MORROW & STEELE

[2015] FCCA 251

FEDERAL CIRCUIT COURT OF AUSTRALIA

MORROW & STEELE [2015] FCCA 251

Catchwords:
FAMILY LAW – Bitterly contested property dispute – husband property developer who conducts business in partnerships – husband’s affairs difficult to construe in face of numerous companies and trusts used to conduct business – experts unable to agree value of husband’s interests – both experts not conducting “fire sale” valuation – arguments about value of initial contributions – whether alleged repayments to husband’s mother bona fide – wife seeking child support in form of, inter alia, private school fees – both parties seeking majority of property pool – characterisation of monies already disbursed to parties – forensic problems almost insuperable – notional division of property 55/45 in favour of the husband – parties to confer regarding appropriate final orders.

Legislation:
Evidence Act 1995

Family Law Act 1975, s.117

Stanford v Stanford [2012] HCA 52

Applicant: MS MORROW

Respondent: MR STEELE

File Number: MLC 4205 of 2013

Judgment of: Judge Burchardt

Hearing dates: 26, 27, 28 November & 1 December 2014

Date of Last Submission: 1 December 2014

Delivered at: Melbourne

Delivered on: 13 February 2015

REPRESENTATION

Counsel for the Applicant: Mr Sweeney

Solicitors for the Applicant: Pearsons Lawyers Pty Ltd

Counsel for the Respondent: Mr Robinson

Solicitors for the Respondent: Blackwood Family Lawyers

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA

AT MELBOURNE

MLC 4205 of 2013

MS MORROW

Applicant

And

MR STEELE

Respondent

REASONS FOR JUDGMENT

Introductory

1. This is the property component of a long-running and bitterly contested dispute between the parties.  At the urgent and express behest of the parties, and against my general inclination, I heard and determined the children's issues by a decision delivered on 13 August 2014.  The property component of the dispute has been as hard fought as the children's issues were.  The matter was heard over four days (albeit one of them only very briefly) in late November and early December 2014.  Although I had already made some findings about the parties in my parenting judgment, there was no application by either party that I not hear the property dispute.

2. The applicant wife's position, as put in her FURTHER AMENDED Initiating Application, filed 15 October 2014, is that the property interests of the parties be divided as to 70 per cent in her favour and 30 per cent to the husband.  In final submissions, counsel for the wife appeared to concede that a 10 per cent loading to the husband for contribution was appropriate, but it was submitted that there should be a very significant adjustment by relation to the future needs factors.  When one bears in mind that a 10 per cent adjustment to the husband would give him 60 per cent of the pool, the wife's proposal that he, in fact, receive only 30 per cent shows that in substance (the matter was not put in terms by counsel), that she seeks a 30 per cent adjustment as to future needs.  

3. The husband's position is that he should receive a loading of either 40 per cent or, at the lowest, 30 per cent in relation to contributions and the wife should receive an adjustment of some 10 to 15 per cent in her favour by virtue of future needs.  Thus, at its highest, the husband's position would give him 80 per cent of the pool and at its lowest, would give him 65 per cent of the pool. 

4. Thus, on the wife's proposal, the husband would receive 30 per cent of the property pool and, on his best case, he would receive 80 per cent of it. Disparities of this enormity in projected outcomes are not commonplace in my experience in family law proceedings.  It is readily apparent that both sides have grossly overstated the force of their positions. 

5. For the reasons that follow, and subject to some very important caveats as to implementation which will be explained, I am of the view that a just and equitable division of the parties' property interests will be 45 per cent to the wife and 55 per cent to the husband. 

Methodology

A Word about Methodology

1. The most significant practical difficulty that this case involves is the nature of the occupation of the husband and the interests that he controls as a result.  The husband is and has been, at the very least throughout the entirety of the relationship with the wife, a property developer.  It is his practice to invest in properties that are perceived to be capable of being developed in company with a number of other such investors.  The pattern of investment is not uniform in the sense that the proportion of funds committed to purchasing what are, it would appear, very expensive blocks of land is by no means always the same.  The husband appears, on the whole, to be a smaller percentage investor than those with whom he regularly invests. 

2. The properties often take many years to come to full and completed development and, indeed, there are tensions between the various investors from time to time as to what is the best way to proceed in the sense of either selling the land as it is or developing it by actually building properties on it.  The difficulty to which this gives rise is that it makes valuation of the husband's property interests extremely complex and difficult.  It is a matter about which respected experts can, and in this instance indeed have, strongly disagreed.  Since the disagreements have the capacity to alter the value of the pool by many hundreds of thousands of dollars, this is a significant and, in one sense, almost insuperable forensic difficulty. 

3. Furthermore, because the husband is, in almost every instance, a minority shareholder, there are real questions as to the amount that would be realised in the event that the Court makes orders causing him to be forced to sell his properties.  This is a yet further difficulty because both the expert valuers called expressly conceded that they had not valued the husband's interests on a forced-sale basis. 

4. Accordingly, what I propose to do is to resolve the controversy that the parties have presented on the evidence that has been put forward by them.  This will enable me to produce a defined property pool, to assess the parties' relative contributions, and to deal with the future needs issues.  Once that exercise is done, it will be necessary to revisit further the mechanics whereby this just and equitable outcome may be achieved bearing in the mind the sort of problems that I have indicated already, and which I will deal with in greater detail in due course. 

5. Whilst on the question of methodology, I would also point out that although the parties elected to rely only on their trial affidavits and updating materials (and most current Financial Statements), I do not propose to traverse the parties' evidence in any great detail.  To do so would be to expand this judgment to epic proportions.  The parties had all too much to say in their affidavit materials and in the witness box, some of it about amounts that were, in my view in the scheme of things, not worth the time that they occupied.  I propose to deal with the various controversies that they have raised, so to speak, seriatim as I hope will become clear. 

Agreed Facts

1. The wife was born on [omitted] 1972 and the husband was born on [omitted] 1959.  They commenced their relationship in January 2003 and married on [omitted] 2007. Separation took place on 21 April 2013.  Their two children are [X], born [omitted] 2007 and [Y] (“[Y]”), born [omitted] 2010. 

2. The children will live with the wife and spend time with the husband pursuant to the orders I made following the earlier parenting hearing, and this will involve a regime of four nights per fortnight with the husband plus half annual holidays from 2016 onwards.  [Y] is autistic, although the extent of his autism is not, as yet, finally understood.  In my earlier judgment, I pointed out that the husband tends to underplay [Y]'s difficulties and the wife somewhat exaggerates them. 

3. The husband, as already noted, is and has at all times been a property developer.  The wife was a [occupation omitted] who, according to the husband, was earning approximately $120,000 per annum until she ceased work in 2006.  Thereafter, the wife has had some very limited part-time work only. 

4. At the commencement of the relationship, the wife owned a property which was sold, in about 2005 or 2006, for a net benefit of $350,000.  The wife's parents, according to her (and this was not contradicted), contributed $50,000 towards the cost of the parties' wedding.  The husband had, at the commencement of the relationship, shares in a number of properties, some of which, indeed, he still owns.  The value of these properties was the subject of significant dispute within the hearing. 

