Nadar & Nadar
[2021] FCCA 1660
•21 July 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Nadar & Nadar [2021] FCCA 1660
File number(s): NCC 866 of 2017 Judgment of: JUDGE BETTS Date of judgment: 21 July 2021 Catchwords: FAMILY LAW – property settlement proceedings – final orders – lengthy relationship – three adult children – where the parties are substantially apart in their competing applications – where the wife contends that husband has deliberately or negligently run down their business and seeks that the reduction in value be added-back as a notional asset of the husband – where the wife alleges that the husband has retained a disproportionate share of the post-separation profits of the business warranting further add-back – Court finds it inappropriate to notionally add-back loss of value of business in circumstances where the business was already in decline and being wound down prior to separation, the husband had significant health issues and there were adverse climatic conditions – Court rejects add-back for post separation retention of profits as the husband was entitled to (but did not receive) a reasonable notional remuneration as manager – where each party made equal contributions to net asset base – where the parties have similar income earning capacity – just and equitable for parties to divide net property equally Legislation: Family LawAct1975, Pt VIII Cases cited: Hickey v Hickey & Attorney General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143
Kennon & Kennon (1997) FLC 92-757
Kowaliw & Kowaliw (1981) FLC 91-092.
Stanford v Stanford (2012) FLC 93-518
Townsend & Townsend (1995) FLC 92-569
Number of paragraphs: 199 Date of last submission/s: 15 October 2020 Date of hearing: 11 – 13 August 2020 and 15 October 2020 Place: Newcastle Counsel for the Applicant Mr Bateman Solicitors for the Applicant Hannaway Lawyers Counsel for the Respondent Mr Tregilgas Solicitors for the Respondent Sheridan Legal Pty Ltd ORDERS
NCC 866 of 2017 BETWEEN: MS NADAR
Applicant
AND: MR NADAR
Respondent
ORDER MADE BY:
JUDGE BETTS
DATE OF ORDER:
21 JULY 2021
THE COURT ORDERS THAT:
1.The wife’s claim for spousal maintenance is dismissed and all orders for spousal maintenance are discharged effective from today.
2.The net matrimonial property of the parties, as set out in these reasons, is to be divided equally between the parties, NOTING paragraphs 158 - 160 and 191 - 196 of these reasons for judgment.
3.The court will hear from the parties as to the form of orders required to give effect to the court’s reasons for judgment.
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment under the pseudonym Nadar & Nadar is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE BETTS
INTRODUCTION
These are property settlement proceedings between Ms Nadar (“the Wife”) and Mr Nadar (“the Husband”).
The parties commenced cohabitation in 1985, married in 1987 and finally separated on 22 August 2016 when the Wife moved out of their Town B property (“Town B”).
They have three adult children – Mr C born in 1986 (now 34), Mr D born in 1990 (now 31) and Ms E born in 1994 (now 27).
Notwithstanding the length of their relationship, the parties are substantially apart in terms of their competing applications.
The Wife seeks to transfer to the Husband the Town B property with its associated business (“Company F”) in exchange for a cash payment of $696,130. She also seeks lump sum spousal maintenance from the Husband of $125,000 or alternatively ongoing periodic payments of $450 per week for 5 years.
The Husband seeks to retain Town B and the business in exchange for a cash payment of $220,000 to the Wife, with no spousal maintenance.
The operations of the business lie at the heart of the parties’ dispute. Since separation the Husband has had sole use and occupation of the Town B property and sole control of the business. It is common ground that the business has become “run down” and that as a result the value of Company F has markedly diminished.
The parties strongly disagree as to how and why that has happened. The Wife contends that Husband has deliberately run down the business or has otherwise conducted it in a negligent, reckless or wanton manner constituting “waste” in the sense discussed by Baker J in Kowaliw & Kowaliw (1981) FLC 91-092. Accordingly she seeks that the reduction in the value of the business be added-back to the Balance Sheet as a notional asset of the Husband.
The Wife also alleges that the Husband has retained a disproportionate share of the retained profits of Company F post-separation. She says that he has not properly accounted to her for those profits, warranting another add-back.
The Husband denies that any add-backs are warranted.
While he accepts that the business has declined, the Husband denies perpetrating “waste” in a Kowaliw sense. Broadly, he says that the business was already declining and being wound down prior to separation, that the business infrastructure was no longer being upgraded (or even being fully maintained) and the business yields were consistently declining.
Post-separation the Husband says he has done the best he can with the business in an extremely difficult situation. He points to the deteriorating state of the business layering beds, his poor health and to the adverse climactic and economic conditions which have impacted the business, including drought, bushfires and Covid-19.
The Husband denies receiving a disproportionate share of the retained profits of the business post-separation; he says he has effectively “equalised” their respective drawings by way of a lump sum deposit to the business holding account. He also says that the retained profits figure is artificial anyway, given that the business was not paying him a salary.
THESE PROCEEDINGS
The Wife commenced these proceedings by way of Initiating Application on 24 March 2017.
In the course of the proceedings various valuations have been obtained and interlocutory orders made. The parties have unsuccessfully participated in mediation.
The matter finally came on for trial before me on 11, 12 and 13 August 2020. Closing submissions were made on 15 October 2020.
At trial, the Wife relied upon:
a.Case Outline Document filed 7 August 2020;
b.Amended Initiating Application filed 3 July 2020;
c.Affidavit of the Wife filed 3 July 2020;
d.Financial Statement of the Wife filed 3 July 2020;
e.Affidavit of the single expert Ms G filed 10 December 2018, annexing her valuation of “Company F” as at 30 June 2017.
The Husband relied upon:
a.Case Outline Document filed 7 August 2020;
b.Amended Response filed 15 October 2019;
c.Affidavit of the Husband filed 3 July 2020;
d.Financial Statement of the Husband filed 3 July 2020;
e.Affidavit of Dr H, Rheumatologist, filed 14 October 2019;
f.Affidavit of Dr J, the Husband’s GP, filed 3 August 2020;
g.Affidavit of Ms G filed 7 August 2020, annexing her updated valuation of “Company F” as at 30 June 2020.
The parties tendered various exhibits which will be referred to as relevant.
The trial itself proceeded by videolink. I had the advantage of seeing each of the witnesses give their evidence. I was broadly impressed with both parties as witnesses; each was being honest and trying to assist me as best they could. To the extent that I have to resolve disputed facts I have done so by reference to the weight of the evidence rather than on the basis of any adverse credit findings.
THE LAW
These proceedings are governed by the provisions of Part VIII of the Family LawAct1975 (“the Act”).
