MCGAREY & STANCATI

FAMILY COURT OF AUSTRALIA

MCGAREY & STANCATI

[2013] FamCA 366

FAMILY LAW – PROPERTY – Where the only substantial property of the parties is the husband’s interest in a unit trust – Where the joint expert’s value was challenged by two adversarial experts – Where the experts used differing valuation methodology – Where the weight of evidence supports the view that the business itself has no value – The unit trust should be valued on the basis of net asset backing – Where husband will continue to draw an income – Where wife’s prospect of employment in preferred field not certain – Where asset pool is small – Wife awarded 100 per cent of the asset pool.

FAMILY LAW – SPOUSAL MAINTENANCE – Application by the wife for spousal maintenance – Where wife’s property settlement insufficient to provide for her future support – Where wife is unlikely to find work in the short term but is likely to be able to work within a reasonable period – Where wife is in a de facto relationship – Where there is an agreement between the wife and her de facto partner that each will pay their own expenses – Consideration of the principles in F & F (1982) FLC 91-214 discussed and applied – Where, notwithstanding the agreement, there is no evidence that the wife’s de facto partner is unable to support the wife – Where the wife has not demonstrated that she has met the threshold of s 72 of the Family Law Act 1975 (Cth) – Application dismissed.

FAMILY LAW – CHILDREN – Substantial and significant time – Where youngest child has not spent overnight time with the father – Where the family consultant recommended that the youngest child’s time with the father be immediately and progressively increased – Where oldest child spends each weekend with the father – Where family consultant recommended that the children spend alternative weekend time with the father and alternate weekday time – Orders made in accordance with family consultant’s recommendations.

Family Law Act 1975 (Cth) ss 72, 79, 75(2)

F and F (1982) FLC 91-214
P and W [2005] FamCA 1303

APPLICANT:

Mr McGarey

RESPONDENT:

Ms Stancati

FILE NUMBER:

SYC

5542

2010

DATE DELIVERED:

22 MAY 2013

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

Rees J

HEARING DATE:

16 & 17 April 2013

REPRESENTATION

SOLICITOR FOR THE APPLICANT:

Aitken Lawyers Pty Ltd

COUNSEL FOR THE RESPONDENT:

Mr Livingstone

SOLICITOR FOR THE RESPONDENT:

Adamson Solicitors

Orders

IT IS ORDERED

Financial

That the husband pay to the wife by way of property settlement within six months of the date of these orders the sum of $58,000.
That upon receipt of the amount of $58,000 the wife sign all documents required to effect the transfer to the husband or his nominee all her right title and interest in:
(a)       M Pty Limited ACN 082 334 290,
(b)       M Unit Trust
(c)       McGarey Family Trust
(d)       N Pty Limited CAN … .
That from the date of these orders the husband indemnify the wife in relation to all liabilities arising from her having any interest in the entities referred to in Order 2.
That the parties instruct Diamond Conway, solicitors, to pay to the National Australia Bank (“NAB”) all money held in the controlled money account from the proceeds of sale of the property at Suburb A.
That, as between the parties, the husband indemnify the wife in respect of any money remaining due to the NAB pursuant to the mortgage held by the NAB over the property at Town B.
That within 30 days of the date of these orders the wife prepare two lists containing between them all of the items of furniture and household contents owned by the parties and forward the two lists to the husband.
That within seven days thereafter the husband shall notify the wife which list he will retain and both parties will do all acts required to effect the collection by the husband of the items on that list within a further seven days.
That in accordance with section 90MT(1)(b) of the Family Law Act 1975 (Cth), whenever a splittable payment becomes payable in respect of the husband’s interest in the C Super Fund, the wife shall be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (Cth) using a specific percentage being 100% and that the entitlement of the husband is correspondingly reduced by the force of this order.
That the Trustee of C Super Fund do all such acts and things and sign all such documents as may be necessary to:
(a)calculate, in accordance with the requirements of the Family Law Act 1975 (Cth), the entitlement created in Order 8; and
(b) pay the entitlement whenever a splittable payment becomes payable.
That orders 8 and 9 of these orders have effect from the operative time and the operative time for these orders is ten business days from the date of service of these orders on the Trustee of C Super Fund.
That the wife’s application for spousal maintenance be dismissed.

