PRESTON and PRESTON
[2012] FCWA 6
•27 JANUARY 2012
JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA
ACT : FAMILY LAW ACT 1975
LOCATION : BUNBURY
CITATION : PRESTON and PRESTON [2012] FCWA 6
CORAM : THACKRAY CJ
HEARD : 13 AND 14 SEPTEMBER 2011
DELIVERED : 27 JANUARY 2012
FILE NO/S : PTW 2508 of 2010
BETWEEN : PRESTON Applicant Husband
AND PRESTON
Respondent Wife
Catchwords:
PROPERTY – Settlement in relation to an eight year marriage – Where the husband asserted that cattle on the farm were leased from his father – This lease agreement masked the true arrangement and the husband’s father intended that the husband would acquire ownership of the cattle – Cattle to be included in the asset pool – Where the husband made substantial initial contributions – Where the parties agreed contributions during the marriage and post separation were of equal value – Where the parties’ families made significant contributions – The contributions made on behalf of the husband by his father were of greater magnitude – Contributions of the husband assessed as 82.5% – Discussion of s 75(2) factors, significant adjustment made in favour of the wife given her obligations to maintain a young family and her modest capacity to contribute to her own support – Wife to receive 42.5% of the asset pool – Husband given option to acquire farm – Parties to confer and provide Minute of Orders to give effect to these reasons.
Legislation:
Family Law Act 1975 (Cth), s 75(2), s 79(4)(d)
Category: Not Reportable
Representation:
Counsel:
Applicant : Mr Jones
Respondent : Ms Anderson
Solicitors:
Applicant : Margaret River Law
Respondent : Steven Forward
Case(s) referred to in judgment(s):
Khademollah and Khademollah (2000) FLC 93-050
Pierce v Pierce (1999) FLC 92-844
WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT - PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED
1I am required to determine a property settlement dispute between Mr [Preston] (“the husband”) and Ms [Preston] (“the wife”) after the breakdown of their marriage.
Brief background
2The husband, aged 38, is a farmer and contractor. The wife, aged 31, is primarily engaged in home duties, but also works part-time at a bottle shop.
3The husband and wife commenced cohabitation upon their marriage in September 2001. They separated in January 2010, following an assault on the wife, for which the husband was later convicted.
4The wife has a child of a previous relationship, [E], who was born in 1997. The husband and wife have three children of their marriage, [S], born in 2002, [J], born in
2004 and [L] 2008.
5Prior to the marriage, the husband was living on his farm at [a south western country town K]. The husband’s father, who lives on a neighbouring property, purchased the farm for the husband many years previously.
6The rundown farmhouse on the husband’s property was substantially renovated at around the time of the marriage. The husband and wife moved into the home when the renovations were complete. The husband continued to live there after the separation, while the wife and children moved in with the wife’s parents, before the wife obtained rental accommodation in [the country town Z].
7In 2007, the husband leased some land at [West Z], some of which he sub-let to his father. The husband ran sheep on his part of the property, whilst continuing to run cattle at the south western country town K.
8The husband commenced proceedings for parenting orders in May 2010, to which the wife responded in July 2010 seeking both parenting and property settlement orders, to which the husband replied in September 2010. Unfortunately, in less than two years, the parties have spent an amount approaching $200,000 on pursuing this litigation.
Orders sought
9 The orders sought by the wife were contained in her Papers for the Judge.
She proposed the sale of the south western country town K farm and an equal division of the net assets.
10 The orders sought by the husband were contained in his Papers for the Judge.
He also proposed the sale of the farm (albeit with an option for him to acquire the property) and a division of the net assets in proportions 70:30 in his favour.
11 Although each party contended there should be an adjustment of 20% for the factors in s 75(2) of the Family Law Act 1975 (Cth) (“the Act”), the husband’s proposal was based on an assumption that contributions would be assessed in proportions 90:10 in his favour, whereas the wife contended that contributions should be assessed at only 70:30 in his favour. The parties’ positions were also based on quite different assessments of the asset pool.
12 Counsel for the wife opened by saying that regardless of the assessment of contributions and adjustment for the s 75(2) factors, the wife should keep what assets she has (including her car, encumbrance free) and receive between $200,000 and
$250,000 in cash. In her closing address, counsel for the wife submitted the wife should receive somewhere between $200,000 and $300,000. This approach was criticised by counsel for the husband as being inconsistent with authority because it “worked backwards” – i.e. by seeking to determine the amount of the settlement without regard to contributions and the s 75(2) factors.
The main issues
13 The husband and wife agreed that their own contributions during the marriage and after separation should be assessed as being of equal value. The main areas of dispute were:
•the weight to be given to the substantial initial contribution made by the husband, primarily in the form of the south western country town K farm;
•the weight to be given to contributions made by the parties’ parents, with the husband contending that those made by his father significantly exceeded those made by the wife’s parents, while the wife contended the contributions were of roughly equivalent value and that, in any event, the Court should not be drawn into making detailed assessments of such contributions;
•the ownership of 40 head of cattle, which the husband claims are leased from his father, but which the wife says are owned by the farming partnership through which the husband and wife operated the south western country town K farm;
• the accuracy of the husband’s estimate of the number of sheep;
•whether it is just and equitable for the stock values to be taken at the date of trial in circumstances where the evidence established the stock would increase substantially in value soon after the trial; and
•the husband’s obligation, if any, to reimburse his father for expenses paid after separation and for the cost of work done by the husband’s father.
