Pallon and Pallon

[2007] FamCA 808

FAMILY COURT OF AUSTRALIA

PALLON & PALLON [2007] FamCA 808

FAMILY LAW - PROPERTY – Contested proceedings involving a substantial pastoral holding in which the husband held a minority interest received through family benefits - Issue of valuation of the minority interest adjusted - Orders made by consent.

Ramsey v Ramsey (1997) FLC 92-742
Georgeson v Georgeson (1995) FLC 92-618
Waters v Jurek (1995) FLC 92-635

APPLICANT: MRS PALLON

RESPONDENT: MR PALLON

INTERVENOR: Y Pty Ltd;
Mr BT Pallon
Ms BM Pallon
Mr I Pallon

FILE NUMBER: MLF 3373 of 2004

DATE DELIVERED: 26 June 2007

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Guest J

HEARING DATE: 26 June 2006

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Ambrose

SOLICITOR FOR THE APPLICANT: Graeme Jackson

COUNSEL FOR THE RESPONDENT: Mr Andrew Crozier-Durham

SOLICITOR FOR THE RESPONDENT: Beaumont Lawyers

COUNSEL FOR THE INTERVENOR: Ms Swart

SOLICITOR FOR THE INTERVENOR: Cuthberts

Orders

1. THAT on or before 25^th September, 2007 ("the date") the third parties pay or cause to be paid to the Husband's Solicitor upon trust for the Husband the sum of $824,645.00 ("the payment").

1. THAT contemporaneously with the payment:-

   (a)The Husband transfer to the third parties' nominee at the expense of the third parties all of his shares in the Y Pty. Ltd. ("the Company").

   (b)The third parties indemnify and keep the Husband indemnified in respect of any liability he might have in respect of the Company.

1. IN default of the payment by the date that the property known as N be sold and in the event that the proceeds of the sale of N are insufficient to effect the payment so much of the other real estate of the Company as is necessary be sold and that from the nett proceeds of sale or sales of the said real estate the Husband receive the payment together with interest thereon at the rate prescribed by the Family Law Rules adjusted monthly and the balance thereof be paid to the third parties.

1. THAT from the payment the Husband's Solicitor:-

   (a)Invest the sum of $80,000.00 in an interest bearing account pending an assessment of any capital gains tax payable by the Husband in respect of the payment.

   (b)Pay to the Wife's Solicitor for the Wife the sum of $242,087.00.

   (c)Pay the balance to the Husband.

2. THAT upon the Husband receiving any assessment from the Australian Taxation Office ("the ATO") for the payment of capital gains tax arising out of the payment:-

   (a)The Husband's Solicitor cause the sum due under the said assessment to be paid in accordance with the notice of assessment from the monies invested by him pursuant to paragraph 4(a) hereof.

   (b)In the event any of the monies so invested remaining after the payment to the ATO divide the monies and any interest accrued thereon as to sixty per cent thereof to the Husband and as to forty per cent thereof to the Wife.

5A.THE Husband indemnify and keep indemnified the Wife in respect of all or any liability in relation to his farming activities including any liability to the Commissioner of Taxation.

1. THAT on or before 9^th July, 2007 Mr I Pallon pay to the Husband and the Wife the sum of $88,799.00 owed to them by and standing to their credit in a loan account in the BT Pallon Family Trust as follows:-

   (a)To the Husband the sum of $53,280.00 being sixty per cent thereof; and

   (b)To the Wife the sum of $35,519.00 being forty per cent thereof.

1. THAT on or before 9^th July, 2007 the Husband do all acts and things and sign all documents necessary to effect a transfer from PW Holdings Pty. Ltd. to P Holdings Pty. Ltd. the right, title and interest in the real estate owned by PW Holdings Pty. Ltd. as trustee of the BT Pallon Family Trust, ("the [S] property") such transfer to be at the expense of Mr I Pallon.

1. THAT on or before 9^th July, 2007 Mr I Pallon pay to the Husband the sum of $4,200.00 being the sum of $2,200.00 in respect of a wool press owned by the said Mr I Pallon and the Husband and the sum of $2,000.00 in respect of any entitlement in the P Staff Superannuation Fund.

1. THAT on or before 25^th September, 2007 the Husband vacate the S property.

1. THAT on or before 9^th July, 2007:-

   (a)Mr I Pallon do all acts and things and sign all documents necessary to transfer to the Husband all his right, title and interest in MLC Policy number … .