5. There is no question that the husband was, notwithstanding the significant scale of the wife's earnings until 2006, the predominant contributor in terms of income.  Likewise, the wife was the primary carer of the children from their birth onwards and has been a full-time mother and, indeed, remains so.  The husband, as noted in my earlier judgment, has had significant health issues over a protracted period of time. 

6. As already indicated, these broad matters are not the subject of material dispute.  They are either agreed or have been asserted by one or other of the parties without contradiction. 

7. One other area of agreement, as I understand it, is that the issue of superannuation in this case should be addressed by aggregating the parties' superannuation and, in effect, dividing it equally. 

8. I should note, perhaps as a personal whimsy, that the parties were so significantly in dispute that at one stage, they apparently wished the Court to determine whether they had actually commenced their cohabitation in July (wife's version) or September (husband's version) 2003.  I pointed out to them at the time that this was scarcely likely to be a matter of any great moment and the issue, thankfully, receded.  I mention it only to give the flavour of the way in which this proceeding has been conducted. 

The Decision of the High Court in Stanford

1. As the High Court made clear in Stanford v Stanford [2012] HCA 52 (“Stanford”), the Court's first task is to determine the legal and equitable interests of the parties, and to determine whether it is appropriate that there be an adjustment to the parties' property interests.  In this case, as in so many, it is clearly appropriate that there be an adjustment to the parties' property interests.  The parties' relationship is at an end, and the basis upon which they conducted their financial affairs has, plainly, disappeared.  Both parties seek that there be such an adjustment.  It is clearly appropriate that there should be. 

The Pool - Introductory

1. The pool was an area which raised quite a considerable number of controversies and disputes between the parties.  The most significant of these was the value to be ascribed to the husband's interests in what both parties referred to as the [Steele] Group.  It emerged from the evidence that it is the practice of the husband and, it would appear, the various colleagues with whom he enters into business to ensure that each particular property development in which they participate is conducted through the medium of a shelf company set up for that project alone.  Thus, if the project goes bad, the shelf company is wound up without, it would appear, at least in the minds of the participants, giving rise to liabilities in any other project which is underway. 

2. The matter is further complicated by the fact that at least in the husband's case (and it would seem fairly clear, at least, some of the other co-investors) the various shelf companies are themselves owned and/or controlled through overarching holding companies which themselves are trust companies, and with all the further accounting complexities to which that gives rise.  To that layer of confusion, there is the fact that the shelf companies to which I have referred set up in respect of each investment are, themselves, owned in different proportions according, it would appear, to the amount contributed thereto by the various co-investors. 

3. It is readily apparent that the resulting circumstances, clearly designed both to minimise risk in the event of a poor investment choice and also to minimise tax, are very confusing.  Notwithstanding all of this, most of these issues were dealt with in considerable detail by the reports of the experts. 

The evidence of the experts

1. Mr F was appointed by the parties as a single expert witness to value the [Steele] Group.  It is clear from the materials filed, and the evidence that Mr F gave, that he conducted himself scrupulously as a jointly-appointed expert and did not adopt a partisan position.  He produced a report, dated 21 July 2014, which is annexure DF-2 to his affidavit sworn 24 November 2014.  He valued the parties' interests in the [Steele] Group entities at $2,720,000. 

2. The husband and his advisers did not agree with Mr F's approach, and engaged Mr L to prepare "a limited scope report regarding the appropriateness of a minority discount and the size of that discount" in the husband's entities (see annexure ML1).  Mr L's affidavit was filed on 7 November 2014, and the letter from which I have quoted is annexure ML1 thereto. 

3. In his report, at paragraph 35, Mr L pointed out, correctly as it turned out, that the [Mr F] report included an important arithmetic error in the calculation of non-current assets in the [Steele] Group.  It omitted the pro-rata value of the [O] Pty Ltd of $746,006.  There are two things to be said about this error.  First, it shows that Mr F is human and can make mistakes, something he readily conceded in respect of this error.  Second, it shows that Mr L was not concerned, so to speak, deliberately to minimise the asset pool.  I would say, with respect, that I would not have anticipated that a qualified professional chartered accountant like Mr L would be expected to behave other than honourably, but in any event the fact is that in this instance he clearly did so. 

4. The two areas of real controversy between the experts related to minority interest discounts and further discounts for lack of marketability.  The report prepared by Mr L valued the [Steele] Group at $2,046,381 but noted that net loans from the husband of $339,968 would need to be adjusted leaving a total "for family law purposes" of $1,706,413.  The experts conferred and subsequently produced a helpful joint memorandum which was tendered as exhibit AR1, dated 1 December 2014. 

5. The report noted that the experts agreed that there was an arithmetic error in the original valuation of [L] Pty Ltd earlier described above.  The report noted an issue relating to shares held in an entity known as [O].  The report noted that it had been asserted that only 20 and not 60 per cent of those shares were beneficially held by Mr Steele, and the valuation was completed on the basis of the 20 per cent shareholding. 

6. In his initial report, Mr F had not made any adjustment for minority interest shareholdings on the footing that it was not appropriate to do so where such entities did not carry on a business.  Following discussion with Mr L, Mr F changed his position and agreed that a minority interest discount would be applied by a prospective purchaser if the husband or his controlled entities were to sell their minority interests within the [Steele] Group.  What emerged, notwithstanding that nature of agreement, was a disagreement as to the percentage to be allowed for the minority interest discounts.  Following their discussions, the parties were able to, in some instances, come to agreement but in others were not. 

7. The experts remained unable to agree as to whether there should be a marketability discount.  Mr F's ultimate figure was $3.597 million (less the loans payable to the husband of $339,968) producing a total of $3,257,032.  This, of course, was on the basis of valuation as valued to owner.  More pertinently, Mr F valued the fair market value as a total, less the husband's loans, of $2,816,732 and Mr L's countervailing figure was $1,780,588. 

8. In evidence given before the Court, Mr F commenced by explaining the difference between value to owner and fair market value, at P-233.  Fair market value is what a particular investment would sell for if it was put on the market on the basis of what a hypothetical willing purchaser would pay from a hypothetical willing seller. By comparison, value to owner is a concept where there are some special circumstances that really mean the value of a particular investment or asset has a value to the owner itself without that level of fair market value discount. 

9. Mr F was of the view that (P-233 line 42): 

   “even on the – on the information presented by Mr L in his report, it would appear that there has been a longstanding relationship between the husband in these – in these proceedings and his business partners, that they’ve – they’ve entered into a number of transactions historically where they’ve – they’ve completed those transactions and distributions have been paid to each of the investment – each of the investors or the - the shareholders, unit holders or partners on the basis of their proportional interest.  So, on that basis, I – I’ve concluded that it’s reasonable in these circumstances to – to say that that relationship would hold true in respect of the properties that still exist and – and it should be valued on a value to owner.  In addition, what it seems is that the husband in – in one particular instance in respect of one of the companies holds 40 per cent of the shares of that company in trust for one of the other partners which again is an indicator that – that, in respect of these investments, they’ve the types of investments and it’s a type of relationship that would stand true.”

10. On P-234, counsel informed Mr F that Mr A had given evidence that the husband, even when not a shareholder in certain developments, was given a gift of six figures for some level of running around, and marketing and general assistance, and was asked:

    “Does that add to your concept of value to owner?---Your Honour, I mean it adds weight in terms of the relationship between the husband and the – and the other partners in respect of these investments.  So - I mean, it adds weight to the – to the conclusions.  It doesn't change the conclusion at all, but it certainly adds some weight, yes.”

