PALSER & PALSER

[2020] FCCA 2791

FEDERAL CIRCUIT COURT OF AUSTRALIA

PALSER & PALSER [2020] FCCA 2791

Catchwords:
FAMILY LAW – Property Settlement.

Legislation:

Family Law Act 1975 (Cth), ss.75(2), 79(2), (4)

Cases cited:

Stanford & Stanford (2012) FLC93-518

Bevan & Bevan (1995) FLC 93-572

Clauson & Clauson (1995) FLC92-595

Applicant: MS PALSER

Respondent: MR PALSER

File Number: LNC 798 of 2019

Judgment of: Judge McGuire

Hearing dates: 6 & 7 October 2020

Date of Last Submission: 7 October 2020

Delivered at: Hobart

Delivered on: 5 November 2020

REPRESENTATION

Counsel for the Applicant: Ms K Mooney

Solicitors for the Applicant: McVeity Dean

Counsel for the Respondent: Mr J Petersen

Solicitors for the Respondent: Petersen Legal

ORDERS

1. That the net property of the parties inclusive of superannuation be divided as to 60% to the wife and 40% to the husband.

2. That the parties bring in settled and particularised orders within   twenty-eight (28) days of the date of these orders.

3. That the parties and each of them have liberty to apply in respect of the particularising of the orders.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT LAUNCESTON

LNC 798 of 2019

MS PALSER

Applicant

And

MR PALSER

Respondent

REASONS FOR JUDGMENT

Applications

1. These are proceedings for property settlement. The applicant is the wife. After a relationship of some 27 years duration each of the parties asks for orders giving them 60% of the net property pool.

The Issues

1. Whilst the parties are substantially in agreement as to the contents and value of the property pool. They disagree as to the value of a Bulldozer. The husband adduces evidence from Mr B, Manager for D Company, who values the item at $170,000 to $180,000. The wife adduces evidence from Mr E, senior auctioneer and certified practising valuer, who values the machine at $220,000.

2. Secondly, the parties are at issue in respect of the wife's claimed loan liability to her mother's company, F Company, for $22,788 being, she claims, a loan obtained to pay ongoing legal costs. The wife says that the husband has met his ongoing legal costs from income earned primarily from jointly owned plant and equipment since separation whereas she has had to obtain a personal loan to meet her legal costs. The husband claims that the alleged debt, if it is legitimate at all, constitutes a gift rather than a loan.

3. Thirdly, the wife seeks 'add-backs' to the property pool in respect of two amounts of $30,521.08 received by the husband from G Ltd post separation and $13,907.52 received from H Company also post separation which I calculate to total $44,428.60.  The wife argues that these were payments received by the husband due and owing to the previous partnership operated by the husband and wife. The husband admits receipts of the monies but says that they were legitimately spent on the continuation of the business and/or the payment down of debts of the former partnership.

4. Fourthly, the husband argues that there should be 'add-backs' or alternatively consideration in favour of the husband pursuant to s.75(2)(0) of the Family Law Act 1975 ('the Act') on account of the wife unilaterally severing the partnership between the husband and the wife and thereby incurring loss of potential income and 'causing the termination of lucrative contracts between the partnership and Client J’. Specifically, he argues a loss of income of $114,474.25 in respect of the contract with Client J.  He argues generally as to wanton and reckless conduct on behalf of the wife in respect of the partnership and its assets and income.  The wife denies any actual loss or reckless behaviour on her behalf.

5. Fifthly, the wife argues generally for an adjustment on her behalf under the s.75(2) considerations and primarily as to disparity in current and potential income between the parties.

6. Finally, the husband argues that the Court should consider the 'fourth step' in the consideration of property settlement pursuant to s.79 of the Act in respect of justice and equity of the orders to be made rather than simply a percentage distribution between the parties. Specifically, the husband asked for consideration that he be permitted to retain the majority of the plant and equipment and specifically income-earning plant and equipment in his current possession and control which in turn provides him with an income by way of contracts with Client J and other entities.

Background

1. The wife is 47 years of age and the husband of 46 years. They commenced cohabitation in 1991 and married in 1992. The parties separated in either August or November 2018.

2. There are two children of the relationship who are both now adults and financially independent of the parties.

3. That during the marriage the parties operated a farm and contracting business in partnership.  The wife severed that partnership on 29 May 2019 being approximately six months after separation.