   (b)The Husband do all acts and things and sign all documents necessary to transfer to Mr I Pallon all his right, title and interest in MLC Policy numbers … and MLC Policy number … .

2. THAT Mr I Pallon make available to the Husband a 16 foot inboard ski boat with trailer on or before 25^th September, 2007.

1. THAT the Wife be entitled to retain for her benefit and use absolutely the property situate at and known as K and the Wife be responsible for and indemnify the Husband in respect of any liability he might have in respect of the K property ("the [K] property").

1. UNLESS otherwise specified in these Orders and save for the purposes of enforcing any monies due under these or any subsequent Orders:-

   (a)The Husband and the Wife be solely entitled to the exclusion of the other to all other property (including choses-in-action) in the possession of such party as at the date of these Orders, including motor vehicles, bank accounts, furniture, personal possessions and like chattels and any  monies or assets received by him/her prior to the making of these Orders and not otherwise specified in these Orders and the Husband make available to the Wife the items set out in Annexure "A" herein at a time to be agreed.

   (b)The Husband and the Wife forgo any claims they may have to any superannuation benefits belonging to or earned by the other.

   (c)Insurance policies remain the sole property of the owner named therein.

   (d)The Husband and the Wife be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.

   (e)Any joint tenancy of the Husband and Wife in any real or personal estate is hereby expressly severed.

2. THAT all extant Applications be otherwise dismissed and that the proceedings be removed from the active pending cases list.

1. THAT pursuant to Order 38 Rule 26 of the Family Law Rules this matter reasonably required the attendance of Counsel.

IT IS NOTED BY THE COURT

A.That the parties intend that these Orders will so far as is practicable finalise the financial relationship between the parties and avoid further proceedings between them.

B.That Mr I Pallon agree to waive any payment due to him by the Husband and Wife or either of them arising out of him escorting the valuer around the company's property.

ANNEXURE "A"

Children's items

Tupperware
Wife's personal effects
Chrystal
Wedding Dress
Wine in cellar
Share of contents of hall cupboards
Child's tea set
Oat Feeder
Chopping Block
Availability of children's photos for copying by Wife or a division of photos
Half share of linen press

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 3373  of 2004

Mrs Pallon

Applicant

And

Mr Pallon

Respondent

REASONS FOR JUDGMENT

1. This matter comes before me in the Standard Track List of defended cases, comprising a property application brought by the wife.  Despite its tortuous travel through the court, it has been resolved by sensible and dignified negotiation.  Mr Ambrose appears for the applicant wife, Mr Crozier-Durham for the respondent husband, and Ms Swart for the named respondents. 

2. A short background is as follows.  The wife was born in February 1960 and is 47 years of age.  The husband was born in June 1958 and is 49 years of age.  They married on … November 1983 and following unhappy differences separated in October 2003.   There are two children of their union, namely a daughter, who is 20 years of age, and a son, who is nearly 17 years of age.  The son attends the M College and lives with his mother.

3. One of the more difficult issues in this matter was the valuation of the husband's minority interest, in Y PTY LTD (“[Y Pty Ltd]”).  At the time of the marriage, the husband owned 220 shares in the company.  He worked on the farm following leaving school and also following his marriage to the wife.  There were periods, however, when by reason of a strained rural situation, he worked elsewhere to supplement the family income.

4. The shareholding ultimately in Y Pty Ltd changed, with the husband owning 330 shares, representing 29.7 per cent of the capital of the company.  His twin brother, I who now operates the farm, also held a similar number of shares.  Two other brothers, J and G, each hold 220 shares, representing 19.8 per cent each of the capital of the pastoral company.

5. I have earlier mentioned that the husband owned 220 shares in Y Pty Ltd at the commencement of the marriage and currently owns 330 shares.  That came about in 1989 when his sister, M, sold her shareholding (then of 220 shares) to each of the husband and his twin brother, I.

6. It is clear that the husband worked very hard on the farm.  Unfortunately, the family unity fractured in 2001 resulting in the husband leaving the farm.  He has not returned since.  As matters are before me at the commencement of the proceedings, the husband and his twin brother each hold 29.7 per cent and the other brothers, J and G each hold 19.8 per cent shares in Y Pty Ltd.  His father and mother each hold five shares, representing 0.5 of 1 per cent of the capital, but have control as to any transmission and registration of shares following change of ownership.