Parenting

That the parties have equal shared parental responsibility for the children D born … October 2005 and E born … May 2009.
That the children live with the father during school terms as follows:
(a)Commencing on the first weekend after these orders, D live with the father from after school on Friday until 6.00pm on Sunday and E live with the father from 9.00am until 6.00pm on Sunday and from 3.00pm until 6.30pm on one night each week and in the absence of agreement that night shall be Wednesday;
(b)Once E has spent six Sundays with the father in accordance with Order 13(a), D will continue to live with the father from after school Friday until 6.00pm Sunday and E will live with the father from 9.00am Saturday until 6.00pm on Sunday and from 3.00pm until 6.30pm on one night each week being Wednesday in the absence of agreement;
(c)Once E has spent six weekends with her father in accordance with Order 13(b), D will live with the father from after school on Friday until the start of school Monday on each alternate weekend commencing on the weekend immediately following the last of the six weekends and E will live with the father from after preschool or school on Friday until 6.00pm on Sunday each alternate weekend, being the same weekend as D lives with the father;
(d)From the commencement of the regime in Order 13(c) both children will spend one night each week with the father from after school or preschool until the time D commences school the next day and in the absence of agreement, that night will be Wednesday; and
(e)Once E starts school or from the commencement of term 1 in 2014, the time E spends with the father shall be the same as the time D spends with the father.
That for the purpose of these orders, school holidays are defined to commence on the first day after the last day of term and to end on the day before the children attend school for the following term. During the school holiday periods at the end of Term 3 in 2013 both children will spend the first half of the school holidays with the father commencing at 9.00am on the first day of the school holidays.
That during the Christmas school holidays in 2013/14, unless otherwise agreed, the children shall spend the first and each alternate week with the mother and the second and each alternate week with the father.
That for the school holidays at the end of terms 1, 2 and 3 in 2014 and thereafter, the children will spend the first half of the school holidays with the father and the second half with the mother, unless otherwise agreed.
That for the Christmas school holidays in 2014 and each alternate year thereafter, the children will spend the first half of the holidays with the father and the second half with the mother.
That for the Christmas school holidays in 2015 and each alternate year thereafter the children will spend the first half with the mother and the second half with the father.
That at Christmas time, the children will spend time with the parent in whose home they are not living, from 3.00pm on Christmas Day until 6.00pm on 26 December.
That in the event that the children are not living with the father on Father’s Day or with the mother on Mother’s Day, then the children will spend time with that parent from 6.00pm on the day before until the time school commences on the following Monday.
That in the event that the Easter public holidays from Good Friday until Easter Monday inclusive, do not fall within school holiday periods, the children will spend time with the father from 9.00am on Easter Sunday until the start of school on the following Tuesday.
That for the purpose of changeover, the father shall collect the children from school or from the mother at the commencement of their time with him. For such time as E is returned to the mother on a mid week night the father shall return her to the mother. The mother shall collect the children from the father or from school at the commencement of their time with her.
That the father shall be responsible to pay for after school care used by him on the days when he is to collect the children from school.
That each party shall cause the children’s Italian and Australian passports to be renewed as necessary and shall do all things required to keep the passports in a safety deposit facility in their joint names which can be opened only by both of them jointly.
That neither party shall be entitled to travel with the children outside Australia without the prior consent of the other.
That each party shall keep the other informed of the children’s current address and contact telephone numbers.
That each party shall inform the other promptly of any medical treatment prescribed by a medical practitioner for the children.
That each party shall ensure that the other is authorized to give and receive information to and from the children’s school and treating medical practitioners.
That the parties shall do all things required for D to engage in one summer weekend sport and one winter weekend sport and to ensure that D is taken to sporting fixtures and to training by the parent who is caring for him at the relevant time.
That the father shall ensure that the children speak to the mother on Saturday before 7.00pm when they spend the weekend with him. The mother shall ensure that the children are available to take a telephone call from the father before 7.00pm on a Saturday when the children spend the weekend with her and on each alternate day when the children are not living with him. The father shall ensure that, during school holiday periods, the children are available to take a telephone call from the mother before 7.00pm on each alternate day the children are with him.
That pursuant to Sections 65DA(2) and 62B the particulars of the obligations these orders create and the particulars of the consequences that may follow if a person contravenes these orders and details of who can assist parties adjust to and comply with an order are set out in the Fact Sheet attached hereto and those particulars are included in these orders.

IT IS NOTED that publication of this judgment by this Court under the pseudonym McGarey & Stancati has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 5542 of 2010

Mr McGarey

Applicant

And

Ms Stancati

Respondent

REASONS FOR JUDGMENT

Before the Court are proceedings relating to parenting and property settlement instituted by the applicant Mr McGarey (“the husband”). The respondent Ms Stancati (“the wife”) and the husband have two children, D born in October 2005, and therefore aged six and half years, and E born in May 2009, and therefore aged four years.
The parties commenced cohabitation in mid 2003 (according to the wife) or in early 2004 (according to the husband). The wife, who was born in Italy and is qualified in Italy as a professional in the construction industry, had come to Australia in late 2002 and commenced to work as a supervised worker in her field. She was not qualified to work in Australia as a professional in her field. She continued in that employment until shortly before the birth of D.
The parties married in January 2005 when the wife was pregnant with D.
In September 2006 the parties purchased the former matrimonial home at F Street, Suburb A (“the Suburb A property”) in the wife’s sole name. The property was purchased for $650,000. The wife contributed $150,000, the husband contributed $50,000 and a mortgage in the sum of $450,000 was obtained from the Westpac Bank. In 2008 the parties renovated the Suburb A property spending $350,000 on the renovations of which the husband contributed from his earnings $140,000 and the parties borrowed a further sum of $170,000. On 1 March 2006 the husband borrowed $40,000 from his mother, entering into a written loan agreement. Reference will be made to the loan agreement when considering the balance sheet. The husband’s unchallenged evidence is that he used the amount borrowed from his mother to fund renovations.
In April 2007 the parties purchased an investment property at G Street, Town B (“the Town B property”) for $320,000. Of that, $42,000 was contributed from monies earned by the husband and the parties jointly borrowed $288,000 from the National Australia Bank (“NAB”).
The parties separated in January 2010. In July 2010 the Suburb A property was sold and the amount of $232,547 was paid into a controlled money account. From that account $20,000 was paid to the wife on 19 July 2010, $30,000 on 13 January 2011 and $50,000 on 13 December 2011, a total of $100,000. On 23 December 2010 the husband received $20,000 from the controlled money account. At the time of trial, the balance of the controlled money account was agreed to be $118,733.
In June 2011 the wife commenced cohabitation with Mr H and thereafter they have lived in a de facto relationship. The husband has not repartnered.
For a period of time after separation, the wife received the rental money from the Town B property. Her unchallenged evidence is that she received a total of $10,504 by way of rent in the period June to August 2012 but it is unclear to what extent those funds were available for the support of the wife and the children in circumstances where the wife’s evidence is that she was required to pay outgoings (not including mortgage payments) in relation to the property. Insofar as mortgage payments were paid in relation to the Town B property, they were made by the husband.
In November 2011 the Town B property was placed on the market for sale. The property was ultimately sold in February 2013. The proceeds of sale were not sufficient to discharge the mortgage with NAB and at the date of hearing the amount outstanding pursuant to the mortgage was $124,428.82. In the course of the hearing the parties agreed that any monies held in the controlled money account from the proceeds of sale of the Suburb A property should be applied against their joint liability to NAB. This will result in a shortfall of approximately $6,000 which will remain their joint liability.
When the matter came to trial, it was not disputed that the children would remain primarily in the care of the wife. The parties disagreed about the amount of time they would spend with the husband, but on any view of their competing applications, she would remain the primary carer.