4. The wife commenced these proceedings on 30 October 2019.

5. The husband has the re-partnered and now conducts a farm and contracting business under a company umbrella with his current partner.

6. The wife has not re-partnered.

7. The wife is employed full-time as a bookkeeper for her mother's company. The wife says that she is diagnosed with depression and anxiety and receives medication. No medical evidence was adduced.

The Evidence

1. Both parties gave evidence and provided affidavits and sworn financial statements. They were both cross-examined.  Each of the parties, in my view, gave their evidence in a direct and forthright manner consistent with honesty. It is abundantly clear that there is residual bitterness and mistrust between them such that has, not unexpectedly, contributed to the remaining issues set out above.

2. Each party adduced evidence on affidavit from valuers in respect of the bulldozer being Mr B for the husband and Mr E for the wife.

3. The wife adduced evidence from the husband's sister, Ms K. Her affidavit was affirmed 8 September 2020. She was not required for cross-examination. Ms K deposed relevantly to the following:

   Most of the machinery and equipment stored at Dads farm which belonged to Mr Palser and Ms Palser have been removed from Dad's farm over several months. At my last visit to Dad's farm on Sunday the 6th of September 2020 there was still the water tanker and spreader there which I understand belongs to Mr Palser and Ms Palser. There is also a calf feeder on Dad's farm which Dad told me belongs to Mr Palser.

4. The wife also adduced evidence from the parties' daughter, Ms L. Her affidavit was affirmed 10 September 2020. She relevantly deposes to the following:

   I am aware that Dad has alleged that Mum took lots of things with her when she left the farm. When I lived with Mum I only saw some of our furniture, her car, and the lawnmower. There was nothing else from the farm or house that I saw at her home.

5. The wife also adduced evidence from Ms M and Mr N. Their affidavits were both affirmed 22 September 2020.

6. Mr N gave evidence in respect of a roller which occupied some time in cross-examination of the parties but which issue was ultimately resolved by the roller being included in the list of assets at $2,700.

7. Ms M’s evidence also related to the roller.

Relevant Law

1. Issues of property settlement are dealt with pursuant to s.79 of the Act. Sub-section (1) provides a wide discretion in the Court as to making orders 'as it considers appropriate' but within the parameters of the statute.

2. S.79(2) provides that the Court must not make any order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order. The High Court in Stanford v Stanford[1]emphasised that this consideration is circumstantial to the particular factual platform before the Court and not one to be simply conflated with a consideration of 'contributions' pursuant to s.79(4) of the Act (although it is now generally accepted that the fact of contributions may assist in this consideration)[2]. In the matter now before me, I am little troubled in determining that it is just and equitable to these parties for the Court to enter into the consideration of alteration of their property interests. The relationship was a long one. It has completely broken down. The parties operated a partnership as farmers and contractors. They are the joint owners of substantial plant and equipment. There are circumstances relevant to their ongoing income and support which attract a consideration of the Court.

   [1] (2012) FLC 93-518

   [2] Bevan v Bevan (2014) FLC 93-572

3. It is well except accepted that the process for the Court is firstly to establish the property pool of the parties or either of them and to attribute value to that pool. 'Property' is to include assets, liabilities and financial resources. Superannuation is 'to be treated as property' for these purposes although, of course, not strictly an asset in the sense that it can usually not be crystallised until sometime in the future.

4. The Court then considers the contributions of the parties to the acquisition, conservation or improvement of the elements of the property pool. Contributions may be of a direct or indirect financial type. Contributions may also be of a non-financial type including as homemaker and parent.

5. After a consideration of any distribution of the property between the parties on the basis of contributions and usually on a percentage basis, the Court then considers whether there should be any further adjustment between them on a consideration of the matters set out at s.79(4)(d) - (g) and including specifically any relevant factors set out under s.75(2) of the Act.

6. It is generally accepted, as argued by Counsel for the husband in this matter, that it is prudent for the Court to 'stand back' and  consider whether the proposed orders are in themselves just and equitable rather than simply a bald percentage distribution

Issues - Property Pool

1. Valuation - Dozer

1. There are competing valuations from Mr E and Mr B on behalf of the wife and husband respectively. Both provided affidavits and were cross-examined. I found both to be impressive witness. They had previously conferred but without reaching agreement. Mr E is a senior auctioneer of 36 years' experience. Mr B is the Regional Manager for D Company and has been with that company for 35 years. Both witnesses inspected the bulldozer.