7. The husband's father who is 81 years of age and his mother incorporated Y Pty Ltd in 1968, intending to preserve the family farm for provision in their old age and protection from probate duty.  It is significant that the shares held by the husband's father (BT) and his mother (BM) have power to issue extra shares (see Article 2) and otherwise a power to refuse to register any transfer of shares (see Article 22).  In the result, the farm holdings consist of three pieces of substantial land, being styled "[Y]", which is valued at $1.430 million; “[L]”, which is valued at $1.220 million and “[N]”, which is valued at $1.390 million. 

8. The landholding, “[Y]”, was purchased by the husband’s father in 1949 and transferred to the company in 1974.  The landholding, “[L]”, was originally owned by the husband’s grandfather and was purchased for $15,000 by him in 1968.  He gifted that land to the company.  The landholding, “[N]”, was purchased in 1975.  Also involved in the proceedings was the [BT] Family Trust which was settled in 1978.  The original trustee was PB Holdings  Pty Ltd, but that changed on 19 December 2001. 

9. This has been a difficult case for the parties and quite clearly an emotional one.  I have been greatly advantaged by the excellent affidavits presented by the legal practitioners who attended to their task with consummate care.  I have before me a valuation of Y Pty Ltd prepared by Mr F.  He valued it on an asset-backing basis as it had no goodwill sufficient to enable it to be valued on the future maintainable earning basis.  Mr F valued the husband's 29.7% holding in Y Pty Ltd but allowed no discount for the minority interest which he viewed as an issue to be ultimately decided by the court.

10. As matters presently stand, the land is leased to the husband’s twin brother for pastoral purposes.  There appear to be no profits resulting from the business operations. 

11. The issues for the parties, when the case commenced before me, were firstly, what is the discount factor to be applied in a case such as this and secondly, what is the percentage adjustment between the husband and the wife, having assessed the pool of assets within the matrimonial matrix?  The issue of the valuation of the minority interest has been one that has caused debate and is capable of a range within precedent.  All counsel were cognisant of and discussed with me a number of decisions of this court, including that of Ramsey v Ramsey (1997) FLC 92-742, (per Warnick J), and that of the Full Court in Georgeson v Georgeson (1995) FLC 92-618.

12. I had a helpful discussion with counsel, but particularly those interested in this particular issue and as a result, further negotiations were conducted between Mr Crozier-Durham and Ms Swart.  They were able to settle upon a discount factor of 25% which in my view is a reasonable one given the whole of the circumstances.

13. As between the husband and the wife, Mr Ambrose and Mr Crozier‑Durham were able to adjust the percentage differential between them on the basis of 60 per cent/40 per cent in favour of the husband.  The differential is quite clear and arises from the husband's overwhelming contribution to the assets before the court and also having regard to prospective adjustments pursuant to s 75(2) of the Act.  Thus it was that proper regard was had in their discussions to what Fogarty J had to say in Waters v Jurek (1995) FLC 92-635 (particularly at page 82-379) dealing with the effect upon parties of a long marriage and their responsibilities arising from it being weighed against the actual financial contributions.

14. In my view, the adjustment agreed between the husband and the wife in the percentages to which I referred was very fair.  It was appropriate, just and equitable.  That left a number of other side issues to be discussed between Mr Crozier‑Durham and Ms Swart relating to the farm and to the family trust.  They too were resolved and sensibly so.

15. In the result, without going through the arithmetical exercise in detail and allowing for the husband's interest in Y Pty Ltd and the family trust and various other assets such as the life insurance policies and some further adjustments between the husband and his twin brother the pool of assets were assessed at $1,006,515.  I hasten to add that that sum did not include, as Mr Crozier‑Durham explained to me, the wool press or superannuation.

16. Accordingly, the wife is to receive 40 per cent which amounts to $402,606.  She will retain the property at K, and thus, after deduction of the value of that home (which is included in the matrimonial pool) the husband will pay a capital sum of $277,606 to her.

17. The parties have been diligent and have been very dignified in their adjustments.  I congratulate them both and the husband’s twin brother, in having the common sense in coming to this arrangement.  I appreciate as any judge of this court that it is not a settlement easily achieved, but one that was reached in the spirit of dignity, commonsense and goodwill.  The orders are, in my view, both just and equitable.  I propose to make orders in the terms of the Minutes.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Guest.

Associate: 

Date:  10 August 2007.

IT IS NOTED that this judgment for all publication and reporting purposes be referred to as PALLON & PALLON