husband to extend himself financially and buy that property in 2006 and hold onto it throughout his de facto relationship with the wife. The wife does not dispute that.
But, for reasons not entirely clear to me now, the parties did not ever make any such application in the years that they were together as a couple after the husband bought that property. There is no evidence that either one of them was ever pushing the other to join them in doing so in that time. It seems as if it was simply a plan that they thought one day they might be able to jointly bring to fruition and, perhaps, profit from. The opinion evidence of the expert as to the combined value of the two properties if the boundary was realigned in the particular manner considered by him is suggestive that profit might be able to be realised if they did that.
In an attempt to present the issue in the best light he possibly could, the husband arranged for expert opinion of a town planner to be adduced into evidence. That expert opinion went to the likelihood of success of such a hypothetical application for approval of such a boundary realignment. In short, in his written report, the expert witness considered that “the proposed boundary realignment has a high likelihood of approval”. That said, under cross-examination from Senior Counsel for the wife, that same expert conceded that in his written report in which he had expressed that opinion he had not considered the “vegetation policies” that were involved. The expert agreed that the vegetation issues that were involved meant that there is no certainty that approval would be granted, though he did express the view that he did not consider the vegetation preservation issue was “a great risk” to the likely success of the application. Nevertheless, he recommended that obtaining a further report from an ecologist would also be advisable to support an application. He also conceded that there were other issues surrounding a remnant dry stone wall boundary fence on the wife’s property which has some heritage value that would also have to be addressed in seeking approval.
Whilst I would not suggest that the town planner withdrew, in any major way, from the expression of the opinion that the hypothetical boundary realignment had a “high likelihood of approval”, he certainly stopped short of saying it would be approved.
In any event, I am satisfied that for an application to be made, let alone to have a prospect of success, the husband and the wife would have to be united in desire, aim and purpose. In this instance, the wife no longer wishes to be a part of this subdivisional plan. It would necessitate the surrender by her of 6471 square metres of her own property to the husband and, whilst she once may have thought of that as desirable when they were a couple and working towards common goals, she does not want to do that now.
When the husband filed his Amended Initiating Application in November 2016, he included an order directed solely at the wife requiring her to take such steps “as shall be required to effect a boundary realignment” in respect of the two properties that had her surrendering those 6471 square metres to the husband.
In a Case Outline document filed 9 April 2018, just before the trial commenced, that particular order sought by the husband was worded such that the husband and the wife be ordered to “do all things necessary to cause a boundary realignment” in respect of the two properties, but still to the exact same effect.
During the course of the trial, when Queen’s Counsel respectfully sensed the Court’s lack of interest in this particular aspect of the husband’s application, leave was sought to amend the orders the husband was seeking to include a proposed alternative order that the husband transfer all his right title and interest in his property that adjoins the wife’s property to the wife “such that the subdivisional potential thereof is held by the wife”.
Having heard that, the wife nevertheless confirmed her position during the second part of the trial in November last year that she does not want to take the ownership of his property so as to be in a position to enjoy any such subdivisional potential. That would simply result in a very substantial increase in the cash amount that she would be required to pay the husband to do justice and equity between them.
I am quite satisfied that the statutory injunction upon the Court, contained within s 90ST of the Act, to “make such orders as will finally determine the financial relationships between the parties to the de facto relationship and avoid further proceedings between them” compels me not to make orders such as the first order sought by the husband in this case. I consider that ordering the two of them to join together in an application for a boundary realignment such as the husband proposes would be a recipe for disaster and would certainly not “finally determine” the financial relationships between them. I will not order that.
The alternative order the husband seeks is clearly designed for him still to get the perceived advantage of the extra value of $740,000 to be added to the total value of the property interests of the parties.
As I understand the evidence, the opinion evidence of the valuer is based on the realignment of the boundary being approved. The evidence is that there is a high likelihood of approval but that it is, by no means, a certainty. The wife’s evidence is that she does not want the husband’s property and no longer wants to undertake a development like that over those two blocks. Her evidence, which I accept, was that she enjoys living in the house on her property there and the serenity and amenity that it currently offers her, as it is. I do not consider that it would be just and equitable to make an order that she must take the transfer of the husband’s property if she does not want it. Further, I do not consider, in all these circumstances, that the evidence of value of these properties based on this hypothetical boundary realignment should be ascribed to these two properties, even if they each retain them in their current form, to do justice and equity between these two parties.