Credibility
14 The relationship between the husband and wife is highly conflictual.
Unsurprisingly, having spent much of their wealth on this litigation, both parties appeared anxious to maximise their share of what remains. Ultimately, I was not persuaded I could rely with complete confidence on the evidence of either party.
15 In some instances, the differences in their testimony amounted to nothing more than a difference in perception. This was particularly so in the case of the assistance provided by their families. The wife’s focus during the marriage was on the home and the children, whereas the husband’s was on the farm. Their different priorities inevitably resulted in them seeing contributions in a different light, as the contributions made by the husband’s father were directed more to work around the farm, whereas the wife’s parents assisted in different ways. I concluded that each party overstated to some extent the contributions their own family made and minimised the contributions of the other family.
16 The divergence in their testimony relating to the issue of the ownership of the cattle fell into a different category. Here one or both parties were telling lies, although it is possible, with the passage of time, they may have become convinced that their reconstruction/recollection was accurate. I will discuss their stories when I come to consider the composition of the asset pool.
17 The credibility of the husband’s father, [Mr P], impacted on a number of the contentious issues. On his own admission, Mr P had a change of attitude after his son and daughter-in-law separated. Whereas he was previously prepared to provide financial and in-kind assistance without expecting reimbursement, he says he was not prepared to do so after separation. Whilst such adjustments are not at all uncommon within families, it needs to be kept in mind that the rationale in “taking sides” is to promote the interests of one party (usually the blood relative) over those of the other party to the failed relationship.
18 Whilst Mr P presented as a generally honest person, he appeared keen to answer questions in a way that he hoped might assist his son. Whilst I had no hesitation in accepting his evidence that he has provided important financial and non - financial support following the separation, I consider it likely that, in making his calculations, there was some “loading up” so as to maximise the extent of his son’s alleged level of indebtedness.
19 The husband’s brother, [H], was not required for cross-examination. His evidence is not contentious. The husband’s other brother, [D], was cross-examined. He appeared to be an entirely reliable witness and I accepted his evidence.
20 The only other witness cross-examined (by telephone) was [Mr W], a stock agent employed by Elders. Although Mr W has no formal qualifications, he impressed as highly experienced in his field and a reliable witness. No objection was taken to his expertise to give the evidence he did, nor to the way in which he was engaged by the husband.
Property settlement approach
21 There is a four-step process in dealing with property applications. These are:
• identify the value of the assets and liabilities of the parties;
• assess the contributions to the assets;
• assess a range of factors set out in s 79(4)(d) to (g) of the Act; and
• consider whether the proposed orders are just and equitable.
The asset pool
22 I find the assets and liabilities of the parties at the date of the trial to be as follows:
| DESCRIPTION | $ |
| ASSETS | |
| South western country town K farm | 686,000 |
| 20 Rams | 1,600 |
| 950 Ewes | 90,250 |
| 670 Lambs | 11,725 |
| 40 Cattle | 40,000 |
| 40 Calves | 17,200 |
| Husband’s superannuation | 18,728 |
| Husband’s life insurance policy | 7,096 |
| Holden Commodore in husband’s possession | 12,000 |
| Mazda utility in husband’s possession | 4,000 |
| CBA shares in husband’s possession | 18,314 |
| Unpaid sheep sale proceeds | 10,000 |
| Husband’s paid legal fees (Family Law) addback | 27,614 |
| Husband’s paid legal fees (non-Family Law) less refund | 5,910 |
| Fine paid by husband for assault on wife | 5,000 |
| Wife’s superannuation | 3,915 |
| Nissan Pathfinder in wife’s possession | 40,000 |
| Wife’s paid legal fees addback | 6,670 |
| Furniture and contents | N/A |
| TOTAL ASSETS | 1,006,022 |
| LIABILITIES | |
| Home loan | 161,243 |
| Equity loan | 50,761 |
| Borrowing from father for Hegney valuation | 1,980 |
| Debt to D | 37,000 |
| Debt to H for payment of legal fees | 11,861 |
| Commodore car loan | 15,126 |
| Debt on Mazda utility | 2,802 |
| Nillup Store trade account | 6,957 |
| Semini Custom Feeds trade account | 5,543 |
| Tax debts | 6,047 |
| Credit card | 5,162 |
| Nissan Pathfinder | 42,177 |
| TOTAL LIABILITIES | 346,659 |
| NET ASSETS | $659,363 |
23 Some of the items in the table above were agreed. There are, however, many matters in relation to which it is necessary to make findings or comment.
Farm
24 The value of the farm was agreed at $686,000; however, the valuation was undertaken in February 2011. At the time of trial, the husband had the property listed at a price of $750,000, which he said was “in all likelihood well over its true value”.
25 The husband said he had been informed by his accountant that there would be “at least some capital gains tax payable” upon sale of the farm, but was unable to give an estimate, as this would depend “on the sale price, the timing of the sale and my earnings in the year of the sale”. As was also pointed out in submissions, the calculation of any capital gains tax will also need to take account of the fact that the homestead is the husband’s principal place of residence. No doubt the calculation would also need to take account of the large expenditure on the renovation of the home.
Sheep
26 The husband claimed he had approximately 950 mixed age, full wool, merino ewes, which the agent considered were worth $95 a head, giving a total value of
$90,250.