2. Mr E values the item at $220,000. He notes that it was purchased in 2016 for $365,000 plus $25,000 for the blades. He sighted a valuation from Mr B himself on the item at $265,000 being some two years ago. Mr E noted that bulldozers have heavy workloads but are in limited supply in Australia and hold their value 'if well­ maintained'. He opined that the vehicle would realise $220,000 plus OST in relatively quick time if offered for sale. He found it difficult to understand a decrease in value of almost $100,000 in two years. Mr E inspected the vehicle on 18 August 2020 in situ at Town O. He was of the view that the vehicle had been in recent use. Relevantly, Mr E saw the vehicle as being in 'good condition' but was told by the husband that there had been mechanical issues in respect of that particular vehicle. Mr E had asked for written evidence in respect of those issues but none was forthcoming from any mechanic through the husband. The inference I take, therefore, is that Mr E in his valuation understandably did not to factor in any decrease in value for asserted mechanical issues and repairs.

3. Mr B also viewed the vehicle. He consulted with his company's head of used machinery in Melbourne and provided still photographs for that person's consultation. Mr B said that the vehicle is some 15 years old. Specifically, however, he did inspect the undercarriage and opined that there was a requirement for rectifications at an estimated cost of $25,000 - $30,000.  In cross-examination he agreed that the vehicle was currently able to be operated but that the rectification would be required specifically for this vehicle and generally after a usage of some 800 hours.  Mr B agreed that he had valued the vehicle in November 2018 for $265,000 with the inference being that the mechanical rectification was not then required.

4. As mentioned above, I found both witnesses to be impressive, objective and professional. On consideration, I prefer the valuation of Mr B given his explanation as to the requirement for mechanical rectification of the undercarriage. Mr E's valuation does not include this consideration although it was raised with him by the husband. Mr Palser was not cross-examined as to why he had not exceeded to Mr E's request for written evidence in respect of the mechanical defect. Nevertheless, and on balance, I prefer the valuation of Mr B which given $30,000E costs of rectifications would put his valuation then in the realm of Mr E's valuation without such costs. Consequently, I am prepared to attribute a value of $180,000 to the dozer.

1. The wife claims a matrimonial liability in the form of a loan taken by her post separation from her mother's business, ‘F Company’ is in the sum of $22,788.

1. Her uncontradicted evidence is that she has used these monies to pay legal costs. No issue was taken by Counsel for the husband as to this fact. The argument from the husband is that the evidence is consistent with these monies being provided by way of gift rather than loan. The strength of that argument is that there is no corroborative evidence to the wife's assertions in the form, for instance, of a written loan agreement or direct evidence from the lender.

2. The issue of whether an advancement to a particular party arguing for property settlement be a gift or a loan is not uncommon in these Courts. Indeed, the Court is often assisted by corroborative evidence which is not forthcoming on this occasion. Nevertheless, such an issue is effectively one of credit. As mentioned above, I have had the advantage given to trial judges of seeing and hearing the parties give their evidence. The wife, like the husband, was an impressive witness. She did not retreat under the minimal cross-examination in respect of this issue. The husband gave or adduced no rebuttal evidence although, of course, it remains the fact that a party asserting a fact carries the onus of proof on the balance of probabilities. I note the figure involved being particularised as $22,788. I note the credibility of the wife's evidence. On the balance of probabilities I am prepared to accept that the wife is, as she says, indebted to the company, F Company, in a quantum of $22,788 for paid legal costs.

3. I accept the submission of Counsel for the wife that this figure should be 'added-back' as a liability in circumstances where it is not disputed that these are paid legal costs. On the balance of the evidence before me, I am satisfied that the husband has met his costs of whatever quantum from income received post separation from the use of jointly owned plant and equipment. As such, I am of the view that justice and equity therefore requires the 'adding-back' of the wife's debt of $22,788 incurred for paid legal fees.

1. Thirdly, the wife argues that there should be four amounts received by the husband post separation of $30,521.08 from G Ltd and $13,907.52 from H Company. These total $44,428.60.  The husband says that these monies have been expended reasonably post separation in his continuation of the former partnership business.  He concedes that he has received the income from these businesses and indeed I have taken this into account above in 'adding-back' the wife's paid legal costs where the husband has had the sole use of the plant and equipment and client contracts that accompany that equipment. Again, the husband gave evidence in an impressive if not well particularised fashion in respect of that expenditure. The wife suggests that the husband spent money on items other than necessities such as tyres for vehicles which were not yet required. Generally, however, there is no suggestion of the husband secreting away these monies or using them for personal luxuries. On balance, I prefer the evidence of the husband in respect of this issue and do not intend to add-back the monies received by him post separation.