In these reasons, I will adopt the following approach:
a.I will identify and value the property, liabilities and financial resources of the parties (the “Balance Sheet”);
b.I will consider whether it is “just and equitable” to make a property settlement order;
c.I will identify and assess the respective contributions made by each of the parties towards the net assets pursuant to s 79 of the Act. For convenience, each party’s respective contributions–based entitlement will be expressed in percentage terms;
d.I will identify and assess the relevant “future factors” set out in s 75(2) of the Act including any relevant matters arising pursuant to s 79(4)(d), s 79(4)(f) and s 79(4)(g). Having done so, I will then determine what (if any) adjustment ought to be made to each party’s respective contributions-based entitlement;
e.Lastly, I will consider the effect of my findings and proposed orders so as to satisfy myself that any proposed property settlement order I am contemplating is “just and equitable”.
This pathway is derived from the Full Court’s decision in Hickey v Hickey & Attorney General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143, adapted to take into account the High Court’s decision in Stanford v Stanford (2012) FLC 93-518.
STEP 1 – THE BALANCE SHEET
The competing Balance Sheets were exhibits 9 and 10.
For convenience, I will largely adopt the same template, including some at-times confusing numbering. Asterisks (***) denote figures which are disputed or which require further explanation.
BALANCE SHEET
ASSETS
VALUE
JOINTLY OWNED BY HUSBAND & WIFE
1
Former matrimonial home
$ 285,000
2
Company F (Ms G valuation @ 30/06/20)
$ 41,000
3
Partnership moneys in bank account (…44)***
$ 8,080
Account (…06)***
$ 184,584
4
K Credit Union (…69)
$ 180
5
Tractor, irrigation, quad bike etc
Nil (included in Company F valuation)
6
Total joint assets
$ 518,844
OWNED/HELD BY HUSBAND
7
Moneys in bank account (…77)***
$ 2,095
Account (…75)***
$ 102,716
8
Legal fees and disbursements (agreed add-back)
$ 182,129
9
Motor Vehicle 1***
$ 16,400
10
Motor Vehicle 2***
$ 6,000
11
Household contents
$ 3,000
Add-backs
12
Reduced value of Company F***
Nil
13
Partnership profit retained by Husband***
Nil
14
Net non-superannuation assets owned/held by Husband
$ 312,340
OWNED BY WIFE
15
Motor Vehicle 3
$ 10,000
16
Household contents***
$ 1,000
Total owned by Wife
$ 11,000
Add-backs
17
Add-backs as follows
18
Gift to Mr D
$ 20,000
19
Gift to Mr C
$ 20,000
20
Gift to Ms E
$ 15,000
21
Outstanding loan to Mr D
$ 6,500
22
Moneys paid for valuation***
$ 13,652
23
Legal fees paid to date***
$ 73,667
24
Bank accounts***
$ 15,763
25
Moneys in trust for legal fees***
$ 5,909
26
Total addbacks
$ 170,491
27
Legal fees and disbursements
Nil (included in item 23)
28
K Credit Union Account***
Nil
29
Wife’s sub-total assets including addbacks
$ 181,491
30
Liabilities
31
Mastercard (Wife)
Net non-superannuation assets owned/held by Wife
$ 1,702
$ 179,789
32
Total Net Non-Superannuation Assets incl. add-backs
$ 1,010,973
Superannuation
33
Husband
$ 2,310
34
Wife
$ 42,099
35
Total
$ 44,409
TOTAL NET ASSETS INCLUDING SUPERANNUATION
$1,055,382
I turn now to the asterisked items.
Item 3 - Partnership monies in accounts (…44) & (…06)
The Wife contended that I ought to adopt the higher figures deposed to in the Husband’s Financial Statement. But I am instead adopting the figures at trial, which take account of subsequent business expenditure, including workers’ compensation expenses, and various other operating expenses which the Husband referred to in the witness box.
Item 7 – Husband’s bank accounts (…75) & (…77)
Again, I have adopted the Husband’s account balances at trial rather than the outdated and higher balances deposed to in his Financial Statement. I consider this an appropriate course given the Husband’s financial circumstances, particularly that his weekly expenses exceed his income.
Items 9 & 10 – Motor Vehicle 1; Motor Vehicle 2
I have adopted the figures deposed to in the Husband’s Financial Statement on the basis that this is the best evidence and can be regarded as “admissions”. While the Wife contended for higher values, she had no evidence to justify them and there was no relevant valuation evidence.
Item 12 – Reduced value of Company F / Item 13 – Partnership profit retained by Husband
The Wife seeks add-backs of $287,000 and $177,994 respectively.
These add-backs go to the very heart of the dispute; they were the subject of much of the cross-examination and argument at trial. I have rejected both add-backs for reasons best explained later on when I have set out the relevant factual foundations so as to give the necessary context.
Item 16 – Wife’s furniture
I have adopted the figure deposed to in the Wife’s Financial Statement on the basis that this is the best evidence I have and that her figure can be regarded as an “admission”. The Husband contended for a higher value but had no evidence to justify it.
Items 22, 23 & 25 - overview
It is common ground that shortly after separation the Wife removed $241,900 from the business accounts. Her subsequent expenditure of these moneys has given rise to the various add-backs.
Save for the add-backs allowed for in the Balance Sheet, I am otherwise satisfied that the Wife has applied the $241,900 towards her reasonable living expenses including paying rent, paying various utility and other bills, and acquiring furniture and white goods. Given her financial circumstances I do not consider the wife’s expenditure wasteful or extravagant.
Item 22 – Moneys paid for valuation
The Husband initially contended for a figure of $6,517 which was taken from the Wife’s affidavit. But at trial she conceded the $13,652 figure.
Item 23 – Legal fees paid to date & Item 25 – Moneys in trust for legal fees
These two figures have been updated to reflect the Wife’s subsequent payment of legal costs out of trust.
Items 24 & 28 – Wife’s bank accounts
As with the Husband’s bank accounts, I have adopted the Wife’s account balances at trial.
STEP 2 – IS IT “JUST AND EQUITABLE” TO MAKE A PROPERTY SETTLEMENT ORDER?
The parties jointly contend, and I agree, that the “just and equitable” requirement is easily met on the facts of this case: Stanford & Stanford (2012) 247 CLR 108.
STEP 3 – ASSESSMENT OF CONTRIBUTIONS
Given the length of the relationship, I propose to assess each party’s contributions on a global basis over the whole of their assets rather than on an asset-by-asset basis.
Initial contributions
At commencement of their relationship, the parties were each in their twenties and living in North Queensland. The Wife was employed as a carer and the Husband as a farm labourer.
Neither of them had any significant assets.
Contributions during the relationship / marriage
The parties adopted fairly “traditional” roles throughout the relationship. The Wife was the primary homemaker and parent, attending to all of the domestic needs of the family. This included caring for the Husband in later years as his health declined.
She worked on an unpaid basis in the family businesses, most significantly Company F. At different times the Wife also engaged in external employment to help financially support the family.