property

In relation to property settlement the dispute between the parties related largely to the value of the business in which the husband has a 60% interest. The husband is a professional in the construction industry and operates a business known as M Pty Ltd. The business is owned by the M Unit Trust. Sixty percent of the issued units in the M Unit Trust are owned by the McGarey Family Trust. The McGarey Family Trust is controlled by the husband and for all purposes is his alter ego. The remaining 40% of the units in the M Unit Trust are owned by an entity associated with Mr J.
At the conclusion of the trial an Amended Joint Balance Sheet was prepared by the legal representatives and that Amended Joint Balance Sheet is set out below:

Ownership		Description			Estimate(s) Wife’s value				Estimate(s) Husband’s value
ASSETS
1	W	Proceeds of sale of [F Street, Suburb A]			$118,733				$118,733
2	W	Villa [G Street, Town B]
3	J ([McGarey] Family Trust)	[M] Pty Ltd, [M] Unit Trust, [I] Pty Ltd, [N] Pty Ltd, [McGarey] Family Trust			$551,415				Nil
4	J ([McGarey] Family Trust)	Loan to [M Unit Trust]			$100,326
5	J ([McGarey] Family Trust)	[Company K] Shares			$7,750				$7,750
6	W	Motor vehicle			$5,230				$5,230
Total		$683,128				$232,039
ADDBACKS
Total		Nil				Nil
LIABILITIES
7	J	Mortgage [Town B] property				$124,428		$124,428
8	J	Arrears on [Town B] property mortgage				$17,345		$10,000
9	H	Loan from Husband’s Mother ($40,000 plus interest)*Wife asserts that it is not a joint debt, it is not executed by her: Biltoff*				Nil		$45,683
10	W	Loan from Wife’s parents (no interest)				$50,000
11	Joint	Tax liabilities from dividends and trust distributions owed on flow of funds crystallised in 2010				Not known		$44,394
12	W	Credit Card - Amex				$9,708
Total		$201,481		$224,505
SUPERANNUATION
Member		Name of Fund		Type of Interest		Estimate(s) Wife’s value		Estimate(s) Husband’s value
13	H	[C Super Fund]		Accumulation Interest		$123,552		$123,552
14	W	[L Super Fund]		Accumulation Interest		$8,195		$8.195
Total		$131,747		$131,747
FINANCIAL RESOURCES
Ownership		Description			Estimate(s) Wife’s value		Estimate(s) Husband’s value
15
TOTAL NETT ASSETS			$613,394		$139,281

Dealing with the items on the balance sheet, the proceeds of sale of the Suburb a property will be offset against the parties’ joint liability to NAB and removed from the balance sheet.
It can be seen from the balance sheet that the interest of the husband in the M Unit Trust and the consequent debt by the unit trust to the McGarey Family Trust is the only substantial property of the parties.
The parties agreed upon a Joint Expert to value the husband’s interest in the Unit Trust and a report was produced by the Joint Expert, Mr O of P Pty Ltd (“P Pty Ltd”) in April of 2012. P Pty Ltd valued the units in the M Unit Trust at between $178,202 and $222,752 and, in addition, estimated the value of the net tangible assets of the business to be between approximately $70,088 and $98,381.
Both parties disagreed with the P Pty Ltd valuation and each was permitted to rely upon an adversarial expert. On behalf of the husband Mr Q valued the units in the M Unit Trust at $0. Mr Q in his evidence said that the M Unit Trust owed the McGarey Family Trust $100,326 and it was his evidence that amount was an asset of the McGarey Family Trust. That evidence was not disputed. Mr Q said that, at the present time, there was no money available in the M Unit Trust to pay that debt and whether or not it would ever be paid was uncertain.
The parties agreed that the McGarey Family Trust owns a small parcel of shares valued at $7,750.
Mr R, on behalf of the wife, valued the units in the M Unit Trust at $919,025 and therefore attributed to the husband’s 60% ownership of the units a value of $551,415.
The significant area of dispute between the valuers was as to appropriate valuation methodology. It was Mr Q’s position that the appropriate methodology was to value the M Unit Trust on the basis of net asset backing. Mr R valued the entity on the balance of future maintainable earnings.
Both experts were instructed to critique the P Pty Ltd report and neither was instructed to make independent enquiry as to the facts underpinning the P Pty Ltd report.