2. There is a relatively minor issue in respect of the wife's credit cards. The husband in his Counsel's aide memoire of the assets and liabilities concedes a Citibank credit card debt of $17,000. The wife, however, claims a further ANZ credit card liability of $6,000. She argues that this is a necessary expenditure and perhaps even incurred during the course of the relationship. The husband's evidence suggests that he was oblivious to that credit card and its use but also conceded that it was the wife who was effectively the manager of finances for the family unit during the relationship. The wife's evidence was again credible and plausible. In those circumstances, I accept the wife's evidence that there is a proper and relevant liability of $6,000 in respect of her ANZ credit card.

3. The husband argues for a further 'add-back' to the pool in a quantum of $80,000 on account of 'lost earnings from wife's conduct'. From Counsel's argument, I understand the figure of $80,000 to be somewhat arbitrary and certainly unparticularised but where I am also invited to consider this issue in respect of an adjustment pursuant to s.75(2)(0) of the Act. It is agreed that the wife severed the partnership operated by the parties in May 2019 and that she did so unilaterally. There can be no suggestion, however, that the severing of the partnership was in any way illegal. As I understand it, the husband then argues that he suffered loss of income (or more particularly perhaps loss of 'partnership' income) because of the severing of that partnership. That argument is perhaps best understood by me transcribing into these reasons from the husband's Counsel's Summary of Argument as follows:

   (d)However, once separation occurred, it is submitted that the wife's reactions became vengeful. To lend context of this, it is the Husband's evidence that: the Wife refused the sale of livestock at proper market price; the Wife physically intimidated third parties who entered onto the property, and commenced abuse towards the Husband, causing a Police Family Violence Order to issue; the wife then attempted to sell the only income-earning assets - the contracting business assets - out from underneath the husband; and that the Wife refused to authorise payment of wages properly owed to the partnership's employees.

   (e)it was in this context that the Wife then, without notice of warning of any kind, severed the business  partnership between the parties by written notice on 29 May 2019.

   (f)The wife’s actions in doing so were, it is submitted, both recklessly wasteful of the parties' finances and unconscionable. It prevented mitigatory steps being put in place as transfer of insurances over vehicles, business credit accounts, and the continued operation of the contracting business. It immediately caused the termination of lucrative contracts between the partnership and Client J. It is submitted that the Wife knew of the existence of these contracts and accounts at the time she issued the severance.

   (g)Revenue from the Client J contract to the partnership, for the 4 months preceding the partnership severance, was $114,474.25. This flow of income was immediately lost, and this is attributable solely to the Wife's reckless conduct.

   (h)A new contract between the Husband and Client J was only able to be commenced in February 2020. In total, the Wife's conduct caused the parties the financial loss of 6 months of revenue. For the purposes of these proceedings the Husband has provisionally and conservatively cited the losses accrued and $80,000.

   35.I fully accept that the breakdown of this relationship was bitter and remained so. However, I am unable to find any necessary nexus between the wife's alleged 'vengeance' and any economic loss. It is a fact that the husband retained the valuable plant and equipment and has had the benefit and income of that machinery and the contracts since separation. I am at a loss to understand why the simple severing of a partnership between husband and wife necessitates the loss of a contract or the asserted inability of the husband, for instance, to simply operate accounts at fuel outlets and the like. The husband's evidence was vague, unparticularised and importantly uncorroborated. I am unable to find that he has proven on the balance of probabilities that the wife's conduct was wanton, negligent or reckless in the sense of causing a loss as asserted by the husband.  Accordingly, there will be no add-back.