The Husband was the primary breadwinner, although he also made parenting contributions and domestic contributions (lawn maintenance and other outside jobs.) The Wife conceded in the witness box that the Husband was a “very hard” worker which I accept. In my view, both parties in fact worked very hard and each made substantial contributions in their respective spheres.
The children were all born early on. By 1987 the parties had moved to New South Wales.
They went on to jointly purchase the Town B property which was then vacant land – a “rough bush block” to use the Husband’s expression. The Husband says the land was purchased in 1988, the Wife says it was 1994. The Wife has produced a Title Search showing that the parties were registered as joint owners in 1994 and so her date seems more reliable.
The Husband’s unchallenged evidence is that the purchase price for Town B was $26,500, funded by way of a gift of $35,000 from his parents, together with a mortgage of $17,000.
The Wife agreed that the Husband’s parents gifted them some money for the purchase but could not remember the exact amount. I accept the Husband’s evidence.
The parties used the surplus available moneys to pay for land clearing, together with construction of a farm shed and a temporary cottage with electricity and basic amenities. The Husband did almost all of the building work on his own in order to keep costs down.
Although the cottage was only meant to be temporary accommodation, the family lived in it throughout the marriage and the Husband has stayed living there post-separation.
The parties initially set up a business in partnership with another couple. When that partnership dissolved after a few years, the Husband and Wife established their own business partnership. Common to both businesses was that the Husband did the manual labour and the Wife assisted with bookwork and accounts.
Then, after doing some work for a local horticultural farmer and learning how to grow it, the Husband decided to establish his own wholesale business at Town B. He set aside a small amount of his wages each week to buy materials and he did extensive earthworks, saving costs by using hand tools.
While the business concept was in its infancy, the Husband was involved in a serious accident wherein his leg was cut deeply by the blades of a ride-on lawnmower. He lost some of his shinbone. The Husband took a number of months to convalesce, during which he had no option but to stop working.
Financially, life was tough for a while. As well as looking after the children, and now the Husband, the Wife had to return to work. She was also cultivating chickens and selling eggs to help the family make ends meet.
The nature of the Husband’s injuries were such that full recovery was impossible. He was left with ongoing pain and reduced leg function, as well as pre-disposition to arthritis. The parties’ business had to be shut down; the Husband could no longer do the physical work required.
Nonetheless, the Husband’s work ethic impelled him to establish the business. He did all of the necessary research and organisational work, as well as arranging the earthworks, irrigation, construction and propagation work. He worked up to eighty (80) hour weeks in order to achieve this.
The Husband’s dedication and commitment paid off. He proved to be a skilled farmer and over time the business built up a good reputation. Various other growers in fact chose to sell their own stock through Company F, who would then on-sell it for a modest profit. To be clear though, the on-selling was a side business; the core business of Company F was propagating and selling its own stock.
The Husband always made the major decisions about the running of the business; he was the operations manager, as well as being actively involved in the planting and cultivation process. Amongst other things he ensured that the dams on the property were maintained and that the fertiliser was applied at the right time and the weeding done. He liaised with the customers, took orders from them and organised delivery trucks.
The Wife also made meaningful contributions towards the business. She assisted throughout by doing the bookwork, running errands and the like. She also assisted with watering and some outdoor activities at the business, usually in the mornings, evenings or on weekends. In addition, she was caring for the children and maintaining the home. She did all of this in addition to continuing to carer work for the first several years of the business’s operation.
Around 2003, the Husband’s health took a further turn for the worse. He contracted an illness similar to Lyme Disease, causing his skin to blister and burn whenever he went into the sunlight. He had to stay out of the sun, particularly in the middle of the day. The parties bought a quad bike so he could get around the property more quickly.
The Husband otherwise spent increasing time in the office, relying upon employees to do more of the physical labour while he supervised.
The Husband also started experiencing bouts of what he describes as “strange illnesses”. These included skin conditions, heart pain and palpitation, dental pain, and rheumatoid arthritis. He also began to experience chronic fatigue and at times nausea. He developed pain in his hands, which he thought was carpal tunnel syndrome. His pain and discomfort got to the point where he started rising at 4am in the mornings to massage his hands and limbs for the day ahead.
I turn now to the propagation business.
The business specialised in the propagation of a particular species of plants known as “Plants”, or “Plants”. This type of business is a popular hedging material and grows very well once it reaches a height of about 2 metres. The challenge is to grow it to that height.
Broadly, there are two (2) key propagation methods:
a.Layering – which involves planting an initial crop in the ground and then removing the in-ground papules (“shoots”) and potting them up. This is difficult and labour-intensive. It requires constant monitoring of temperature, humidity, fertiliser and irrigation levels. But even then there is a very high risk of failure. The advantage to this method is that, if it is successful, a large amount of propagation material can be produced over several years – although to maintain the availability of saleable stock, the layering does need to be completed regularly.
b.Cuttings – which involves taking cuttings from a crop and potting them up. This is also labour-intensive and high risk but produces a much lower yield.
Notwithstanding the Husband’s deteriorating health, it is common ground that in 2010/2011 he undertook some highly successful plants layering, resulting in Company F generating substantial amounts of propagation material (and consequent profits) over the next several years leading up to final separation.
To consider the Wife’s add-back argument in respect of the loss in business value, it is necessary to consider the circumstances surrounding the essential exhaustion of that propagation material, and the resultant decline in the business’s performance.
Just a few years after the successful layering crop, the Husband’s health deteriorated again. Around late 2012/early 2013, he suffered an allergic reaction to some painkilling medication, as a result of which he was hospitalised for 2 days and administered intravenous cortisone.
In 2013 the Husband was diagnosed with a medical condition. His antibiotic dosages were greatly increased; he suffered a severe toxic shock reaction. He was essentially incapacitated for about 6 months, spending up to 18 hours a day in bed – effectively bedridden. When he got out of bed he could barely walk. He then suffered insomnia at night. I accept the Husband’s evidence that at that time he genuinely thought he might die.
I accept the Husband’s evidence that he was not physically capable of maintaining the layering beds himself. I also accept the Wife’s evidence that the Husband had become rather difficult to live with.
The parties’ relationship began to unravel and their communication suffered.
The Husband sought the Wife’s assistance with maintenance of the layering beds, and claims that she refused because the work was to be done around the time she was making dinner. She denies this, and says it is illogical as there was no need to do the layering maintenance at dinner time.
I prefer the Husband’s evidence on this issue and consider that the Wife has likely forgotten those conversations. I am not critical of the Wife for not wanting to assist. The parties were not getting on very well at that time and the Wife probably found the prospect of working under his supervision to be unattractive.
In the result, the Husband struggled to maintain the layering beds himself, and his further attempts at layering were unsuccessful.