11. Under cross-examination by counsel for the husband, Mr F conceded that he had changed his mind about the applicability of minority interest discounts since writing his original report.  He also conceded that his conclusions about the way in which Mr Steele interrelated with his various business partners was an extrapolation from the particular circumstances of his relationship with Mr A.  He further pointed out, at P-246, that the evaluation of minority interests in property was a discrete field in which there were particular experts.  (It is apparent, given that Mr L himself had to read up about the subject, that neither he nor Mr F are particular experts in that field). 

12. Mr F was cross-examined about the differences of minority interest discount in relation to the two entities still in dispute, namely, [R] and [O].  In relation to [R], Mr F asserted 12.5 per cent and Mr L 16.5 per cent.  It was Mr F's view that none of the shareholders had a clear majority and he, therefore, felt that a discount of 12.5 per cent reflected the fact that no particular shareholder had the capacity on their own to coerce the others. 

13. In relation to [O] and the associated [B] Trust, one investor had a 50 per cent holding.  Mr F was of the clear view that there should be a lower level of discount for minority interest because one of the shareholders had 50 per cent.  In relation to [O], Mr F conceded that if the 40 per cent of shares asserted by Mr A to be effectively his and not those of [L] (Mr Steele's company), then a discount of 12.5 per cent would be appropriate on the same basis as it was for [R]. 

1. Mr F was cross-examined about whether a 50 per cent shareholding was sufficient to provoke this kind of discount.  He was of the view that, effectively, once somebody achieves 50 per cent, (if there was a 50 per cent holding), then there should not be a minority interest discount provided (P-250) that a person holds the 50 per cent themselves.  I note further that at P-247, Mr F was of the view that there was no real industry standard in respect of minority interest discounts.  There were some parameters, but there was a vast variation between whether there should be no discount at all or whether there should be discount of what would generally be regarded as a pure minority interest, (in public company shares), which can be very small percentages of about 25 per cent. 

2. Mr F was then cross-examined about lack of marketability.  At

   
   

   P-251-252, Mr F said:

   “While there are somewhat different concepts between a discount for minority interest and discount for marketability, my view is there's – there’s some crossover in terms of – of what’s accounted for under either of those discounts.  The differential in terms of timeframe for the sale of – of shares for a private company, particularly in circumstances where that company may own a business as compared to a company that owns a property, in my view is that it’s two-fold.  (1) that there's allowance for the liquidity of the – the particular asset, being the – being the property that’s owned by the company in the valuation of the property itself.  And that, in fact, the calculation Mr L performed was, in fact, a - comparison between the rate of return that – that an investor, being a minority interest shareholder, would require as compared to an investor in the property as a whole.  And that there's in fact allowance for – for marketability in the – the value of the underlying asset, being the property itself.”

3. At P-252, Mr F went on to say:

   “In my view there's no basis to indicate that a minority shareholder in a company that owns property would in fact require a rate of return between 20 and 40 per cent when, on
   Mr L's account, the rate of return for a residential property is six per cent.”

4. Despite being pressed, Mr F stuck to the objections he had to

   
   

   Mr L's calculations as to marketability, and was firm in his view (P-253) that the minority interest made no difference at all in terms of marketability.  I note that on P-254, in response to an observation from the bench that Mr Steele might be forced to seek to realise some of his assets sooner than otherwise, Mr F responded, "Which is a forced sale, not a fair market value.  Right?---So there's no doubt that in a forced sale, what’s generally termed a liquidation sale, that the value, in fact, would be lower --- Yes?------because he’s being forced – effectively forced to sell as a consequence of particular circumstances”.  Mr F went on to confirm that he had not investigated the value on any liquidation or forced sale basis (P-255). 

5. Mr L adopted his report.  Under cross-examination by counsel for the wife, Mr L conceded that (P-258) he had looked at a 40 per cent discount for minority shareholdings in the context, initially, of public companies and made a further adjustment in respect of private companies.  At P-259, he confirmed that the range that he thought might apply was from 0 to 23 per cent.  It should be noted that the figures upon which Mr L relied dated from the period 1986 to 1996, and that takeover premiums were asserted in the work by

   
   

   Mr L as being closer to 20 per cent for listed companies.  I note, furthermore, at P-259, this extract from Mr L’s report:

   “There is no standard or set percentage discount for a controlling interest that can be applied with any certainty.”

6. Mr L confirmed, at P-261, that as forensic accountants it was necessary to operate in reasonable ranges.  Mr L also confirmed that the fact that there was a 50 per cent holder in the [B] Trust significantly altered the measure of discount for minority shareholders and, thus, a different and lower figure, if I understand the matter correctly, would be appropriate in [R].  Nonetheless, this was offset (P-262) by the fact that in [B], the husband had a directorship or secretaryship whereas in [R] he did not.  This would support Mr L's view that the discount should be the same in both the two entities. 

7. I should interpolate and say that this is one aspect of Mr L's evidence I do not agree with.  It seems to me that these companies do not have day-to-day affairs over which being a director or shareholder would necessarily have any influence.  Although some business activities are conducted in the sense that some small amount of rent is received on several of the properties, the fact is that they are essentially holding companies.  These companies hold the properties and conduct litigation by and large, it would appear, to ultimately improve their value, but they do not carry out business in the ordinary sense of the word. 

8. At P-264, Mr L confirmed that he had not been aware that Mr A had given the husband hundreds of thousands of dollars for doing some works on a couple of developments in which the husband had not invested.  He also conceded, at P-265, that he was not aware of the precise nature of the relationships between the various investors.  He conceded, at P-266, that if there was a very close relationship between the investors, a range of discount would be between 12 and 32 per cent.  He made the point, however, that he would not be able to say where within that range it would be. 

9. At this point, it is appropriate to turn to the evidence of two of the co‑investors who were called to give evidence. 

The Evidence of Mr T

1. Mr T's affidavit, filed 13 November 2014, deposes that he is one of the two directors of [B] Pty Ltd, which is the trustee of the [B] Unit Trust, which is the owner of the [B] project.  He is the sole director of [T] Pty Ltd, which is trustee of the [T] Trust which holds 10 per cent of the units in the [B] Unit Trust.  Mr Steele, likewise, holds 10 per cent through [L] Pty Ltd, which is the trustee of the [J] Trust.  Mr T and

   
   

   Mr Steele, likewise, each own 25 per cent of the units in the [H] Trust.  Mr T deposed that there were some tensions between the directors of [H] concerning governance and financial issues quite apart from the default of Mr Steele concerning necessary financial contributions. 

2. The affidavit went on to depose to [L] (i.e., Mr Steele) being in default of $105,000 in total of contributions relating to the [B] project.  I note that "To date, the victim unit holders have covered [L] Pty Ltd's $105,000 arrears of contributions towards the [B] project”. The affidavit went on to depose both that legal action against [L] was being considered, and that he did not propose to acquire the units held by [L] or Mr Steele unless it would materially improve his minority unit holding, decision-making and additionally could be obtained at a substantial discount. 