Property Pool

36.Taking into account the above and also items agreed, I can find the property pool to be the following:

ASSETS
Cars, vehicles, equipment - valued by Mr E Valuers (in husband's possession)		$ 430,850
Furniture valued by Mr E Valuers (in wife's possession		$         700
Tractor (agreed)		$     84,000
Disc mower (agreed)		$       7,000
Posthole driver (agreed)		$       8,000
Wife's Motor Vehicle 1 (Mr E Valuers)		$     40,000
Ride on lawnmower (Mr E Valuers)		$    3,000
Cash at bank NAB ...10 (husband)		$    7,404
NAB account P Farms ...52		$ 11,582
Funds in trust		$ 35,066
Roller		$     2,710
Q Shares (wife)		$     4,000
Bank (wife)		$     1,710
Motor Vehicle 2 (wife) (inheritance)		$     3,000
Total		$ 639,022
LIABILITIES
Unpaid Tax (wife) (2018-2019)		$     12,302.91
Outstanding Tax (wife) (partnership)		$       8,247
Unpaid Tax (husband) (partnership)		$       8,248
Wife's outstanding loan - paid legal costs		$     22,788
Wife's credit card		$     17,000
Wife's ANZ credit card		$       6,000
Car finance –Motor Vehicle 3 (husband)		$     15,080
R Finance - tractor		$     48,984
R Finance - spray unit		$     23,754
Tax Accountant debt (half share wife)		$         950
Tax Account debt (half share husband)		$         950
Total		$    164,303.91
Total Net Tangible Assets		$ 474,718.09
SUPERANNUATION
Husband – Super Fund S		$     23,411
Husband –Super Fund T		$             8
Wife – Super Fund U		$       4,000
Total		$     27,419
TOTAL NET PROPERTY		$     502,137.09

Contributions

37.Both parties agree that in this lengthy marriage their contributions should be seen as .equal. In particular, whilst the husband has had the use and benefit of the plant and equipment since separation, he has also paid down debts including on the Motor Vehicle 3 where the debt seems to have reduced from $40,000 to E$15,000.

38.Consequently, I find no rationale for any adjustment between these parties on the basis of contributions.

s.75(2) Factors

39.The net property of the parties set out above has a value of just $502,137.09.

40.That wife works as a bookkeeper in her mother's business and perhaps subsidised from some casual work as a retail worker. Her financial statement discloses a gross income of $862 per week.

41.The husband's financial statement deposes to a total average weekly income of $1,000E. Cross-examination elicited, however, that this is a figure which equates with his drawings from his current company with an equivalent drawing to his co-shareholder/Director and domestic partner. The evidence persuades me that the husband's actual and potential income is, in fact, much higher. As set out above, the husband has retained the valuable plant and equipment from the parties' previous partnership. His evidence impressed me as a hard working man keen to obtain and benefit from Client J contracts. Whilst it is not possible on the evidence to determine his actual income, I am comfortably satisfied that it is far in excess of that enjoyed by the wife.  Still further, the husband's employment gives him a number of benefits including free accommodation and utilities. I am easily able to find, therefore, that the husband's financial position currently is far superior to that of the wife and further will remain so potentially.

42.Counsel for the wife referred me to the well-known decision of the Full Court in Clauson v Clauson[3] where their Honours stated:

[3] (1995) FLC 92-595

It has long been recognised that in most cases the most valuable 'asset' which a party can take out of a marriage is a substantial, reliable, income - earning capacity: see Best and Best (1993) FLC92-418.

…

There is, we think, at times a tendency to assess s.75(2) factors in percentage terms without considering its real impact, and we think there is legitimacy in the views expressed in more recent times that the Court has tended to operate in this area within artificially delineated boundaries. That is, it appears almost to be inevitable that the s.75(2) factors will be assessed in a range between 10% and 20%. A number of cases will justify an assessment outside those parameters and in any event, it is the real impact in money terms which is ultimately the critical issue.

43.The clear divergences in these parties moving forward is in respect of their current and potential income. The significance is for these parties re-establishing themselves financially after the demise of their marriage and this settlement. In that sense, and taking into account the value of the property pool, I am easily persuaded that an adjustment of 10% to the wife from that pool would give effect to the justice and equity of the orders themselves in respect of the distribution of property.

Conclusion

44.Consequently, I am of the view that the property of the parties should be distributed as to 60% to the wife and 40% to the husband.

45.Given the relative the minimal quantum's of superannuation, the parties both agree that I should approach this distribution on a one-pool approach.

46.Consequently, I am of the view that the parties' property inclusive of superannuation should be divided as a net 60% to the wife and a net 40% to the husband.

47.Both parties have asked me to refrain from further particularisation of the orders so as to allow them the opportunity to agree a distribution of the assets and liabilities pursuant to the percentage division and also to allow the husband the opportunity to explore his borrowing capacity.

I certify that the preceding forty seven (47) paragraphs are a true copy of the reasons for judgment of Judge McGuire

Associate: 

Date: 5 November 2020