But the parties still had their successful 2010/2011 layering crop. The Husband turned to their son Mr D, telling him that maintaining the laying beds would require Mr D to work long and varying hours.
The Husband’s evidence is that he specifically told Mr D to remove only part of the layered plants in order to achieve a sustainable yield. I accept the Husband’s evidence that Mr D did not follow his instructions, instead removing all of the plants, not just part of them.
The Husband had previously always managed the layering beds himself. He was much more aware of what was required. Though the Husband is highly critical of Mr D’s work, the fact is that Mr D lacked the necessary experience in what was a difficult task. Moreover, the Husband had an at-times difficult relationship with Mr D and thought him somewhat unreliable. That the Husband reached out to Mr D for this critical task in the first place really only highlights the Husband’s poor health and incapacity at the time to do the work himself.
The Husband’s evidence is that after discovering what Mr D had done, he decided in 2013 that he had no choice but to “remove all the propagation material and sell it.” To that end, he says that from about 2013 he began to remove as much saleable stock from the ground as possible, in order to provide immediate (and maximised) income for the parties over the short term, particularly in case the Wife ended up being a widow.
To that end, the Husband stopped trying to replace the layering. He could not do the layering himself without assistance and he did not consider he could rely on Mr D. At the same time the Husband abandoned the planned infrastructure upgrades at the business, including essential infrastructure like pathways, staff amenities, building a new shed and greenhouses. He also let the maintenance lapse on the roads, drains and buildings as he did not expect to be working the business long-term and considered that it would most likely need to be wound up.
The Company F financial statements do show a “spike” in business sales in FY 2013.
The Husband says that he consulted the Wife about these matters, including specifically suggesting to her that they remove all the layering material, bank the income and buy themselves a beach house to retire to. In the witness box, the Wife seemed genuinely surprised when it was put to her that they had such a plan. She did however admit that they had talked about “lots of things” at the time.
By this stage, there was increasingly fraught and at times poor communication between the parties. I consider that the Husband was somewhat “torn” about what to do. He had worked hard over the years and his business had built up a good reputation but the state of his health was such that he could not properly maintain the layering beds on his own and he did not consider that he could rely on anyone else to do so. His own affidavit deposes that, after the 2012 deterioration in his health, he had been “forced to make hard decisions” and when the Wife says that they had talked about “lots of things” at that time it is likely that at least some of those discussions did involve winding the business down and others involved keeping the business going in some form or another.
In short, I doubt that the Husband was as consultative as he remembers - but equally the Wife must have known (or at least become aware well before separation) that the maintenance and upgrade works had stopped. After all, she was still living at Town B herself, doing things around the business and doing the bookwork.
The Wife was emotionally struggling at that time; she was not taking in information as well as she otherwise would. The parties were growing apart, precipitated in large part by the Husband’s significant medical problems and consequent irritability and his ongoing need for support. In my view the Wife was thinking/hoping that their son Mr D could just continue the business as she took the generally optimistic view that the plants grows quite easily once established. But the Husband, who had always managed the business, better understood the risks and difficulties.
The plants business sales rose again in FY 2014. The Husband’s evidence is that in 2014 the parties met with their accountant, Mr L, to discuss the business’s operations. The Husband says that Mr L noted the significant increase in earnings and profits and that the Husband told him that this was because they were removing as much stock as possible and banking the proceeds to buy a home for his forced retirement.
The Wife had no recollection of that meeting. Her recollection may be impaired as she admitted that at that time she was “in such a state” [emotional state] as a result of the stress of living with the Husband and having to put up with his yelling at her. The Husband’s recollection may also be impaired because his health was compromised; he was taking painkillers and other drugs.
On balance I prefer the Wife’s evidence that there was no such meeting in 2014. This is primarily because, although Mr L’s records have been subpoenaed, no records have been produced to corroborate such meeting.
In the meantime, business sales reached an all-time high in FY 2015. But the business maintenance was not being kept up; the layering beds were being depleted. Rather than being conducted in a sustainable way, the business operations were geared to obtaining maximum profits over the short term. From FY 2016 onwards, plant yields and consequent sales were on a consistent downwards trajectory (see Husband’s affidavit para “G”).
I am satisfied that the parties did have discussions with Mr L in 2016 around future business planning, including using the “cash” from the successfully layered crop to take up other investment and residential options. This is apparent from subpoenaed material, specifically the Husband’s email to Mr L of 21 March 2016 which became exhibit 5:
We have spoken to Mr M at Town N K Credit Union about pre-approval for a loan on a rental property as we discussed.
With your advice to use our cash to buy/build a house and to use borrowings for a rental income investment in mind, we were wondering if we could buy a house and a couple of acres nearby and use it for primary production (ie, to produce propagation material for our business) while we lived there temporarily? I would imagine there would be some criterion for eligibility as primary production, but it would not be that difficult to produce high value material that would outweigh the value of the rent we would forgo by living there ourselves. This would be most likely temporary while we move on one of the other options we discussed, and this property would then serve as a rental property.
I guess what I am asking is if this is a viable option for another primary production property on a “rough bush block” like our current one, as opposed to buying a house with xx acres of kikuyu and then using it for agistment and/or production of propagation material and/or plants? I doubt if I’ll want to chase anything with four legs around a paddock ever again.
The last sentence is understandable. By this stage the Husband had been diagnosed with moderate, chronic, medical conditions. He was largely incapable of normal physical activities, experiencing significant joint and muscle pain and suffering numerous ailments including nausea. He spent a lot of time in bed, getting up to supervise and instruct the employees but was otherwise physically inactive. I consider that his suggestion to Mr L about potentially growing plants on another property was entirely aspirational.
The Husband had two consistent business employees, Mr O and Mr P. Superficially these employees would appear to have been ideal persons to assist with the layering. In the witness box I specifically asked the Husband why he did not get them to take over the layering in order to sustain the business’s operations and profitability. This to me seemed more logical than just letting the business operations wind down.
The Husband admitted that he had “agonised” over the layering. He explained that successful layering was a very difficult job to do properly, requiring up to 24 hours of constant supervision of the garden beds. It was thus labour-intensive and very expensive to pay an “arms length” employee to do (as distinct from their son Mr D.)
Moreover, the Husband’s evidence was that while both Mr O and Mr P each grew their own plants (which they sold through Company F), neither of them used the layering method themselves; each of them grew plants from cuttings.
The Husband also said that, the maintenance programme having ceased and the layering beds having become more depleted over time, increasing amounts of investment in the business were required if the business was to be run sustainably.
Although the Wife disagreed in the witness box that the layering was as labour-intensive as the Husband was suggesting, he was the one who had been doing the work and I consider his evidence to be broadly more reliable as to such matters. But even if he somewhat overstated the requisite work involved, I am of the view that whatever work was required was largely beyond him physically. The highly successful 2010/2011 layering crop was the last successful crop before separation – some five (5) years later.