27 The husband also said he had about 670 cross bred lambs (June/July 2011 drop), which the agent estimated were worth between $15 to $20 per head, giving a total value of about $11,725.
28 The wife did not take issue with the values, but drew attention to the inconsistency between the numbers provided by the husband to the agent and those shown in the farm accounts. The agent had not undertaken a headcount but, having looked at the flock, had satisfied himself the numbers provided were roughly correct. I accept his evidence that he is able to estimate the number of sheep in a flock, give or take a margin of 10%.
29 The husband’s explanation for the discrepancy between the stock figures given to the agent and those shown in the farm accounts was that, some years ago, he had made a “big muck up” when estimating the numbers for the annual accounts, but that he had never paid attention to these book figures until the numbers were challenged in these proceedings. The husband said the figures he had provided to the agent were from a count he made when the sheep were crutched and the lambs were docked.
30 Whilst I am not completely convinced that the husband did not overlook some stock in the counting process, his evidence about the error made in assessing the sheep numbers was given in a convincing fashion. His testimony about not having previously noted the error is also consistent with my assessment that he took very little interest in the bookwork. On balance, I am satisfied the figures provided to the agent were fairly accurate.
31 There was only one area of contention relating to the rams. It was put to the husband that in addition to the 20 rams he acknowledged owning, he also had two others, which were far more valuable than the rest. This issue was not pursued by counsel for the wife in her closing submissions, and in fact she relied on the husband’s explanation about these rams to support her argument that the husband’s paperwork sometimes disguised the real position. In any event, I accepted the husband’s convoluted explanation about how these two rams are, in fact, owned by a third party.
Calves
32 The husband’s claim that he has 40 calves was corroborated by the stock agent who said he had counted them. The agent’s opinion was that these February/March 2011 drop calves were worth $430 each, but he commented they were still young, and would increase “a fair bit” in value if they were “hung onto” for a while. Counsel for the wife drew attention to this rider, but accepted there was no evidence of any other value. She therefore made her calculations for her submissions on the basis of this figure.
Leased cattle
33 The husband claimed he did not own the 40 cows on the farm (although he accepted he owned their calves). He asserted that the cows belong to his father, and that he owes his father $36,000 pursuant to a cattle lease agreement (being nine annual instalments of $4,000). The husband’s father supported these claims.
34 It is now common ground that:
•in July 2002 the husband and his father signed a one page agreement by which the husband agreed to lease 45 cows from the father at an annual cost of $4,500 (not $4,000 per annum);
• the agreement was witnessed but never stamped;
• the cattle came onto the husband’s farm at around the time the lease was signed
(although the wife’s recollection is that there were 48 cattle, not 45);
• the agreement was for three years and was to be reviewed in July 2005;
• the lease agreement was not reviewed, nor was it formally extended;
• no payments were ever made under the lease; and
•there is no reference to the lease payments or the accrued liability under the lease in the accounts of the husband or his father.
35 The husband originally claimed that the cattle continued to carry his father’s ear tags, however, in his oral evidence-in-chief, he acknowledged this was not the case with the cattle he had acquired to replace cows that had died or been sold.
36 The wife does not dispute the lease was signed in 2002, but claims it was always understood no payments would be made pursuant to the agreement. She says the “deal” was that in return for receiving the cows, the husband’s father would be allowed to take the hay from the husband’s farm for the next three years and the husband would continue to work for his father for the next three years for “virtually nothing”. It was also suggested that the arrangement regarding the cows took into account that the husband had been working for his father for two years without adequate payment. The wife also points to the fact that the husband ceased receiving the income of $200 per week he had been receiving from his father at the time he took possession of the cattle.
37 The wife acknowledged there was nothing in writing to confirm her assertions about the cattle being handed over in lieu of past and future remuneration, but she was adamant she had seen a handwritten agreement confirming the arrangement about the hay. The existence of this document was strongly denied by both the husband and his father.
38 I did not find the wife’s evidence about the handwritten agreement to be convincing. Some of her evidence on the topic was inconsistent (for example, whether she had actually signed the document as she initially claimed in her affidavit). It was also not possible to reconcile all of her answers touching on the question of the farm’s capacity to provide the hay required to honour the alleged agreement. I accept the wife may have seen hay being taken to the father’s farm, but that was probably
because he had a hay shed in which to store it. I also accept the husband’s father may have kept hay from the property before the husband starting running his own herd of cattle on it.
39 I did accept the wife’s evidence that there was never any discussion during the marriage about the lease or any accumulation of liability pursuant to the lease (and therefore I did not accept the husband’s evidence that he mentioned the liability to the wife “a few times”). I also accept the wife’s evidence that when she was arguing with the husband about his father’s failure to give the couple a wedding present, the husband said, “what about the cattle?”. The husband admitted there was a conversation along these lines, but his explanation was that his father’s wedding gift was in the form of providing them with a “start” by allowing them to lease the cattle. I did not find that explanation convincing.
40 Although I accept the evidence of the husband and his father that there was no handwritten agreement of the type described by the wife, I was not persuaded that the balance of their evidence on this issue was accurate. On the balance of probabilities, I find that the lease agreement masked their true arrangement and that, whatever his motivation, the husband’s father intended that the husband would acquire ownership of the cattle. (His possible motivations will be discussed when I come to consider contributions.)
