Kostou & Paganotis
[2023] FedCFamC1F 737
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Kostou & Paganotis [2023] FedCFamC1F 737
File number(s): SYC 6803 of 2019 Judgment of: ALTOBELLI J Date of judgment: 31 August 2023 Catchwords: FAMILY LAW – PROPERTY – Where the wife owns numerous properties in Sydney and in Country B with her brother – Where the husband is a tradesperson and renovated many of the properties on the balance sheet – The Court concluded initial contributions favour the wife as to 55 per cent – An adjustment of 5 per cent made in favour of the wife for s 75(2) factors – Where both parties seek to retain the Suburb D property – It is ordered that the wife be given the opportunity to retain the property. Legislation: Family Law Act 1975 (Cth) ss 75, 79 Cases cited: Bevan & Bevan (2013) FLC 93-545; [2013] FamCAFC 116
Eureka Operations Pty Ltd v Transport for New South Wales [2021] NSWLEC 41 (17 May 2021)
Hickey and Hickey and Attorney General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143; [2003] FamCA 395
Jabour & Jabour (2019) FLC 93-898; [2019] FamCAFC 78
Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52
Transport for NSW v Eureka Operations Pty Ltd [2022] NSWCA 56
Division: Division 1 First Instance Number of paragraphs: 80 Date of hearing: 24–26 July 2023 Place: Sydney Counsel for the Applicant: Mr Livingstone Solicitor for the Applicant: Taylor & Scott Lawyers Counsel for the Respondent: Mr Dura Solicitor for the Respondent: Lexington Law Group ORDERS
SYC 6803 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR KOSTOU
Applicant
AND: MS PAGANOTIS
Respondent
ORDER MADE BY:
ALTOBELLI J
DATE OF ORDER:
31 AUGUST 2023
THE COURT ORDERS THAT:
1.In relation to the property at C Street, Suburb D NSW (folio identifier: …) (“the Suburb D property”):
(a)From the date of these orders, the Respondent Wife (“the Wife”) is solely entitled to any income or benefit to be derived from the Suburb D property and solely liable for all expenses and liabilities associated with the Suburb D property.
(b)Within 42 days from the date of these orders, the parties do all acts and things necessary to:
(i)Discharge the caveat in favour of E Limited of dealing number … at the Wife’s sole cost and expense, such cost to include the balance of any loan secured by such caveat;
(ii)Discharge or refinance the mortgage in favour of Westpac Banking Corporation of dealing number …36, so as to remove any and all liability of the Applicant Husband (“the Husband”), at the Wife’s sole cost and expense, such cost to include the balance of any loan secured by such mortgage;
(iii)Transfer the Husband’s right, title and interest in the Suburb D property to the Wife;
and thereafter the Husband shall have no right, title or interest in the Suburb D property nor to any income derived from the property and the Wife shall indemnify him in relation to all liability associated with the Suburb D property.
(c)In the event that the Wife fails to comply with her obligations in relation to Order 1 and the payment of the sum in Order 2, Order 6 shall apply in relation to the Suburb D property and the net sale proceeds are to be disbursed in the following manner:
(i)To the payment of all costs and expenses associated with the sale, including agents commission and expenses, conveyancing costs and disbursements;
(ii)To the payment and discharge of the caveat and the loan described in Order 1(b);
(iii)To discharge the mortgage in favour of Westpac Banking Corporation of dealing number …36;
(iv)To the payment to the Husband of the amount referred to in Order 2 below, if not already paid, together with interest calculated in accordance with the Family Law Rules and Regulations; and
(v)The balance to the Wife.
2.Within 42 days of the date of these orders, the Wife is to pay to the Husband the sum of $198,748, failing which interest will accrue on the said sum calculated in accordance with the Family Law Rules and Regulations and the provisions of Orders 1 and 6 shall apply.
3.Within seven days of the date of these orders, the parties do all acts and things necessary to authorise the distribution of the proceeds of sale of the property at F Street, Suburb G NSW held by Lexington Law Group Pty Ltd in the following manner:
(a)$130,000 to the Wife;
(b)$512,835 to the Husband; and
(c)Any interest accrued in relation to such proceeds be disbursed in the following manner:
(i)60% to the Wife; and
(ii)40% to the Husband.
4.Within 14 days from the date of these orders, the parties shall do all acts and things necessary to close all joint bank accounts and distribute the funds held in those accounts to the Husband.
5.In relation to the property at H Street, Suburb J NSW (folio identifier: …) (“the Suburb J property”):
(a)From the date of these orders, the Husband is solely entitled to any income or benefit to be derived from the Suburb J property and solely liable for all expenses and liabilities associated with the Suburb J property.
(b)Within 42 days from the date of these orders, the parties do all acts and things necessary to:
(i)Discharge or refinance the mortgage in favour of Westpac Banking Corporation of dealing number …90, so as to remove any and all liability of the Wife, at the Husband’s sole cost and expense, such cost to include the balance of any loan secured by such mortgage; and
(ii)Thereafter the Wife shall have no right, title or interest in the Suburb J property or any income derived from the property and the Husband shall indemnify her in relation to all liability associated with the Suburb J property.
(c)In the event that the Husband fails to comply with his obligations in relation to Order 5, Order 6 shall apply in relation to the Suburb J property and after a sale the proceeds are to be disbursed in the following manner:
(i)To the payment and discharge of the mortgage described in Order 5(b);
(ii)To the payment of all costs and expenses associated with the sale, including agent’s commission and expenses, conveyancing cost and disbursements; and
(iii)The balance to the husband.
6.This Order 6 shall operate subject to Order 1 or Order 5 and this Order 6 shall relate to the relevant property that is subject to the respective Order 1 or Order 5 that causes this Order 6 to operate:
(a)Within seven days of the date of the relevant party’s failure to comply with their obligation created by these orders, the parties shall do all acts and things and sign all necessary documents to effect the sale of the respective property and the following shall apply:
(i)The property shall be listed for sale by private treaty with such real estate agent as is agreed between the parties and failing agreement within seven days, the real estate agent will be as nominated by the then President of the Real Estate Institute of New South Wales or his nominee at the request of the parties or either of them;
(ii)The listing price of the property shall be such amount as is agreed between the parties and failing agreement within seven days of the date of these orders the list price will be as nominated by the President of the Australian Property Institute (NSW Division) or his nominee;
(iii)The parties are to cooperate in every way with the real estate agent in relation to the marketing of the property for sale including making the key readily available, allowing inspection of the property at all times reasonably requested by the agent and ensuring that the property is clean, neat and in good order at the time of inspection by any prospective buyer;
(iv)That upon agreement being reached for sale of the property the parties shall execute the contract of sale and all other documents necessary to complete the sale of the property including all transfer documentation forthwith upon its submission to them by the agent or their solicitor; and
(v)The contract of sale shall provide for completion within 42 days after the date of the contract, unless otherwise agreed by the parties.