I accept the Wife’s evidence that, in the lead-up to separation, the Husband perpetrated family violence against her one evening. She had been asleep, but woke up in pain as a result of the Husband hitting her on the legs. He also “wrenched” her arm, injuring her shoulder and for which she later obtained chiropractic treatment. Though the Husband denied this event, I accept that it occurred. This violent event contributed to the wife’s anxiety and to the parties’ increasingly poor communication as their relationship spiralled downwards.
But while this assault occurred, and while the Husband was difficult to live with in later years, the evidence before me is insufficient to enable the wife to mount a claim for an increased contributions assessment on the basis of family violence: Kennon & Kennon (1997) FLC 92-757.
Post-separation contributions:
At separation the Wife moved out of the Town B property and into a rental home. At that time the Wife’s superannuation, accumulated during the relationship, was worth approximately $30,000.
Very early on, the Wife withdrew two (2) sums of money from the joint accounts totalling $241,900. In response, the Husband withdrew $224,000 and put it into a separate holding account in his own name. I accept that he did so in order to ensure that there was sufficient money left to support himself and to keep operating the business. (When business expenses had to be paid, the Husband would transfer monies from the holding account back into the business account.)
Each party withdrew an amount that they considered necessary; neither of them was setting out to defeat the other’s claim or to waste assets. The Wife had no accommodation and she needed money to re-establish herself and to have some measure of financial security. Given her substantial contributions to the marriage over many years, those withdrawals were entirely reasonable. The Husband needed money to continue to run the business.
I am satisfied that the overwhelming bulk of the Wife’s lump sum withdrawals have since been spent on the Wife’s reasonable living expenses. The Wife had to pay rent; she had to re-furnish her rental home because the Husband had retained the white goods and she needed to purchase new items.
To the extent that the Wife has met legal fees from her lump sums, those fees have been added-back in the Balance Sheet. So too her generous payments for the benefit of their adult children.
The Husband has had sole use of Town B ever since separation and has met all associated payments for the property. He has been solely responsible for the running of the business. As there is no mortgage, the Husband has had relatively “cheap” accommodation although, to be fair, the cottage at Town B has only ever provided fairly basic accommodation. To put things in perspective, one of the walls has been eaten out by white ants, the cottage is very cold in winter and the only hot water comes from a wood fire.
The Husband still retains substantial moneys in the various bank accounts; the relevant account balances are included as assets in the Balance Sheet. The Husband’s legal expenses have also been included as an add-back.
Since separation each party has received moneys from Company F characterised as “drawings”.
The Husband has paid the Wife an amount of $450 per week and at trial it was indicated that those payments would continue until the court made a final property settlement order. The Wife needed a greater income stream. Given her half ownership of the business, she was only entitled to $8 per fortnight in Centrelink benefits – and so she found some work at Employer Q in Town R in 017 where she has since remained. This has enabled her to meet her living expenses.
On 19 September 2019 the Husband “refunded” an amount of $180,766 to the business account so as to, on his calculations, “equalise” the parties’ respective drawings.
It is convenient now for me to turn to the Wife’s two critical add-back arguments.
Loss in value of Company F: should it be an add-back against the Husband?
I accept the Husband’s evidence that, after the Wife left Town B, he did not attempt to upgrade or improve the business. It continued to deteriorate. The Husband did make some attempts at layering the plants but these were unsuccessful.
In addition to the Husband’s substantial health issues, I also consider that he did not want to risk investing his lump sum moneys into the business to try to “revive” the depleted layering beds and maintain and upgrade the infrastructure. To be fair, any such investment would inevitably have been a high risk exercise. The lump sums he had were the only substantial asset in reserve. If they were depleted, there was no “Plan B”.
Nature also intervened cruelly.
Town B is a “dry” property; there is no running water. It relies on rainfall to fill a number of permanent dams. Usually the dams had ample water but from 2017 onwards the property was affected by an ongoing drought. As the drought wore on over the next few years, the dam water levels diminished significantly. And as the dams dried up, the business’s propagation capacity further diminished.
By November 2017, the Husband was:
Almost past caring. The business is winding down and soon will not make enough to pay wages. The work I did two months ago hurt me badly and reversed my recovery, and so I have no choice but to stop working and focus on my health. I hope to stay and survive as a much smaller venture but they appear to be trying to force me to sell. As far as I’m concerned the tax return doesn’t matter as much as the reality on the ground….”
[email from Husband to Mr L dated 13/11/17; part of ex. 5]
In February 2018, Mr S conducted an inspection of the Town B property. Though his evidence is not before me, the Husband agreed with Mr S’s observations that by that stage the layering beds were in poor condition, with weed infestation. There was a small number of plants; large areas had become vacant. In short, the business was very much run down.
According to the Husband, by 20 August 2018 it was:
necessary to invest large amounts of money now to get the business back on track, but with the ongoing legal blackmail, it still seems to be a sound business decision to wait rather than make investments that are unlikely to pay a return. This means that I am forced to keep running things down and to keep at a low level of production, or risk losing everything. And so, I am stuck in legal limbo and have just about had enough.
Stock at hand is down to about half of last year’s amount (and disappearing fast!)
[email from Husband to Mr L; part of ex. 5]
Looked at in isolation, the above email could be seen as a concession that the Husband was deliberately allowing the business to decline. And in a sense he was. But this email needs to be looked at in the broader context, namely that the business had become run down prior to separation. It required a substantial investment to restore it to a sustainable position.
There was a need for significant investment in capital improvements and business management, and additional propagation stock would be required to return the business to its previous production level.
The Wife was also pressing for a sale of Town B. So in the event the Husband invested significant money into the business, thus depleting his reserve cash, he would be taking a serious financial risk:
(a)if the layering failed - which was a real possibility given the drought conditions and the Husband’s own poor health; or
(b)if the layering was successful but the business had to be sold in any event before the returns on the crop could actually be realised.
To use the colloquial, the Husband was “between a rock and a hard place”. Short of having to invest a substantial amount of his available cash reserves into the business, the Husband’s safest option was to just keep the business running as well as possible for as long as possible and keep those monies in reserve.
This is effectively the course of action that the Husband chose. He was by no means sitting idle. He continued removing/depleting the remaining propagation material in the most sustainable way he could. He propagated some cuttings. He actively continued running the business, including selling plants on behalf of other suppliers. I accept his evidence that he fixed water problems alone in the middle of the night - one night falling heavily and struggling to walk ever since – and that he repeatedly hurt himself loading trucks.
His health continued to give the husband substantial problems; on two occasions he travelled to the Region T for weeks of intensive treatment with intravenous drugs and supplements. The cost of these treatments was some $40,000 or so which had to be paid out of his cash reserves, which I consider reasonable.