41 In arriving at my decision I have taken the following matters into account:
• no lease payments were ever made;
• the absence of any mention of the accrued liability in the accounts;
•my finding that there was never any discussion of the existence of the alleged accrued liability until after the husband and wife separated;
• the lease was never reviewed or extended;
•the strong inference drawn from the numbers in the husband’s own accounts that the cattle were treated by him as being his own (see Exhibits 1 and 2); and
•the husband’s evidence that he had sold some of what he now claims to be his father’s cattle (the husband’s father purchased another nine cows for the husband after the separation and even then the total number in the herd had not returned to the original 45).
42 In my view, the most likely explanation for the husband and his father entering into the lease agreement was to use it for the one and only purpose that it has ever been used, namely to seek to quarantine the cattle in any dispute between the husband and his wife. In this context it is worth recording that the husband’s father acknowledged that the south western country town K farm had been placed in the name of his then 13 year old son for the purpose of protecting the property from any claim by the father’s new de facto wife. It is hard to resist the suspicion that the father had similar concerns when handing over valuable cattle to his recently married son.
43 For the reasons given, I intend to proceed on the basis that the husband owns the
40 head of cattle. The issue now becomes how much they are worth, since the husband did not have them valued when the other stock was valued, although he did
accept in cross-examination that they could fetch $855 per head as others had done before.
44 Counsel for the wife relied upon evidence given by the stock agent in seeking a finding that the cows were worth $1,000 per head. There was some basis for this submission, given that the stock agent said they could be worth between $650 and
$1,300, depending upon age. I intend to proceed on the basis that these mixed age cows are worth, on average, $1,000 per head. Whilst counsel for the wife conceded that the valuation evidence was not satisfactory, it was the husband who instructed the agent not to value the cattle, even though it was the wife’s case that they were assets to be taken into account in the proceedings. Whilst the husband held a different view, that did not prevent him from having the cattle valued.
Husband’s superannuation
45 Although the value of the husband’s superannuation was agreed, the great majority of it was accumulated prior to the marriage.
Holden Commodore
46 It only came to light during the trial that the husband had acquired a Holden Commodore three months previously. The amount owing ($15,126) was more than the vehicle cost ($12,000).
47 The wife’s counsel submitted it was inappropriate for the wife to subsidise the husband for the acquisition of this vehicle in circumstances where the arrangement had been entered into post-separation and without consultation with the wife. Although there is some strength in this proposition, I accept the husband’s evidence that he acquired the vehicle in order to have suitable transportation for the children. The purchase was not extravagant and the reality is, because of the financing arrangements and the stamp duty, the vehicle is worth less than the debt. I note also the vehicle in the wife’s possession is worth less than the amount owing on it. I have therefore determined it is appropriate for the vehicle, and the associated debt, to be brought into account at full value.
CBA shares
48 The value of the CBA shares was agreed. Although the wife asserted they were a gift by the husband’s grandmother to the “family”, I find that they were a gift made on behalf of the husband. The husband has been advised the shares would be subject to a capital gains tax liability on sale, but I was provided with no information to assist in determining the likely amount of the liability.
Husband’s tools and machinery
49 Although the wife asserted that the husband had tools and machinery which should have been taken into account, it was conceded there was no evidence of their value.
Nissan Pathfinder
50 The wife estimated the value of the Nissan Pathfinder was $40,000 whereas the husband estimated it was worth $45,000. The vehicle cost $57,500 in September 2009. Counsel for the husband submitted it was encumbent upon the wife to obtain a valuation given that she was in possession of the vehicle. There was no evidence to indicate the wife had been asked to obtain a valuation. I take the view that the party asserting the higher value of an asset should usually be expected to provide evidence to support their assertion (see Khademollah and Khademollah (2000) FLC
93-050 at 87,763 per Finn J). I am not persuaded the vehicle is worth any more than the figure relied upon by the wife.
Paid legal fees
51 It was common ground that the paid legal fees of the parties incurred in these proceedings should be added back into the pool, noting that the husband’s debt to his brother, Joshua, must therefore also be included as it was incurred to assist in meeting legal fees.
52 The husband also incurred $12,000 in legal fees arising out of the criminal proceedings associated with his assault on the wife. He was successful in part of the proceedings and received a reimbursement of costs in the amount of $6,090. The husband’s counsel submitted that these legal fees should not be added back because the husband had sufficient income from his off-farm work in order to meet those expenses. I do not accept this submission. The husband has asked the Court to take into account many liabilities which he has not paid. I propose to take those debts into account. If the husband had not expended money on legal costs, the money he spent on dealing with the criminal charges would have been available to discharge some of those liabilities.
53 The husband was fined $5,000 for the assault on the wife. I accept the wife’s proposition that the money used to pay the fine, which otherwise would have been available for division, should be added back as an asset of the husband, otherwise the wife would, in effect, be paying part of the fine the husband incurred for assaulting her.
Furniture and contents
54 The wife acknowledged she had furniture and contents worth $5,000. The husband’s counsel advised this figure was agreed. As I am not taking into account any furniture (or farming equipment) in the husband’s possession, and as some of the furniture in the wife’s possession was purchased for her by her parents after separation, I do not propose to take into account the wife’s chattels.
Westpac and equity loans
55 The wife contended that these liabilities should be taken into account at
$158,194 and $49,136 respectively, being the amounts outstanding at the date of separation. I do not accept this proposition. The husband gave evidence that he was still owed $10,000 by a local butcher for sheep he had sold. These overdue funds have
been treated as an asset. Had the butcher paid his account on time, the husband would have been able clear the arrears on the loans. I do not accept he was in a position to meet the arrears from other sources.