(b)In the event that the property is not sold by private treaty pursuant to Order 6(a) on or before three months of listing, then the parties shall do all acts and sign all documents as are necessary to sell the property by auction and the following shall apply:
(i)The property shall be listed with the agent appointed under Order 6(a) and the parties shall, and failing agreement the agent shall, appoint an auctioneer (“the Auctioneer”) for sale by auction within a further 3 months;
(ii)The parties shall execute all documents requested by the Auctioneer for sale of the property by auction;
(iii)The reserve price of the property shall be such amount as is agreed between the parties and failing agreement being reached between the parties seven days prior to the auction;
(iv)The parties shall each pay to the Auctioneer one half of any sums requested for advertising or auction expenses and if one of the parties pays all of the expenses, that party shall be reimbursed from the proceeds of sale in respect of one half of such payments before any division between the parties;
(v)The parties shall give such instructions as are necessary to a solicitor to prepare a contract of sale and provide it to the Auctioneer prior to the auction no later than the date sought by the Auctioneer;
(vi)The parties shall cooperate in every way with the Auctioneer in relation to the sale by auction including allowing inspection of the property at all times reasonably requested by the auctioneer and ensuring that the property is clean, neat and in good order at the time of any inspection and on the day of auction;
(vii)The parties shall attend at the auction and negotiate with the highest bidder in the event of the reserve price not being reached;
(viii)The sale price of the property shall be any amount in excess of the reserve price but in the event of the reserve price not being reached the sale price of the property shall be such amount as is agreed between the parties or failing agreement any offer received after the auction to buy the property at a price that is at least 95% of the reserve price shall be accepted by the parties; and
(ix)That upon agreement being reached for sale of the property, Orders 6(a)(iv) and 6(a)(v) shall apply.
(c)In the event that the property is not sold at the auction pursuant to Order 6(b) or within 14 days after the date of the auction by further negotiation, then the parties shall cause a further auction of the property to be held within four months after the date of the first auction and for that purpose the provisions of Order 6(b) shall apply.
(d)The net sale proceeds are to be applied in satisfaction of any outstanding order for payment pursuant to these orders.
7.In relation to the accounts held by the parties for the benefit of the children of the relationship, X and Y, the following orders apply:
(a)From the date of these orders, each party is restrained from withdrawing, transferring or otherwise removing any funds held in any account that is held for the benefit of either of the children of the relationship, X or Y, other than as provided for in this order.
(b)Within 14 days from the date of these orders, the Husband shall transfer into the account bearing “BSB: […67] Account number: […07]” the total balance of the accounts with the following account particulars:
(i)BSB: …67 Account number: …93; and
(ii)BSB: …67 Account number: …14.
(c)In relation to the bank accounts of the following descriptions (“X accounts”):
(i)CBA Youth Saver Account (##...86 - X); and
(ii)CBA Youth Saver Account (##...08 - X);
within 14 days from the date of these orders, the parties shall cooperate to have the X accounts closed and the balance transferred into the account of the following particulars “BSB: […67] Account number: […07]” to be held for the sole benefit of X.
(d)In relation to the bank accounts of the following descriptions (“Y accounts”):
(i)CBA Youth Saver Account (##...93 - Y); and
(ii)CBA Youth Saver Account (##...81 - Y);
within 14 days from the date of these Orders, the parties shall cooperate to have the Y accounts closed and the balance transferred into the account of the following particulars “BSB: […89] Account number: […53]” to be held for the sole benefit of Y.
(e)From the date of these orders, the parties are to jointly manage the accounts held for the benefit of X which the parties will hold for X’s sole benefit until such time as the parties determine that X is mature enough to have the funds released to her, such release being not later than X’s 21st birthday.
(f)From the date of these orders, the parties are to jointly manage the accounts held for the benefit of Y which the parties must hold for Y’s sole benefit until such time as the parties determine that Y is mature enough to have the funds released to her, such release being not later than Y’s 21st birthday.
8.The Wife shall retain, to the exclusion of the Husband, all of her right, title and interest in (and any income or benefit to be derived from her interest in) the properties of the following descriptions (collectively, “the Suburb K properties”):
(a)L Street, Suburb K NSW (folio identifier: …); and
(b)M Street, Suburb K NSW (folio identifier: …);
and hereafter the Wife shall indemnify the Husband in relation to all liability associated with the Suburb K properties.
9.The Wife shall retain, to the exclusion of the Husband, all of her right, title and interest in (and any income or benefit to be derived from her interest in) the properties of the following description (collectively, “the Country B properties”):
(a)N Street, Suburb P, Town Q, Region R, Country B;
(b)Suburb S, Town T, Region U, City V, Country B;
(c)Suburb W, Town T, Z Street, Region U;
(d)AA Street, Town BB, Region R;
and hereafter the Wife shall indemnify the Husband in relation to all liability associated with the Country B properties.
10.As and from the date of these orders, and except as otherwise provided for by these orders:
(a)Each party shall be solely entitled, to the exclusion of the other party, to any shares, bank accounts, motor vehicles, household items, personal effects, investment accounts and any other assets in their sole name or possession not otherwise dealt with in these orders;
(b)Each party shall be solely entitled to any superannuation interests in their sole name to the exclusion of the other party; and
(c)Each party shall be solely liable for any and all liabilities in their sole name not otherwise dealt with in these orders and shall indemnify the other party in relation to such liabilities.
11.In the event the Husband or the Wife fails, refuses or neglects to sign any deed or instrument necessary to give effect to these orders then a registrar of the Federal Circuit and Family Court of Australia at Sydney is appointed, pursuant to s 106A of the Family Law Act 1975 (Cth), to sign any deed or instrument necessary to give effect to these orders instead of the party in default and the other party shall be at liberty to make an application for costs arising in respect of the default.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Kostou & Paganotis has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALTOBELLI J:
INTRODUCTION
These reasons for judgment explain the orders made in a dispute between the applicant husband (“the husband”) and the respondent wife (“the wife”) about alteration of property interests.
BACKGROUND
The husband is 49 years old and a self-employed tradesperson. The wife is 49 years old and her usual occupation is educator but she is currently on an extended leave of absence without pay. They both reside in Sydney. They commenced cohabitation and married in 2002 and separated on a final basis on or about 21 January 2019.
There are two children of the marriage, X who is 14 years old and Y who is 9 years old (“the children”). The parties have resolved their parenting dispute with final orders made by consent on 18 December 2019. The parties have equal shared parental responsibility for the children. The children live with the mother and spend time with the father as agreed but failing agreement, for four nights per fortnight which will increase to five nights per fortnight from 2025 onwards.
In 1995, the wife and her brother purchased property at L Street, Suburb K (“the Suburb K commercial property”). In 2000, the wife and her brother purchased M Street, Suburb K (“the Suburb K home”). In 2001, the husband purchased H Street, Suburb J (“the Suburb J property”) and performed renovations on the property in 2002. In 2002, the parties married and moved into the Suburb J property and remained there until 2009.
In 2004 the parties purchased C Street, Suburb D (“the Suburb D property”) as joint tenants and the husband performed renovations. In 2009, the parties moved into the Suburb K home and rented out the Suburb J property. In 2011, the parties purchased F Street, Suburb G (“the Suburb G property”) as joint tenants and the husband performed renovations.