For the reasons I set out below, I accept the valuation of Mr Q. In coming to that conclusion I have considered the reality of the business conducted by the husband in contrast with the theoretical approach taken by Mr R and the assumptions Mr R has made.
Dealing firstly with the valuation of Mr R, he valued the unit trust using a future maintainable profit methodology. Mr R’s starting point was the calculation of P Pty Ltd in relation to the weighted earnings before income tax depreciation and amortization (“EBITDA”). In the joint statement of experts there was a table setting out the P Pty Ltd calculations and Mr R’s calculations which is reproduced below:

[M] UNIT TRUST
Comparison of Weighting

[P Pty Ltd][Mr R]
Calculation Calculation

Weighted Weighted
Weighting EBITDA Weighting EBITDA

[P Pty Ltd] Adjusted EBITDA
2008   714,030  2         1,428,060     2         1,428,060
2009   53,604  4         214,416         4         214,416
2010   92,044  4         368,176         4         368,176
2011   -128,030                  8         -1,024,240     2         -256,060
2012   21,488  8         171,904         8         171,904
26  20

Weighted EBITDA $44,551 $96,325

The first matter to be noted is that both P Pty Ltd and Mr R have included the 2008 year in the calculation. The second matter to be noted is that whereas P Pty Ltd weighted the loss of $128,030 in 2011 by a factor of eight, Mr R has reduced that weighting to a factor of two.
In relation to the 2008 results Mr Q was of the view that those results were abnormal and distorted the calculation of the EBITDA to the extent that they should not be included. It was not disputed that the Global Financial Crisis (GFC) commenced in the second half of the calendar year 2008, that is, after the 30 June 2008 results. Accordingly, the 2008 earnings were unaffected by the GFC. It is notable that, whereas in 2008 the adjusted EBITDA of the unit trust was $714,030, in the following years the highest EBITDA (in 2010) was $92,044 and the lowest (in 2011) was -$128,030.
Mr R gave evidence that inclusion of the 2008 year was a matter for judgment in the exercise of his expertise. Mr Q asserted that it was inappropriate to include the 2008 results because they were abnormal by comparison with the later years. It was Mr Q’s evidence that a prospective purchaser would look at a number of years sufficient to observe a trend in the profitability of the business. He did not suggest that a five year period is inappropriate but suggested that a three year period might be more appropriate depending upon the cycle that the business was in. Mr Q gave evidence, and I accept, that it would be reasonable for a purchaser to be more interested in the performance of the business post the GFC and argued that the purchaser would really be interested in the performance of the business now, rather than historically in 2008, particularly having regard to the significant difference between the results achieved in 2008 and those achieved in later years. The hypothetical purchaser is concerned with the profitability of the business now. I accept the evidence of Mr Q that the 2008 results are abnormal and ought not be included for the purpose of the calculation of the EBITDA.
That proposition is illustrated by Mr Q’s observations that the business in the financial years 2009 to 2012 inclusive has never achieved the positive future maintainable earnings of $96,325 for which Mr R contends.
The second matter to be considered is Mr R’s weighting of the loss of $128,030 in 2011. It is to be noted that the P Pty Ltd calculation weights the 2011 results with a factor of eight. Mr R has adopted a weighting of two for the 2011 results, this being the substantial difference between the P Pty Ltd calculation and that of Mr R. There is no real explanation for Mr R’s decision to apply a weighting of two to the 2011 results, except that that is a matter of professional judgment.
I accept the evidence of Mr Q, that it is appropriate in weighting the future maintainable earnings, to apply the highest weighting to the most recent years, as was done by P Pty Ltd, and I do not accept that it was appropriate to weight the 2011 results by a factor of two as was adopted by Mr R.
In any event, the unreliability of Mr R’s calculation is illustrated by removing from his calculation the 2008 results. It was Mr R’s evidence that if the 2008 results were not taken into consideration then the weighted EBITDA of the business would be reduced to $28,931 (based also on a change in the weighting for the 2012 year) and the value of the unit trust derived would therefore be approximately $145,000 rather than $919,025. If the 2008 figures are excluded from the calculation, and a capitalisation rate of 25% is adopted, the resulting value is approximately $116,000 and the value of the husband’s interest is then $69,436.
In relation to the capitalisation rate, Mr R gave evidence that his nominated capitalisation rate of 25%, assumed that the husband would remain as an employee of the business. Indeed, he said, the husband’s remaining as an employee would be critical to what a prospective purchaser would be prepared to pay for that business.
When asked to assume that the husband would not remain as an employee of the business Mr R said that he would increase the capitalisation rate to 40%. Thus, if the 2008 results are excluded and the capitalisation rate is adjusted to take into account the fact that the husband does not remain as an employee of the business, Mr R would value the unit trust at $72,327 and the interest of the husband consequently at $43,396. That figure relies upon the weighting of the 2011 results (a loss of $128,030) by a factor of two. If those results were weighed differently, the value may be nil.
Even if the court were of the view that the future maintainable earnings methodology is the appropriate methodology for the valuation of the business, I do not accept that it is appropriate to include in the calculation the 2008 adjusted EBITDA. There being no evidence that the husband would be likely to remain as an employee of the business, then Mr R’s calculation would have to be adjusted by varying the capitalisation rate to 40% producing a result, using Mr R’s methodology, that the value of the business would be $43,396 rather than the amount of $551,415 for which he originally contended.
Since that amount is less than the sum of $100,326 for which Mr Q contended (that being the amount owed to the husband by the M Unit Trust) I propose to adopt Mr Q’s valuation.
I am persuaded to Mr Q’s view, that the business itself has no value. Viewed objectively, the business is no more than the vehicle through which the husband pursues his professional practice and earns his income. It is personal to him and his income stream derived from it will be taken into account in the consideration of the section 75(2) factors. In my view, to do otherwise would be to double count.
There is no evidence to support the contention that the parties owe NAB any sum other than the amount of $124,428, and the amount at Item 8 on the balance sheet will be disregarded.
The loan from the husband’s mother was evidenced in writing in a document dated 1 March 2009. Under the heading “Interest” the document provides:
Either:
No interest is payable on the loan amount OR
Interest is payable on the loan amount at the rate of 4% per annum.
I am unable to conclude that there is any requirement for interest to be paid. However, I am satisfied that the sum was advanced to the husband and that he is required to repay it to his mother. There is no date fixed for repayment and the term of the loan as set out in the agreement is “until the borrower repays the loan amount (together with any interest payable, if any) in full. There is no evidence that the husband’s mother has called for repayment and, having regard to the terms of the loan agreement she is not entitled on the face of the agreement to call for payment. I propose to disregard the loan as a liability as there is no evidence that the husband will be required in the foreseeable future to repay it.
I propose to deal with the loans to the wife from her parents in the same way. There is no evidence that she is being pressed for payment and, although no doubt she would repay her parents if she had available funds, I cannot be satisfied that she will be required to repay them in the foreseeable future.
There is no evidence that the wife’s claimed credit card debt arose out of expenditure during cohabitation and I propose to disregard it.
The husband’s evidence that he will be required to pay tax of $44,394 arising from distributions from the trust in the year ended 30 June 2010, is unchallenged.
I find the assets and liabilities of the parties to be as follows:
ASSETS
M Pty Ltd, M Unit Trust,
I Pty Ltd, N Pty Ltd and
McGarey Family Trust  $100,326
Company K shares owned by McGarey Family Trust               $     7,750
Wife’s car$    5,230
Total $113,306
LIABILITIES
Balance ofdebt to NAB after payment of proceeds of sale
of Suburb A  $    5,695
Husband’s tax liability   $ 44,394
Total$ 50,089
NET ASSETS BEFORE SUPERANNUATION            $ 63,217
SUPERANNUATION
Husband’s C Super Fund  $123,552
Wife’s L Super Fund  $    8,195
Total$131,747
NET ASSETS  $194,965
Having regard to the quantum of the assets available for distribution it is appropriate to note that the parties have incurred legal fees, in the wife’s case of $127,750 (all unpaid) and in the husband’s case of $80,000 paid and, on his evidence, approximately $100,000 unpaid. The wife filed 17 volumes of annexures and exhibits to her trial affidavit and the husband filed two lever arch files of annexures to his. Of the 211 paragraphs of the husband’s affidavit all but 56 were struck out. At the commencement of the trial the annexures and exhibits were returned to the parties unread. They were invited to tender any document from the volumes returned which was relevant and to which the Court should have regard. Ultimately six documents were tendered in the wife’s case from the rejected documents and two in the husband’s case.