This outcome on this particular issue is a consequence of their apparent unwillingness to progress any development of the two properties in the decade or so that they were a couple after the property was purchased by the husband, the subsequent breakdown of the relationship substratum upon which any joint venture development could be achieved, and the legitimate change of mind of the wife in such circumstances.
Consequently, I will include the two properties in the list of property interests of the parties at the values of $2,075,000 for the wife’s and $835,000 for the husband’s.
The addition of these properties and these values to the list of property interests of the parties results in the following for the wife:
Value of Property
Value of Superannuation
Total Debt
Total value of property and superannuation – net of debt
$6,436,205
$184,036
$2,175,553
$4,444,688
The addition of these properties and these values to the list of property interests of the parties results in the following for the husband:
Value of Property
Value of Superannuation
Total Debt
Total value of property and superannuation – net of debt
$2,020,449
$242,878
$1,224,183
$1,039,144
The net total for both parties is $5,483,832 and the husband’s net interests equate to just under 19% of the net total for both.
As I have already observed, for the wife, it is argued that payment to the husband of $125,000 by the wife would be a just and equitable property adjustment. Included in that position, implicitly, is an acceptance that the wife should also indemnify the husband against any liability to her unit trust for the $50,000 that is still recorded in the accounts as a loan to the husband. That would lift the husband’s net total to $1,214,144 or just over 22% of the total of all of their property and superannuation interests less their debt.
For the husband, it is submitted that a just and equitable distribution of their net property interests would see him receiving 60% of them. That would equal $3,290,299 in value and would necessitate orders for the wife to settle cash and/or property on the husband to the value of $2,251,155.
The principles by which just and equitable property adjustment orders are formulated
After the determination that it is just and equitable as between the parties to make property adjustment orders, the Court must go on to determine those orders and can only make them if satisfied that they are just and equitable. By a long line of authority, it has been recognised that the generally appropriate way for the Court to exercise its discretion in determining orders that are appropriate to make pursuant to s 79, that the Court is satisfied are just and equitable as between parties, is by way of a four step process. I accept that the same four step process is applicable to the determination of just and equitable property adjustment as between parties to a former de facto relationship pursuant to s 90SM of the Act.
The first of those four steps involves making findings as to the property of the parties, or either of them, that is available to be subject to property adjustment orders. I have just done that.
In respect of the superannuation interests of the parties, no submissions were made in this case that they should be considered separately from the balance of the net property during the remainder of the process. I see no reason why they must be. I will include them in the one “pool” of net interests against which adjustment orders will be determined.
The second step involves making findings as to the contributions of the parties, pursuant to ss 90SM(4)(a) to (c), across all facets of their relationship and in all spheres. Once those findings have been made, the Court is to attribute a notional percentage division to the net pool of property, having regard to the contributions assessments so made.
Thirdly, the Court is to consider the evidence pursuant to ss 90SM(4)(d) through to (g), including in respect of the matters set out in s 90SF(3) of the Act insofar as they are relevant. Effectively, what the Court is required to do at this stage is to consider whether the facts as found, insofar as the parties’ relative financial positions currently and prospectively are concerned, require there to be any adjustment to the notional percentage division already reached at the contributions level in order to achieve a just and equitable property division in all of the circumstances of the case.
The fourth step is one where the Court takes a step backwards and looks at the orders that are to be shaped to give effect to the percentage division arrived at to determine if the orders that are to be made are in themselves just and equitable.
Contributions
As I have already set out earlier in these reasons, when the former couple began actually cohabitating in a de facto relationship the wife solely owned real property at Town C and in Town B, as well as the one quarter interest in a property at Town C. The Town C properties were unencumbered. The Town B property, which the wife had asserted a few years before was worth $1,500,000, secured debt which had been $410,000 in February 2004, but which was increased by a further $110,000 when the Town F leasehold was purchased in 2007. There is no evidence as to what her superannuation interest was worth at that time. The business had also been operating for a few years but it was not worth anything of significance at that time.