In 2012, the wife’s parents transferred four unencumbered properties in Country B (“the Country B properties”) into her and her brother’s joint names. The wife maintains that these properties are held on trust for her parents and she has not received any financial benefit from these properties.
In 2015, the parties moved into the Suburb G property. In 2016, the husband renovated the Suburb K commercial property and in 2017 began renovating the Suburb J property.
The parties separated on a final basis on 21 January 2019.
In late 2019, the wife moved into a rental accommodation in Suburb J where she still resides. In 2020, the parties sold the Suburb G property and received net sale proceeds of approximately $1,100,000. To date, there have been interim distributions in the amount of $225,000 each to the wife and to the husband.
In mid-2021 the husband gave the tenants of the Suburb J property notice to vacate and moved into the Suburb J property himself with his new partner and her son. In early 2022, the husband sold three lots of shares and transferred the proceeds of approximately $46,150 into a Commonwealth Bank Investment account, with the intention that the funds would be on trust for the children.
In mid-2022, the wife was involved in a car accident which she asserts had a great psychological impact on her. The wife has not returned to work and has taken unpaid leave until the end of 2023.
COMPETING PROPOSALS
By the time of closing submissions, the orders sought by the husband proposed an equal distribution of assets and can be summarised as follows. He proposed orders that he retain the Suburb D property and the total amount of the net sale proceeds from the Suburb G property. The husband further sought that the wife sell the Suburb K commercial property and the wife’s half share be equally distributed between the parties.
By the time of closing submissions, the wife proposed orders that reflect her receiving 62.5 per cent of the matrimonial pool. She proposed that she receives $300,000 from the sale proceeds of the Suburb G property and the husband receive the remaining $342,835. The wife sought orders where she retains the Suburb D property and the husband retains the Suburb J property with the caveat that if either of the parties fail to comply with their respective obligations, the property be sold. In closing submissions, counsel for the wife conceded that if the Court orders the wife receive more than $600,000 the Suburb D property would have to be sold in order for her to be paid out. The wife seeks to retain the Suburb K commercial property, the Suburb K home and the Country B properties. The wife seeks an order that the husband deliver to her the jewellery box containing the jewellery of the wife and the children. She further seeks to solely manage the funds held on trust for the children.
EVIDENCE BEFORE THE COURT
In support of his case, the husband relied on the following documents:
(a)Amended Initiating Application filed 10 July 2023;
(b)His affidavit filed 10 July 2023;
(c)Amended financial statement filed 21 July 2023;
(d)Minute of order for the sale of the Suburb K commercial property received 28 July 2023;
(e)Case outline filed 21 July 2023; and
(f)Various documents tendered during these proceedings and marked Exhibits A1–A9.
In support of her case, the wife relied on the following documents:
(a)Amended Response to Initiating Application filed 10 July 2023;
(b)Her affidavit filed 10 July 2023;
(c)Financial statement filed 14 July 2023;
(d)Affidavit of Mr DD filed 10 July 2023;
(e)Affidavit of Mr EE filed 10 July 2023;
(f)Affidavit of Mr FF filed 6 July 2023;
(g)Case outline filed 21 July 2023; and
(h)Various documents tendered during these proceedings and marked Exhibits R1–R4.
APPLICABLE LAW
This is an application under s 79 of the Family Law Act 1975 (Cth) (“the Act”) which relevantly provides:
79 Alteration of property interests
(1)In property settlement proceedings, the court may make such order as it considers appropriate:
(a)in the case of proceedings with respect to the property of the parties to the marriage or either of them—altering the interests of the parties to the marriage in the property; or
(b)in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the marriage—altering the interests of the bankruptcy trustee in the vested bankruptcy property;
including:
(c)an order for a settlement of property in substitution for any interest in the property; and
(d)an order requiring:
(i) either or both of the parties to the marriage; or
(ii) the relevant bankruptcy trustee (if any);
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.
…
(2)The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
(4)In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a)the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b)the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last‑mentioned property, whether or not that last‑mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c)the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d)the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e)the matters referred to in subsection 75(2) so far as they are relevant; and
(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
Section 79(4) incorporates the provisions contained in s 75(2) of the Act, which states:
(2) The matters to be so taken into account are:
(a)the age and state of health of each of the parties; and
(b)the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(c)whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and
(d)commitments of each of the parties that are necessary to enable the party to support:
(i)himself or herself; and
(ii)a child or another person that the party has a duty to maintain; and
(e)the responsibilities of either party to support any other person; and
(f)subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i)any law of the Commonwealth, of a State or Territory or of another country; or
(ii)any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g)where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and
(h)the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(ha)the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant; and
(j)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; and
(k)the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l)the need to protect a party who wishes to continue that party’s role as a parent; and
(m)if either party is cohabiting with another person—the financial circumstances relating to the cohabitation; and
(n)the terms of any order made or proposed to be made under section 79 in relation to:
(i)the property of the parties; or
(ii)vested bankruptcy property in relation to a bankrupt party; and
(naa)the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i)a party to the marriage; or
(ii)a person who is a party to a de facto relationship with a party to the marriage; or
(iii)the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv)vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(na)any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o)any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p)the terms of any financial agreement that is binding on the parties to the marriage; and
(q)the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.
In Bevan & Bevan (2013) FLC 93-545 (“Bevan”), the Full Court considered the High Court’s decision in Stanford v Stanford (2012) 247 CLR 108, which provided guidance on how s 79 was to be interpreted and implemented. Bevan endorsed the continuing application of the four-step approach articulated by the Full Court in Hickey and Hickey and Attorney General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 (“Hickey”), but on the basis that it is a shorthand distillation of the words of s 79, as opposed to being a statutory edict. The four steps articulated in Hickey at [39] are:
(1)Identify and value the property, liabilities and financial resources of the parties;
(2)Identify and assess the contributions of the parties and express them as a percentage of the net value of the property;
(3)Identify and assess the other facts relevant under s 79(4)(d)–(g) including s 75(2) and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
(4)Consider the effect of the above and resolve what order is just and equitable in all the circumstances.
FINDINGS ABOUT THE PARTIES AND THE EVIDENCE THEY GAVE
Both the husband and the wife were extensively cross-examined. Both did the best they could in the circumstances. They are a hard working migrant couple who have done well financially. They are both relatively unsophisticated people. In cross-examination there were times when both of them seemed to struggle to understand what was asked of them. This was not obfuscation but rather genuine lack of understanding. The wife presented as the more intelligent one, which is unsurprising given her profession as an educator, and the extensive tertiary education she has undergone. The husband is clearly a capable tradesperson with a background in some form of engineering, and with some competency in computers. He did present as less financially articulate than the wife. Whilst the Court finds there to be no credit issues, as such, in relation to either party, the Court also finds both of them to be poor, and thus unreliable, historians in relation to their financial affairs. This was not contrived, but genuine. The impact of this long-running litigation on them was palpable at times. The wife appeared visibly stressed, and the husband was often visibly emotional. A degree of self-interest permeated their evidence, and maximising personal gain was a subtle, but nonetheless apparent, undercurrent to all of the evidence.