3. When called to give evidence, Mr T confirmed that there had been increased calls for contributions by way of investment into [B] in more recent years as rent from the property was declining.  It had, in fact, declined from $450,000 per year to $25,000 now so those calls are scarcely surprising.  He also confirmed that there were consistent calls in relation to [H]? which are made from time to time when the available funds run out. 

4. Mr T confirmed, at P-198, that over the years there had been times when one or other of the partners had been financially in straitened circumstances, then others had assisted by paying in their place.  He confirmed, at P-198, that Mr A had had difficulties in 2002 to 2003.  He had, however, over the years had very little to do with [H], whereas he was deeply involved with [B]. 

The Evidence of Mr A

1. Mr A's affidavit, filed 13 November 2014, confirmed that he was in partnership with Mr Steele (amongst others) in relation to a number of developments.  Like Mr Steele, he conducts his business affairs through an extensive series of company and trust holdings.  He deposed that in relation to the purchase by [O] Pty Ltd of a property in [omitted] in around 2001, he had had a very high debt level ratio personally, and had asked Mr Steele to assist him by registering 40 per cent of the shares which Mr A's company (“[A] Pty Ltd”) purchased, in the name of [L].  This was "to avoid difficulties with my lending bank". 

2. The affidavit went on to assert that he always intended to transfer the 40 per cent holding to [A] when his debt problems were resolved but had forgotten about the matter over the years, and that now he was aware of Mr Steele's court proceedings, he proposed to transfer the shares to himself.  The affidavit confirmed Mr Steele's non-payment of calls in relation to both the [B] property, the [H] Unit Trust and the [omitted] property partnership, and the fact that he was prepared to force, in effect, Mr Steele to pay the moneys he owed in relation to those projects.  He further deposed that if Mr Steele was to sell his interests, he would only buy them at a substantial discount. 

3. The affidavit also deposed to unspecified continuing tensions between shareholders in relation to [R] and [O].  The other shareholders were asserted to propose to sell the properties which he, Mr A, opposed. 

4. When called to give evidence, Mr A, under cross-examination by the counsel for the wife, confirmed that he had been involved in a number of developments with Mr Steele throughout the years.  He asserted, at P-222, when questioned about giving monies to Mr Steele when Mr Steele had not been a shareholder in the developing company:

   “I’ve given him some proceeds of my profit as a gift in the past.”

5. When questioned as to why this was so, he responded:

   “Well, sometimes he helped out with marketing.  He helps out with a few things.  You know, day-to-day run around things to help me out.  So it's just basically a reward.”

6. It transpired that Mr A had given Mr Steele monies from the development in [omitted] Street, [S] and also one in [G]. At P-223,

   
   

   Mr A said:

   “Well, he lent some money on, I think, one or two of them or I think one.  I'm not sure.  For which I’ve paid him back. 

   … And I was just short on that particular month and he would help me with some marketing and – and some advertising for it.  He did a lot of that work for me and it was a reward for that.  Certainly wasn’t a – certainly wasn't a partner in it.”

7. When it was put to him that the amounts involved were in hundreds of thousands of dollars, he replied, "That's not unusual".  When questioned about the 40 per cent of shares in [O] allegedly beneficially held on his behalf by [L], Mr A's answers ran into the difficulty that the ASIC records had shown 60 per cent owned by [L].  At the request of counsel for the husband, (as with the husband himself), I gave a warning under the Evidence Act 1995 as to whether Mr A would be required to answer such questions.  In retrospect, I am not sure that I dealt with the matter entirely appropriately but no objection was taken by counsel for either side.

8. Mr A asserted, at P-225, that:

   “You didn't want to hold the shares in [O] on paper, did you?---That's correct.

   You knew that there was only one person who was being asked to hold those shares on your behalf; right?---I gave them to Mr Steele because I trusted Mr Steele.  I would have given them to somebody else if I trusted them as well ---.”

9. Mr A asserted that the income derived from his shares was all declared in his tax returns but in the ultimate, Mr A refused to answer further questions on the footing that he might be required to incriminate himself (P-226).  When questioned as to whether this course of action was precipitated by matrimonial disputation, Mr A purported to be unsure of the years when he had undergone this travail (P-228).  These answers were entirely unconvincing.  Marital break-up is not something that one forgets. 

10. Noteworthily, although it deals with another matter, Mr A confirmed that the financial reports for [J] Pty Ltd, tendered as exhibit A11 being the report for the year ending 30 June 2003, were a correct record of the company's affairs. 

Conclusions on the Value of the [Steele] Group

1. I should say straightaway that it is quite apparent from the answers given by both Mr A and the husband about the transfer or lodgement of the 40 per cent-odd shares in [O] nominally as owned by [L], those shares were in fact owned by Mr A. This shows two things.  Unfortunate as it is to make such a finding, it shows that Mr A, with the assistance, apparently given wholeheartedly, of the husband was prepared to misrepresent to the relevant authorities (ASIC and possibly the lending bank of Mr A), a state of affairs that they knew was untrue. 

2. From the fact that both refused to answer questions, at least in part, about this course of dealing, it is apparent that they knew what they were doing was dishonest.  It really does not matter whether this was done to protect assets in the course of Mr A's matrimonial disputation, which seems to me clearly to have been at about that time, or for some purpose of apparently misleading the lending bank.  The fact is that this was a dishonest course of conduct wittingly embarked upon by the pair of them. 

3. This is also important because it goes to show the very close personal relationship that Mr A and the husband have.  It is quite clear that the 40 per cent of shares were always effectively owned and controlled by Mr A, and it speaks volumes for the trust Mr A had in Mr Steele that he was prepared to deal with the matter in this way.  This also goes to explain part of the very munificent returns given to the husband for what was clearly only a small amount of work in relation to the two projects in [S] and [G] for which he received payments well in excess of $100,000. 

4. This goes very much to buttress, in my view, the findings made by

   
   

   Mr F that the parties involved in the developments with which the [Steele] Group has been, and remains, involved involve parties who are not acting wholly in a commercial fashion.  As Mr A said, from time to time people run short of funds and they are assisted, and it is clear from Mr T's evidence that that continues to be the case. 

5. Although there are clearly tensions within the various investor groups who have different plans, at least from time to time, about how properties should be dealt with and obviously these are vicissitudes in terms of financial immediate resources, the picture that emerges is one of a group of individuals who - as Mr F, in my view, rightly opined - have been doing business together in a mutually supportive way (at least most of the time) for many, many years. 

6. With this finding in mind, I approach the remaining differences between the two experts as exemplified in exhibit AR1.  I should make it clear, if I have not sufficiently done so already, that I thought both Mr F and Mr L were thoroughly honest witnesses, both of whom are well-qualified professionally.  Criticisms were advanced by counsel on both sides on each of the other one's experts but I would make the following points. 

7. First, the significant arithmetical error identified by Mr L in Mr F's written report merely shows that Mr F is human, and that he makes mistakes from time to time; so, as appeal courts sometimes point out, do judges. We are all human. Insofar as Mr F was criticised for not addressing the issue of minority discounts, I accept that Mr F approached this matter in an incomplete way. 

8. Nonetheless, he clearly addressed himself to some reading before making his report and it would appear, bearing in mind that the valuing of minority interests in property cases is a particularly specialised field (in which neither of the two experts called had that expertise), it is not, in my view, a matter that detracts from the overall force of his observations or expertise to note that he made a mistake in this regard. 