section 79(2)

Having identified the property of the parties, it is necessary to consider whether it is just and equitable to make any order which alters the parties’ legal and equitable interests. The substantial property of the parties rests in the family trust and in the husband’s superannuation. The parties agree, as do I, that by reason of the breakdown of their marriage, it is necessary that the manner in which their assets are held be adjusted so as to make the assets available, so far as is possible, for their immediate use. It is just and equitable that their interests and rights in their property be altered. They disagree on what alteration is appropriate.

CONTRIBUTIONS

At the commencement of co-habitation the husband was a professional in the construction industry working in a business which he had started in 1998. That business ultimately became part of the enterprise operated by the M Unit Trust. He had an interest in a superannuation fund but there is no evidence of the value of that interest at the relevant date, and he had some money in bank accounts.
At the commencement of co-habitation the wife had $135,000 (including $130,000 given to her by her parents) and an interest in superannuation worth $1000. When the parties purchased the Suburb A property in 2006 the wife contributed $150,000 to the purchase and the husband contributed $50,000. Some of the husband’s funds came from savings and some from earnings post cohabitation. Thus the wife’s initial contributions exceeded those of the husband.
Although the husband identifies monies contributed to renovations and to the purchase of the Town B property as being contributed by him, I take the view that since those monies must have been accumulated from the business, post co-habitation, they should be attributed to both parties.
Both parties were in employment at the commencement of co-habitation and the wife continued to work until shortly before the birth of the first child. After D was born, the wife was the primary carer for the children and was engaged in home making and parenting. Indeed it was the intention of the parties that the wife would not return to work until such time as their children started high school. The husband for his part was the primary income earner for the family up until separation. Thus, I find that the contributions of the parties during co-habitation were equal.
After separation the wife continued to be the primary carer for the children and the husband continued to work. I find that contributions subsequent to the parties’ co-habitation should be assessed as equal.
The assets of the parties now are less than they were at the commencement of co-habitation and therefore the wife’s greater initial contribution deserves recognition. I assess her contributions to be 55% and the husband’s to be 45%.