THE BALANCE SHEET
By the time of closing submissions, the Court was provided with an update on the joint balance sheet as the parties had each made concessions on several items. The balance sheet filed 21 July 2023 in its original form was marked as MFI2. The joint balance sheet, with the updates implemented, is as follows:
Ownership Description Husband's value Wife's value ASSETS Real Estate 1. J C Street, Suburb D NSW 775,000 $775,000 2. W M Street, Suburb K NSW (50% share) 900,000 $900,000 3. W L Street, Suburb K NSW (50% share) 1,237,500 $950,000 4. H H Street, Suburb J NSW 1,300,000 $1,300,000 Bank Accounts 5. J GG Bank Suburb D Offset Account (x…06) 78 78 6. J CBA Direct Investment account (x…40) NIL 0 7. W Commonwealth Bank account (x…45) 1,982 1,982 8. W Commonwealth Bank account (x…53) 1,992 1,992 9. W GG Bank account (x…31) -288 -$288 10. W GG Bank Offset account (x…01) (50% share) 237 $237 11. W GG Bank account (x…14) – Jointly owned with her brother Mr DD -66 -$66 12. W HH Bank account (x…44) NK 0 13. W Interim releases from sale of Suburb G Property 225,000 225,000 14. H NAB Bank account (x…22) 633 633 15. H CBA Business account (x…67) 2,337 2,337 16. H CBA Direct Investment account (x…15) NIL 0 17. H JJ Finance account (x…95) – balance of interim release from sale of Suburb J Property incl. at item 18 NIL 0 18. H Interim releases from sale of Suburb G Property 225,000 225,000 Country B Properties 19. W N Street, Suburb P, Town Q, Region R, Country B 9,513 9,513 20. W Suburb S, Town T, Region U, Country B 43,840 43,840 21. W Suburb W, Town T, Z Street, City V, Country B 12,407 12,407 22. W AA Street, Town BB, Region R 62,038 62,038 Shares 23. W KK Finance account (x…18) 8,415 8,415 24. W CommSec trading account (x…83) – linked with CBA Direct Investment account (x…40) 0 0 25. W LL Company share Holding number (x…48) – inherited from late father NK 0 26. H CommSec trading account (x…65) 8,490 8,490 27. H NAB trading account (x…02) 6,444 6,444 Other 28. J Cash in Trust from the sale of F Street, Suburb G 642,835 642,835 29. W Motor Vehicle 1 18,000 18,000 30. W Suburb MM Burial Plot 16,200 16,200 31. W Excessive payments on living expenses 11,250 0 32. W Loans given to a friend on 20 and 22 November 2019 17,500 17,500 33. H Motor Vehicle 2 7,000 7,000 34. H Box trailer 200 200 35. W Household contents (Wife) 5,000 5,000 36. H Household contents (Husband) 100 5,000 37. H Jewellery (Wife’s and children’s in Husband’s possession) NIL $10,000 38. H Husband's partially paid legal fees 25,000 25,000 Total $5,563,769 $5,279,919 ADDBACKS 39. H Rental loss on Suburb J Property/add back on redraw of mortgage of Suburb J property NIL 36,892 40. W Addback for Wife’s legal fees paid by litigation funding - - Total $0 $36,892 LIABILITIES 41. J GG Bank Residential Loan account (x…00) (Suburb D) 127,349 127,349 42. J JJ Finance Home Loan account (x…02) (Suburb J) 497,972 495,577 43. W GG Bank Home Loan account (x…00) (Suburb K Res) (50% share 30,919 30,919 44. W GG Bank Home Loan (x…01) (50% share) 35,214 35,214 45. W Westpac Equity Loan account (x…71) (Suburb K Comm) (50% share) 22,691 22,691 46. W Car Finance 8,416 8,416 47. W NN School debt (School Fees) NIL 55,866 48. W Land Tax debt outstanding NIL 4,008 49. W Loan from Mr DD NIL 103,160 50. W Litigation Finance (QQ Finance) - - 51. W Income Tax liability NIL 29,302 52. W Capital gains tax lability on potential sale of L Street property NIL 186,188 53. W Capital gains tax lability on potential sale of M Street property NIL 93,820 54. W Funds withdrawn by Wife as Trustee to be paid back to X 15,822 0 55. H Loan from Ms RR - - 56. H Loan from Mr SS - - Total $738,383 1,192,510 SUPERANNUATION Member Name of Fund Type of Interest Husband's value Wife's value 57. W Superannuation Fund 1 44,404 44,404 58 W Superannuation Fund 2 86,729 86,728 59 H Superannuation Fund 3 48,952 48,952 Total $ 180,085 $ 180,084 FINANCIAL RESOURCES Ownership Description Husband's value Wife's value 60. W Funds held on trust for the children by the wife $ 44,694 $ 44,694 Total $5,050,165 $4,349,079
The main issue in contention was the value of the real estate noted at item 3 being the wife’s one half share in the Suburb K commercial property co-owned with her brother. The Single Joint Expert Mr FF (“the Expert”) valued that share at $950,000, a value which the wife accepted but the husband disputed. The Single Joint Expert Report is dated 20 March 2023 (“the Report”) and the Expert was cross-examined on the last day of the hearing. In short, the Court accepts the evidence of the Expert, and does not accept the submissions made on behalf of the husband as to a finding that it was not possible to accurately value the wife’s interest in the property and therefore the market should determine the property. The following paragraphs will explain why the Court has so concluded.
The Report in relation to the Suburb K commercial property is comprehensive. The methodology adopted was capitalisation of income (in this case by way of rental) supported by direct comparison. The reasons for adopting this were given, and are convincing. The Expert was well aware of the permitted use as a processing facility. The Suburb K commercial property is leased on a three-year term that commenced in late 2022, and is terminating in late 2025, but has an option for a further three-year term. A capitalisation rate of 3.5 per cent was adopted based on an analysis of comparable sales information. When the result was directly compared to the alternative approach based on building area, a very similar conclusion was found. The current market value was thus assessed to be $1.9 million, of which the wife’s half share was $950,000.
Clarifying questions were asked and answered. The questions were appropriate, as were the answers. There is nothing in either the questions or answers that led the Expert to change his view about the value of the Suburb K commercial property.
The Expert was cross-examined. He was aware of the fact that his current valuation as at 20 March 2023 of $1.9 million was less than his valuation on 6 May 2022 which was $2.235 million. He explained that even though the rental that was being received on the property had increased after the May 2022 valuation, market evidence had changed. Whilst he took into account the increased rent, this was but one factor taken. For example, interest rates had increased, and demand for this type of real estate had decreased. As the market had “softened”, the value had decreased.
The Expert was unaware of the concept of a “trade-related property” as discussed in the Land and Environment Court’s decision in Eureka Operations Pty Ltd v Transport for New South Wales [2021] NSWLEC 41 (17 May 2021) (“Eureka Operations v Transport for New South Wales”) at [56]. The Expert agreed, however, that it was relevant to consider the activities undertaken at the property, as well as adjoining properties. He accepted that a property in the immediate vicinity was being used as a processing facility. He also accepted that at the time of valuation the property was being used as a facility, indeed a “fairly basic” facility.