The business decline was known to the parties; each party had addressed the decaying state of the business in competing instructions to Ms G when in December 2018 she wrote her first valuation report of the business as at 30 June 2017. Ms G expressly stated that her report had made no allowances for future capital improvement costs in her future earnings calculations or as a contingency on the business Balance Sheet: see valuation report of 30/06/17, Appendix E, paragraph E5 at pp.16 & 17 and Appendix G, item 10 at p.27.
Ms G valued Company F on a future maintainable earnings (“FME”) basis. She concluded that its value was either $268,000 or $328,000 - the difference between those two figures depended upon the appropriate notional salary for the Husband. As Ms G is not a remuneration expert, she proceeded on the basis of each party’s proposed notional salary allowance.
The Husband contended for a $105,000 allowance comprising a manager’s salary of $75,000 and a caretaker allowance of $30,000. On that basis the business valuation came in at $268,000. The Wife contended for a $75,000 manager’s salary only; she disputed that there should be any additional caretaker allowance. On that basis the business valuation came in at $328,000.
I accept the Husband’s evidence that by 2019 the water levels at the business had become critical; the Husband had to sell off stock early in the year that could otherwise have been potted and sold for a higher figure. By the end of 2019 there was no longer enough water to plant any new layering beds even if the husband wanted to take the risk. The remaining propagation stock was also drought damaged and the Husband sold it for a salvage price.
The Husband considered that the business’s situation had become quite hopeless. On 2 September 2019 he told his accountant:
I am sorry to say that I am not well. Between ongoing health problems and my ex-wife’s lawyers, things have become pretty miserable. We are almost out of water and I have been forced to sell off most stock and to stop potting up. There is not enough water to start propagation, and we might be forced to have a year off.
I did the BAS and then collapsed and forgot about the tax return…
By the end of 2019, the Town B region (like much of north-eastern NSW) experienced catastrophic bushfires. Coming after years of drought, farming conditions were about as hostile as one could reasonably imagine.
By December 2019, the business had no more of its own stock and no longer required active employees. The Husband paid out Mr O’s and Mr P’s long service leave entitlements, though Mr O was still called in to work from time to time on an as-needed basis. Both of them still supplied plants to the business to on-sell, although that remained a fairly modest aspect of the business enterprise.
When Ms G updated her valuation as at 30 June 2020, the business had declined to such an extent that the FME valuation methodology was no longer appropriate. Instead Ms G valued the business on a net assets basis, arriving at a range of $38,000 - $44,000. At trial, the parties adopted her mid-point figure of $41,000.
The reduction in Ms G’s business value between 2017 and 2020 ranges between $227,000 and $287,000. For add-back purposes the Wife has adopted the higher figure.
By the time of the trial, the business was all but closed.
In Kowaliw (supra), Baker J said:
As a statement of general principle, I am firmly of the view that financial losses incurred by the parties or either of them in the course of a marriage…should be shared by them (although not necessarily equally) except in the following circumstances:
a.where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets; or
b.where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has diminished their value.
In this case, the business was in decline prior to separation. Gross business sales had peaked and were already on the way down when the Wife moved out. The maintenance programme had been put on hold. The business profits were high in the short term but they were never going to be sustainable without significant capital investment and physical outlay.
After separation, the Husband did not want to risk that capital outlay. In the circumstances he found himself in, I do not consider that he was acting recklessly, negligently or wantonly. Short of putting in a substantial investment with all of the attendant risks, I find that he did all he reasonably could to maintain business profits for as long as possible.
It is true that the decisions the Husband took meant the inevitable decline of the business, albeit that did what he could to slow it down. But assuming he had invested his reserve cash into the business, there is a high risk that the crops would have failed in any event given:
·the Husband’s very significant health issues;
·the lack of other sufficiently qualified persons to assist him with the layering beds;
·the adverse climactic conditions.
It is true that, had the Husband made the necessary investments and the layering crop/s succeeded, the business might now be in a better position. The corollary to this is that, had the crops failed, the reserve moneys would be largely gone and the Balance Sheet assets would be less. The business may also have closed its operations earlier as there would have been less available cash to meet operating expenses, tax bills and the like.
In all the circumstances I do not consider it appropriate to notionally add-back the loss of value of the business.
Did the Husband retain a disproportionate share of the business profits after separation?
The fact that one party retained a disproportionate share of post-separation partnership profits may potentially justify an add-back: see Townsend & Townsend (1995) FLC 92-569. Alternatively, it may warrant a contributions adjustment, although any such adjustment needs to be weighed up in the context of all relevant contributions.
The wife effectively argued the matter as a partnership accounting question. Given the way that she framed her case, I will undertake such accounting as I consider appropriate.
At trial, each party’s counsel provided the court with a schedule setting out their respective positions: see exhibit 7 and exhibit 9. Unhelpfully, those competing schedules pass “like ships in the night”.
The Wife’s schedule is based upon taxable net profits of the partnership; these are said to be based on Tax Returns which do not appear to have been put into evidence. The Husband did not concede the reliability of the Wife’s figures. In the circumstances I have adopted the unchallenged net profit figures contained in the reports of Ms G who has analysed all relevant financial documents.
The Husband’s schedule was based upon the respective “drawings” of the parties over the relevant financial years. In support of the Husband’s figures, he tendered the relevant transaction listings from the business’s computerised accounts system: exhibit 3. I will also adopt those figures, which include not just the transactions internally described as “drawings” but also the PAYG payments made on behalf of each party which are recorded separately in the exhibit.
In an accounting sense, drawings are not the same as profits. But for practical reasons I will link them given the manner in which the arguments were presented.
What follows is my own schedule which incorporates what I consider to be all of the relevant figures borne out by the evidence. In drawing the schedule, I have done all I can to avoid the risk of “double counting” which was specifically flagged by the Husband’s counsel. The schedule contains specific annotations in this respect.