At the same time, the husband owned two real properties. He had one in Town A that he had owned for a long time, said to be worth about $700,000 at that time with a mortgage debt around $150,000. The other was in Town B that he had bought for $627,000 the year before with debt of at least that much encumbering it. He also had superannuation of around $72,000.
In respect of the value of these contributions, the wife’s exceeded the husband’s to a significant degree. I accept that the total of her net assets was probably about twice as much as the total of the husband’s net assets.
Other contributions matters
As I have already observed, in the few years leading up to the former couple taking up actual cohabitation together in the wife’s property, the husband was in employment earning a reasonable income and the wife was working to get the business operational and viable, not earning a great income at all. At the same time, she was still supporting two teenage children.
I am satisfied that in those years, though they were not cohabitating as such, they spent a lot of time together, and the husband did give the wife financial support from time to time. I have already found that he advanced a total of $35,000 by way a number of smaller lump sum payments to her over those years, but I am also satisfied that he would give her cash amounts out of his wallet from time to time as she needed it. Those are not quantifiable. He would also buy food such as meat and fish for the household when he would go there, as well as taking beer and wine there. I am also satisfied that he did some physical work around her property, including yard maintenance work, from time to time during the years before he moved in to live with her at the property. However, the husband conceded that the wife paid all the utility bills in connection with her property, including her telephone and internet connection bills, as well as rates bills.
As for the wife’s other properties down near Sydney, I am satisfied the husband made no direct financial or non-financial contributions towards those. In respect of the husband’s Town A property, though the wife sometimes stayed there with the husband overnight in these early years of their relationship, I do not find that she made any contributions towards it in any way.
I accept the wife’s evidence that the husband did not develop particularly close relationships with her two children. Indeed, they were in and around young adulthood when he actually moved in to live with the wife. Though he says he sometimes drove them to school and picked them up from parties and gave them a bit of advice from time to time, which I accept, I am not persuaded that he made very significant contributions towards their care and welfare before they reached adulthood. The wife principally bore that responsibility herself.
I also accept that the husband, though employed with a competitor in the hinterland town, did make some contributions towards the business the wife had established before he joined her working full-time in the business in 2007. Those contributions measure nowhere near as significantly as the wife’s in this same sphere in that timeframe, however.
After the former couple began actually living together, and then working together in the same business, I am prepared to accept that their contributions outside the business and financial sphere, across the other aspects of their relationship, became relatively equal. Around the property, the husband would more consistently maintain the large yard, whilst the wife did most of the internal house cleaning, but with assistance from the husband. The wife did most, though not all of their cooking, with the husband cooking breakfasts and barbeque dinners a couple of times each week. They gave each other the company, mutual affection and support that most couples do. I am satisfied that this continued, though the level of their emotional and practical support for each other gradually diminished towards the end of their cohabitation, until their separation in or around the beginning of 2016. Their actual cohabitation lasted nearly nine years in total.
In respect of the business, there is significant dispute between the parties about the nature and quality of the husband’s contributions compared to the wife’s contributions.
The husband would have the Court accept that he was an equal contributor. The wife argues for a different finding. The husband pointed to some emails that were adduced into evidence that were contemporaneously written by the wife during their time together that are, prima facie, inconsistent with the wife’s position maintained at trial about the quality of his performance. Indeed, the evidence supports a finding that she was prepared to travel overseas from time to time for holidays, leaving the husband in charge of the business, advising the staff that he was being left in charge. They prove that she was complementary of his efforts and performance in the business. Documents that come into existence contemporaneously with the continuation of a relationship are often better indicators of how people truly felt at the time, than the expression of their views given through the prism of the disappointment and bitterness often felt after the breakdown of the relationship.
I am satisfied that the husband was a salesman of some experience and apparent ability. He earned well when he was employed by others up to the time he commenced working in the business. He was offered a well-paying position working for another agency that was set to open in the hinterland town a couple of years before moving to work in the business with the wife, and turned the offer down because of his intention, apparently held at the time, to join the wife in the business at some point in the future at that time. That offer was a clear indicator of what others thought of his proven ability and potential at that time.