The Expert was also unaware of the fact that a development application had been lodged in respect of the commercial property to use it as a processing facility. He accepted that it was relevant information, but insisted that it would have no significant impact on the value of the property. The Expert accepted that for some buyers it would be relevant to know that a tenant had gone to the trouble to obtain a development approval.
Counsel for the husband did not suggest to the Expert in cross-examination any other alternative value of the commercial property.
In re-examination by counsel for the wife, the Expert agreed that a buyer would be primarily interested in the terms of the lease and its rental return. The Expert confirmed that he would not depart from the opinion he had expressed in the Report about the value of the commercial property.
In closing submissions counsel for the husband contended that the Court would not accept the evidence of the Expert and that considerable doubt remained about the value of the commercial property such that it would need to be sold in order to determine its current market value. In effect, counsel submitted that the new evidence of the development application, as well as what was, in effect, an unsatisfactory explanation by the Expert as to the significant reduction in the value of the property between 2022 and 2023, would cause the Court to place no weight on his expert opinion.
The Court does not agree. The reasons given for the decline in the value of the property within the space of a year are cogent. The existence of a development application means nothing in circumstances where there is no evidence the development approval will be granted, or that if granted, it would be on terms viable and acceptable to the tenant, or indeed that the tenant would in fact act on any approval that was granted. Indeed, contingency on the hypothetical nature of the development application was palpable.
The lease of the Suburb K commercial property refers to a processing facility being a permissible use.
Counsel’s reference to the decision in Eureka Operations v Transport for New South Wales is enigmatic. The reference to [56] does not appear to be relevant in the present context. There may have been a typographical error in this regard. [48] of the reasons states:
48.Mr Firth relied upon the concept of a “trade related property” (TRP) which comprises a property, such as hotels, fuel stations and restaurants, that usually change hands in the marketplace whilst remaining operational. He considered that TRP’s were typically valued on the basis of their potential Earnings Before Interest Taxes Depreciation and Amortisation (EBITDA), as adjusted to reflect the trading of a “reasonably efficient operator” and often on the basis of either a DCF methodology or by use of a capitalisation rate applied to the EBITDA. Mr Firth relied on the International Valuation Standards Council – Guide Note 12 (IVSC) for support for his approach, which he considered endorsed his approach to the valuation of the Eureka Lease as a TRP.
On the facts of this case, however, it is not self-evidently apparent that the Suburb K commercial property is the type of property “that usually change hands in the marketplace whilst remaining operational”. It was not suggested to the Expert in cross-examination that an alternative valuation approach was potential Earnings Before Interest Taxes Depreciation and Amortisation (EBITDA), as adjusted to reflect the trading of a “reasonably efficient operator”.
In any event, the decision went on appeal (Transport for NSW v Eureka Operations Pty Ltd [2022] NSWCA 56) and the Court found that the trial judge was in error for treating the property as a “trade related property”.
The Court accepts the evidence of the Expert. Item 3 of the balance sheet will read $950,000.
At item 31 the husband seeks some form of adjustment in relation to what he contends were excessive payments on living expenses by the wife. There was neither cross-examination about this issue, nor specific submissions made. There was vague, generalised reference in submissions to the wife’s excessive living expenses, but the evidence does not support this. Item 31 will read nil.
In relation to items 35 and 36, in the absence of expert evidence, the Court will treat the figures advanced by each party as an admission against interest. Thus item 35 will be $5,000, and item 36 will be $100.
In relation to item 37 the main issue for the Court is who retains the jewellery in question, not its value which appears to be agreed at $10,000. It is not possible for the Court to make a finding about who retains the jewellery. There was evidence before the Court that the wife attended the police to seek a recovery order. The husband contends he was served with a property recovery order issued by a Local Court, in conjunction with an apprehended violence order, and which included the jewellery. Therefore, the husband’s belief is that the wife recovered the jewellery and possesses it. The document contended to be the “property recovery order” was objected to as it was not stamped and therefore became MFI1. It is thus not in evidence. The wife says the jewellery was left at the Suburb G property when she left with the children. The husband says to the contrary. No finding is possible. Item 37 will be notionally removed from the balance sheet. The Court notes that this decision does not affect the justice and equity of any final order made, given the small amount compared to the total pool of assets.
Counsel for the wife conceded item 39 would not be pressed but rather address it as a factor under s 75(2)(o) of the Act. Item 39 will read nil.
Item 47 represents outstanding and/or unpaid school fees for the children. The wife agrees that she is solely responsible for these fees. As such, it is a personal debt, relevant for the purposes of s 75(2)(o) of the Act, but it will be removed from the balance sheet to avoid confusion.
Item 48 represents outstanding land tax levied against the wife, and thus against properties in her name. The properties in question are on the balance sheet. The land tax is a post separation liability. The wife receives the benefit of rentals from the property in respect of which land tax is levied. The liability is not secured against the property, other than in the general statutory sense of a charge. In the circumstances this will be treated as the wife’s personal debt, once again relevant for the purposes of s 75(2)(o) of the Act, but it will be removed from the balance sheet to avoid confusion.
The Court makes the same ruling in relation to item 51, the wife’s personal income tax liability.
Item 49 is a debt that the wife contends she owes to her brother as a result of drawing down on their joint funds for the purposes of her personal use and living expenses. The alleged debt is referred to in her financial statement and explained at paragraph 248 of her affidavit. The Court finds that it is a post separation personal debt of the wife and should not appear on the joint balance sheet but should be taken into account as a s 75(2) factor. The overall impression formed from the evidence is that the wife had access to considerable amounts of money in the post separation period. It is hard to discern any logical basis for treating this liability as a joint one to the effect that the husband would share in the same.
Items 52 and 53 represent estimates of capital gains tax liability if the Court were to order the sale of either or both of the wife’s Suburb K properties. The quantification of the same will depend on the sale price. All of this is highly contingent and on that basis items 52 and 53 will be treated as having a nil value. Should the Court order that one of the properties has to be sold (as the husband contends in relation to the commercial property) the issue of capital gains tax liability will be revisited.
Item 54 is an amount that the wife agrees she withdrew from her daughter’s bank account and which should be paid back to her. There is a broader dispute between the parties about funds held in trust by each of them, for the children. This will be the subject of a specific determination. For now, it is problematic and confusing to treat this as a liability on the balance sheet. Item 54 will read nil.
Item 60 represents funds held in trust for the children in a bank account in the wife’s name. This is related to item 54. Through her counsel, the wife indicated that she agrees to repay money withdrawn from this trust account, presumably in the amount of $15,822. It seems common ground between both parents that the funds held in trust for the children be applied for that purpose. The wife contends that the husband also holds funds in trust for the children. The husband did not contend otherwise even though such funds are not disclosed in his evidence. The wife proposes detailed orders in relation to accounts held for the benefit of the children at Order 8 in her proposed minute. The husband makes no equivalent proposal but as indicated above the impression formed in closing submissions is that he joined with the wife’s suggestion that all monies be held in trust for the children.