9. It is also to be noted that Mr L's report also had some measure of deficiency, on one view.  He had not, for example, consulted the most recent edition of the work by Mr L on which he, essentially, relied.  As he made clear, at P-265, he did not have all the facts in relation to the history of involvement/investing as between the various partners.  This was an important omission, bearing in mind that he apparently was aware of the 40 per cent discrepancy in the [L] shareholding in [O].  I have already referred to what I have concluded was an error in relation to the weight he gave to the husband being an office bearer in one of the companies. 

10. Given that I am not an accountant, the forensic task of working out where the truth lies becomes very difficult.  As a matter of first principles, however, I think that there is a certain amount to be said for each of the parties' views.  The first thing to be noted is that Mr F conceded that if [L] only had 20 per cent of the shares in [O], then he would concede an increase in the level of discount from 7.5 to 12.5 per cent.  Since I have found, and have no difficulty in finding whatever, that the shares, the 40 per cent, always belonged to Mr A, clearly the [O] discount should be raised to 12.5 per cent in that instance. 

11. Bearing in mind that both the experts clearly accepted that there is no precise range to establish minority interest exactly, one is left wondering how it is possible to say which of the rates is appropriate.  In the end, however, I am more persuaded by Mr F's 12.5 per cent than Mr L's 16.5 per cent.  The first point to be noted is that r F was engaged as a single expert witness.  He, at all times, conducted himself in that style.  Mr L was engaged with the clear aim of reducing the value to be ascribed to the interests of the [Steele] Group. 

12. I make it clear that I have no criticisms to advance of Mr L whatsoever.  It must, however, have been clear to him that the exercise in which he was engaged was designed to improve the outcome from the point of view of the husband, although I refer to and repeat the very proper identification of the error in Mr F's report which was greatly to the wife's advantage.  Nonetheless, in these matters, it is always possible that there is some measure of partiality, unconscious even, in the position of the party brought in to conduct the review. 

13. Furthermore, Mr F, who impressed me as being extremely reasonable and thoughtful in the way that he gave his evidence, was not moved by Mr L's qualifications to his report in this regard.  As a matter of ordinary common sense, it would seem inevitable to me that the notion of how much money Mr Steele's interests would generate if sold must necessarily be somewhat reduced by the fact that he is only a minority shareholder in the various enterprises in which he is still engaged and, therefore, cannot compel a sale. 

14. He would be selling, on any view, in a highly specialised market where the most likely purchasers would either be his existing colleagues or people likewise in the same line of work.  Two witnesses have deposed, Mr T and Mr A, that they would only buy the Steele interests at a significant discount and, as a matter of practical politics, that is highly likely but there is, however, a countervailing and very significant matter, and that is Mr F's accurate assumption, as I find, that this is not a normal arms-length business relationship. 

15. The fact is that these parties have been engaged in business for a long time, and while they clearly have their ups and downs, and while equally clearly the evidence of Mr A has been extrapolated to all the other participants by Mr F without any direct evidence, in one sense, to support it, I think that Mr F's views are more probably correct than otherwise.  This is a matter of simple common sense, in my view. 

16. Insofar as the dispute about value to owner or fair market value is concerned, the differences involved were relatively small, in any event.  In my view, it would be inappropriate if one was to double count by increasing the value of Mr Steele's interests by virtue of the value to owner component (which would, in principle I agree, apply), and then applying the same factor to diminish the minority interest discount available to him were he forced to sell. 

1. The next question, of course, is whether there should be an additional marketability discount.  While they are clearly, in principle, different issues, I agree with Mr F, as a matter of analysis, that there is obviously an element of interrelationship between the minority interest discount and the marketability discount.  Mr L, as is clear from exhibit AR3, has calculated the variation between the required rate of return for a minority interest investor (between 20 per cent and 40 per cent) as compared to the expected growth rate of a residential property investment (5.95 per cent).  It was this disparity that gave rise to his proposed discount of 32 per cent. 

2. The differences between the two experts are helpfully noted at pages 4 and 5 of exhibit AR1.  For what it is worth, I think Mr F's is the more inherently cogent thesis.  A required rate of return of 20 to 40 per cent, in my view, simply does not accord with ordinary human experience.  A 20 to 40 per cent return compares extraordinarily with a 6 per cent residential property increase.  As is noted on page 5 of the report:

   “Mr F opines that it is unlikely the required rate of return of a minority interest holder in an entity that owns property would be different to the expected return for the underlying property and on that basis application of a marketability discount is inappropriate.”

3. Put shortly, I agree.  I further note that the methodology giving rise to some of these discounts is based on materials now substantially out of date in circumstances where such references as have been made to that earlier authority, suggests that the discount rates were more in the process of declining than increasing.  I note, in the context of minority interest discounts, Mr L was clear that discounts of 20 per cent were within his own knowledge, but he has no special experience, (nor has Mr F) of this particular field. 

4. In my view, as earlier indicated, while the relationship between the parties is one that would properly ground the lower assessment of minority interest discount for which Mr F contended, the value of the group should, nonetheless, be assessed by fair market value. 

A Final Word on the Value of the [Steele] Group

1. There is another facet on the valuation of the [Steele] Group with which it is necessary to deal.  As I have already made clear, Mr F has not done a valuation on a liquidation basis.  That would be the basis that would, in fact, occur if the Court were to make an order that

   
   

   Mr Steele was not able to satisfy from other sources.  There is a very real risk, in my view, that were a liquidation sale to occur, the other investors would - either through friendship (a proven matter in

   
   

   Mr A's case and a very possible one in respect to the others) or opportunism (as Mr T indicated would be the case) - buy these interests at a very substantial discount and then, possibly, sell them back to

   
   

   Mr Steele for something close to the purchase price. 

2. I am positively satisfied that Mr A would assist Mr Steele in this way, and there must be a very real prospect that the same would happen with other investors.  Thus, not only do I not have the valuation that would actually be effected in the event that the [Steele] Group is sold but there is, in my view, a risk - more probable than otherwise - that

   
   

   Mr Steele and his colleagues would connive to produce a more beneficent result to Mr Steele, in any event.  This represents a significant practical difficulty. 

3. I have, therefore, in substance accepted those aspects of the experts' reports where there is agreement.  I have adjusted the disputed component in [O] to 12.5 per cent, and I have set aside totally the market discount for which Mr L contended.  Since any endeavour by me to embark upon the appropriate arithmetic calculations in property cases always seems to lead to error on my part, together with associated costs to the parties in rectifying the error, I will leave it to the parties to work out the figures. 

4. As a matter of preliminary impression, it seems to me that the $2,816,732 total contended for by Mr F will reduce by approximately $260,000 by virtue of the higher percentage applied to [O]. 

Proceeds of Sale of the Former Matrimonial Home

1. As I understand it, there is no dispute that the remaining proceeds of the sale of [address omitted], the former matrimonial home, is of the order of $1,291,558 held on trust by solicitors. 