Significantly, he brought a half a million dollars of commission into the business in the few years after he joined the wife at the business, all sourced from his long term friendship with the third party who developed and sold the relevant properties that produced that commission.
However, the wife made a strong case in respect of the husband’s use of alcohol and its impact upon him. The husband met that case with simple denials. Yet, despite the husband’s denials that he has had a problem in respect of his dependence on and consumption of alcohol, I consider that it has been a problem in his life and that it has actually impacted upon his work performance all through the years that he was working in the business. Additionally, it was clear that he left a lot of significant management and investment decisions to the wife, letting her go to meetings with accountants and bank officers on her own, and deferring to her decisions when investments were proposed that he did not consider to be good ones. Significantly, in respect of these investment decisions when they related to property purchases or even the customer list purchase, he did not provide any of his property as security for borrowings or even become a joint registered proprietor of the properties.
The wife gave a lot of evidence going to her concerns about and difficulties coping with the husband’s alcohol consumption. There was not a lot of dispute about some basic facts and the evidence quite clearly satisfied me of the accuracy of them. At least from the time the husband began working full-time in business with the wife, he would spend a lot of his time both during working hours and in the evening after working hours at hotels drinking beer.
He sought to justify that by assertions that the hotel in the hinterland town was the hub of the community and that it was the place where a lot of business was done. That may well be true, but it does not follow that one must drink alcohol whilst at that hotel to succeed in business in the town. The husband said he often had lunch at the hotel in that town, drinking one or two beers over lunch. The evidence was that he would also spend entire afternoons there drinking from time to time. If he did not, he would go there, or back there, around 4.00 or 5.00 in the afternoon, in any event, and have two to three more beers before driving home to the coastal hamlet some 20 minutes away. He would drink one to two beers, followed by one or two glasses of wine, after he arrived home at 7.00 or 8.00 at night. The wife gave evidence that the husband often rang her before driving home and asked her if she had seen any police random breath testing units on the road that he would be driving on to get home. I accept that evidence. She said that she and her daughter often complained to him of the danger his driving under the influence of alcohol posed to other road users.
After he began working principally from the coastal hamlet, he apparently simply switched his drinking habits from drinking at the hotel in the other town to drinking at the hotel in the coastal hamlet. The evidence shows that virtually all cash withdrawals he made from his bank accounts over long periods of time were made at hotels. He clearly did spend a lot of time in hotels. There was no suggestion by the wife that he gambled. In fact she accepted that he did not, but she gave evidence that it was a standard joke amongst the staff of the business that if the husband was not in the office, he would be in his other “office” – the bar of the hotel. The wife was troubled by the fact that the husband had developed a reputation around the business and the community for being a big drinker and she was concerned, at that time, about the potential impact of that on the reputation of the business.
There was evidence that even when he was mowing the property on the ride on mower, he would have a stubby of beer in his hand, drinking whilst riding the mower.
The wife’s concerns were also shared by members of the husband’s extended family. The wife of his brother, a medical practitioner herself, had written to the psychologist the husband started to see after the separation from the wife informing him, amongst other matters of the husband’s history, that he had a history of binge drinking. The psychologist himself acknowledged that when the husband came to start seeing him, he had himself accepted that he had a problem with his consumption of alcohol and was intent on addressing it.
The evidence proved the husband was struggling with addressing the problem, however. Early last year, he was stopped driving from the hotel in the town nearest to the property on which he has been living, and subsequently charged and convicted of an offence of driving with a blood alcohol concentration of .22% – more than four times the legal limit. He was disqualified from driving for a lengthy period and also ordered to have a device fixed to the ignition of his motor car after he was permitted to resume driving, which would prevent the car from being started if a level of alcohol was detected on his breath. As I remarked during the course of the trial when this evidence was discussed, I am quite satisfied that the husband, with a blood alcohol concentration as high as .22%, could not have been under any illusion as to the appropriateness of his driving on that occasion, yet he chose to drive. That is indeed problematic.