Debt to husband’s father for cattle lease
56 For the reasons already given, I do not propose to include the money said to be owing to the husband’s father for the cattle lease. It is therefore unnecessary to comment on the taxation issues that would have required consideration in the event that the husband’s position about this obligation had been accepted.
Debt to husband’s father for post-separation expenditure
57 The husband claims he owes his father $61,182 for expenditure paid on his behalf after the separation. This included rates ($1,262), purchase of heifers ($11,432), fertiliser costs for the West Z property ($40,466) and lease payments on the West Z land ($3,866). Although he was not seeking reimbursement for similar expenditure incurred prior to the separation, the husband’s father had calculated that he had spent
$117,412 on similar items before the parties separated.
58 As I have already indicated, I have some concerns that the husband’s father may have “loaded up” his claim, at least to some extent. The husband relied entirely upon his father to calculate this alleged liability. The father in turn relied on his accountant to assist him calculate the debt. The biggest item of expenditure was fertiliser on the property at West Z. The conflicting answers given in cross-examination about the way the fertiliser bill had been apportioned between the two parts of the property did not give me great confidence that the calculation was entirely reliable, especially as the purpose of the exercise was clearly to further the husband’s interests in this litigation.
59 Counsel for the wife submitted that the post-separation expenditure by the husband’s father should not be treated as giving rise to a liability, but rather should be seen as part of an ongoing family arrangement pursuant to which the husband and his father performed various services for the benefit of the other and without expectation of payment or reimbursement.
60 Although I accept that the husband’s father did outlay large amounts for the benefit of the husband in the period following separation, I was not convinced he seriously expected to get his money back. I gained the impression that the husband’s father was keen for his son to be able to remain on the land and was prepared to subsidise him in doing so in the same way he had been doing prior to the separation.
61 I regard it as significant that the evidence does not indicate that the major items of expenditure paid by the husband’s father have been claimed as expenses of the husband’s farming business, which they could have been, even if the husband was effectively borrowing from his father to cover the expenses. Accordingly, I infer that the taxation advantages associated with this expenditure have been obtained by the husband’s father, as I do not accept that the husband and his father and their accountants would have allowed such high levels of expenditure to be incurred without someone claiming them as an expense.
62 In my view, the better way to deal with this issue is in the context of assessing the post-separation contributions, since I am not satisfied that this expenditure (or the bulk of it) was ever intended to be treated as giving rise to a liability, other than for the purposes of these proceedings.
Debt to husband’s father for spreading fertiliser and gypsum
63 The husband and his father claim they agreed that the husband’s father would be paid for spreading fertiliser and gypsum over the West Z land. The price agreed was
$35 per tonne, which was said to be a commercial rate. The father claims to be owed
$7,910.
64 I am satisfied this arrangement was an exercise in “loading up” in order to seek to diminish the wife’s claim. I was not satisfied the husband could not have undertaken this work himself, especially when he ultimately acknowledged that his off farm work has been “spasmodic”. I find the husband’s father was more than willing to undertake the work himself, and I do not consider he had any expectation of being paid in return. I should note that the wife’s parents have also helped out the wife since the separation but they have not sought payment for their time, or for accommodation in their home, at commercial rates.
Loan for Hegney’s valuation
65 I was informed that the paid legal fees of the husband do not include his share of the cost of the valuation of the farm. I accept the husband was unable to afford the expense and therefore borrowed the money from his father. I accept that this liability should be taken into account as the husband proposes.
Debt to D
66 The husband’s brother D has lent the husband sums totalling $37,000. The wife was only prepared to concede that $29,000 of this should be treated as a liability because that was the amount the husband had expended on the purchase of sheep. Although the husband was not specifically cross-examined about how he had expended the balance of the moneys, I consider he would not have approached his brother for the money (which D said was his entire life savings) unless he was in extremis, given the absence of any suggestion that the husband has been wasteful or extravagant with funds. I therefore propose to take the full liability into account.
Debt to wife’s family
67 The wife claims she owes her parents $15,000 for financial assistance provided since the time of separation. I accept that the wife’s parents have been providing her with financial assistance because she has had insufficient income to maintain herself and the children adequately. Although the wife’s evidence indicated that the figure of
$15,000 was little more than an informed estimate, I accept it was made in good faith and possibly fairly accurate. However, just as I am not prepared to take into account at full value the assistance provided by the husband’s father, I am not prepared to take this alleged liability into account either. I instead propose to consider this issue when I am assessing the various contributions.
Contributions
68 I have previously noted the agreement that the contributions made by the parties, both financial and non-financial, were of equivalent value. This agreement related to contributions during the marriage and those made after separation. I would have had no hesitation in making a finding to that effect had the issue not been agreed.
69 It is also common ground that the other contributions strongly favour the husband, with both counsel accepting that his initial contributions should be given significant weight.
70 The major asset the husband introduced was the south western country town K farm, albeit there was no evidence of how much it was worth at the time of the marriage in 2001. The property had cost $60,000 when it was acquired in 1986, but the husband’s father had made some improvements while he was farming it. There was a ramshackle homestead, but it was substantially renovated, using a loan of $140,000 obtained at the time of the marriage. There was no evidence of the impact this improvement had on the value of the property. The husband and wife stayed rent free with the wife’s parents for a couple of months while the renovations were completed.