Financial Year
ended
Net Business Profit
Each party’s half share
Wife drawings & taxes paid
Husband drawings & taxes paid
Surplus Profits not accounted for in Schedule (assume Husband has benefitted)
Husband > Wife
30/06/17
$223,563
$111,781
$49,071 [I am excluding $41,900 as this forms part of the Wife’s lump sum of $241,900 referred to earlier]
+
$29,271 [taken from ex.3, p.15]
TOTAL $78,342
$142,658
+
$21,853 [taken from ex.3, p.12 - ignore the other tax payment of $7,910 as already included in the $142,658 figure]
TOTAL $164,511
N/A – combined drawings exceed net profit
$86,169
30/06/18
$156,965
$78,482
$28,182
+
$31,577 [taken from ex.3, p.16]
TOTAL $59,759
$106,747
+
$31,330 [taken from ex.3, p.13]
TOTAL $138,077
N/A – combined drawings exceed net profit
$78,318
30/06/19
$150,854
$75,427
$46,400
$111,291
+
$8,015 [taken from ex.3, p.14]
TOTAL $119,306
N/A – combined drawings exceed net profit
$72,906
30/06/20 but including up to 12/08/20
$87,324
[as at 30/06/20. Profits 01/07/20 to 12/08/20 presumed minimal]
$43,662
$48,275
$20,034
N/A – combined drawings exceed net profit
($28,241)
SUB-TOTAL
$618,706
$232,776
$441,928
$0
$209,152
HusbandDrawings refund
19/09/19
($180,766)
TOTAL
$618,706
$232,776
$261,612
$0
Husband > Wife
$28,386
I accept that my table is somewhat complex, artificial and has inherent limitations:
(a)the table ends as at 12 August 2020 as these are the latest figures I had;
(b)the table has not allowed for any net profit in the period 1 July 2020 to 12 August 2020 noting that the business operations have all but wound down;
(c)it includes tax bills paid for each party on 5 July 2016 – shortly prior to separation. But each party’s amount is about equal, so it makes little difference to the result;
(d)while I have disregarded drawings at p.11 of exhibit 3 as being pre-separation, one of those drawings ($612) is in fact post-separation;
(e)the table makes no allowance for the fact that each party has presumably continued to receive drawings of $450 per week on an ongoing basis;
(f)the table does not include valuation fees and accounting fees of around $25,400 even though these might be classified as litigation-related drawings.
To be fair, the parties’ own schedules have similar limitations. The Wife’s schedule is so broad-brush as not to be of any meaningful assistance. The Husband’s schedule is of more assistance, but he double-counts the Wife’s lump sum withdrawal of $41,900.
Overall, I consider that my table gives a reasonable picture of the respective post-separation benefits each party has received from the business partnership. In short, the Husband has received more direct financial benefits from the business than the Wife.
But the fundamental difficulty for the Wife’s argument is that she makes no allowance for the Husband’s notional salary as a business manager either at $105,000 per annum or $75,000 per annum. Ms G’s 30 June 2020 valuation report specifically acknowledged that the business profits for FY 2020 really only equated to remunerating the Husband for his efforts. The Wife’s failure to account for reasonable remuneration in her figures is a fatal flaw and renders her argument entirely artificial.
At the end of the trial and before closing submissions, on 13 August 2020, I squarely raised this issue with the Wife’s counsel:
HIS HONOUR: I can’t expect this man to work for free, can I, because it seems to me the flaw in your numbers – I haven’t attempted to crunch them in detail – but unless you make an allowance for the Husband to be paid something, there’s a rather gaping hole in the argument, isn’t there?
MR BATEMAN: Yes, your Honour. That’s probably right. As to how you measure that---
HIS HONOUR: Well, that’s the detail. That’s what I want you to think about before we hear the argument so that…I’m not dealing with ambit claims.
In his late closing submissions the next month, Mr Bateman effectively contended that the Husband was trying to “have it both ways”, ie. he wanted a notional salary as manager while at the same time winding down the business operations. Although there is some merit in that submission, it does not avail the Wife. The Husband must logically be entitled to some reasonable notional remuneration over that four (4) year period.
I consider that the Wife’s figures effectively require the Husband to work for free which in a post-separation setting is incompatible with justice and equity.
OVERALL ASSESSMENT OF CONTRIBUTIONS
In these proceedings the court is mandated to arrive at a just and equitable outcome, and this necessarily requires that I weigh up all of the relevant contributions made by the parties both during and after the relationship. While I dismiss the Wife’s add-back arguments, my findings form part of the overall factual matrix upon which I must assess contributions. And notwithstanding that I have undertaken a form of accounting given the arguments advanced at trial, I am mindful that the overall assessment of contributions is a holistic exercise and not a strictly accounting one.
In the end, I consider that each party has made significant contributions to their net asset base. The Husband’s initial financial contribution was superior, courtesy of his parents’ gift of $35,000 to acquire Town B. The Husband was the driving force behind the successful business but the Wife contributed, including by caring for him. She also worked outside the home at a time when the parties were under financial pressure due to the Husband’s tractor accident.
The Wife’s contributions as parent and homemaker were superior during the relationship and must be given real weight.
Post-separation the Husband has had the benefit of “cheap” accommodation at Town B and has run the business in a manner that I consider reasonable. While he could have invested more capital into the business, I am unpersuaded that his decision not to do so constitutes “waste”.
Any moneys that either party have retained for their own use have either been spent on their reasonable living expenses, or been added-back to the Balance Sheet.
Overall, I consider that the parties have made an equal contribution towards their net assets. This includes the superannuation interest of the Wife, the overwhelming bulk of which accrued during the relationship.
STEP 4 – CONSIDERATION OF SECTION 75(2) FACTORS
Before considering the s 75(2) or “future” factors, it is helpful to set out each party’s 50% contributions-based entitlement given it is that entitlement which then falls for potential adjustment under s 75(2).
As the total net assets are $1,055,382, each party is entitled to $527,691. Including superannuation and add-backs the Husband presently holds $314,650 and the Wife holds $221,888. The remaining joint assets of $518,844 – including Town B and the business– would be divided as to $213,041 to the Husband and $305,803 to the Wife.
On those figures, it is very difficult to see how the Husband could retain Town B as he seeks.
Of course, if Town B is sold, the net assets figures in the Balance Sheet will change on account of the costs of sale, and potentially tax liabilities. In this event a formulaic property settlement order will be required in order to take such matters into account.
The Husband was born in 1957 and is 63 years old, turning 64 this year. His health is significantly compromised on a number of levels. He has rheumatoid arthritis in his right knee, which has markedly degenerated and causes him to suffer constant pain and swelling. This makes it difficult for him to walk; he uses a cane and has to sit down regularly. By the time this judgment is delivered he may already have had knee replacement surgery.
His left knee is also painful, though not as bad. He also has hand pain.
He has a chronic dermatological condition, namely chronic non-healing lesions (hard plaques) on his arms and legs, one of which is particularly inflamed and painful. They have been resistant to treatment.
From time to time, the Husband periodically suffers from particularly disabling bouts of several medical conditions.
The Husband consults upon his GP, a rheumatologist and an orthopaedic surgeon.
The Husband’s medical problems have been stubbornly resistant to treatment; it seems likely that they are a legacy of his previous tick-borne infectious disease.
As a result of his various health issues, the Husband is not going to be commercially employable in the future. He could not compete with other able-bodied applicants for the type of work for which he would otherwise have been suited by reason of his experience and skillset. Realistically, the Husband’s only viable option is to work for himself.