Notwithstanding his best efforts to deny that he had a problem, I am satisfied that he did. I am also satisfied that it did impact to a not insignificant degree upon his performance in the business over the years he was working there.
Queen’s Counsel for the husband took the Court, in his submissions, to the fact that the business income went from $528,184 in 2007 to $1,453,295 in 2016 with net profit increasing from $59,153 to $448,691 over the same period. This certainly highlights the success and growth of the business over those years. I am satisfied that the husband contributed to that in a not insignificant way, particularly having regard to the half a million dollars in commissions he brought in from the one property development deal and the tens of thousands of dollars in commissions he left in the business over the years. In addition to those factors, there was his contribution of a couple of hundred thousand dollars to the wife in the early part of that time frame that he sourced from the equity in his Town A property that clearly helped her and the business through some difficult times.
Those contributions, particularly the commissions that I have referred to that he brought in through his pre-relationship connections, still must be viewed in the context of the evidence about income the business earned totally over the years they were together. The single expert accountant who provided valuation opinion evidence set it out in his report, at least for the 2014, 2015 and 2016 financial years. Total commission income in those years was approximately $717,000, $858,000 and $742,000, respectively. In the 2017 financial year, for more than half of which the husband was no longer working in the business, it increased to $770,000. Management fees, which the husband had little, if anything to do with, for those same years were $315,000, $567,000, $604,000 and $600,000 respectively.
Ultimately, having considered all of the evidence, I am convinced that the wife provided most of the drive and energy towards the day to day running of the business over these years and that she was the person principally responsible for its success. Additionally, it was her property that principally provided security for the borrowings the business undertook that also helped it facilitate its growth. Additionally, it was her belief and willingness to undertake risks that led to the investment decisions that have borne fruit in terms of capital growth and generation of income over the years since those decisions were made.
The wife also gave evidence that the husband regularly just took a day off from the business and went to spend time on his parents’ farm doing livestock work there for no personal remuneration. The wife’s evidence was that the husband’s days off were never recorded as leave. He was also paid out his unpaid leave entitlements when he left the business in 2017. I accept the wife’s evidence about this and consider it another matter that weighs in the contributions assessment.
In assessing and weighing all of these contributions, I also do have regard to the big financial commitment the husband made in borrowing heavily to purchase the property adjoining the wife’s property that was part of a joint plan to profit on a potential development of the two properties that never eventuated. As was pointed out in Queen’s Counsel’s submissions, the husband’s evidence was that he had paid $516,413 in interest charges on the borrowings that he used to purchase that property up to 30 June 2017, along with another $100,811 in miscellaneous expenses. The right to claim the losses he incurred in that respect, after having regard to the rental income received, gave him $383,693 in deductions from his assessable income over the same period. That saved him a lot of tax over the years, but there was still a loss. Clearly, he did contribute those funds to the maintenance and continued ownership of the property that kept the potential development alive until their separation.
Ultimately, I am not satisfied that the husband’s contributions in the business and financial sphere of their relationship, from the time they began their intimate relationship through to the time of commencement of their de facto relationship and then on until the end of that relationship on their separation in early 2016, equalled those of the wife. In my assessment, they fell short of the wife’s contributions.
Similarly, for the post-separation period, from early 2016 to the end of the trial late last year, 2018, I am not persuaded that their contributions were equal. Of course, the husband was excluded from the business by the wife and she retained the benefit of the income it generated in that period to his exclusion. In the 2017 financial year that was, as Queen’s Counsel pointed out, a net total of $662,257. Nevertheless, the husband was not contributing to the generation of that income or the maintenance of the success of the business by any sales or management work undertaken himself in that time, whilst the wife was.
Indeed, during that period the husband was not in employment and was supporting himself by drawing further against the equity in his Town A property. The full extent of those drawings was not in evidence, but when Senior Counsel for the wife put to the husband that he had “drawn down further funds of about $93,000” the husband did not take issue with him, saying he drew down funds to pay legal fees and to live.