The Court finds that all funds held in trust for the children, including funds withdrawn from these trust accounts and agreed to be paid back, will continue to be held in trust for the children but on the basis that both the husband and the wife are trustees and will have to jointly decide how and when the monies are used. The funds will otherwise not appear on the joint balance sheet.
Accordingly the Court finds that the balance sheet to be as follows:
Ownership Description Value ASSETS Real Estate 1. J C Street, Suburb D NSW 775,000 2. W M Street, Suburb K NSW (50% share) 900,000 3. W L Street, Suburb K NSW (50% share) 950,000 4. H H Street, Suburb J NSW 1,300,000 Bank Accounts 5. J GG Bank Suburb D Offset Account (x…06) 78 6. J CBA Direct Investment account (x…40) 0 7. W Commonwealth Bank account (x…45) 1,982 8. W Commonwealth Bank account (x…53) 1,992 9. W GG Bank account (x…31) -288 10. W GG Bank Offset account (x…01) (50% share) 237 11. W GG Bank account (x…14) – Jointly owned with her brother Mr DD -66 12. W HH Bank account (x…44) 0 13. W Interim releases from sale of Suburb G Property 225,000 14. H NAB Bank account (x…22) 633 15. H CBA Business account (x…67) 2,337 16. H CBA Direct Investment account (x…15) 0 17. H JJ Finance account (x…95) – balance of interim release from sale of Suburb J Property incl. at item 18 0 18. H Interim releases from sale of Suburb G Property 225,000 Country B Properties 19. W N Street, Suburb P, Town Q, Region R, Country B 9,513 20. W Suburb S, Town T, Region U, Country B 43,840 21. W Suburb W, Town T, Z Street, City V, Country B 12,407 22. W AA Street, Town BB, Region R 62,038 Shares 23. W KK Finance account (x…18) 8,415 24. W CommSec trading account (x…83) – linked with CBA Direct Investment account (x…40) 0 25. W LL Company share Holding number (x…48) – inherited from late father 0 26. H CommSec trading account (x…65) 8,490 27. H NAB trading account (x…02) 6,444 Other 28. J Cash in Trust from the sale of F Street, Suburb G 642,835 29. W Motor Vehicle 1 18,000 30. W Suburb MM Burial Plot 16,200 31. W Excessive payments on living expenses 0 32. W Loans given to a friend on 20 and 22 November 2019 17,500 33. H Motor Vehicle 2 7,000 34. H Box trailer 200 35. W Household contents (Wife) 5,000 36. H Household contents (Husband) 100 37. H Jewellery (Wife’s and children’s in Husband’s possession) 0 38. H Husband's partially paid legal fees 25,000 Total 5,264,887 ADDBACKS 39. H Rental loss on Suburb J Property/add back on redraw of mortgage of Suburb J property 0 40. W Addback for Wife’s legal fees paid by litigation funding 0 Total 0 LIABILITIES 41. J GG Bank Residential Loan account (x…00) (Suburb D) 127,349 42. J JJ Finance Home Loan account (x…02) (Suburb J) 497,972 43. W GG Bank Home Loan account (x…00) (Suburb K Res) (50% share) 30,919 44. W GG Bank Home Loan (x…01) (50% share) 35,214 45. W Westpac Equity Loan account (x…71) (Suburb K Comm) (50% share) 22,691 46. W Car Finance 8,416 47. W NN School debt (School Fees) 0 48. W Land Tax debt outstanding 0 49. W Loan from Mr DD 0 50. W Litigation Finance (QQ Finance) 0 51. W Income Tax liability 0 52. W Capital gains tax lability on potential sale of L Street property 0 53. W Capital gains tax lability on potential sale of M Street property 0 54. W Funds withdrawn by Wife as Trustee to be paid back to X 0 55. H Loan from Ms RR 0 56. H Loan from Mr SS 0 Total 722,561 SUPERANNUATION Member Name of Fund Type of Interest Value 57. W Superannuation Fund 1 44,404 58. W Superannuation Fund 2 86,729 59. H Superannuation Fund 3 48,952 Total 180,085 NET POOL (INCLUDING SUPERANNUATION): 4,722,411
Before proceeding to consider how contribution and future needs should be assessed, it is useful to set out assets held jointly, as well is in individual names, together with the relevant balance sheet liabilities. It is important to record that counsel for the husband, in closing submissions, quite properly conceded that the wife’s Country B properties, would not be included in his client’s proposed orders for alteration of property interests. In order to simplify matters, therefore, as well as reduce the prospects of error, items 19–22 of the pool will be omitted for the purposes of the present exercise.
JOINT NAMES
Assets in joint names Value 1 C Street, Suburb D NSW 775,000 5 GG Bank Suburb D Offset Account (x…06) 78 6 CBA Direct Investment account (x…40) 0 28 Cash in Trust from the sale of F Street, Suburb G 642,835 Total 1,417,913 Liabilities in joint names Value 41 GG Bank Residential Loan account (x…00) (Suburb D) 127,349 42 JJ Finance Home Loan account (x6002) (Suburb J) 497,972 Total 625,321 Total: $792,592 THE HUSBAND
Assets currently in the name of the husband Value 4 H Street, Suburb J NSW 1,300,000 14 NAB Bank account (x…22) 633 15 CBA Business account (x…67) 2,337 16 CBA Direct Investment account (x…15) 0 17 JJ Finance account (x…95) – balance of interim release from sale of Suburb J Property incl. at item 18 0 18 Interim releases from sale of Suburb G Property 225,000 26 CommSec trading account (x…65) 8,490 27 NAB trading account (x…02) 6,444 33 Motor Vehicle 1 7,000 34 Box trailer 200 36 Household contents (Husband) 100 37 Jewellery (Wife’s and children’s in Husband’s possession) 0 38 Husband's partially paid legal fees 25,000 39 Rental loss on Suburb J Property/add back on redraw of mortgage of Suburb J property 0 Total 1,575,204 Liabilities to be retained by the husband Value 55 Loan from Ms RR 0 56 Loan from Mr SS 0 Total 0 Superannuation to be retained by the husband Value 59 Superannuation Fund 3 48,952 Total: $1,624,156 THE WIFE
Assets currently in the name of the wife Value 2 M Street, Suburb K NSW (50% share) 900,000 3 L Street, Suburb K NSW (50% share) 950,000 7 Commonwealth Bank account (x…45) 1,982 8 Commonwealth Bank account (x…53) 1,992 9 GG Bank account (x…31) -288 10 GG Bank Offset account (x…01) (50% share) 237 11 GG Bank account (x…14) – Jointly owned with her brother Mr DD -66 12 HH Bank account (x…44) 0 13 Interim releases from sale of Suburb G Property 225,000 23 KK Finance account (x…18) 8,415 24 CommSec trading account (x…83) – linked with CBA Direct Investment account (x…40) 0 25 LL Company share Holding number (x…48) – inherited from late father 0 29 Motor Vehicle 2 18,000 30 Suburb MM Burial Plot 16,200 31 Excessive payments on living expenses 0 32 Loans given to a friend on 20 and 22 November 2019 17,500 35 Household contents (Wife) 5,000 40 Addback for Wife’s legal fees paid by litigation funding 0 Total 2,143,972 Liabilities to be retained by the wife Value 43 GG Bank Home Loan account (x…00) (Suburb K Res) (50% share 30,919 44 GG Bank Home Loan (x…01) (50% share) 35,214 45 Westpac Equity Loan account (x…71) (Suburb K Comm) (50% share) 22,691 46 Car Finance 8,416 47 NN School debt (School Fees) 0 48 Land Tax debt outstanding 0 49 Loan from Mr DD 0 50 Litigation Finance (QQ Finance) 0 51 Income Tax liability 0 52 Capital gains tax lability on potential sale of L Street property 0 53 Capital gains tax lability on potential sale of M Street property 0 54 Funds withdrawn by Wife as Trustee to be paid back to X 0 Total 97,240 Superannuation/Financial resources to be retained by the wife Value 57 Superannuation Fund 1 44,404 58 Superannuation Fund 2 86,729 Total 131,133 Total: $2,177,865
Pool total: $4,594,613 ASSESSMENT OF CONTRIBUTION
By the time of closing submissions counsel for the husband submitted that the Court would ultimately find that contribution to the date of trial is assessed equally, and there are no relevant future needs adjustments as the s 75(2) factors offset each other.