SECTION 75(2) FACTORS

The husband will continue to work in the business and to derive income from it. It was the husband’s unchallenged evidence that his current income from the business is $96,772 per annum and that in addition he receives a benefit of a car which he valued at $12,480 per annum. Thus, the benefits derived by the husband from the business on his evidence amount to $109,252.
In the course of cross-examination, the husband conceded that he was also able to pay personal expenses using the funds of the business and in particular to pay to his solicitors the sum of $1,000 per week. He gave evidence that those expenses were then debited to his loan account with the unit trust. Although it was uniquely within the husband’s ability to do so, he did not give any evidence of the balance of his loan account with the unit trust and the only evidence that the court has in relation to the husband’s loan accounts is the evidence of Mr Q to the effect that the unit trust owes the McGarey Family Trust $100,326.
It is not possible to say whether or not the amounts which are debited to the husband’s loan account result in the husband owing money to the unit trust or whether, as a result of monies previously advanced by the husband to the unit trust, the amounts debited to his loan account merely reduce the amount which the unit trust owes to him.
Similarly, the husband gave evidence, that in the course of overseas travel, he attempts to set aside periods of time when, in addition to attending to business commitments, he can enjoy some leisure time and the costs applicable to the leisure portion of his travel are debited to the loan account. The Court is in a similar position in relation to those expenses.
I am satisfied that the actual benefit which the husband derives from his employment is greater than his drawings but I am not in a position to quantify the extent of the further benefits. The husband will continue to derive an income. Whether that income will exceed that which he currently enjoys cannot be predicted.
As a result of the orders which will be made in these proceedings the husband will spend substantial and significant time with the children and will be obliged to provide accommodation for them.
The wife is qualified in Italy as a professional in the construction industry but her qualifications are not recognised in Australia. It was her evidence that in order to have her qualifications recognised she would need to complete a process which takes about 15 months. She would also need to pay the fees associated with the recognition of her qualifications. After re-qualifying she would then be in a position to seek work as a professional in her field.
The prospects of employment in that field, as was illustrated by the evidence of the husband, are not certain. The husband gave evidence of a large number of professional firms in that field laying off workers.
The wife, when the parties met, was employed in Australia as a supervised worker in her field. It was her evidence that she could seek employment in that capacity. Her reason for not doing that was that she had chosen not to do so. The wife gave evidence that it was her intention to establish her own business and to work three days per week preferably as a qualified professional in her field working part-time. I find that the wife has a capacity in the future to earn income but it is reasonable to assume that it would take some years for her to achieve an income commensurate with that of the husband.
The wife will have the primary care of the children but in that respect I take into account the fact that currently D is in after school care for three days of each week and that from the beginning of 2014 E will be in school and presumably also in after school care which is available for five days each week and nothing prevents the wife from working full-time, should she choose to do so, from 2014 onwards.
The wife is living in a de-facto relationship with Mr H. He is self employed and in the financial year ended 2012 his income was $62,500 (gross). He has the ability to contribute to the support of the wife although he has no obligation to support the children.
Taking all of those matters into account, there should be an adjustment in favour of the wife for section 75(2) factors of 15%.

conclusion

The wife would receive 70% of the available property on the analysis set out above. Because the available pool is so small, I consider that she should receive the whole of the available net assets of the parties. Because the pool is small I consider that result to be reasonable.
The husband conceded that the wife should receive most, if not all, of his superannuation entitlement. Although no notices have been given to the trustee, I accept the submission of the husband that the trustee is unlikely to raise any objection.
In real terms, the wife will receive the superannuation interests totalling $131,747 and a payment from the husband of $58,000 (noting that she has her car in her possession). She has already received $100,000 from the sale of the Suburb A property. The husband will have to raise funds to pay that sum and he has no security to offer. It may have to be paid from income and I propose that he be given six months to pay.
The husband will be responsible (as between the parties) for the joint debt to the NAB and his tax liabilities.
The parties have agreed that furniture should be divided using a “pick a pile” method and, as the furniture is in the possession of the wife, she will draw the lists.
In the context of the matters I have referred to I consider this outcome to be just and equitable.

spousal maintenance

The amount to be received by the wife by way of property settlement is insufficient to provide for her future support.
In order to prosecute her application for spousal maintenance, the wife must first demonstrate that she has crossed the threshold test contained in section 72 (1) of the Family Law Act 1975 (Cth) (“the Act”) as set out below:
(1) A party to a marriage is liable to maintain the other party, to the extent that the first-mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:
(a) by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b) by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c) for any other adequate reason;
having regard to any relevant matter referred to in subsection 75(2).

The wife has two potential means of support. Her ability to earn an income from paid employment has been discussed earlier in these reasons. She is not likely to find employment in the short term but is able to work, at least as a supervised worker in her field, within a reasonable period.
For the balance of the year she would be able to work part time when E is in pre-school if she could find employment. Once E starts school in 2014, she would be able to work longer hours.