The evidence did establish that the wife had paid $162,669 in legal costs and outlays as at 16 April 2018 and was advised that she could expect a further $164,862 in costs and outlays that she would be required to pay thereafter (before the matter was adjourned part-heard to a date later in the year). The money she had spent was sourced from the business and was being recorded to her “Director’s Loan Account”.
The evidence also established that the husband had spent, as at 13 April 2018, $250,783 in legal costs and outlays. The sum of $112,035 of that had been paid for him by the estate of his late father. The balance of just under $139,000 had been paid by the husband using funds that he had been loaned by his sisters. The evidence supports a finding that his sisters had loaned him more than that amount, but it would seem the additional amount loaned was being held by the husband’s solicitors, in trust, on account of the anticipated future costs and outlays that were estimated at around $84,000 at that time.
As for the $112,035 paid for him by the estate of his late father, there was evidence that was mostly offset and repaid by way of the estate giving him credit for the $50,000 that had been advanced towards his late father’s nursing home deposit and also giving him credit for the 50 head of livestock he had inherited which he had sold back to the estate. So, clearly, in that respect, the husband used $100,000 worth of “property” that was his at the time he separated from the wife, indirectly paying for his legal costs and outlays. The rest he borrowed from his siblings. He had only just inherited the livestock and the wife had not contributed to that inheritance as it was expressly attributed to assistance the husband had given his parents on the property in his young adulthood before he ever met the wife.
There are various ways in which paid legal costs and outlays can be legitimately considered in the determination of just and equitable property adjustment orders. In this case, Queen’s Counsel for the husband submitted, I interpreted from his written submissions, that amounts should be “notionally adjusted” or “added back” to the total of the net property interests of the parties against which property adjustment orders could be made. That is certainly one common approach. He submitted that $30,239 should be added back for the husband’s paid costs and $172,998 added back for the wife’s paid costs.
With all due respect to Mr Kirk QC, I will not do that. Firstly, I do not quite understand where his figures come from, having regard to the evidence I have already referred to, particularly the evidence that the husband used $100,000 in property to repay the estate for the legal fees it had paid on his behalf. If I was to notionally “add back”, I would think it would need to be at least the sum of $100,000 on the husband’s side. Secondly, I consider that regard to the use of funds coming from “capital” prior to the trial can just as legitimately be considered and taken into account at the contributions stage of the process in this case.
As the husband appears to have spent around $100,000 from “property” and the wife appears to have spent almost $163,000 that has probably also come out of “property”, they have indirectly contributed to each other’s paid legal costs and outlays, with the husband making a greater contribution in that respect than the wife due to the disparity in amounts and the fact that the livestock were a very recent inheritance.
All that said, I consider the post-separation contributions of the wife, overall, to still exceed the husband’s.
Given that I have considered the contributions of the wife across all relevant s 90SM(4) spheres as exceeding the husband’s, I must reject the submission made by Queen’s Counsel for the husband that the parties’ contributions over the period from 2002 to now will be held to be equal.
The discretionary exercise involved in converting my assessment and weighing of the various contributions of the parties into a notional quantitative reflection of such evaluation requires an inevitable “leap” from words to figures. That is the very nature of the discretionary exercise.[2] It is not a simple mathematical exercise. Making that “leap” in the circumstances of this case, I would express the outcome of my evaluation of the parties contributions in this case, quantitatively, in terms of a 66/34 percentage split in favour of the wife.
The third stage – considering the matters required by ss 90SM(4)(d) to (g), particularly the matter referred to in s 90SF(3) so far as they are relevant, and determining if any further adjustment is necessary to arrive at just and equitable orders
[2] As Coleman J said in Steinbrenner & Steinbrenner [2008] FamCAFC 193 at [234] and which has been approved by the Full Court in Sexton v Sexton [2012] FamCAFC 218.
For the husband it is submitted that “the massive earnings disparity which has arisen warrants an adjustment in favour of the husband such as to justify the 60/40 division sought by him”. Given that comes after a submission that an equal division based on the evaluation of contributions should be determined, I consider that the adjustment argued for by the husband in percentage terms is 10%.