71 Although counsel for the wife submitted that the farm is now an entirely different enterprise to that which had been brought into the relationship, there was little evidence to support that submission. I do accept, however, that the property has been well maintained and that there have been a number of improvements made apart from the renovations to the home. Again there is no evidence to indicate the impact of any of this on the value of the property.
72 There were no encumbrances on the land at the time of the marriage, save for the borrowing to renovate the home. The parties subsequently extended the loan by
$20,000 to purchase a vehicle. They also obtained an “equity loan” of $50,000 to acquire sheep. The total borrowing was therefore $210,000, and the parties have not reduced this liability in the time they have been together.
73 The husband also had a life insurance policy at the date of the marriage, which had been commenced for him in 1974. It is now worth $7,096. In addition, he had his superannuation entitlements, now worth $18,728, most of which were accumulated before the marriage. Apart from these initial contributions, the husband should also be credited with the contribution of the CBA shares, which were given to him in about July 2009. These are now worth $18,314.
74 I have already found that the husband is the owner of a herd of cattle, which can be traced to the 45 cattle given to him by his father. Whilst denying he was the owner of the cattle at all, I accept the husband would contend that now the cattle have been included in the pool, they should be treated as a gift from his father. It was the wife’s contention that there was no gift involved, and the cattle were provided in at least partial recognition for work the husband had done, and was expected to do, for his father for inadequate reward.
75 It is often difficult, commonly impossible, to make firm findings about the reasons why farming families “order” their affairs as they do. Love of land, love of family, custom, pride and a desire to avoid/minimise tax are often thrown into a rich
mix of interwoven obligations and expectations of future support and care. The likelihood is that there were many factors that led to the arrangement about the cattle, and just as likely that many of these were never discussed or acknowledged. The father may have felt he was giving his son a helping hand in setting up his own operation. The husband may have felt he was getting some reward for the assistance he had provided his father. The wife may have had her own notions about why the arrangements had been made, and why her husband was still doing some jobs on his father’s property without being paid.
76 I nevertheless accept there was some basis for the wife believing that the arrangements had at least something to do with an obligation the husband’s father felt he had to his son for the work he had done for little reward. Although the husband initially denied he had worked full-time for his father in the early part of the marriage, when he was being paid only $200 per week, he later changed his position when it was pointed out that his father’s evidence was that he had indeed worked full-time. I find that in the period following the marriage in September 2001, until the cattle were handed over in July 2002, the husband worked effectively full-time for his father for much less than a commercial rate. In making this finding I have not overlooked that the husband also had other paid employment.
77 I also accept that after the cattle were handed over, the husband continued to provide assistance to his father for which he was not paid. However, this is only part of the story, because the father was also undertaking work on the husband’s farm for which he was not paid. He was also expending money on behalf of the husband as detailed in the father’s affidavit. To complicate matters further, the wife’s parents were also providing assistance which, even if it was not quite of the magnitude suggested by the wife, was of benefit to the husband and the wife.
78 The overall picture created is that the husband, the wife and both sets of parents were pulling together with a view to providing a sound financial footing for a young couple starting out their life together. In providing the assistance they did, the parents were no doubt intent also on making a better life for their grandchildren. The assistance was sometimes reciprocated in the case of the husband’s father (and the husband’s grandmother before her death), whereas there was no evidence of any reciprocal assistance provided to the wife’s parents.
79 Even if I was able to place complete faith in the evidence of one of the parties, it would be exceedingly difficult to attempt to conduct what amounts to a post-mortem of the marriage to see which side of the family provided the greater level of support – and then attempt to quantify any disparity in dollar terms or in terms of a percentage of the asset pool. As I have indicated earlier, complete faith cannot be placed in the evidence of either party. Both the husband and the wife were inclined to exaggerate the assistance provided by their own family and minimise the assistance provided by the other. I have also found that the husband’s father was inclined to give answers in a way to support his son’s position.
80 Notwithstanding the difficulty in making anything approaching a principled assessment, I have nevertheless formed the view that the contributions made on behalf of the husband by his father were of greater magnitude than those made by the wife’s parents. This is particularly so in the case of expenditure that the husband’s father
made for the benefit of the husband and the wife. In this regard, I note the concession made by the wife that the farming operation could not have continued had it not been for the support of the husband’s father.
81 I accept also that the husband ought to receive some very modest credit for the contributions he made financially and non-financially for E, the child of the wife’s former relationship. The boy did not spend any time with his father and was treated as part of the family of the husband and the wife. Although the husband said E’s father provided “negligible” child support, in fact he paid $33,840 during the marriage, albeit the payments were somewhat inconsistent.
82 Of all the contributions I have discussed, I find the most important were the initial contributions made by the husband, especially the land. Although counsel for the husband said in his closing submissions that the authorities would support a finding that there had been an “erosion” of the husband’s initial contributions, the Full Court has said it is “not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances to the initial contribution”: Pierce v Pierce (1999) FLC 92-844 at 85,881.
83 Taking into account the very significant initial contributions made by the husband and making allowance for contributions subsequently made by both the husband and the wife, and the contributions by their respective families, I have determined that contributions overall should be assessed at 82.5% to the husband and
17.5% to the wife.