Interim Distribution of $250,000 each

1. Each of the parties was paid $250,000 by orders made on 3 October 2013.  At the time the characterisation of those payments was to await trial.  The wife has sought, however, that only $100,000 of the sums paid to her be taken into consideration in these proceedings.  The reason that underpins that is set out in MFI4 as:

   “The wife has supported the family from her amount received including the payment of school fees.  The sum is reduced to recognise that the wife has had no income and incurred for reasonable living costs.”

2. While this puts the matter shortly it is the essence of what the mother’s evidence was.  The issue of school fees remains a live dispute between the parties.  Part of the wife’s FURTHER AMENDED Initiating Application is that the husband be compelled to pay for private school fees for the two children on an ongoing basis.  The husband’s countervailing position is that he is quite prepared to have the children go to a state school. 

3. In my view, while it is clear that the husband has paid a substantial amount of the $250,000 he received in legal fees, the reality is that none of his projects, so far as I understand it, have come to final fruition since separation in April 2013.  While the husband may have had relatively small distributions of rental income through his various entities in essence, as I find, his position has been largely indistinguishable from that of the wife.  They have both had to live from day to day essentially out of the funds that were dispersed to them in October last year. 

4. It is also noteworthy that on the wife’s version of the figures, and assuming she may have spent something of the order of approximately $40,000 in private school fees (I note that the children are young and would not be at the most expensive time in their education), she has still expended some $100,000 since October last year.  That equates to some $8,000 net per month.  That is a high figure for someone who does not see employment as something that she is any way required to undertake. 

5. The husband’s evidence about what he had done with his money struck me as being unremarkable.  In my view it is proper to characterise the $250,000 received by each of the parties as part property settlement.  It is the wife’s choice whether to enrol the children on a continuing basis in private education.  Minds may legitimately differ as to the true value of such education.  Given the fact that the children were in private education while the parties were together, I strongly suspect that the wife was correct to say, as she did, that the husband would have paid school fees if the parties were still living together. 

6. In these circumstances, and given the measure of uncertainty that must necessarily have obtained following separation and up until trial, it seems to me, notwithstanding that it was the wife’s choice to continue private education, that a sum should be adjusted for that purpose.  I will not add-back $40,000 of the $250,000 as it seems to me that this was money reasonably expended to the benefit of the children and it is, in my view, just and equitable to deal with it in this way. 

Amount Removed from Husband’s iSaver Account on 21 June 2013

1. This is an area of considerable difficulty.  It is clear that on 21 June 2013, the date of final separation, the husband transferred $205,000 into his iSaver account and on the same day took $208,000 from that account (see exhibit A8).  It is clear from the NAB Flexi account that also forms part of exhibit A8, that that is where the $205,000 appears to have gone.  What is not apparent is what happened to the $208,000 that was then transferred to the iSaver account, although it seems in the ultimate more probable than otherwise from exhibit A8 that this was a kind of circular set of transactions conducted for no obvious reason that was pressed in final submissions. 

2. Counsel for the wife pressed strongly in submissions the proposition that the $205,000 had effectively been extracted by the husband and not explained.  In my view, the bank records are not sufficiently clear to enable such a finding to be made. 

3. I note that the process of discovery in this case has been very extensive.  In the end I would have expected that if these funds were available they would have been recorded somewhere, and they are not.  I have the husband’s sworn evidence that there was no such sum extracted, and in this particular instance I am not prepared to disbelieve him.  The $205,000 will not, so to speak, be re-entered in the ledger. 

The $125,000 Paid to [J] Pty Ltd

1. Here the same exhibit just referred to, exhibit A8, shows that $125,000 was withdrawn from the husband’s account and paid to [J] on

   
   

   21 June 2013.  As he had it, this was a payment in fact previously made and was reflected in the financial statements of [J] which are exhibit A11.  Those purport to show a contribution by [omitted] Pty Ltd (another of Mr Steele’s entities) in the financial year 2012 and a further payment of $40,000 in 2013.  The difficulty I have with that assertion is that Mr A, whose evidence was otherwise largely unconvincing, has adopted exhibit A11 as a correct set of records.  It necessarily follows that the $125,000 paid to [J] in June 2013 cannot be that reflected in exhibit A11. 

2. The evidence of Mr F was that there would be no utility in purchasing shares in a bare trustee company such as [J] and I accept that evidence.  It was put, however, that in substance these were more in the nature of calls for funds made by [J] in relation to a motel property in [omitted] with which [J] is concerned. 

3. In my view the more probable position is that the records of [J] reflected a liability that Mr Steele had not met although it had been entered in the books of the company.  All these businessmen appear to conduct their affairs in a fashion in which what actually happens is not necessarily reflected in company records and tax returns, and I think the husband took the opportunity on 21 June 2013 to discharge a debt and to deprive the wife of the benefit of potential access to this amount of money.  The $125,000 should be added into the pool. 

Cash Taken From Safe by Husband

1. It emerged with tolerable clarity that there had been $11,000 in a safe in the former matrimonial home at the time of separation.  It is clear that the husband extracted this and used it to support himself from time to time thereafter.  Whether an item of this amount should have taken up the time that it did in a proceeding of this nature is, in my view, highly debatable.  On any view of the matter, however, it is clearly money that the husband has had and it was previously joint funds so it should be reinserted in the pool. 

Inheritance from the Husband’s Uncle [name omitted]

1. This money was, as emerged clearly from the evidence, bequeathed to the husband by his late Uncle [name omitted].  It was $50,000.  It was part of an enormous amount of money paid to the husband’s mother at or about the time of separation.  While the husband put it that he took the moneys to have been bequeathed to him to benefit the children and he was concerned to ensure that it not be diverted to any other purpose, it is clear beyond any possible doubt that the husband was simply seeking to alienate these funds from the matrimonial pool.  It is clear that they should be reinserted. 

Monies Paid to the Husband’s Mother

1. As with every topic raised by this case the evidence about funds advanced by Mrs S to the husband over time was by no means highly clear.  From exhibit R1 it seems clear that Mrs S advanced a loan of $100,000 in May 2000 upon which interest was paid by the husband from time to time.  That loan was extended to $200,000 on 17 December 2000 and interest was paid on a monthly basis thereafter until July 2001.  $100,000 was then repaid leaving $100,000 outstanding.  

2. Interest was then paid on a regularly monthly basis until May 2002 when the loan was re-extended to $200,000.  Interest appears to have been paid once again on a regular basis through till 11 June 2004.  There is then a curious annotation “$200,000 loan - $20,000 paid as gift”. 

3. There is then another annotation that suggests the total owed was $200,000 and there is a reference to interest to be paid on $150,000. 

4. $500 per month interest appears then to have been paid until, it would appear, June 2005. 

5. It is clear from exhibit R1 that no monies were thereafter repaid until June 2013. 

6. In June 2013 the husband purported to repay his mother $200,000 plus interest calculated on a yearly basis through to that point.  In fact, he overpaid some $44,000, which was later repaid. 

7. The tenor of the evidence, including the affidavit filed by Mrs S (she was not required for cross-examination given her advanced age and ill health) could not be clearer.  Mrs S was perfectly happy to have the money in the hands of her son while he was married.  As soon as he was not going to be married she wanted it back.  I have no doubt in the face of the evidence given by both the husband and Mrs S that these monies would never have been called for, as they had not been called for for almost six years in June 2013.  It was a clear device on the part of the husband to alienate funds.  Although the advancement of funds in 2000 clearly took place on a commercial basis and appeared to proceed on the same footing through till 2005, the failure of Mrs S ever to call upon these funds speaks for itself. 