But by nature, the Husband is opposed to claiming Centrelink benefits. In response to a question from me in the witness box, the Husband said he had never checked his eligibility for sickness benefits or a disability support pension. This is despite his treating specialist on the Region T, Dr H, stating that the Husband “should be considered permanently disabled and unable to manage his work”.
This leads me to the Husband’s future work plans which bear not only the s 75(2) factors, but also the form of orders he asks the court to make.
In particular, the Husband wants to retain Town B. He says that it has since rained at the property and that whatever propagation material still remains has largely recovered - but he is unsure as to the viability of that material given the previous drought damage.
I accept his evidence that to get the business “up and running” as before would require substantial work and associated expenditure in the order of $150,000. Amongst other things, this would include levelling and increasing the layering beds, significant planting and upgrades to business infrastructure.
It thus seems unviable to try to restore the business production to its previous maximum capacity. The Husband’s evidence is that it will be necessary to substantially scale back business operations, with a commensurate drop in propagation capacity and profitability.
To that end, the Husband has thus come up with a different concept: micro-propagation at Town B. This involves growing tissue cultures in test tubes in an air-conditioned room with appropriate seating for the Husband to sit and monitor.
But the Husband admitted that he is unsure as to the exact costing of such an enterprise. Perhaps as importantly, he does not consider that a bank or lending institution would loan him money given his age, his state of health and the potential unserviceability of any such loan. These are all legitimate concerns.
The Wife was born in 1960 and has recently turned 60. She works on a part-time basis at Employer Q, usually around 15 hours per week which generates a net income of around $230 per week. She has a capacity to work longer hours if they are available.
Though a qualified carer, she has not done such work for over 13 years. Moreover she suffers from a sore back and cannot easily get down on the floor with clients or carry them. She sees a chiropractor regularly. She also has some shoulder pain as a result of the Husband’s assault. In my view she has no meaningful work capacity as a carer; at best she could potentially generate a hobby-type income if she actively pursued such work.
The Wife does not trust the Husband. She contends that the Husband has a long-term plan to revive the business and that after this case finishes, it will rise again like the proverbial “phoenix from the ashes”. On that basis she contends that he has a superior – potentially significantly superior – income-earning capacity than she does.
I respectfully disagree. It is far from clear that micro-propagation is even feasible, much less that it will generate any meaningful income for him. I am particularly concerned about the costs of such an enterprise, the inherent and very real uncertainty about how the Husband could fund it, the uncertainty about whether it would be commercially viable. The alternative - scaling back production – inevitably means much lower yields and profits.
These things also need to be considered against the backdrop of the Husband’s age and significantly compromised health.
Overall and with respect to them, both parties have a solid work ethic but neither has a significant income-earning capacity. The Wife has a proven capacity to earn a modest income. The Husband potentially has a greater income-earning capacity but only if things pan out for him – including things beyond his control such as his health, the current pandemic and the environmental conditions. Presently the Husband’s higher income-earning capacity is very much potentiality rather than actuality.
On balance I proceed on the basis that the parties have similar income-earning capacities – the Wife’s more tangible and modest, the Husband’s potentially larger but inevitably somewhat spectral.
If Town B has to be sold, it is difficult to see how the Husband could work for a third party given his state of health. The Wife would then have a higher income-earning capacity but in my view this should carry no weight given the nature of the Wife’s work, her modest income and the parties’ ages.
Each party lives week-to-week. Neither has a particularly high standard of living. While the Husband has had the benefit of the former cottage at Town B, it provides only basic accommodation. Like the Wife, he would like a new home. The Wife rents with their son Mr D.
The Husband may potentially have an entitlement to a means-tested Centrelink benefit but he will not apply for same unless he has no other choice. While he retains a business any such benefit may be harder for him to claim.
The Wife has tried to claim Centrelink benefits but she cannot presently receive anything more than a nominal amount given her interest in the business.
It seems inevitable that in the short to medium term both parties will be in receipt of Centrelink benefits by way of an Aged Pension, or is the Husband’s case Sickness Benefits or a Disability Support Pension.
The Wife has modest superannuation; the Husband has none.
The Wife raised an interesting argument pursuant to s 75(2)(o) – namely that the Husband could and should have agreed to sell Town B earlier in time given that the business was being run down. There is some superficial merit in this but I have no evidence as to any substantial change in the market value of the property. As for the lost value of the business, this is true but the parties continued to receive the business income in the interim and there is no evidence as to the existence of a willing buyer post-separation, particularly noting the business’s run-down state.
In short, the most that can be said is that the parties have sustained a “loss of chance” of selling the business and property at an earlier date but I cannot put a figure on that nor can I properly make any s 75(2)(o) adjustment on that account. Town B may even have increased in value over time. (I add here that I have already taken into consideration the Husband’s “rent-free occupation” of the cottage at Town B in the context of contributions.)
Regrettably, in the end there is simply “not enough money to go around”. I do not consider that any adjustment is warranted to either party’s contributions-based entitlement by reason of the s 75(2) factors.
STEP 5 – ENSURING A JUST & EQUITABLE OUTCOME
In my assessment, it would be just and equitable for the parties to divide their net property equally for the reasons set out above. This reflects each party’s myriad contributions over many years and the various factual findings I have made.
The necessary adjustments will need to be made from the jointly-owned property unless otherwise agreed. I do not see how it would be feasible for the Husband to pay the Wife the sum of $305,083 to which she is entitled. A sale of Town B therefore seems inevitable, with a resultant adjustment to each party’s entitlement after deducting costs of sale.
However, if it is in any way possible for the Husband to retain Town B then he should be given that opportunity – provided he is given a very tight timeframe to refinance/pay out the Wife. In my view twenty-eight (28) days would be appropriate.
Failing that, an order for sale will be necessary and orders will have to be made for an appropriate formulaic division.
Pending sale, the Husband should be entitled to continue to occupy the property and to meet all associated expenses.
CONCLUSION
Out of an abundance of caution, I will hear further from the parties as to the exact form of orders that should be made in order to achieve an equal division of their net matrimonial property consistent with these reasons for judgment.
Separately, the Wife’s claim for lump sum spousal maintenance must be dismissed; on the basis of my findings there is no proper basis for the making of such an order. I do not consider that the $450 per week spousal maintenance payments should continue any longer. In my view, while the Wife can establish need, the Husband does not have the requisite capacity to pay except by depleting capital which would otherwise be available for division. To make an ongoing order for spousal maintenance which effectively requires depletion of capital is not in my view a “proper” order to make in the circumstances of this case: s 74 of the Act.
To the extent that capital may have been depleted on account of the $450 weekly spousal maintenance/drawings payments to each party since I reserved judgment, that depletion has at least been shared equally. But it would not now be “proper” for the court to order that such ongoing spousal maintenance continue.
I certify that the preceding one hundred and ninety-nine (199) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Betts. Associate:
Dated: 21 July 2021
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