Until such time as the wife is able to earn income to support herself, the financial circumstances of her cohabitation with Mr H are a relevant factor.
Mr H has an income derived from his consultancy of $62,500 in the financial year ended 30 June 2012. He swore an affidavit in relation to his financial position in April 2013 and does not suggest that his income will be less than that amount in the year ended 30 June 2013.
Fogarty J in F and F (1982) FLC 91-214 dealt with this issue and said:
It was the evidence of both the wife and Mr. T that Mr. T makes no financial contribution to the wife or to her household….
No doubt the wife and Mr. T are entitled to make any personal or financial arrangements between them which are suitable to both of them. That however does not mean that the wife may continue to impose upon her husband the responsibility for her support in those circumstances.
Section 75(2)(m) provides that the Court may take into account the following: “if the party whose maintenance is under consideration is cohabiting with another person the financial circumstances relating to the cohabitation”. In my view, in a specific case such as this, the term “the financial circumstances relating to the cohabitation” is not confined to any actual financial arrangements between the relevant persons. It may also include financial arrangements which would be appropriate in those circumstances. That is, the Court is entitled to take “this potential into account'” as Wood S.J. pointed out in Patterson and Patterson (1979) FLC 90-705, at p. 78,759.
The passage set out above was cited with approval by Warnick J sitting as the Full Court in P and W [2005] FamCA 1303.
Thus, although Mr H deposes to an agreement between him and the wife that each will pay their own expenses, that does not preclude his being able to support her and such of his income as is not required for his own personal support would be available for her support.
There is no evidence that Mr H is unable to provide adequate support for the wife.
In those circumstances the wife has not demonstrated that she has met the requirements of section 72 and her application for spousal maintenance will be dismissed.