8. The undated loan agreement relied on by the husband (exhibit HS23) is difficult to understand in the sense that it was never executed and certainly never acted upon by Mrs S until separation.  In my view it is of little moment given it is dated 2 May 2008 and the history set out above. 

9. The material exhibited showing Mrs S’s income (exhibit A10) shows a woman of substantial income and means. I have been informed without challenge that Mrs S sold her former home at some point and distributed $250,000 additionally both to the husband and his other siblings.  There is no reason to suppose that that disposition was not a gift.  What seems to me to be more likely than otherwise is that Mrs S, finding herself well in funds, simply effectively forgave the loans in around about 2005. 

10. This means that the sums extracted by the husband to repay to his mother, purportedly in repayment of loans, together with the additional $250,000 which I find to be a gift, should all be re-included in the pool. 

Cars

1. As I understand it and subject to clarification, the husband is to retain his 2012 Jeep which has an agreed vale of $30,000 and the wife to retain the 2009 BMW owned nominally by [L], valued at $55,000. 

Jewellery

1. The husband has exhibited valuations for insurance purposes of several very valuable items of jewellery.  He seeks that they be included in the pool at that value.  The wife scoffs at these valuations and says there is simply no evidence to establish the value of the jewellery.  As I find the wife undoubtedly has some very expensive jewellery.  Given the purchase price of at least two of these items I will adopt a cautious approach and allocate them a total value of $10,000.  Jewellery of this cost, even accepting the limitations of insurance valuations, is not valueless.  It is typical of the meanness of spirit with which the parties have both approached this case that the wife should not give credit for even $1 of it. 

Liabilities

1. As I understand it, the husband and the wife both have liabilities in relation to their personal tax assessments for the year ending 30 June 2013.  Given that separation occurred on 21 June 2013 it is, in my view, quite clear that those obligations which plainly arose out of the income splitting that the parties had previously undertaken are liabilities, so to speak, of the relationship and should be paid out of the joint funds available from the sale of the matrimonial home. 

2. There is also a personal tax liability on each of the parties arising from untaxed transfers from the [J] Trust in the 2010 financial year required to be paid, as I understand it, pursuant to Division 7A of the Tax Legislation.  This again is clearly a liability of the parties jointly and should be paid out of joint funds. 

3. Counsel for the husband pressed that the costs of Mr F’s report should be paid out of joint funds. I opined during the hearing that these were part of the parties costs of the proceeding and would attract the operation of s.117 of the Family Law Act 1975 (“the Act”) accordingly. 

4. While considering these reasons for judgment I have reconsidered the matter.  Given that Mr F was jointly engaged by the parties as part of the necessary forensic exercise that this case necessarily involved, I am now inclined to the view that this cost should be met jointly.  I will hear any further submissions about this issue. 

5. I believe that this lengthy recitation deals with all matters in dispute in relation to the pool. 

Contribution

1. This was another keenly contested area of dispute.  Much of the debate concerned initial contributions. 

2. There seems to be no doubt that the wife’s initial contribution consisted of $350,000 from the sale of a property she owned at the time of the commencement of the relationship and which was sold relatively shortly thereafter.  It appears to have been invested in a further property which was itself sold and the proceeds applied to the purchase of the former matrimonial home.  It was the wife’s evidence, not as I understand it challenged in cross-examination, that she put $431,000 into the purchase of the matrimonial home (the total cost of which was, as I understand it, in excess of $2.2 million). 

3. Although there does not equally seem to be any challenge to the wife’s assertion that she contributed $50,000 in the sense that her parents paid for the wedding, that as a contribution seems to me to be of lesser moment.  The fact is that there is no evidence that the parties would have sent that very substantial amount of money had it not been in fact advanced to them.  It is also of its nature of no significance now in the sense of being a building block for the parties’ finances.  The most one can say is that in 2003 the husband and wife were freed from the costs that would have then fallen to them in relation to their marriage.  In my view, it is now not a matter of any significance, although it needs to be borne in mind as a background issue. 

4. The real battleground concerned more the position of the husband’s initial contribution.  The way the husband approached it was to look to the amounts made as cash investments into the properties in which he then, at the commencement of the relationship, had an interest.  At paragraph 5 of his affidavit sworn 24 November 2014 the husband lists a number of assets and liabilities that he had in September 2003.  He lists five projects which were finalised during the relationship and a further four in which he still has an interest.  As I understand it, the amounts asserted in the affidavit are the amounts he had actually contributed to the various projects. 

5. Additionally he had an interest in a villa in Bali, a boat and a car. 

6. Counsel for the wife approached the matter in a completely different way.  He rather concentrated upon the balance sheets of the various entities which, not surprisingly, showed substantially lesser figures.  This methodology, unsurprisingly in the circumstances, produced a total not wildly disparate to the $400,000 plus figure that the wife had asserted she had contributed. 

7. Notwithstanding this, in final submissions counsel conceded that perhaps the husband should be allocated a 10 per cent loading in relation to his contributions. 

1. As I indicated in a preliminary way during the hearing of the case, I think both the methodologies propounded by the parties are incorrect. 

2. The modus operandi of the husband’s business is that the parties would jointly buy a property, contribute cash initially to purchase it (albeit that on occasion these were maybe also assisted by borrowings).  Self-evidently they are not looking for a dollar for dollar return.  It would not be profitable.  What happens is that they appear to make additional investments over time and ultimately the benefit is obtained when the property is realised whether by sale or development as the case may be.  What Mr Steele really brought into the relationship was his income stream as exemplified by his investments in the various projects in which he was then involved.  This was, on any view, a very valuable resource.  Additionally of course he had the Bali villa (worth over $100,000) and his chattels. 

3. For obvious reasons no forensic exercise such as that now conducted by Mr F was conducted when the parties commenced their relationship in 2003.  There is no appropriate evidence therefore to be able to say what the [Steele] Group was worth at that time.  What is clear, however, is that it was worth far more than the amount contributed by the wife. 

4. As with so many things, these figures are scarcely entirely clear, but it does seem clear that the parties were able to live well and from at least 2006 onwards entirely on the basis of the husband’s earning.  The first child was not even conceived at the time that the wife ceased to work and it is clear that the husband was by far the major financial contributor even if, as the husband says, the wife was earning a six-figure income until she ceased work. 

5. While, as I have said, there is no evidence as to what the true value of the [Steele] Group was in 2003, the husband had interests in an additional five developments which subsequently came to fruition that he does not have now.  In my view it is more probable than otherwise that if the forensic exercise had been undertaken it would have shown an initial value at the very least in seven figures and in all probability over $2 million.  

6. The fact that this may not be reflected from time to time in the accounts of the various entities, in my view, merely reflects the obfuscating way in which the husband conducts his affairs.  

7. Furthermore and irrespective of what the precise value of the [Steele] Group was in 2003, it is quite clear that the parties’ position now owes far more to the [Steele] Group than it does to any initial or continuing contribution by the wife. 

8. In saying this of course I am mindful of the need to give the wife proper credit as a homemaker and mother and as an earner contributing until 2006 and as a person who clearly brought in hundreds of thousands of dollars at the start of the relationship. 