By the time of closing submissions counsel for the wife submitted that contribution and future needs would be assessed as to 67.5 per cent in the wife’s favour. In submissions it became apparent that contribution represented not less than 62.5 per cent of that, and 5 per cent was the s 75(2) adjustment in her favour.
The polarised, and with respect unrealistic positions adopted by both parties, was singularly unconducive to compromise and settlement.
Assessment of contribution at cohabitation
At cohabitation the husband owned the Suburb J property which is item 4 on the balance sheet. It is agreed between the parties that the husband had an equity of $88,000 at cohabitation. The property has increased significantly in value.
At cohabitation the wife owned interests in the Suburb K properties which are items 2 and 3 on the balance sheet together with her brother. A retrospective valuation of both properties was performed by Single Expert Mr EE who valued item 2 and 3 at $480,000 and $440,000 respectively. The parties agree that the value of the wife’s interest in these properties at cohabitation was $460,000. The evidence indicates that these properties were subject to a loan of $182,000 collectively. Thus, her equity in her one half share of the properties was $369,000. These properties have increased significantly in value.
Both parties assert, but do not prove to the reasonable satisfaction of this Court, that they had other assets of nominated value. The Court finds that they did have motor vehicles, superannuation entitlements, bank accounts and shareholdings, but no findings can be made about their value at that time.
At a superficial level only, it could be contended, as counsel for the wife did, that she commenced with almost 75 per cent of the assets at cohabitation. However, cohabitation commenced in 2002 almost 21 years ago. It is artificial, and indeed unwise, to seek to attribute finite values to contribution simply because there are finite values to the assets in question. In order to achieve a holistic assessment of contribution, as contemporary family law jurisprudence demands, one must be very careful not to allow the starting point to distort the ending point. Counsel for the wife finally submitted that contribution should be assessed at 62.5 per cent in the wife’s favour.
It is clear that the wife made a greater financial contribution at the commencement of this relationship. It is a quantification best assessed retrospectively and having regard to the myriad contributions made by both parties over what each counsel described was a long marriage.
The Court adopts the following passage from Grant T Riethmuller & Robin Smith, Family Law (Thomson Reuters, 7th edition, 2022) at chapter 26.450:
…More recently, in the case of Jabour & Jabour, the Full Court of the Family Court placed less weight on such an argument, describing an initial contribution as ‘merely a springboard,’ and in Hurst and Hurst the Full Court suggested that increases in value of a property during the relationship should be treated as equal contributions even if the property was contributed by one party unencumbered.
The Full Court in Jabour held that it would be antithetical to the holistic approach to contributions to assess the contributions of a party who had brought in and kept a particular property throughout a relationship based solely on the property’s value at trial. Such an approach would effectively ‘quarantine’ the property from the rubric of all the other contributions made by the parties. Rather, in such circumstances, that contribution had to be seen in light of the totality of the contributions, including the use to which the property was put.
(Footnotes omitted)
Jabour & Jabour (2019) FLC 93-898 states at [83]:
Importantly, it also had the effect of minimising the myriad of other contributions that were made in the course of a long marriage during which both parties worked very hard and raised a family. In this case, those contributions were made over a very long period and the parties regarded them as being equal.
Of course, holistic assessment does not necessarily mean the contribution will be assessed equally. It does mean, however, that no undue weight should be placed on the values of properties at the time of cohabitation, or the values at the date of the trial. These are important factors but it must be considered and assessed by reference to all of the other evidence in this case.
Assessment of contribution at separation
Both parties were in paid employment at different stages throughout the relationship. When one was working, sometimes the other was not for very good reason such as illness, parenting and childcare responsibilities. Even the wife conceded that the period when the husband was not earning income was minor. They both worked to their respective capacities. Indeed they both worked hard in their respective jobs, and this finding extends to the way in which they undertook the roles within their relationship that they had agreed to which includes all the diverse aspects of homemaking and parenting. There may well have been times when the wife’s income as an educator outstripped that of her husband as a tradesperson, but equally there were times when the reverse was the case, particularly having regard to the negative gearing activities of the wife in relation to the property co-owned with her brother.
They purchased and sold real estate, either for occupation by the family, or for investment purposes. This included the property which is item 1 on the balance sheet, and the Suburb G property that was later sold. There was no evidence before the Court to indicate that the wife’s co-owned properties (with her brother) were used as security for the loans obtained to acquire the jointly owned properties with the husband. There is little doubt in the Court’s mind, however, that the fact of her ownership of an interest in these properties strengthened her balance sheet for the purposes of the loan application. To this extent it was a contribution she made, but one almost impossible to measure.
The wife contends that she and the husband had the benefit of rental income derived from her co-owned properties, throughout their marriage. Whilst the Court accepts this in principle, assessing the weight to be given to this contribution is difficult given the evidence before the Court indicating that there were periods during the marriage (e.g. Exhibit A6, the wife’s FY16 taxation return showing a net rental property loss of $6,641) when the Suburb K properties were negatively geared i.e. the expenses exceeded the income derived by the wife. Of course, negative gearing must have provided some tax relief to the wife thus offsetting part of any net loss. The wife’s contention in her evidence that neither she nor the husband applied any of their income to the outgoings of the Suburb K property is problematic. It is inconsistent with her 2016 taxation return. The onus was on her to prove the assertion she made. This could have been achieved by tendering her own taxation returns. The Court accepts, however, as a general principle that when the Suburb K properties were not negatively geared, the parties enjoyed the benefit of rental income derived therefrom.
The parties engaged in share trading. Whether this was conducted in the name of the husband or wife matters not. There was no suggestion that if there were gains, that such gains were not used for the mutual benefit of the parties and their family. There was but a veiled suggestion in the wife’s case (e.g. paragraph 93 of the wife’s affidavit) that when losses were incurred, for example during the global financial crisis, it was somehow attributable to the husband. The Court rejects this. The wife cannot enjoy the benefit of the flow in share trading, but attribute the ebb just to the husband.