I am satisfied that the wife, who is now 57 years old, is in good health and, at trial, continued to run the business that was generating a very good income that I have already said was around $660,000 in the 2017 financial year. At trial, she had not formed a relationship with any person that she would describe as a new partner. She continued to live in her Town B property.
The husband is almost 52 years old now but put a case to the Court that his health has not been good since the separation. In particular, it was asserted that his mental health has not been good.
It is the case that the husband began seeing a psychologist in June 2016, soon after the separation and continued to see him regularly and consistently up until the start of the trial.
According to that psychologist, the husband was suffering the combined depressive emotional effects of the death of his father in late 2015, the loss of his relationship with the wife after their separation in early 2016, and the loss of his livelihood and involvement in the business later in that same year. In addition to that, he has had the emotional stress of being involved in hard-fought, expensive litigation in this Court.
Queen’s Counsel, in his written submissions, pointed to the psychologist’s opinion stated in his first of two reports, that the husband “will have great difficulty obtaining and maintaining future employment due to his negative experience during the process of exiting” the business that he and the wife operated together. Mr Kirk QC placed substantial reliance upon that, in submitting that I should conclude that his mental health issues will cause him that great difficulty.
All these stressful matters that have contributed to the husband’s mental health difficulties, I am satisfied, overlay a pre-existing dependence upon alcohol that is likely to have been of some relevance to the development of his symptoms. However, in cross-examination, the psychologist conceded that he had not really addressed the issue of the husband’s alcohol dependency with him as much as the evidence suggested he should have. He even apologised for that. In my judgment, that detracted significantly from the value of the psychologist’s opinions.
The husband’s actual experience post-separation was not as negative as such an opinion would, on its face, suggest. The husband gave evidence that in the first part of 2017 he was offered a position as a sales agent with a Town A business that he intended to commence in July 2017. He said he negotiated a very favourable commission arrangement and was ready to start. He said that he then became aware that the principals sold the business to an employee and he did not take up the employment. He adduced email evidence of his communications with those third parties. Interestingly, the last email from the third party still included an invitation for him to join her in her business, working in sales. The husband did not take up a position, though, and, with respect to him, that decision was, in my judgment, not very adequately explained.
After separation, the husband went to live, principally, in a home on the farm that his late parents had owned and which is now owned through the trust structures I have already discussed. Around the middle of 2016, he met a man who had a property in that same area with whom he fairly quickly entered into a relatively informal business relationship. Essentially, pursuant to an informal agreement, he has been advising and assisting this property owner with respect to a subdivisional development application and the sale of the blocks of land after they are physically and lawfully created as individual blocks. The other man, who gave evidence speaking very positively of the husband’s capacities, stressed that he is committed to the deal they have done and intends to pay the husband a commission of 4.4% on the sale of the blocks achieved through the development. The evidence satisfied me that work was giving the husband some purpose and satisfaction, despite the stress and depression he was clearly experiencing.
Indeed, the husband spoke of an intention to develop his own business from his home “focusing on small project rural developments and the subsequent sale of those properties” just as he was doing with the third party at the time of the trial and just as he had done with the big project he had taken with him into the business when he started working with the wife.
I am satisfied that the husband has been depressed in the few years since separation, and that it does give him some emotional impairment. However, I am not convinced that this will cause him the “great difficulty in obtaining and maintaining future employment” in the industry that is submitted by his Queen’s Counsel I should find.
The evidence was that he was able to give up drinking for several months in the immediate aftermath of the separation. If he were to obtain some expert assistance in dealing with his drinking at the same time as he is obtaining psychological counselling, I consider that he could expect to be able to earn an income in the industry in the future, particularly once these proceedings are concluded, and he receives some further funds pursuant to a property adjustment order. As I have pointed out, he said he had intentions of starting his own business, but if he does not, I consider that he could expect to go into sales with another agency in the area.
All that said, I do not expect that he will ever be likely to be earning the amount of income that the wife is earning through the business that she will retain. As Mr Kirk QC submitted, there is likely to be a significant earnings disparity between the husband and the wife in the future.
Included in the matters to consider at this stage is “the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party”. It is not the husband’s maintenance that is under consideration though, rather the question of whether there needs to be any further adjustment to the contributions based evaluation to arrive at a just and equitable position.