9. Calibrating these matters together is very much a matter of the exercise of a discretionary judgment.  As with so many property cases, the evidence is nothing like clear enough to make any kind of precise analysis practicable.  Doing the best I can it seems to me that it is just and equitable that the husband receive a 20 per cent loading as to his contribution.  I am perhaps comforted by the fact that this is the mid-point between the wife’s assertion (10 per cent) and the lower end of the husband’s assertion (30 per cent) but it should be emphasised that I have not split the difference.  Rather, 20 per cent seems to me in all the circumstances the appropriate amount. 

Future Needs

1. The wife has an earning capacity.  She has, however, a palpable disdain for work.  

2. I have omitted all reference to the Cryosite expenses.  They are trivial in the scheme of things, and the parties will need to turn their minds as to whether they wish to continue them.  At P-75 the following exchanges took place:

   “Do you see that you have any, sort of, obligation to support yourself or the children?---I do support the children, every day I’m there for them in supporting them.  Not everything is revolving around money and finances.

   But practically you need money to be able to support yourself and the children, don’t you; on a practical day-to-day basis?---I – I do, yes. 

   Yes.  Do you see that you have any responsibility there, or is it all really [Mr Steele’s] responsibility?---I think I have a responsibility to keep our children happy and safe and on a straight road ahead of them.”

3. Earlier on that page the following exchange took place:

   “[Mr Steele] and I made an agreement when we had children that I was the stay at home mother.  I – I don’t understand now his, other than for financial gain for himself, I don’t understand his need to push so heavily for me to abandon what we had set out together and what I’ve been faithfully doing … for the last seven years.

   You understand you’re separated now?---So the children’s needs are secondary now, are they?  I - I don’t understand that at all.”

4. Despite all the difficulties the children are having (and not only is there the misfortune of [Y]’s autism but [X] is also having some psychological difficulties, most likely as a result of the stress of separation and its sequelae), the evidence at P-71-P-72 does not suggest that the children’s medical appointments are anything in nature of a full-time occupation.  The reality is that the mother sees herself as a stay at home mother and does not see that it is necessary for her to work in the foreseeable future. 

5. As noted in the parenting dispute, the mother is a quite outstanding mother and has certainly devoted herself in the most exemplary way to the care of the children.  She will have them in her primary care on an ongoing basis and even at its fullest the spend-time regime with the father will involve no more than four nights per fortnight and half school holidays.  Clearly she will have the primary role as the carer. 

6. I should make it clear also that the mother was, in my view, a good witness who answered questions directly and responsively.  Nonetheless, in this instance I am of the clear view that the mother has a palpable sense of a continuing entitlement, vis-a-vis the husband, which entitlements must now be re-evaluated in the light of their separation. 

7. It is no doubt true that the husband would have continued, for example, to pay school fees if the parties remained together, but they are not now together and he is entitled to revisit his position should he so wish.  Likewise, the wife’s desire simply to be a housewife, while perfectly understandable and not in any way the subject of criticism, nonetheless ignores the practical realities of her situation.  The children are at school and would be at school until no less than 2:00 or 2:30pm each day.  The wife, it would appear, is an experienced and highly-skilled employee.  She will have, to an extent, to reassess her position. 

8. The wife is of course younger than the husband but equally would face, on any view, all the usual difficulties of seeking to re-enter a workforce from which she has been absent for over eight years.  The husband is substantially older than the wife and unlike her he has a number of not insignificant ongoing health issues.  Nonetheless there is no suggestion that he will be unable, subject to an extent to the outcome of these proceedings, to earn his living as he has done throughout his life. 

9. There is a further aspect of the matter.  The husband will undoubtedly have further assistance from his mother available to him should he require it.  I have no doubt that the loans repaid to the mother will be made available to the husband again should he need them.  The evidence is clear that is so.  Thus we are in the somewhat artificial and unrealistic situation where the sums have already been added back notionally into the pool for division but are presently, as best I understand it, under the control of Mrs S. 

10. It is important to avoid an element of double counting but it is important also to acknowledge the realities which is that whatever amount may be ordered to be paid to the wife, the husband will have, in my view, at least some $455,000 available to him from his mother should he need it for that or other purposes. 

11. In all the circumstances it seems to me appropriate that the wife receive a loading of some 15 per cent in respect of the future needs factors.

The Other Aspects of the Wife’s Further Amended Initiating Application

1. The wife seeks a departure from administrative assessment of child support such as to require the husband to pay for the entirety of not only child support as assessed but all school fees and any related school fees together with extra-curricular activities, private health insurance and all expenses not covered by such insurance or Medicare. 

2. In my view it is entirely desirable to bring the financial affairs of these parties to final conclusion.  The matters sought by the wife are not inherently absurdly unreasonable but they are equally entirely open-ended. 

3. As I have already indicated, most unfortunately following separation the financial circumstances of parties who were previously a couple necessarily are usually significantly diminished.  The wife will need to think again whether or not she wishes the children to continue in private education in the event that the husband is not prepared to contribute.  Given the very substantial impost that private school fees represent, together with related extra-curricular activities and the like, it would seem to me to be an unfair burden to impose on Mr Steele in the event of his resistance. 

4. I will hear from counsel for the husband what his attitude is as to private health insurance.  This is not an area involving anything like the same financial impost and is one that is not unreasonable in my view to seek that he contributes. 

5. Likewise, in my view the claim that the husband pay in effect all gap payments between private health and/or Medicare and actual cost is merely to leave an opening for endless disputation between the parties.  I am not prepared to order it. 

Just and Equitable

1. As will be apparent from these reasons for judgment, which I freely acknowledge are disjointed to an extent, I have found the determination of the issues in dispute in this case at times almost insoluble.  It is certainly amongst the most difficult matters in which I have ever endeavoured to give judgment.  The nature of the husband’s business and the obscurity of his business dealings and tax affairs have, I readily confess, all but defeated me at times.  It may well fall to others to evaluate the success of my endeavours. 

2. As I indicated earlier, in my view both parties have wildly overestimated the force of their respective cases and the weakness of that of the other.  This was a relationship of about 10 years.  It is neither a short nor a long marriage.  The outcome that I produce namely of a 55/45 division in favour of the husband (bearing in mind that the equalisation of the parties’ superannuation significantly benefits the wife) is one that, in all the circumstances, in my view can be said to be just and equitable.  There has been a meanness of spirit I regret to say between the parties, most particularly by the husband, who was a poor witness who in my view remains embittered by the wife’s decision to leave him and has done everything in his power to punish her.  It is regrettable that each of the parties has been put to the enormous expense that this case has involved, although I note and have no doubt that the husband’s initial endeavour to settle without the engaging of lawyers was designed to enable him to settle on terms wholly advantageous to himself.  

Conclusion

1. As I indicated at the outset it is not possible to contemplate making final orders without hearing further from the parties.  The pool needs to be calculated in the light of my findings.  Once that is done thought needs to be given to how the orders are to be effected given the practical problems associated with realising any, let alone all, of the [Steele] Group.  I will give the parties the necessary opportunity to study these reasons for judgment and will list the matter for further hearing thereafter.  

I certify that the preceding one hundred and forty-nine (149) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Associate: 

Date:  13 February 2015