There is non-contentious evidence about how the husband applied his skills as a tradesperson to the benefit of the family. He renovated the Suburb D property. He undertook substantial renovations to the wife’s co-owned property, the Suburb K commercial property. He undertook extensive renovations to the Suburb G property. He renovated the Suburb K home and the Suburb J property.
Much was said about how the Court should assess the value of the husband’s renovations to the Suburb K commercial property. The fact that he did work is beyond doubt. The Court finds it was valuable work. The lack of clarity in the evidence of the invoices rendered is hardly determinative in circumstances where the husband presented to the Court as an unsophisticated businessman. It is true that the husband was paid by funds coming from the wife and her brother, the owners of the commercial property. It is equally true that the monies received went into a joint account and were applied to the family’s expenses. It was disingenuous of the wife to seek to minimise the contribution made by the husband by suggesting that she and her brother were, in effect, doing him a favour by giving him work to do. The Court finds that the husband, through the provision of his skills and labour, made a contribution to the conservation or improvement of the Suburb K property. It was not, however, a significant contribution.
The Court notes a number of ancillary and relatively minor issues about contribution arising from the evidence. The husband’s occupation of various properties after separation probably resulted in a less than optimal use of the property from a financial perspective. His failure to pay the mortgage is inexplicable even taking into account that his income was not as great as that of the wife. It is unclear to the Court why the husband’s current partner could not have made a greater contribution. Whether this is treated as a negative contribution by him, or a positive contribution by the wife, ultimately makes no difference. The Court takes this into account.
Assessment of contribution at date of hearing
Having regard to the matters set out above the Court concludes that contribution should be assessed in favour of the wife as to 55 per cent, thus producing a 10 per cent differential between the parties. Having regard to the Court’s findings about the pool of assets for division between the parties, this is the equivalent of $459,461.30.
ASSESSMENT OF S 75(2) FACTORS
During closing submissions, counsel for the husband contended that there should be no adjustment in favour of either party as their respective s 75(2) considerations offset each other. For the wife it was submitted that an adjustment should be made in her favour of not less than 5 per cent.
Notably, counsel for the husband conceded that the amount paid by way of child support was not adequate. Indeed, the husband has struggled to pay child support and the weekly figure that he claims to pay, $89, includes arrears of $26 weekly. The husband contends that he only earns $600 a week as a tradesperson, and receives rent from the Suburb D property of $250 weekly, which is far less than his actual weekly expenses. On the husband’s own evidence, he does not have the capacity to pay an adequate level of child support. The Court has reservations about whether the husband is working to capacity and would not be at all surprised if it were to suddenly increase after the conclusion of these proceedings. As he is self-employed, that does not automatically mean that he will be assessed to pay a more realistic level of child support. The wife is primarily responsible for the care of the children, even though an order for substantial and significant time is in place. It is the view of this Court that these factors alone warrant an adjustment in the wife’s favour of 5 per cent.
There are other s 75(2) factors that the Court acknowledges. There are the off balance sheet debts of the parties. There is the fact of the husband’s occupation of the Suburb J property and his failure to properly service the mortgage. There is the wife’s agreement to service the children’s school fees. All of these are taken into account in a general sense.
The Court finds, however, that there is no other basis for any other adjustment under this section in favour of either party. The wife has a much greater earning capacity, even if it is not being presently realised for health reasons. She also has additional resources in the form of her brother who has been generous in his support of her, and also her interest in the Country B properties.
A JUST AND EQUITABLE ORDER
Having regard to the Court’s findings above, the wife would be entitled to an order in her favour of 60 per cent, which results in the wife receiving $2,756,768 and the husband receiving $1,837,845. If the parties retain all assets and liabilities currently in their name, the wife would have $2,177,865 and the husband would have $1,624,156.
A number of observations can be made which are relevant to the orders which are just and equitable for the parties. Firstly, there is cash of $642,000 that is available for distribution between them. The wife proposes that she retain $300,000, and that the husband receive the rest, $342,835. By contrast, the husband proposes that he receive all of this money.
The parties agree in principle that subject to the implementation of a just and equitable property settlement, the husband retain the Suburb J property. Quite properly, they both concede that the husband would need to refinance or discharge the mortgage over this property which has a current balance of about $498,000. Given the husband’s poor earning capacity, on his own evidence it would be unlikely that he could service a loan in that amount. The more likely scenario is that in order for him to retain the Suburb J property, he would have to use the sale proceeds from the Suburb G property to discharge the mortgage.
The parties are in dispute about the Suburb D property. The wife wishes to retain this property on the basis that she will discharge the mortgage debt over the property in the sum of $127,000. Of course she intends to discharge the caveat protecting the E Limited debt which relates to her litigation lending. This debt is not on the joint balance sheet but appears to be about $120,000. The wife would need access to the monies held in trust for the parties to achieve this. By contrast, the husband prefers that the Suburb D property be transferred to him. The wife would have to pay out her litigation lending debt. He would discharge the mortgage secured over this property, $127,000. He cannot do so without also accessing the jointly held funds. From the Court’s perspective, selling the Suburb D property is the last resort as both parties wish to retain it. Little was said about this in submissions. The Court will need to try to assess each party’s capacity to retain the property based on the evidence before it.
If the husband were to receive $642,835 in cash, retain the Suburb D property and the Suburb J property, but discharge the Suburb D mortgage of $127,349, and the Suburb J mortgage of $497,972 he would receive $2,416,670. This is $578,825 in excess of his entitlement of $1,837,845. On his own evidence, and consistent with the wife’s counsel’s closing submissions, he could not afford to borrow this amount to pay to the wife.
An alternate scenario is if the wife keeps the Suburb D property, pays out the GG Bank mortgage of $127,349 (as well as her off balance sheet litigation loan), and the husband keeps the Suburb J property. The husband is allocated $512,835 out of the $642,835 joint funds. This enables him to keep Suburb J unencumbered. It also means the wife is able to pay out the mortgage on Suburb D with the remaining $130,000 of the joint funds. However, the wife would still need to pay the husband $198,748 as well as her litigation loan of $127,000. The Court is satisfied, again consistent with her own counsel’s closing submissions that she will be in a far better position than the husband to achieve this due to her greater earning capacity, more stable employment, and available financial resources. She will thus be given the opportunity to do so.
Orders will be made to reflect the above alteration of property interests. The wife’s orders will be used as a template in this regard. Orders will be made in relation to monies being held on trust for the benefit of the children on the basis that both parents seemed to agree with this in principle. Little attention was given to the detail though. The Court has done the best it can. It is odd that the accounts supposedly held by the husband for the children were not specifically referred to in the evidence, and that made some of the orders sought by the wife impossible to make. Another issue is that the wife sought an indemnity from the husband for possible Capital Gains Tax arising out of share sales. However, again there was no reference to this in submissions, or any evidence about quantum, and so the Court could not make this order.
The Court is otherwise satisfied that the orders are as just and equitable as the evidence before it allows.
I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Altobelli. Associate:
Dated: 31 August 2023
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