Section 75(2) and other factors
84 Both parties contended that a 20% adjustment for the s 75(2) factors was appropriate. Notwithstanding this, I intend to conduct my own assessment. This is necessary because I recognise that the parties’ submissions were made on the basis of acceptance of their position regarding the asset pool and the assessment of contributions.
85 The husband is 38 and the wife 31 years of age. Neither has any health problems.
86 The husband and wife have the property and financial resources already described. I recognise that the superannuation entitlements are unlikely to be available to the parties for a long time. I also recognise that each party has very substantial legal costs that will have to be paid out of the settlement, unless they succeed in obtaining an order for costs. Finally, I recognise that some of the assets in the pool are in fact “addbacks” and thus no longer available.
87 The husband has the capacity to earn income as a farmer (although that capacity, in my view, is fairly limited). In addition, however, the husband has a demonstrated capacity to work off-farm as a contractor, including as a fencing contractor. On the evidence available, working away from the farm would be the best way for him to maximise his income, albeit I acknowledge this would not be his choice. I accept that whichever alternative he chooses, the husband is likely to earn only a relatively modest income.
88 The wife left school at age 15 and is unskilled. Her capacity to earn income is significantly affected by the fact that she has four young children and lives in a small town where work opportunities are limited. The wife is currently working 20 hours per week for which she receives around $352 net. She receives social security/family tax benefits of around $1,100 to $1,200 per fortnight, depending upon her other income.
89 The children spend a significant majority of their time with the wife. Although the husband says he proposes to pursue an application for shared care, the parties elected to have the property issues determined first. In these circumstances, I consider the safest course is to assume that the children are likely to continue to spend the same time with their mother as they presently do, noting she has always been their primary caregiver. It is important to recognise, however, that whilst the wife may have the primary obligation for caring for and accommodating the children, the husband will nevertheless need to be in a position to maintain and accommodate them when they spend time with him.
90 Neither party has any commitments to support any person other than themselves and the children. Neither party is living with any other person.
91 The husband has had the benefit of living in the home on the farm following the separation, whereas the wife has had to rent after she moved out of her parents’ residence where she stayed for the first eight months of the separation. She currently pays rent of $260 per week.
92 The wife did not give any indication that she wished to undertake a course of education or training. In any event, I accept it would be difficult to do so whilst she lives where she does and while she has responsibilities to care for a young family, as well as working part-time.
93 The orders sought by the parties would not have any impact on third party creditors. They will each retain sufficient to meet their liabilities.
94 The marriage has had no impact on the husband’s earning capacity, but has had a significant impact on the wife’s earning capacity to the extent she now has not one, but four children requiring care.
95 The husband has a current obligation to pay child support of $141 per month.
The payments he has been meeting relating to the vehicle in the wife’s possession have been treated as child support. He has not paid any other child support. Although the husband has calculated that he has been paying very much more than his child support obligation, this is reflected in the asset pool, since there are a number of liabilities which the husband has not been able to pay because of his many commitments.
96 Notwithstanding the submission made by counsel for the wife, there is no evidence to indicate that the husband would be anything other than reliable with payment of child support in the future. The difficulty, however, is that his capacity to earn income is not great and he is therefore unlikely to be required to pay anything like the amount needed to meet the costs of maintaining the children. The wife’s capacity
to contribute to the costs of maintaining the children is very limited, as any funds she is likely to earn would be required for her own support. The wife is now receiving only $5 per week from E’s father.
97 The wife says the husband has an expectation of inheriting property. This may be so, but I do not propose to take that into account.
98 The parties have not entered into a binding financial agreement.
99 The only other matter to consider under s 75(2) is the submission of counsel for the wife that I should take into account the fact that, in the months following the trial, the value of the stock would increase significantly.
100 Counsel for the wife submitted that:
• in December 2011, just a few months after trial, the sheep would be worth not
$95 per head, but $130 per head – an overall increase of $33,250;
•within a month or two of the trial, the lambs would start being sold and instead of fetching $17.50 per head, would sell for $100 per head – an increase of
$55,275 in total; and
•the value of the wool had not been taken into account in assessing the value of the sheep; this would amount to $40 to $45 per animal, or a total of $38,000.
101 The evidence of the agent provided general support for these propositions (as did some of the evidence of the husband). The agent explained that both ewes and lambs would increase in value because the lambs could not be weaned when he appraised the flock, just before trial, and the ewes were in poor condition because they were lactating.
102 I should also note the following in relation to the evidence of the agent:
•although he was unable to predict future market conditions, and his estimate of the likely value of the ewes in December 2011 was, to that extent, a “guess”, he nevertheless expected the market would be strong;
•the agent was not involved in the sale of wool, but his estimate of the gross return on the sale of the wool was based on his knowledge of market prices; and
•the agent noted that the sheep were nearly in full wool at the time of valuation and he expected they would be shorn within 4 to 5 weeks of trial.
103 Taking all of these matters into account, counsel for the wife submitted that the interests of justice required the Court to “look at the real position” in assessing the value of the stock, and should therefore proceed on the basis that, given an orderly program for sale, the husband stood to gain $126,525 more than the figures provided by the agent.
104 In reply, counsel for the husband submitted the Court should not adopt the “goldmine approach to valuation”. He further submitted there are costs associated with holding and operating the farm, and that the Court should look at the history of the farm income in order to appreciate that it would not translate into the large figures advocated by counsel for the wife. Counsel for the husband also submitted that all of
the sheep were on the West Z land and that the lease on that property had two years to run. There was no evidence to support the latter proposition, nor any evidence to support another proposition of counsel for the husband that stock numbers had increased following separation.