Unlike the partner who stays at home running a household and raising children, freeing up the other partner to earn income and pursue a career, who comes out of a broken relationship with little earning capacity compared to the partner who has never forsaken their career, I do not consider it can be said that the husband in this case has contributed in the same indirect though significant way to the earning capacity of the wife whilst at the same time sacrificing his own. Neither is he left with the care of children that will impede his future earning capacity.
Additionally, the husband does have that financial resource that is available to him in the future in the form of the discretionary trust and the apparent benefit of the use of the property owned by that trust and the other three family trusts of his siblings.
10% of the total of their net property and superannuation interests is $548,383. A further adjustment of 5% in the husband’s favour would result in a 5% downwards adjustment of the wife’s notional share, bringing them 10% or $548,383 closer together. In all of the circumstances of this case, I am satisfied that such an adjustment is entirely appropriate in order to effect a just and equitable outcome having regard to the evidence and the matters set out in s 90SF(3).
Accordingly, I am satisfied that the net property and superannuation interests of the parties should be adjusted between them so as to effect a 61/39 division with the wife retaining 61% and the husband getting 39%.
With the husband retaining the net property and superannuation interests that I have already identified, this will require the wife to adjust in his favour an additional $1,099,550. Indemnifying him against liability for the $50,000 owing by him to her trust reduces the cash amount that she will have to pay to $1,049,550. That is what my orders will require her to pay.
The orders that I will make will have them keeping the net property interests and superannuation interests that they already have, the wife indemnifying the husband in respect of his liability of $50,000 to her trust, and the wife causing the husband to be paid the further sum of $1,049,550. I will give the wife until Christmas to pay the money to the husband. I consider that three months is a reasonable period of time for her to be able to arrange finance or sell property if she has to in order to meet the obligation the orders will impose.
Mr Kirk QC did not submit that default property sale orders be made to deal with any event of default on the wife’s part. Accordingly, I will not make any such orders. It is not expected that enforcement proceedings will be necessary in this case and the wife will, I am satisfied, be advised of the provisions of the Act relating to enforcement and the imposition of interest on any amount outstanding in the event of default.
I am satisfied that such orders will be just and equitable as between these two former members of a de facto relationship.
There was no evidence adduced by the wife in her evidence-in-chief as to how, if there was an order made for her to pay a cash amount to the husband, she would meet such an order. During her cross-examination, the wife was offered the opportunity to give evidence about that issue if she wished. I informed her that she did not have to if she did not want to, given that it might reveal advice she may have received about her potential liability. The wife chose not to give that evidence. Accordingly, I do not know whether she will be able to simply borrow the amount that she will now have to find to pay the husband the amount that she will be ordered to pay him, using existing security or whether she will have to sell real property to realise funds to do so.
In this respect, there is evidence in the form of opinion from Mr L, the single expert accountant who provided a report that includes estimates of notional capital gains tax that would likely be assessed as payable on the sale of the three of the real properties actually owned by the wife. The total would be $257,443. Notional costs of sale was assessed by Mr L as likely to be a total of $118,200 on those three properties.
All that said though, as I cannot determine whether the wife will be required to sell any or all three of those properties to meet her obligation, or whether she has the capacity to borrow the amount without selling any property, I do not consider it appropriate to take those notional costs of sale and capital gains tax liabilities into account at all in determining the orders to be made. Indeed, though the wife said she did not want to sell Town B property 2 that was her position before she knew how much I would be ordering her to pay the husband. As that property would have no capital gains tax liability attaching to it because it has always been her place of residence, she may now choose to sell that property, if property has to be sold.
I will take nothing off the total of net property and superannuation interests or the amount that the wife is to be pay the husband on account of notional costs of sale and capital gains tax liabilities.
I will make the orders set out at the commencement of these written reasons.
I certify that the preceding one hundred and ninety-one (191) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 30 September 2019.
Associate:
Date: 30 September 2019
Key Legal Topics
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Family Law
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Civil Procedure
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Costs
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Remedies
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Jurisdiction
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Procedural Fairness
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