PARENTING

Neither parent seeks an order for equal shared time with the children.
E was between seven and eight months old when the parties separated and D was four years old. On 28 November 2011 the parties entered into consent orders which provided for D to spend time with his father each weekend from Friday evening until Sunday at 6 pm as well as shared time during school holidays. Pursuant to the orders E spends time with her father for three hours on Tuesday and for three hours on Saturday.
The Court was assisted by a Family Report prepared by Ms S. The report was released on 5 October 2012 based on interviews conducted by Ms S in September 2012. Ms S in her report recommended that the time E spends with her father immediately be increased so that for a period of six weeks she spend the whole of either Saturday or Sunday with her father and D. Ms S recommended that after six weeks E begin to spend overnights with her father at the weekend from 9.00am Saturday until 6.00pm Sunday. Ms S recommended that after three months, the time E spends with her father, should increase to two consecutive nights each alternate weekend from after school or preschool on Friday to 6.00pm on Sunday as well as the midweek visit from 3.00pm to 6.30pm.
At the same time as E begins to spend alternate weekends with the father, Ms S recommended that D commence spending each alternate weekend with the father, rather than each weekend, but that the weekend be increased to finish with the commencement of school on Monday morning. Ms S also recommended that D spend one midweek night each week with the father (as with E) from after school until 6.30pm. Ms S recommended that by the end of 2013 the time the children spend with their father should, for each of them, commence after school on Friday and finish before school on Monday morning as well as on the alternate Wednesday after school until Thursday morning.
The mother in her oral evidence said that she did not agree with Ms S’s recommendations. Accordingly the mother did not increase the amount of time E was permitted to spend with her father and, at the time of trial, E has never spent an overnight period with her father.
The orders which the husband sought were broadly in accordance with Ms S’s recommendations.
The orders which the mother sought were more restrictive of E’s time with her father. It was her position that until E is four years of age she should continue to spend three hours with her father each Wednesday and Sunday. When E turned four years of age the mother was prepared to increase E’s time on Sundays to commence at 12.00pm and conclude at 6.00pm and when E turns five years of age the mother proposed to increase her time with her father and D to commence on Saturday at 12.00pm and conclude on Sunday at 6.00pm. The mother does not propose that E spend school holiday periods with her father until she is six years of age.
In relation to school holidays the mother proposes that the children spend the school holidays in a week about arrangement with each parent, commencing immediately for D and commencing for E when she reaches six years of age.
Thus it is clear that each parent sought orders that the children spend substantial and significant time with the father. Neither parent suggested that it was appropriate for the Court to consider spending equal time with each parent, and in circumstances of the age of these children and the limited time that E has spent with her father thus far, it would not be appropriate to make that order.
It was the father’s position that D has spent every weekend with him since separation (subject to the father’s availability) and that it would be inappropriate to reduce the amount of time that D spends with his father. It was the mother’s position that it is unreasonable, in circumstances where D is attending school, for him never to be able to have a weekend during term time with his mother. The mother also gave evidence, and I accept, that D has on numerous occasions expressed a wish to be able to spend time with his mother and sister at weekends. There is no independent evidence of the children’s wishes and given their ages, their wishes would be given little weight.
It is entirely understandable that the wife would like the opportunity to spend family time with both of the children together on the weekend and to experience the sorts of activities that are not possible during the week because of D’s school commitments.
Ms S reports that D spoke positively of the time he spent in the home of each of his parents. Ms S reported that D clearly enjoys the opportunity to spend regular time with each of his parents and her observations raised no concerns about the nature of D’s relationship with either of his parents.
In his interview with Ms S, D expressed a preference to be able to spend some weekend time with his mother and E so that they could do “fun stuff” together. However, D also told Ms S that he did not want to spend any less time with his father. D suggested to Ms S that a possible solution to this problem was that he might be able to spend alternate weekends with his father and then a couple of nights with the father in the other week, to make up for the time that they would miss out on the weekend.
D expressed no concerns about the possibility of staying with his father on Sunday night or of his father dropping him to school in the morning and indeed told Ms S that he would be happy if any of these things occurred. Ms S in her report expressed the view that, although E has yet to experience spending overnight time with her father there was no indication that E does not view her father as a source of security and that she would not cope with beginning to spend greater periods of time with him including overnights. Ms S opined that “it is likely that [D’s] presence would assist [E] as would the fact that she is of an age where she has the emotional, cognitive and language development to anticipate absence and reunion, to verbally communicate her internal feeling states and to be verbally reassured.” Ms S expressed the view that “[E’s] social experiences of being separated from her mother to attend family day care and, more recently preschool are also likely to assist her to cope.”
The mother was critical of the father’s failure to spend time with the children on every opportunity that was available to him. She was particularly critical of the father for choosing, during a school holiday period, to take D snowboarding which had the effect of his missing out on three hours with E. I accept that in circumstances where the father was required to balance the opportunity to spend a week at the snow with D against the possibility of spending three hours with E, he choose to take D snowboarding. I do not accept the mother’s criticism of him in that regard to be valid, in circumstances where the mother would not permit E to participate in the holiday. The mother in her evidence details a number of occasions when the father was unable to spend time with the children due to being overseas or interstate because of his work commitments. The father has worked extensively in Europe and Asia. The practice according to its website has completed over 150 projects in numerous countries. The father gave evidence that he was attempting to obtain work in Indonesia. In circumstances where the husband’s work requires him to travel internationally and interstate I do not accept that he has failed to take the opportunity to spend time with the children or, as is asserted by the mother, that he has given improper priority to his work over his relationship with his children. It is, however, a fact that the nature of the father’s work and the commitments which require him to travel create some difficulties in structuring arrangements which are in the best interests of the children.
The mother was also critical of the father for failing to maintain his financial obligations towards the children. There was a time when his child support payments were in arrears but I accept his evidence that at the present time his child support is paid. If the mother is critical, as she is, of the amount of child support paid by the father then it is open to her either to bring a departure application in conjunction with the current proceedings or to seek a change in the administrative assessment. It was not put to the father that his taxable income in any way misrepresents his actual income and in those circumstances I do not accept the mother’s criticism.
Ms S in her report dealt with the effect of changes in the children’s arrangements.
The parents live within relatively close proximately and the only real practical difficulty in the children spending regular time with their father is that, on occasions, he is not available. That is, however, not of itself a reason to limit their time.
There is no evidence that either parent lacks capacity to care for the children.
Ms S observed E’s relationship with her father to be warm and positive.
In cross-examination Ms S gave evidence that it was important that both of these children, as far as possible, be treated equally by their father. For that to happen it is necessary that as soon as possible, consistent with her age and stage of development, E should commence spending the same time with her father as does D.
Ms S in her report said that evening and overnight periods with the parent that the child does not primarily live with can be psychologically important for young children. She said:
These periods of time provide opportunities for crucial social interactions and nurturing activities that short two to three hour visits cannot provide. Everyday activities such as bathing and bedtime rituals help to promote a child developing and maintaining trust and confidence in the parent, whilst deepening and strengthening child-parent attachments. It also allows time for the children to settle into the rhythms and routines of (the parent’s) household, encourages children to feel that they have two homes whilst affirming that the identity as a “parent”.
I accept the evidence of Ms S that the mother’s proposal for E to spend overnight time with her father is unduly cautious and I accept the evidence of Ms S that the mother’s proposal limits the opportunities for E to build and strengthen emotional bonds with her father and to experience family life with him and her brother across a range of contexts.
I accept the evidence of Ms S that in this family, a compromise would appear to be that the children have the opportunity to spend some mid-week and weekend time with each parent in their respective households as well as building towards both children spending periods of block time with each parent during school holidays.
The orders I propose will see the children spending substantial and significant time with their father and I consider those arrangements not only to be in their best interests but to be reasonably practicable.
Each of the parties sought orders in relation to travelling overseas with the children. It was the father’s proposal that each party should be permitted to take the children out of Australia during times when the children would be with that parent for school holiday periods, subject to the travelling parent giving appropriate notice and information to the other party. The mother sought orders which would permit her to take the children to Italy to visit in 2013 and each alternate year thereafter. Notably the mother sought an order which did not require the father to consent to that travel. In relation to the possibility of the father’s travelling with the children outside Australia however, the mother sought an order which would require her consent.
I am of the view that each party should be subject to the same conditions and limitations in relation to the children’s travel and accordingly the orders will require that each must obtain the consent of the other.
Each of the parties sought orders in relation to special days. There appeared to be no controversy between them in relation to those arrangements and there was no evidence directed towards the suitability of one set of proposals as opposed to the others. The orders will provide for the children to spend time with each parent on special occasions.

I certify that the preceding one hundred and five (105) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 22 May 2013.

Associate:

Date: 22 May 2013

[2013] FamCA 366

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Family Law

Equity & Trusts

Commercial Law