105 I do accept, however, that there are costs associated with holding rural property and stock and that it is not necessarily practicable to ensure that stock and land are sold at a time that will ensure the price of both is maximised. In this regard I note the husband’s evidence that he needs to find about $6,000 per month to keep everything “afloat”.
106 Counsel for the wife also conceded that the sale of all of the stock would attract a taxation liability, but she continued to submit that a lot of money and effort had gone into getting the stock to a stage at which, given a short wait, they would realise a much higher price.
107 There was no discussion of the costs associated with transporting the stock to market and the costs of sale. Nor was there any discussion of the costs of having the sheep shorn. In relation to the latter, I note that the accounts show that $5,874 was spent on shearing and crutching in 2009/10 and $3,171 in 2008/09.
108 Whilst the calculations made by counsel for the wife did not take into account all of the matters to which I have referred (holding costs, tax, freight, shearing costs etc), I nevertheless accept that the valuation of the stock could not have been much better timed from the husband’s perspective. I consider this is a factor that overall supports some adjustment in favour of the wife.
109 In the exercise of the wide discretion available to me, I consider there should be a significant s 75(2) adjustment in favour of the wife, principally because of the fact that she has significant obligations to accommodate and maintain a young family and has a very modest capacity to contribute to her own support and that of the children.
110 In my view, an adjustment of 25% would be appropriate, thereby bringing about an outcome where the wife will receive 42.5% of the asset pool. In making this adjustment I recognise it is higher than the figure advocated by either party, but I have earlier pointed out that the wife’s position was based on assumptions about the asset pool and the assessment of contributions that are not reflected in my determination of those issues.
111 In coming to my decision, I have not overlooked s 79(4)(d) which requires me to consider the effect of the proposed order on the earning capacity of either party. I recognise that the effect of my decision may be that the husband will have to sell the farm, but that is his primary proposal anyway. I have already noted that I consider the husband is likely to earn more income as a contractor than he would on continuing to run what his father described as a “Hobby Farm”.
Just and equitable?
112 The 25% adjustment which I have made for s 75(2) factors amounts to $164,841 and brings about a disparity of 50% between the parties, amounting to $329,681.
113 Notwithstanding that the husband brought a valuable property into the relationship, and made other contributions not matched by contributions made by the wife, I consider the overall outcome to be just and equitable, inter alia because of the significance I have placed on the desirability of both parties having funds to accommodate and support their children.
Orders
114 The effect of my judgment is that the wife will receive net assets to the value of
$280,229 and the husband will receive net assets to the value of $379,134.
115 I propose the wife’s share will be made up as follows:
| DESCRIPTION | $ |
| ASSETS | |
| Half of the CBA shares | 9,157 |
| Superannuation | 3,915 |
| Nissan Pathfinder | 40,000 |
| Paid legal fees | 6,670 |
| Payment from husband/sale of property | 220,487 |
116 I have provided for the wife to receive half of the CBA shares as proposed by the husband. Although this does not necessarily mean responsibility for the capital gains tax will fall equally, it does mean the husband will not have to pay all of it.
117 I have not provided for the wife to take on responsibility for the Nissan Pathfinder debt, which is what the husband had proposed. There is no way of knowing how long it will be before the farm is sold, and until the wife receives her property settlement entitlement there is no way she can afford to meet the payments. I am not confident (notwithstanding the value stated in the table above) that the vehicle would sell for sufficient to pay out the debt and the wife would then need to acquire another suitable vehicle to transport herself and the children.
118 I do not propose to make any further orders relating to furniture apart from those made at the conclusion of the trial. There was no evidence and no submissions to assist me in making any further orders.
119 I do propose to give the husband the opportunity to acquire the farm, but not in the way he proposed. The husband now knows the outcome of the proceedings. He knows how much he would need to pay out the wife. He can make enquiries to see if
he can afford to acquire her interest. If he can, and he wants to do so, he can buy out the wife on the basis of the figures found in these reasons. If he cannot, or does not want to, buy out the wife, then he can continue to market the property and each party will then share in the proceeds of sale in such a way as will bring about the division I have found to be just and equitable. Either way, I propose the husband will indemnify the wife against liability in relation to the farming business, including any tax.
120 If the husband keeps the farm I would not propose that capital gains tax be taken into account. There is, in any event, no evidence upon which a calculation of that contingent liability could be made. If the husband proposes to sell the property then I would be prepared to consider a mechanism in the orders which would allow a portion of the proceeds of sale to be set aside to cover the tax when it is ultimately calculated.
121 I propose the parties will confer and provide a Minute of Orders to give effect to these reasons once the husband has decided if he wants to keep the property. I will give him a month in which to decide, and if thereafter the parties cannot reach agreement on the form of orders, they will have liberty to seek a special appointment before me for argument on that issue. Not later than 14 days prior to that appointment each party will be required to file and serve a Minute setting out the orders they propose to give effect to these reasons.
122 In the event that costs are sought, I propose that the matter be listed before me for oral argument, with copies of any offers of settlement relied upon to be provided to my Associate not later than 14 days before the hearing.
I certify that the preceding [122] paragraphs are a true copy of the reasons for judgment delivered by this Honourable Court
Associate
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